Social Security's Insecurity

June 23rd, 2025

Ian Cheng

Social Security, where the federal government provides retirement benefits, currently costs an eye-watering $1.6 trillion a year to support about 69 million Americans. It is composed of two separate trust funds (a pool of money distributed by the government): The Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI). OASI pays retirement and survivor (alive family members of an eligible, deceased worker) benefits, a bigger chunk of the total portion. DI only provides income replacement for ill or injured individuals who can’t work.

In a report on June 18th, OASI will become insolvent, or run out of reserve money, nine months earlier than projected, in 2033. This means that the “profit” they earned from past years’ taxes has been spent completely, and the fund must make do with freshly-paid payroll taxes (separate taxes that people pay specifically for Social Security). DI is not expected to become insolvent for the foreseeable future. Social Security will only have enough revenue to cover 77% of the benefits that US citizens will be eligible to receive, in other words, payments will be slashed by 23%. This reflects the long-lasting trend that Social Security spends more than it makes. In 2021, the OASI and DI funds spent a combined $1.48 trillion, when taxes only provided it with $1.42 trillion, a loss of $60 billion.

The insolvency date was pushed forward for several reasons, with one of them being the passage of the Social Security Fairness Act, passed by President Biden and approved by Congress after Trump was elected. The law eliminated provisions/clauses that reduced benefits for workers that didn’t pay Social Security taxes, such as firefighters and police officers. It reimbursed the 2.8 million people who were already affected and increased their monthly payments by anywhere from $360 to $1,190. This led to extra costs being incurred for the present and the future. The recovery of fertility rates was also delayed by 10 years, to 2050. A rise to the healthy rate of 1.9 children per woman is crucial for a steady workforce and more Social Security taxpayers in the future. America’s population is expected to rise 2.4% by 2030, yet, it’s aging, with 1 in 5 Americans being expected to be 65 years old or older in that year. This is significant because Social Security will only incur more losses with more people collecting benefits as the years go by.

Economic policy is another factor to consider. Although tariffs, or taxes on imported goods, have had a relatively small impact, that’s largely because the implementation of them has been constantly delayed, giving domestic companies time to stockpile and keep prices at current levels. A 25% tariff on Canada and Mexico coupled with a 10% tariff on China could boost inflation by 0.5-0.8%. The recent trade “agreement” has a 50% tariff on China, and since the US has a $300 billion trade deficit with China, it is very likely that inflation could soar to even higher levels. Inflation alongside other potential effects like rising prices will force the adjustment of benefits for a higher cost of living, making it more expensive to run Social Security.

Trump has promised to not touch Social Security benefits, which probably means to not let them fall. However, he’s anti-immigration. What makes this so detrimental in this case is that immigration is exactly what has kept the workforce afloat. In the past 3 decades, 95% of the growth of “prime-age” laborers has been thanks to immigration. Regardless of being legal or undocumented, immigrants pay taxes and mitigate the impact of a lower fertility rate. The best solution would be for the Trump administration to find a way to streamline the tax-paying process for migrants, making it easier to obtain a Taxpayer Identification Number that can be used to file and pay taxes. It would make sure that the United States could continue reaping the benefits of things like the $97 billion undocumented immigrants paid in 2022.

Despite everything, one thing’s clear: Social Security is ticking time and must be dealt with as soon as possible. A gradual restructuring with little impact on the people is what’s best for the United States, and only time will tell how this plays out.