Social Security Is in Dire Straits, and President Donald Trump's Policies Are Making Things Worse

For the vast majority of Social Security's nearly 55 million retired workers, their monthly payout is much more than just a check. It represents a financial lifeline that many would struggle to make do without.

Unfortunately, this foundational retirement program is on shaky ground. Although Social Security is in absolutely no danger of going bankrupt or halting benefits, the continuity of the existing payout schedule, including annual cost-of-living adjustments (COLAs), is very much in doubt.

While there are several factors to blame, including a laundry list of ongoing demographic shifts, President Donald Trump's policies, based on projections, are making things worse.

President Trump's policies are hindering, not helping, Social Security. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.

Social Security's financial foundation is crumbling

Since 1940, the Social Security Board of Trustees has published an annual report detailing how the program is funded and where each dollar is spent. These reports also provide forward-looking projections concerning the solvency of Social Security's trust funds.

Over the last 41 years, the Board of Trustees has cautioned of a long-term (75-year) unfunded obligation. In simple terms, the estimated income to be collected in the 75 years following the release of a report should be insufficient to cover outlays (primarily benefits, but also includes the costs to oversee Social Security). Through the year 2100, this unfunded obligation has exploded to $29.3 trillion.

US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts

But the more immediate concern is the projected depletion of the Old-Age and Survivors Insurance trust fund's (OASI) asset reserves by the fourth quarter of 2032. This is the excess income collected since inception that's invested in special-issue, interest-bearing government bonds, as required by law.

Although the OASI doesn't need a penny in its asset reserves for retired workers and survivors of deceased workers to receive monthly benefits, the depletion of its asset reserves in six years would trigger an estimated 22% sweeping benefit cut.

Image source: Getty Images.

Donald Trump's policies are hindering, not helping, Social Security

Though President Trump has pledged to leave Social Security alone, several of his policies have inadvertently made things worse for America's leading retirement program.

For example, the president's flagship tax-and-spending law in his second term, the "Big, Beautiful Bill," has boosted take-home income for many Americans. Trump's tax law permanently lowered the personal income tax brackets and provided a bevy of temporary tax breaks from 2025 to 2028. This includes no tax on tips or overtime for select workers and a beefed-up standard deduction for most seniors aged 65 and up.

While taxpayers are enjoying their extra income, the Big, Beautiful Bill has reduced the pool of earned income subject to the 12.4% payroll tax, Social Security's primary funding source. According to the Social Security Administration's Office of the Actuary, Trump's flagship tax law is estimated to increase the program's costs by $168.6 billion from 2025 through 2034.

Additionally, President Trump's tariffs and the Iran war are both contributing to persistently elevated inflation.

New from the New York Fed: "By February 2026, tariffs had contributed 2.9 pp to goods price inflation, and without them goods prices would have fallen slightly." About one quarter of every point in higher tariff rates shows up in consumer prices within one year. • A 10% across-the-board tariff yields a 2.6% rise in consumer goods prices after one year. • About two thirds of the increase comes from pricier imports, which get passed through quickly. • Another third comes from U.S. made goods, as producers face higher input costs and less import competition. This takes longer, about 6-12 months, to filter through.

— Nick Timiraos (@NickTimiraos) October 6, 2026

Social Security's COLA is the near-annual raise given to beneficiaries to combat inflation (rising prices). While inflation is perfectly normal in an expanding economy, Trump's tariffs and soaring fuel prices caused by the Iran war have lifted the prevailing inflation rate well above modest levels.

When the Board of Trustees formulates its OASI trust fund solvency projections, it assumes modest annual COLAs. However, two consecutive years with an inflationary "Trump bump" have led to outsize Social Security raises.

Although beneficiaries enjoy seeing their monthly payouts grow, Trump's inflation-igniting policies risk draining the OASI's asset reserves more quickly than forecast.

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