Some things are worth worrying about, but others aren’t. Recent comments made by Elon Musk, Tesla CEO, tech billionaire, and Trump administration advisor, saying that Social Security is “the biggest Ponzi scheme of all time” is an example of the latter category. However, the possibility that President Trump’s policies will negatively impact Social Security could fall into the former category.
Social Security’s trust funds are currently on track to be depleted by 2034. But will President Trump cause the popular federal program to run out of money sooner than expected? Here are four things to know.
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1. Tariffs could lead to higher Social Security benefit payments
Trump’s tariffs and threats of more tariffs have been front and center in recent days. The stock market plunged last week as investors fretted about the potential impact of the White House’s trade policy on the economy. Tariffs could affect Social Security, too.
Wall Street investment bank Goldman Sachs now projects higher inflation in 2025, primarily due to Trump’s tariffs. Goldman Sachs isn’t alone: 91% of corporate economists recently surveyed by Wolters Kluwer think tariffs could cause higher inflation.
If inflation indeed resurges, Social Security cost-of-living adjustments (COLAs) — which are based on inflation — will also be higher. If inflation is higher than the projections used by the Social Security trustees, the program’s trust funds will be exhausted sooner than expected.
2. Tax cuts could reduce cash inflows to Social Security
President Trump has proposed multiple tax cuts. He wants to permanently extend the temporary corporate tax cuts implemented in 2017. During his presidential campaign, he pledged to eliminate federal taxes on Social Security retirement benefits, overtime pay, and tips.
Several of these ideas are popular. However, they could reduce cash inflows to Social Security. This would, in turn, cause the program to run out of money sooner without additional sources of revenue.
3. An immigration crackdown could accelerate trust funds depletion
Trump made a crackdown on illegal immigration a centerpiece of his 2024 presidential campaign. Since his inauguration, the president has issued multiple executive orders focused on beefing up border security and deporting unauthorized immigrants.
These moves could also impact Social Security. How? Many unauthorized immigrants pay FICA taxes that help fund Social Security, but are ineligible to receive benefits. In a 2024 analysis, the nonpartisan Institute on Taxation and Economic Policy estimated that “undocumented immigrants paid $25.7 billion in Social Security taxes” in 2022.
A significant reduction in the number of these immigrants could therefore reduce the amount of money flowing into Social Security and accelerate the depletion of the program’s trust funds.
4. The net impact of Trump’s policies could cause Social Security to run out of money three years earlier than expected
Another nonpartisan organization, the Committee for a Responsible Federal Budget, estimates that the net impact of Trump’s policies could cause Social Security to run out of money in 2031 — three years earlier than expected. The committee’s analysis found that the biggest impact could come from the president’s plan to end federal taxation of Social Security benefits, followed closely by his proposal to eliminate federal taxes on overtime pay and tips.
Importantly, though, President Trump can’t accomplish these objectives on his own. He will need to win congressional support to pass legislation to lower taxes. That could be challenging. Republicans only control the U.S. House of Representatives by a slim margin.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Tesla. The Motley Fool has a disclosure policy.
