Congress and the president are having a grand time spending taxpayers’ money.
Whether it’s the One Big Beautiful spending and tax cuts bill, funding for wars in the Middle East, deporting immigrants, or bailing out farmers, there seems to be unlimited resources.
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Remember when tax-and-spending proposals were met with the question: How will that be paid for? Well, not anymore.
Unfortunately, for some programs, such as Social Security, the well is going to be dry soon, and neither Congress nor the president seem to be interested in dealing with the looming financial crisis
Social Security is facing insolvency
Social Security, which in some form or another provides funds for over 75 million people, has always been a program that pays for itself. That no longer may be the case.
Since 2010, the Social Security System has been running deficits, paying out more in benefits than it received in revenues. The so-called Trust Fund that built up for the first 75 years is starting to run dry.
It is estimated that the previous surpluses will be depleted some time in 2032. And that forecast was created before the financial impacts of high inflation on expenditures are known.
Social Security payments are inflation-adjusted every year. Given the elevated inflation rates created by the Iran war, the adjustment for 2027 could be 4% or higher. In comparison, this year’s increase was 2.8%.
That could mean the day of reckoning gets pushed even closer.
A government bailout is doubtful
Though it would be nice to think the federal government can fund anything and everything, high and rising government debt and deficits make that unlikely.
The latest estimate for the current fiscal year’s deficit is roughly $2 trillion. That is up from the nearly $1.8 trillion level posted in fiscal year 2025.
It would also be the third largest deficit in history, exceeded only by the COVID-driven fiscal years in 2020 and 2021.
And the current deficit estimates will probably be adjusted upward. Costs of the Iran war are uncertain, and refunds for tariff payments are also unclear.
Heavier burden
Meanwhile, the national debt keeps ballooning and now exceeds an astounding $39 trillion.
To put it in perspective, the ratio of debt-to-GDP will likely hit 125% this year. It first broke the 100% mark in 2013. That is a 25% increase in just 14 years.
While the ever-growing national debt is a clear problem in and of itself, the true burden is the interest on the debt.
We will never pay off the national debt, but paying the interest on the debt is mandatory. A U.S. default would be catastrophic.
In the current fiscal year, interest payments will likely break the $1 trillion level for the first time and will continue to rise.
Consequently, the share of government revenues earmarked for interest payments, interest as a percent of total expenditures, and interest costs as a percent of GDP are all at or nearing historically high levels.
The huge interest payment burdens, coupled with massive tax cuts and spending increases, make it clear that the federal government has limited capacity to pay for interest costs and budgeted programs while also funding Social Security shortfalls.
Everyone hurt by a drop in Social Security payments
According to the nonpartisan (and they really are nonpartisan) Committee for a Responsible Federal Budget, a failure to resolve the looming Social Security Trust Fund crisis will require a 24% — or about a $345 billion — reduction in benefits.
Though most benefit reductions will be felt by the nearly 60 million retired Social Security recipients, the resulting economic impacts will hit the economies of all states, as well as well as households at all income levels.
A high-income couple could experience as much as a $24,000 per year reduction in payments, a middle-income household could see their benefits fall by up to $18,000, and some low-income recipients might suffer $8,000 cuts.
Since a significant proportion of Social Security recipients spend most if not all of their benefits, there is likely to be a substantial reduction in the demand for goods and services.
Nationally, the reduction in benefits amounts to 1.1% of GDP. The resulting cutbacks in spending will multiply through the economy and yield an even greater decline in economic activity.
For businesses in lower income areas, where recipients tend to spend most of their checks, the impact on consumption could be significant.
Time is running out
The insolvency threat has been known for decades, but Washington has done nothing but help accelerate the process.
As a consequence, Social Security insolvency could be about six years away.
It will not be easy to find a solution that pushes insolvency back significantly. It will require taxing some people more, maybe even a lot more, altering the revenue base to include nonwage and salary compensation, and modifying and/or reducing benefits.
But there is way out. The American public has not been heard from on this subject.
Budgets are political documents with economic consequences. The spending structure is supposed to mirror the wants and desires of the public.
The way those preferences are made clear is through the ballot box.
At this point, Social Security is not on the ballot.
For Social Security to be saved from insolvency, politicians must put it on the ballot. They will have to make it a campaign issue, and the voters will have to show that it is something they truly care about by electing those candidates.
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