For most retirees, Social Security income isn't a luxury -- it's a necessity. Over the prior 23 years, national pollster Gallup has surveyed retirees to determine how much they rely on their monthly Social Security check. Every year, without fail, between 80% and 90% of respondents noted it was needed, in some capacity, to make ends meet.
Given that Social Security forms the financial foundation for tens of millions of retired workers each year, you'd think lawmakers would do everything in their power to ensure the program's financial health. But with each passing year, the foundation of America's leading retirement program crumbles a bit more.
Reforms are needed to strengthen Social Security for current retirees and future generations of workers. Although President Donald Trump has promised to "not touch Social Security," there are questions of whether or not he may renege on this assurance with House Republicans passing a budget resolution that seeks $2 trillion in mandatory spending cuts over the next decade.
President Trump signing an executive order in the Oval Office. Image source: Official White House Photo by Daniel Torok.
Sweeping Social Security benefit cuts may be just eight years away
Before digging into the dynamics of how lawmakers and/or Trump may approach "fixing" Social Security, it's important to understand how we got to this point.
Ever since the first retired-worker benefit check was paid out in January 1940, the Social Security Board of Trustees has issued an annual report that acts as something of a "balance sheet" for the program. It allows anyone to see how Social Security generates income and tracks where those dollars end up.
What's even more valuable from these annual Trustees Reports is the forward-looking projections. Every report since 1985 has forecast a long-term (75-year) funding obligation shortfall. In other words, estimated income collected in the 75 years following the release of a report will be insufficient to cover benefit outlays, including cost-of-living adjustments (COLAs), and administrative expenses to operate Social Security. This 75-year funding obligation shortfall hit $23.2 trillion in 2024.
Worse yet, the Old-Age and Survivors Insurance Trust Fund (OASI), which pays monthly benefits to retired workers and survivors of deceased workers, is expected to exhaust its asset reserves by 2033. Although the current income-generating structure of Social Security ensures it can't go bankrupt or become insolvent, the existing payout schedule, inclusive of COLAs, is at risk of being disrupted. If the OASI's asset reserves are depleted in eight years' time, sweeping benefit cuts of up to 21% may be necessary.
The ultimate "blame" for Social Security's financial woes rests primarily on demographic shifts and a lack of action on the part of Congress. These demographic changes include rising income inequality, an all-time-low U.S. birth rate, and a 58% drop-off in the legal net migration rate into the U.S. since 1998.
The OASI's asset reserves are forecast to be gone by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
House Republicans are seeking $2 trillion in mandatory spending cuts: Is Social Security on the chopping block?
With a better understanding of why Social Security finds itself in financial straits, let's turn to the House Republicans' 45-page budget resolution passed a little more than a week ago.
Although specifics can often be few and far between with 10-year budget proposals, and these initial resolutions tend to change quite a bit before being adopted, the House GOP did lay down a skeleton framework for achieving a $1.5 trillion floor in aggregate mandatory spending reductions, with the ultimate goal "to reduce mandatory spending by $2 trillion over the budget window."
The House GOP proposal calls for minimum respective 10-year cuts of:
- $880 billion for the Energy and Commerce Committee
- $330 billion for the Education and Workforce Committee
- $230 billion for the Agriculture Committee
- $50 billion for the Oversight and Government Reform Committee
While it's possible these categories open the door for cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), Social Security isn't part of the $1.5 trillion floor or ultimate $2 trillion reduction goal.
To add to this point, President Donald Trump made clear while on the campaign trail that traditional Social Security cuts would be off the table.
Though the House Republicans' budget resolution dangles some eye-popping figures, Social Security isn't affected by it.
Image source: Getty Images.
President Trump may still break his key Social Security promise
However (and this is a pretty big "however"), this doesn't mean Trump will hold to his promise of not touching Social Security. Although sweeping benefit cuts may be off the table, the president has another method for trimming outlays.
In a December 2024 interview with Meet the Press, then-President-elect Trump noted: "I said to people we're not touching Social Security, other than we make it more efficient. But the people are going to get what they're getting."
In short, efficiency-based Social Security cuts are on the table.
During Trump's first term in the White House, he and his team prepared four presidential budget proposals. All four of these budget proposals called for various efficiency-based spending cuts to Social Security. If implemented, these actions would have reduced Social Security's spending by:
- $72 billion from fiscal year (FY) 2018 through FY 2027 (the FY ends on Sept. 30).
- $64 billion from FY 2019 through FY 2028.
- $26 billion from FY 2020 through FY 2029.
- $24 billion from FY 2021 through FY 2030.
For example, one of the reforms called for in Trump's budget proposals is to halve retroactive benefits for workers with disabilities to six months from the current 12 months.
Although efficiency-based cuts to Social Security won't make much of a dent into the program's $23.2 trillion (and growing) long-term funding shortfall, they would, ultimately, represent a break of Trump's promise to "not touch Social Security."
Strengthening Social Security for current retirees and future generations of workers will require some tough decisions that may include an increase in the payroll tax and outlay reductions. What remains to be seen is if Trump is the president that ultimately spearheads this much-needed discussion, or if the proverbial can is kicked to his successor.
