President Trump Has Made This Prisoner's Dilemma for Social Security Worse

Social Security is in trouble. That doesn't mean benefits will end, because there will always be revenue coming into the program to pay retirees some of what they are owed. But the revenue isn't enough to pay all the promised benefits, and Social Security's trust fund is running dry.

No one disputes these facts, and the most recent Social Security Trustees' report gave some dates for when the trust fund will dry up.

The Old-Age and Survivors Insurance (OASI) Trust Fund is expected to run out in 2032, leaving enough money to pay 78% of promised benefits. If the OASI and disability trust funds are combined, the money will run out in 2034, leaving enough to pay 83% of promised benefits.

The time is coming when these automatic cuts will happen if nothing is done. Unfortunately, President Trump's policies have made the shortfall worse. And perhaps the bigger issue is that we're locked in a prisoner's dilemma when it comes to fixing this critical retirement program.

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Politicians know Social Security must be fixed, but no one wants to fix it

The prisoner's dilemma is a classic game theory puzzle in which two prisoners are interrogated separately for a shared crime, and while both would end up better off if each stayed silent and cooperated, the police try to persuade each one to betray the other by making it in their own best interests to do so. The question comes down to: Will they act for the common good, even at a potential personal cost?

Politicians right now are facing a similar scenario when it comes to Social Security. Everyone knows that it will be much worse if Social Security isn't fixed, and the longer lawmakers go without coming up with a solution to stop the financial bleeding, the worse things get, because the trust fund money disappears faster. So if lawmakers don't act quickly to raise taxes or cut benefits, the future tax increases will have to be higher and the cuts deeper.

Despite this common knowledge, no politician wants to be the one to compromise on key Social Security positions supported by their base if they believe that doing so puts their own careers at risk. So Republicans typically are not going to be OK with raising taxes, while Democrats are not going to want to cut benefits.

It's likely both of those things would need to be included in a deal to stabilize Social Security, so no one wants to even propose such a deal.

President Trump has made the situation worse

Unfortunately, Trump's policies have made the situation worse, for a couple of reasons.

The biggest issue is that the One Big Beautiful Bill Act gave seniors a new tax deduction that means many seniors don't pay tax on Social Security benefits because their taxable income is reduced below the threshold at which taxes are owed.

Because of this change, the chief actuary estimates the trust fund will lose $169 billion in revenue over a decade.

That's more money that has to be made up somewhere. And the president has also been vocal in promising no cuts to Social Security, which makes it even harder to find a fix since raising taxes would be the primary tool left on the table -- and most Republican lawmakers are especially not going to want to sign on to a deal that includes tax increases with no entitlement reforms.

All of this means that a fix for Social Security probably isn't happening anytime soon, so future lawmakers will have even more undesirable options on the table to prevent the automatic (and disastrous) benefit cut that will come if there's no solution.

Unfortunately, the ones who will suffer the most because of this prisoner's dilemma are the seniors who will have their retirement plans derailed by a benefit cut that no one wants.

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