President Donald Trump is going to break his promise of social security – and it is definitely the right decision
There is no social program in this country that is more important for the financial well -being of Americans than social security. In 2023, one hand pulled 22 million people above the federal poverty line, including 16.3 million adults aged 65 and older.
What is even more important, it is a program that charges an overwhelming percentage of pensioners to make ends meet. Span of 23 years annual surveys by Gallup, 80% to 90% of pensioners have consistently responded that social security explains a “major” or “small” source of income.
Unfortunately, this 90-year-old program is not on the best financial foot. Strengthening social security requires action from our chosen officials, including President Donald Trump.
But although Trump has promised to get through for seniors, one of his greatest promises of social security will have to be broken.
President Donald Trump addresses reporters. Image Source: Official photo of the White House by Andrea Hanks, thanks to the National Archives.
Before digging further, it is important to understand the dynamics of how the financial basis of social security has deteriorated over time.
In the past 85 years, the Social Security Board of Trustees has released an annual report describing the financial “health” of the program. This report enables everyone to break down how social security generates income and to keep track of where those dollars end up.
But the most valuable aspect of the annual Trustees report is to investigate how monetary and fiscal policy changes, together with demographic shifts, have adjusted the long-term (75-year-old) solvency forecast for the trust funds. Keep in mind that social security is not in danger of going bankrupt, disappearing or paying not eligible beneficiaries. What is in danger is the continuity of the existing payment schedule, including adjustments to the costs of living (Colas).
According to the report of the Trustes 2024, the long -term deficiency of the $ 800 billion financing obligations increased compared to the estimate of the previous year to $ 23.2 trillion. In other words, program errors – mainly benefits, but also administrative costs for running social security – it is expected that the estimated income from 2024 to 2098 is expected to surpass with $ 23.2 trillion.
Undoubtedly even more worrying is the projection that the old Age and Survivor's Insurance Trust Fund (OASI) will exhaust its activities reserves by 2033. The OASI is responsible for paying monthly benefits to retired employees and survivors of deceased employees. If the active of the OASI grants itself in eight years, major reductions of up to 21% may be needed to maintain payouts until 2098 without the need for further reductions.
The debt for the weakening financial prospects of social security has nothing to do with omnipresent myths of conference theft and migrants without papers who receive traditional benefits. It is rather the result of many continuous demographic changes, including a historically low American birth rate, rising income inequality and a significant decrease in net legal migration to the US
The asset reserves of the OASI are expected to have disappeared by 2033. Activa of the American old age and survivors Insurance Trust Fund at the end of the annual data of YCHARTTS.
Most presidents tend to prevent changes in social security from being proposed, because every change will ultimately lead to a group of people being worse off than before. But this did not prevent Trump from proclaiming Truth Social on his social media platform at the end of July that: “Seniors are not allowed to pay tax on social security.”
In 1983, the leading pension program of America was in a somewhat similar situation such as today. Without action by legislators, the trust funds of social security were on schedule to exhaust their asset reserves. The changes to the social security of 1983 ensured that this would not happen.
The latter major two -part revision of social security led to gradual increases for wage tax on earned income and the full retirement age, and introduced the tax on benefits.
From 1984, up to 50% of social security benefits could be exposed to the federal tax rate as a provisional income (adjusted gross income + tax -free interest + half of the benefits) $ 25,000 surpassed for a few files and $ 32,000 for couples that jointly submit. A second layer was added in 1993, so that up to 85% of the benefits could be exposed to federal taxes as provisional income $ 34,000 for a few files and $ 44,000 for joint archiving couples.
Although most Americans do not like to pay taxes, the tax on social security benefits is mainly hated for one reason: these income bulls have never been adapted for inflation.
When the tax on benefits was introduced more than four decades ago, it was expected that this would affect around 10% of senior households. But because wages and colas have increased income over time, more and more pensioners are now being exposed to a certain level of tax on their social security control.
The function of Trump that puts an end to the tax on social security benefits would increase the payouts for about half of all pensioners.
Image source: Getty images.
On paper there is sufficient support for terminating the tax on benefits. But what is popular is not always what is best for social security.
Although eliminating this hated tax on benefits would stimulate the social security checks for selected pensioners, it would further paralyze the already weakening financial basis of the program.
Social Security generates income in three ways:
The 4% wage tax on income earned (wages and salary, but no investment income)
Interest earned on its asset reserves, which are invested in federal bonds with special problems
The tax on social security benefits
The wage tax is the unmistakable breadwinner of the program. In 2023 it was good for 91.3% of the $ 1.351 trillion of income collected for the combined OASI and Disability Insurance Trust Fund.
But over time, the tax on benefits has grown into a more important source of income. If Trump's promise were to be kept and this source of income was eliminated, an estimated $ 943.9 billion (from 2024 to 2033) would not be collected by the leading pension program of America for 10 years. This would not only broaden the $ 23.2 trillion long -term financing deficit of $ 23.2 trillion, but it would accelerate the estimated dating date of the OASI and can even increase the size with which the benefits should be cut. There is no tax responsible way in which Trump can comply with this promise.
To build on the above, the president would also need 60 votes in the Senate to change the Social Security Act. The last time that one of the American political parties had a Supermajority of Voting (60) in the Hogerhuis was in 1979. In short, Trump would need two -part cooperation to change social security, that's that very Unlikely – and it is not even clear what kind of support he would have from his own party in the Senate.
It's just a matter of time before Trump breaks his promise of social security, and it will definitely be the right decision.
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