Supported by
Paul Krugman
How Trump Could Bankrupt Social Security
Opinion Columnist
Remember when George W. Bush tried to privatize Social Security? I was very involved in that debate, and one thing I learned was that well-off Americans, who typically have substantial sums stowed away in their 401(k)s and have other assets besides, often have little sense of just how important Social Security is to their less affluent fellow citizens. Benefits from the program make up more than half of many retirees’ incomes; a substantial number have almost nothing else to live on.
So it’s important to be aware that one effect of Donald Trump’s economic proposals, if enacted, could be to drive Social Security into bankruptcy, impoverishing many older Americans — not in the distant future, but within around six years. And while I have in the past assumed that Social Security will be bailed out if necessary, that looks less certain in the antidemocratic nation we may become if Trump wins.
First things first: Social Security is a government program, counted as part of federal spending. So how is it possible for an individual program to go bankrupt if the federal government as a whole remains solvent (which, despite Trump, it probably will)?
The answer is that Social Security has its own, separate budget. If you get pay stubs, you’ll see that there’s a deduction for FICA, the federal payroll tax. Your employer pays an equal amount, and when you include the employer share, around two-thirds of Americans pay more in payroll taxes than they do in income taxes. Most of these payroll tax receipts are dedicated to Social Security (the rest support part of Medicare).
This system, in which contributions from working-age Americans pay for benefits to seniors, has been placed under pressure from an aging population, which has increased the ratio of beneficiaries to workers. But everyone knew long ago that baby boomers would eventually stop paying in and start taking money out, so way back in the 1980s steps were taken to shore up Social Security’s long-term finances. These steps included increasing the payroll tax rate, making benefits subject to income tax and gradually raising the age of eligibility for full benefits from 65 to 67.
These actions allowed Social Security to run large surpluses for a couple of decades and accumulate a trust fund that could be used to help pay benefits once baby boomers began retiring. The plan was to keep the system actuarially sound for 75 years, but the fix appears to be falling short, largely because of rising inequality. Under current policy, Congressional Budget Office projections suggest that the trust fund will be exhausted in 2034. At that point, the budget office estimates, benefits would have to be reduced immediately by 23 percent, and potentially by a greater percentage in future years, to bring them in line with revenues, unless something else was done to close the gap.
Until recently, I assumed that something would, in fact, be done to maintain retirees’ benefits; after all, seniors vote, and there would be a huge backlash against politicians who oversaw a large reduction in their incomes. But Trump has made me question that assumption.
As a new report from the Committee for a Responsible Federal Budget points out, Trump has made multiple proposals that would undermine Social Security’s finances. These include exempting Social Security benefits, tips and overtime pay from taxes. Less obviously, perhaps, Trump’s tariffs would be inflationary, increasing Social Security’s cost of living adjustments. And deporting undocumented immigrants — many of whom pay payroll taxes — would further worsen the situation.
The C.R.F.B. estimates that these policy actions would cause trust fund exhaustion in fiscal 2031, and since we’re already in fiscal 2025, that’s just six years from now; payable benefits would also fall off a steeper cliff, immediately declining by about a third.
And if you ask me, even these numbers are over-optimistic, because they don’t take into account the economic chaos Trump’s deportation and tariff policies would probably create.
As I said, however, in the past I’ve assumed that if and when the trust fund is exhausted, Congress and the president will do whatever is necessary to maintain benefits. Why isn’t that still my default assumption?
One answer is that Trump’s plans would make the hole in Social Security’s finances much bigger while also weakening the economy and adding trillions to national debt. This would make it harder to come up with the money for a Social Security bailout.
But there’s an even more important issue. I’ve argued that Social Security will almost certainly always be protected because seniors vote. But that’s relevant only because we live in a democracy — and democracy, as political scientists like to say, “is a system in which parties lose elections.”
Will America still be a democracy in that sense if a former president who tried to overturn the results of the previous election — a man described as a fascist by one of his Joint Chiefs chairmen and one of his chiefs of staff — regains power? And if we cease being the kind of democracy we’ve been, will seniors’ votes really matter?
The fate of Social Security isn’t my top concern if Trump wins — I’m more concerned about his threat to democracy — but it’s definitely on the list.
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Paul Krugman has been an Opinion columnist since 2000 and is also a distinguished professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman
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