President Joe Biden and President-elect Donald Trump share at least two things in common when it comes to Social Security. They've both been eligible to receive their full retirement benefits for more than a decade. Additionally, neither Biden nor Trump pushed hard for major Social Security reforms during their respective first presidential terms.
However, Trump is about to have a second chance to do something about the federal program that impacts millions of Americans. Could he fix Social Security's biggest problem in 2025?
Image source: Official White House photo by D. Myles Cullen.
What is Social Security's biggest problem?
First, let's address a common misconception about Social Security. The program is emphatically not going bankrupt. To officially be bankrupt, Social Security would have to be unable to pay its obligations. Such a scenario isn't on the horizon.
However, Social Security is running out of money. To be specific, the program's two trust funds -- the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund -- are on track to be depleted. The current timeline for the combined trust funds running out of money is 2035, according to the 2024 annual report published by the Social Security trustees.
What will happen then? Social Security will be able to continue paying around 83% of scheduled benefits at first. This level is projected to decline to 73% by 2098.
Social Security will be able to pay reduced benefits because the program will still receive ongoing revenue from Federal Insurance Contributions Act (FICA) taxes. Employees pay 6.2% of their wages to fund Social Security, with another 1.45% going to fund Medicare. Employers pay the same percentages. However, these taxes currently don't generate enough money to fund Social Security benefits at full levels.
Does Trump have a plan to fix this problem?
So, does President-elect Trump have a plan to prevent future Social Security benefit cuts? Sort of.
In a town hall in December 2023, Fox News host Sean Hannity asked Trump about Social Security. He responded, "You don't have to touch Social Security." He added, "We have money laying [sic] in the ground far greater than anything we can do by hurting senior citizens with their Social Security." Trump argued that tapping the U.S. oil and gas reserves would allow the country to solve many of its fiscal problems, including Social Security's looming insolvency.
However, Trump's campaign never provided details on exactly how this idea would work. The 2024 GOP platform stated, "Republicans will restore Economic Stability to ensure the long-term sustainability of Social Security." But again, no specifics were given on how this would be accomplished.
The nonpartisan Committee for a Responsible Federal Budget, founded in 1981 by former Democratic congressman Robert Giaimo and former Republican congressman Henry Bellmon, analyzed how leasing more federal land for domestic oil and gas drilling might help Social Security. This organization determined, "[D]edicating current oil and gas leasing revenues to Social Security would cover less than 4 percent of its shortfall, and it would be impossible to fix Social Security even if all federal land were opened to drilling operations."
Perhaps President-elect Trump could also increase federal taxes on domestic oil and gas production to help fund Social Security. The problem with this approach, though, is that it would almost certainly counteract his promise to bring down inflation since oil companies would probably pass their higher costs along to consumers.
Muddying the waters
Further complicating matters, several of Trump's proposals would likely exacerbate Social Security's biggest problem. The Committee for a Responsible Federal Budget determined that Social Security would run out of money three years earlier than forecast if the president-elect's plans to eliminate federal taxes on Social Security retirement benefits, overtime, and tips are implemented. All these proposals would reduce revenue for Social Security.
The organization also concluded that Trump's plans to impose steep tariffs on all imports could lead to higher inflation, which would result in higher cost-of-living adjustments (COLAs) and greater cash outflows from Social Security. Further, his proposal to deport millions of unauthorized immigrants would reduce the amount of Social Security taxes paid by these workers.
In short, it seems highly unlikely that President-elect Trump will fix Social Security's biggest problem in 2025. He could even make it worse. But what about later in his second term? Politics can sometimes be surprising.
In 1972, then-President Richard Nixon visited China after establishing his career as a vehement anti-communist. At the time, people said, "Only Nixon could go to China." Maybe the president who will do what it takes to fix Social Security will be the one who adamantly opposes touching the program right now.
