Trump’s Social Security plan would hasten insolvency, lead to bigger benefits cuts, analysis finds

October 21

Harris and Trump have different visions in their plans for the economy and taxes

21:00

Former president Donald Trump’s campaign pledges would hasten the insolvency of the Social Security trust fund and lead to a 33% across-the-board cut to all benefits, according to a new analysis from the nonpartisan Committee for a Responsible Federal Budget (CRFB).

The group’s report, released Monday, is based on Trump’s vow to eliminate income taxes on Social Security benefits, overtime pay and tipped income, as well as his proposal to slap tariffs on all imports and deport millions of immigrants, many of whom currently pay Social Security taxes.

The CRFB, which advocates in favor of lower federal deficits, said Vice President Kamala Harris’s plans “would not have large effects on Social Security trust fund solvency.” It added, however, that while Harris has pledged to protect Social Security, neither her campaign nor Trump’s have specified how they would fix the looming shortfall in funding.

Under Trump’s plans, Social Security’s trust fund would become insolvent in 2031, which is three years earlier than currently projected by the Congressional Budget Office. At that point, the program would need to cut benefits by 33%, a steeper decrease than the 23% reduction forecast by the CBO in August.

A cut of that size would mean that the typical monthly benefit check of $1,907 in 2024 would be reduced by $629 per month, leaving recipients with average payments of $1,278.

Social Security currently pays out more in benefits than it takes in through payroll taxes. As a result, the program is dipping into its trust fund to make full payments. But experts warn it is at risk of running out of funds, which could lead to the benefit cuts.

To be sure, Trump’s pledge to cut income taxes on Social Security benefits could appeal to the roughly 40% of recipients who pay federal income taxes on their checks. But the CRFB concludes that Trump’s plan would ultimately undermine the financial health of the retirement program at a time when it’s already facing funding strains.

Trump vows to protect Social Security

“Social Security will be only nine years away from insolvency when the next president takes office. If President Trump’s campaign agenda were enacted in full, we estimate it would shrink that window by one-third, to only six years,” the Committee for a Responsible Federal Budget said in its report.

In a statement emailed to CBS MoneyWatch, Trump spokeswoman Karoline Leavitt said, “The so-called experts at CRFB have been consistently wrong throughout the years. President Trump delivered on his promise to protect Social Security in his first term, and President Trump will continue to strongly protect Social Security in his second term.”

In a statement, Harris campaign spokesman Joe Costello said, “Donald Trump’s agenda poses an imminent threat to Social Security, and seniors could have their benefits cut by a third.”

He added, “Vice President Harris is committed to protecting Social Security benefits and is the only candidate who will actually fight for seniors, not just pay them lip service on the campaign trail.”

How Trump’s plans could impact Social Security

Eliminating income taxes on Social Security benefits would remove one of the program’s funding sources.

While payroll taxes — the FICA taxes taken out of workers’ paychecks — fund the bulk of Social Security, about 4% of its financing stems from the income taxes that recipients pay on their benefits.

That would likely deliver the biggest financial hit to Social Security, costing the program about $950 billion over the next decade, the CRFB estimated. Another $900 billion would be lost by eliminating taxes on overtime pay and tips, due to the reduction in FICA tax collection from that income, the group projected.

On top of that, Trump’s plans to enact widespread tariffs as well as deport millions of undocumented immigrants could lower Social Security’s funding by another $400 million. That’s because new tariffs would likely drive up prices for U.S. consumers, which in turn would require the Social Security Administration to increase its annual cost-of-living adjustments, increasing costs and draining the trust fund more quickly, the analysis said.

Many undocumented immigrants pay into the Social Security system but aren’t qualified to claim benefits, which means they add revenue to the program without requiring a payout later.

Together, Trump’s plans would add about $2.3 trillion to Social Security’s cash deficit between fiscal year 2026 and 2035, the CRFB estimated.

“As a result of these higher cash deficits, Social Security trust fund reserves would be depleted much faster than under current law,” the analysis noted.

Trump promises tariffs to help pay for economic plans

08:18

Trump spokesman Leavitt told CBS MoneyWatch that the former president’s plans for “unleashing American energy, slashing job-killing regulations, and adopting pro-growth America First tax and trade policies” would put Social Security “on a stronger footing for generations to come.”

However, the CRFB said it was skeptical of those plans. “[W]e’ve shown that increased energy exploration is unlikely to have a meaningful effect on Social Security — even if the gains were deposited into the trust fund,” the analysis said.

The group added that the U.S. would require “unrealistically fast economic growth” to close its existing funding gap.

Aimee Picchi

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

Source link

#Trumps #Social #Security #plan #hasten #insolvency #lead #bigger #benefits #cuts #analysis #finds

Pelican News

Source Link