Key Points
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President Trump has overseen several key changes to Social Security during the first year of his second nonconsecutive term.
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Trump’s tariff and trade policy has had a permanent impact on Social Security’s cost-of-living adjustment (COLA).
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Meanwhile, the president’s flagship tax and spending law, the “big, beautiful bill,” comes with an unsightly price tag for America’s leading retirement program.
Year one of President Donald Trump’s nonconsecutive second term is nearly in the books, and change has been a common theme — especially when it comes to America’s leading retirement program, Social Security.
For example, the Trump administration ended the overpayment and recovery rate of 10% that was set under the previous administration, led by President Joe Biden, during the COVID-19 pandemic. In its place, the Social Security Administration (SSA) installed a 50% clawback rate on the more than 1 million beneficiaries who owed a cumulative $23 billion in overpayments, as of the end of the federal government’s fiscal 2023 (Sept. 30, 2023).
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President Trump also signed an executive order (EO) in late March (“Modernizing Payments To and From America’s Bank Account”) that set Sept. 30 as the compliance date to end the mailing of federal benefit checks. Although 99% of Social Security beneficiaries were already receiving electronic payments when Trump signed this EO, more than 500,000 beneficiaries were still required to set up direct deposit or a Direct Express Card to continue receiving their monthly payouts.
President Trump delivering remarks. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.
But there are more nuanced changes that have been made by Donald Trump’s policies, which may not be as apparent. Two of the president’s policies come with unintended consequences for Social Security.
Trump’s tariff and trade policy has had a permanent impact on Social Security’s COLA
Arguably, nothing Trump has done in his second term has received more attention than his tariff and trade policy.
On April 2, Trump unveiled a sweeping 10% global tariff, as well as higher “reciprocal tariffs” for dozens of countries deemed to have adverse trade imbalances with America. Between the extension of reciprocal tariff implementation dates and several announced trade deals, these reciprocal tariff rates have undergone significant changes over the last eight months.
While Donald Trump’s intention with tariffs is to make American-made goods more price-competitive with those being imported into the country, as well as to protect U.S. jobs, his policy has come with an unintended (and permanent) consequence for Social Security.
In December 2024, four New York Federal Reserve economists writing for Liberty Street Economics published a report (“Do Import Tariffs Protect U.S. Firms?”) that examined the effect of Trump’s China tariffs in 2018-2019 on the U.S. economy and stock market. What these economists noted was a decisively negative effect caused by input tariffs.
An input tariff is a duty placed on an unfinished good (e.g., copper, steel, or an automotive component) imported into the country that’s used to complete the manufacture of a product domestically. Input tariffs were found to have increased production costs for some domestic manufacturers, which in turn meant higher costs for consumers.
The inflation rate has been increasing following the implementation of President Trump’s tariffs. US Inflation Rate data by YCharts.
Since the impact of President Trump’s tariff and trade policy began showing up in monthly reported economic data, the U.S. inflation rate has moved modestly higher — from 2.31% to 3.01%, based on the Consumer Price Index for All Urban Consumers.
But when the U.S. inflation rate increases, so does Social Security’s cost-of-living adjustment (COLA). The program’s COLA is the near-annual benefit increase passed along to recipients to help them offset the effects of inflation (rising prices). Since deflation (falling prices) can’t result in Social Security benefits declining from one year to the next, the tariff-related “Trump bump” beneficiaries will receive in 2026 is a permanent part of the program’s history, and their payout.
On Oct. 24, the SSA announced Social Security’s 2026 COLA would be 2.8%, which is modestly above the 2.3% average annual raise since 2010. Next year will also mark the first time in close to three decades that benefits have risen by at least 2.5% for five consecutive years.
Image source: Getty Images.
Trump’s “big, beautiful bill” comes with an unsightly price tag for Social Security
The other prominent policy change during the first year of Donald Trump’s second term is the passage of the “big, beautiful bill.”
This tax and spending law made the individual tax brackets that were temporarily set by the Tax Cuts and Jobs Act during President Trump’s first term permanent. Moreover, it introduced several tax deductions that will be active from calendar years 2025 through 2028, including:
- A $6,000 increase to the standard deduction ($12,000 for couples filing jointly) for eligible seniors aged 65 and above.
- The ability for eligible workers to deduct a portion of their overtime pay from their federal income.
- The ability for eligible workers to deduct up to $25,000 in reported tips from their federal income.
While the seniors and workers to whom these tax breaks apply are potentially smiling, it’s an entirely different story for future generations of retirees who expect to rely on Social Security as a meaningful source of income.
In late July, the highest-ranking Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-OR), sent a letter to the SSA’s Office of the Actuary (OACT) requesting a financial assessment of how Trump’s “big, beautiful bill” will impact the program. A week later, the OACT sent a worrisome response.
According to the OACT, the tax breaks in Trump’s flagship law are projected to reduce income collection for Social Security’s Old-Age and Survivors Insurance trust fund (OASI) and Disability Insurance trust fund (DI). In turn, this is expected to increase costs for the combined OASI and DI by $168.6 billion from 2025 through 2034.
The OASI’s asset reserves are expected to be exhausted in 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
Furthermore, Trump’s “big, beautiful bill” is forecast to speed up the timeline to potential benefit cuts for retired workers and survivor beneficiaries.
The 2025 Social Security Board of Trustees Annual Report estimated the OASI would completely exhaust its asset reserves (the excess cash collected since inception) by 2033. The OACT’s newest analysis calls for the OASI’s asset reserve depletion timeline to jump forward from the third quarter of 2033 to the fourth quarter of 2032. For context, the Board of Trustees believes that sweeping OASI benefit cuts of up to 23% may be necessary to avoid further reductions over the next 75 years.
Although things will look a bit rosier on the tax front for some folks through 2028, Trump’s tax and spending law is expected to worsen Social Security’s financial outlook.
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This is nothing more then a propaganda hit piece. one glaring one , how the Tariff policies increase inflation and effect Social Security. Inflation is lower now then under Biden. The COLA received were higher under Biden because of it. Yet all we heard then was the economy was great. Now with lower inflation things are terrible? give it a rest.
Where did you ever read that inflation is lower? just read 4 articles all stating that unemployment is at it’s highest rate since 2021 and inflation is moving up like an air balloon. I know that everything I go out to buy is considerably higher. That $30.00 per month increase in S.S. doesn’t come close to touching even one bill increase.
Currently, the inflation RATE is slowing, which it does need to do before reversing. And the Consumer Price Index has dropped dramatically since 2022 according to the US Bureau of Labor Statistics. And here is a good article about unemployment myths:
https://lsbe.d.umn.edu/articles/unemployment
Agreed that SS stinks, would have been better to have the option to keep and invest the money for sure!
It’s difficult to lend any credence to the words of a person who can’t discern the difference between “Affect,” and “Effect,” or especially between “Then,” and “Than,” but, who still feels qualified to lecture the rest of us on much more complicated economic issues. That’s both the beauty, and the tragedy of freedom of speech. Your bias clearly shows, and even though is little more than your opinion, I , for one, am pleased that you are so happy with current rate of inflation, the cost of living adjustment, and can find no complaint with the nation’s current economic state, not even the growing national debt.
https://bipartisanpolicy.org/report/deficit-tracker/
Stan-thank you I noticed that as well, words matter Sam.
Stan is sadly correct! Trump has not helped the low and middle class families. But, has really helped his millionaire
friends.
Low & Middle Class ??? Are you referring to the 43 % of Americans that pay ZERO taxes to the IRS ???
Another thousandaire on the side of the billionaires.
It is so disappointing that the economic literacy of our nation is so low that accusers can get away with false and inflammatory statements. “Trump has not helped middle and lower-income families while helping millionaire friends. First the Big Beautiful Bill did not lower tax rates for the millionaires. There were several aspects of the bill that did increase costs to millionaires, but the tax rates continued where they were. Second, the advantages built in for overtime pay, tips, and social security were exclusively limited to lower- and middle-income families. Third, taxes paid by the rich went up after the 2017 bill to lower tax rates. When tax rates are over 36%, wealthy people shift their assets into non-taxable or tax-advantaged vehicles — decreasing their tax bill. However, when tax rates are lowered, having assets in tax-advantaged vehicles are no longer worth the costs and loss of flexibility of such vehicles. The switch takes place and tax revenues actually increase. Moreover, putting assts into taxable positions typically are associated with investments that enhance productivity and enhance growth. This has been observed for order a hundred years ago. Woodrow Wilson said that only a stupid country would have high tax rates on the rich. Yes, their rates should and are higher than lower incomes.
references or evidence of tax revenues decreasing with increasing tax rates over 36%.
OMG! Does the writer of this story actually believe that non of the people getting SSI checks dont already have bank accounts. No bank will cash the SS check if the person doesnt have an account with them. However these people getting physical checks could be dead and this will keep people from continuing to cash grandmas check! Oh The HORROR!