Social Security’s already precarious financial outlook has worsened under President Trump.
Since 1940, Social Security has been providing a financial foundation for aging workers who could no longer do so for themselves. According to Gallup, between 80% and 90% of retirees lean on their monthly payout, in some capacity, to cover their expenses.
Unfortunately, America’s leading retirement program isn’t on the best financial footing. The Old-Age and Survivors Insurance trust fund (OASI), which is responsible for doling out monthly benefits to retired workers and survivors of deceased workers, is projected to exhaust its asset reserves by the fourth quarter of 2032.
The good news is that Social Security can’t go bankrupt and won’t halt benefits. The 12.4% payroll tax on earned income generates more than 91% of the program’s income. As long as Americans keep working, income will continue to flow into Social Security for disbursement to eligible beneficiaries.
But this doesn’t mean the existing payout schedule is sustainable. If the OASI’s asset reserves are exhausted, sweeping benefit cuts of 22% may be needed for retired workers and survivors of deceased workers.
While ongoing demographic changes are primarily to blame for Social Security’s weakening outlook, three of President Donald Trump’s policies are also helping to push this critical program over the edge.
Trump’s “Big, Beautiful Bill” digs a sizable $169 billion hole
The first policy that’s hindering, not helping, America’s top retirement program is the president’s flagship tax and spending law from his second term, the “Big, Beautiful Bill,” also known as the BBB.
The BBB made the personal income tax bracket reductions from Trump’s first-term tax and spending law, the Tax Cuts and Jobs Act, permanent and nearly doubled the standard deduction. It also introduced a bevy of temporary tax breaks from calendar years 2025 through 2028, including (but not limited to):
- The senior tax deduction: Qualifying seniors aged 65 and above are granted an extra $6,000 annual deduction (or $12,000 if filing jointly).
- No tax on tips: Up to $25,000 in qualified income can be deducted from federal income taxes. Take note that this deduction is capped at $25,000 for both single and joint filers.
- No tax on overtime: Up to $12,500 in qualified overtime pay can be deducted annually, or up to $25,000 for couples filing jointly.
While the Big, Beautiful Bill is helping some Americans retain more of their income, these temporary tax deductions are reducing the pool of earned income subject to the payroll tax (i.e., Social Security’s primary funding mechanism).
In July 2025, shortly after the BBB was signed into law by President Trump, Sen. Ron Wyden (D-OR) requested that the Social Security Administration (SSA) provide a financial projection of the law’s impact on the program’s financial outlook. In early August 2025, the SSA’s Office of the Actuary (OACT) responded.
According to the OACT, Trump’s flagship law is estimated to increase program costs by $168.6 billion between fiscal years 2025 and 2034 (the government’s fiscal year ends on Sept. 30). Worse yet, it’s projected to push forward the OASI’s asset reserve depletion timeline from the first quarter of 2033 to the fourth quarter of 2032.
Trumpflation may accelerate the timeline to sweeping Social Security benefit cuts
However, the Big, Beautiful Bill isn’t the only policy that’s expected to worsen Social Security’s financial outlook. Trumpflation (inflation driven directly by the president’s policies) is also playing a role.
Social Security’s cost-of-living adjustment (COLA) is the near-annual “raise” given to beneficiaries to offset inflation (rising prices). If payouts remained static and prices kept climbing, recipients would lose buying power over time.
When the Social Security Board of Trustees formulates its short- and long-term outlooks, it takes several variables into account, including Social Security’s annual COLA. The expectation is that these COLAs will be relatively modest — but Social Security’s 2027 COLA of 3.6% was well above average, thanks in large part to Trumpflation.
Specifically, two of President Trump’s policies are fueling higher consumer prices.
Firstly, his tariff and trade policy has been increasing prices. Although the president has stated that “Tariffs don’t cause inflation,” a recently released report by three New York Federal Reserve economists writing for Liberty Street Economics begs to differ.
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
According to the NY Fed economists in “How Fast Do Tariffs Pass Through into Consumer Prices,” Trump’s 2025 tariffs increased goods price inflation by 2.9 percentage points by February 2026. Prices rose as a direct result of the tariffs, as well as higher domestic production costs. Economists also indicated that goods prices would have declined if not for the president’s tariffs.
The other policy pumping up the prevailing inflation rate is the Trump-led Iran war. For eight months and counting, the Strait of Hormuz has been closed to virtually all commercial vessels, stymying the daily movement of a fifth of the world’s crude oil supply. The largest modern-day energy supply disruption sent gas and diesel prices into the stratosphere.
While well-above-average inflation resulted in one of the largest COLAs being announced since 1993 for next year, this outsize raise threatens to drain the OASI’s asset reserves even faster than initially projected. Though we’ll likely have to wait for the 2027 Social Security Board of Trustees Report for confirmation, the program’s 3.6% COLA may end up further accelerating the timeline to sweeping benefit cuts.
Between the BBB, tariffs, and the Iran war, Trump’s policies are worsening an already precarious outlook for Social Security.
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