Social Security is our nation's most successful social program -- but it's also in some pretty big trouble. According to the April-released Social Security Board of Trustees report, the program won't bring in enough revenue over the long term (the next 75 years) to cover outlays to beneficiaries, inclusive of cost-of-living adjustments.
The silver lining for seniors who are dependent on Social Security as a major source of income is that the program is in no danger of disappearing or going bankrupt. Recurring sources of revenue, such as the payroll tax and the taxation of benefits, ensure that there will always be money to divvy out to eligible beneficiaries.
But the bad news is that Social Security is facing an estimated funding shortfall of $13.9 trillion between 2035 and 2093. If this shortfall isn't dealt with by adding revenue, cutting expenditures, or some combination of the two, retired-worker benefits could fall by as much as 23% within the next two decades. That means Social Security's future is in our elected lawmakers' hands.
Could President Trump come after Social Security benefits?
Although President Trump has taken a hands-off approach to fixing Social Security, there's been speculation that he'd become more proactive in the years that lie ahead and aim for reforms that would directly address the problem. Thus far, he's been focused solely on growing the U.S. economy, with the thesis being that a faster-growing economy with higher wages should lead to increased payroll-tax collection and a sounder Social Security program.
But should Trump win re-election to a second term as president, the potential for direct reforms increases substantially, even with "The Donald" suggesting on the 2016 campaign trail that entitlement programs like Social Security would be off-limits if he were president.
Before getting into the timeline of when I suspect Trump would attempt to pass direct reforms to the Social Security program and reduce long-term outlays, let me first describe exactly what's meant by the idea of "cutting Social Security benefits."
Here's what "cutting benefits" actually means
Cutting benefits doesn't mean taking the scissors and lopping off a percentage of the monthly benefit that current and future retirees would receive. Rather, the Republican Party has two core proposals that it or Trump would likely lean on to lower how much Social Security spends over a long period of time.
The first resolution involves a gradual increase of the full retirement age, or the age at which you become eligible to receive 100% of your retired-worker monthly payout, as determined by your birth year.
The full retirement age is set to peak in 2022 at age 67 for anyone born in 1960 or later, but the GOP has proposed raising it to as high as age 70. While protecting current retirees and pre-retirees who are near their claiming ages from any lifetime-benefit reductions, such a move would wind up reducing the lifetime-benefit potential of future generations of workers, such as millennials.
A higher full retirement age would require a worker to either wait longer to claim their full monthly benefit or accept a steeper permanent monthly reduction by claiming early (as early as age 62). No matter what this future generation of eligible retirees chooses to do, they'd earn less in lifetime benefits than they would under the current payout schedule.
The other way Trump and Republicans could look to cut Social Security benefits is by switching the program's inflationary tether from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Chained CPI.
The Chained CPI takes into account the idea of substation bias, which involves consumers trading down to a less-costly good or service when another becomes too pricey (i.e., buying pork or chicken when ground beef prices rise). Although this is a real-world consumer habit, the Chained CPI would result in smaller annual cost-of-living adjustments. While hardly noticeable over a short time frame of a year or two, the Chained CPI could substantially reduce outlay growth over the long run, thereby saving the program money.
Here's the likeliest time when Trump would try to reduce Social Security outlays
Now that you have a better idea of what I mean when I say "cut Social Security benefits," let's get back to the topic at hand: Trump potentially cutting lifetime benefits.
Although there are a lot of hypotheticals involved with such a prediction -- i.e., the 2020 election offers no assurances he'll be re-elected and there's absolutely nothing concrete to suggest he'll offer direct reforms to the program if re-elected -- the likeliest scenario is that Trump tackles Social Security reform after midterm elections in November 2022 or perhaps even in 2023, when the new Congress takes shape.
As the president stated at the Conservative Political Action Conference in 2013:
As Republicans, if you think you are going to change very substantially for the worse Medicare, Medicaid and Social Security in any substantial way, and at the same time you think you are going to win elections, it just really is not going to happen... What we have to do and the way solve our problems is to build a great economy.
Essentially, any sort of reform measures are off the table during election years. That's because no matter what direct reforms are made to Social Security, some people will always be worse off than they were prior to the changes. The GOP's reforms, for instance, could hurt low- and middle-income millennials and Generation Z.
Meanwhile, the Democrats' core fix, which involves raising or eliminating the payroll tax earnings cap, would be a direct hit on wealthy and upper-income Americans. In short, Trump was saying in a roundabout way that fixing Social Security could mean losing votes.
With this in mind, there's virtually no chance Trump tackles any sort of direct Social Security reform prior to the elections in November 2020. Since it's unlikely that Republicans would regain majority control of Congress in 2020, my belief is that, once the 2022 midterms are complete, Trump, with roughly two years left on his term (hypothetically assuming re-election), would go after direct Social Security reforms.
Again, there's nothing concrete to suggest that Trump will target direct Social Security reforms and benefit cuts. However, two of his presidential federal spending budgets have included long-term cut proposals to Social Security Disability Income, and Business Insider reported in December 2017 that Trump told a congressional colleague that he'd go after Social Security at the beginning of his second term.
There are obviously a lot of "what ifs" between now and the 2022 midterms, but in my view, direct Social Security reform proposals from President Trump that would reduce long-term outlays are a very real possibility if he's re-elected to a second term. Of course, whether they would become law is a completely different story that'll be dependent on the makeup of Congress.
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