Since entering presidential politics in 2015, President Donald Trump has consistently pledged not to reform the failing entitlement programs. His unwillingness to touch the third rail of American politics undoubtedly bolstered his popularity among centrists and the elderly, but it put the final nail in the coffin of the Republican Party’s claims of fiscal responsibility. The bill is coming due faster than any big-spending member of Congress would like to admit.
Social Security trustees now estimate that both the Old-Age and Survivors Insurance, or OASI, Trust Fund and the Disability Insurance Trust Fund, which support the program, will run out of money in fiscal 2034, one year earlier than previous estimates.
“Congress, along with the Social Security Administration and others committed to eliminating waste, fraud and abuse, must work together to protect and strengthen the trust funds for the millions of Americans who rely on it — now and in the future — for a secure retirement or in the event of a disability,” said Social Security commissioner Frank Bisignano.
Social Security makes up over 20% of the federal budget. Together with Medicare and Medicaid, it accounts for nearly 50%. For reference, defense spending makes up roughly 13% of the federal budget. When the OASI Trust Fund is depleted, it will trigger a 23% reduction in benefits across the board, regardless of age, income level, or need, as the Social Security Administration has no legal authority to prioritize payments. When the money’s gone, it’s gone.
To avoid the entitlement insolvency cliff, at this point, it would likely take a combination of massive payroll tax increases and a dramatic increase in the retirement age, or complete privatization, neither of which is politically viable. Heck, Republican members of Congress couldn’t even manage to prevent criminal illegal immigrants from receiving Medicaid benefits in the House version of the president’s so-called “big, beautiful bill.”
It didn’t have to be this way. Two decades ago, Democrats celebrated as they killed former President George W. Bush’s attempts to reform Social Security. The Republican effort was modest, only a partial privatization that would have allowed younger people to divert a percentage of their payroll taxes to private accounts that would have been invested in stocks and bonds rather than the traditional OASI and DI Trust Funds. The new program would have been voluntary, and traditional Social Security benefits would have been reduced for individuals who chose to use private accounts. If the 2005 effort had passed, it probably would not have solved all of the program’s problems due to the nation’s aging population and the mass retirement of baby boomers, but we would not be facing the same level of uncertainty we’re facing now.
The S&P 500 finished 2005 at 1,248. Since then, it has more than quadrupled to 5,600. Citizens who opted in would have earned far more than those currently receiving Social Security benefits, but, of course, Bush was Hitler, and Paul Ryan (R-WI) wanted to murder your grandmother (according to journalists and Democrats), so here we are.
THE SOCIAL SECURITY ADMINISTRATION IS STILL IGNORING THE BABY BUST
Democrats forsook the fiscal future of the nation generations ago, and unfortunately, it doesn’t look like Republicans will return to any semblance of fiscal sanity anytime soon. Nevertheless, the train is coming.
Politicians of both parties will have to look their constituents in the eye and explain, assuming they are economically literate enough to do so, why they suddenly took a 23% pay cut. Whichever party is left holding the bag come 2034 will likely be tossed out of power for a generation. Take care of your aging family members, because sooner rather than later, your government will no longer be able to.
Brady Leonard (@bradyleonard) is a musician, political strategist, and host of The No Gimmicks Podcast.