Trump’s Recent Move Could Be Bad News For Social Security

There are millions of older Americans who collect Social Security today. And for many, it’s their primary or only source of income. But in the coming years, Social Security risks having to cut benefits if lawmakers don’t find a way to address the program’s fiscal shortfall.

The problem, in a nutshell, is that Social Security’s main funding source is payroll taxes. But in the coming years, a large number of older workers are expected to exit the labor force permanently and start filing Social Security claims.

As this happens, younger workers are expected to come in to take the place of the people who will be retiring. But there’s a reason baby boomers are called just that — there are lots of them. And the rate of replacement workers is expected to fall short once boomers start retiring in droves.

All of this will put a strain on Social Security, forcing the program to rely on its trust funds to stay afloat. But once the program’s trust funds run dry, benefit cuts may be unavoidable.

The most recent report from the Social Security Trustees has the program’s combined trust funds being emptied by 2035. But that timeline could be pushed up, especially if President Trump’s crackdown on immigration continues at full speed.

A big problem for Social Security

President Trump has made it clear that he’s taking a tough stance on immigration, and that undocumented workers risk being deported. The problem, though, is that undocumented immigrants still contribute to the U.S. labor force and still pay into Social Security.

Without that revenue, Social Security might need to dip into its trust funds at a faster pace to keep up with scheduled benefits. That could lead to broad cuts at an earlier date. It could also mean more significant cuts, leaving current and future retirees in the lurch.

There are solutions to prevent benefit cuts, but not easy ones

Social Security cuts were also a distinct possibility even before Trump took office. And they also are not guaranteed to happen.

Lawmakers have options for potentially preventing Social Security cuts. But each potential solution to the program’s fiscal problems has a flaw.

One option, for example, is to raise payroll taxes to boost Social Security’s revenue. But Americans aren’t likely to applaud that change, as many feel they’re already overtaxed.

Another option is to delay full retirement age, which when older Americans can claim Social Security without a reduction in benefits. Currently, it’s 67 for people born in 1960 or later. But if lawmakers push it back to 68, 69, or even 70, it could help Social Security preserve critical funding.

But that option could effectively force millions of Americans into a later retirement than they want. So like raising taxes, it’s unlikely to be regarded as a positive solution.

All told, something needs to be to prevent Social Security cuts. But if Trump continues to take a tough approach to immigration, those cuts could end up happening sooner than anyone wants. And given the number of seniors who depend on Social Security today, that could spur a widespread poverty crisis among older Americans that lawmakers just aren’t equipped to deal with.

The post Trump’s Recent Move Could Be Bad News For Social Security appeared first on 24/7 Wall St..