President Trump’s policies and the proposed One Big Beautiful Bill Act (OBBBA) could accelerate the insolvency of Social Security and Medicare trust funds. The Social Security Administration plans to reduce its workforce by 12%, which may lead to less assistance for retirees and pre-retirees needing help with their benefits. The administration also plans to phase out paper checks, affecting nearly half a million retirees who still receive them.
Many of these individuals are in their 90s and may not have bank accounts, making the switch to direct deposits challenging. Tougher identification rules now require many Social Security transactions to be done online or in person at an SSA office, inconveniencing those who are not tech-savvy or live far from an office. The most significant concern is the shrinking surplus of the Social Security program.
With more people living longer and retiring early, the surplus is estimated to run dry by 2034 if no action is taken. This could result in beneficiaries receiving only 81% of their entitled benefits.
Social Security funding shortfall worsens
Recent policy changes, such as eliminating provisions that reduced benefits for certain public workers, have further accelerated the depletion date. President Trump’s immigration and tariff policies also risk reducing the number of workers contributing to Social Security and increasing inflation. The OBBBA, currently under consideration in the Senate, would significantly increase the standard deduction for senior couples, reducing the number of seniors paying taxes on their benefits.
This reduction could accelerate the insolvency of the Social Security and Medicare trust funds to 2032. Upon insolvency, Social Security beneficiaries could face a 24% benefit cut, while Medicare payments could be reduced by 11%. Policymakers must consider measures to address this impending issue rather than passing bills that advance insolvency.
Alternative proposals suggest raising the payroll tax cap, slightly increasing the payroll tax rate, and encouraging legal immigration. Another proposal includes enforcing the payroll tax on all income above $250,000, which could keep the trust funds solvent while increasing benefits. As the funding shortfall nears, it is crucial for the current administration and future leaders to take action to ensure the sustainability of these vital programs.
