Another Trump presidency spells trouble for Social Security and Medicare. Start saving now.

By Brett Arends

The presidential debate may have been a win for Trump but his plans cannot help the retirement safety net

After Thursday night's presidential debate, it looks like it's time to start preparing for Trump's second term.

And when it comes to money, that may come down to one word: save.

Save for your retirement. Save more, save now, save aggressively. You will need it. That's because America's national retirement plans, meaning Social Security and Medicare, were already in fiscal trouble. And Donald Trump has committed himself to budget policies that will do nothing to help them, and are likely to do the reverse.

Miracles may happen. But even if somehow things turned out OK - well, it's better to have the money and not need it than to need the money and not have it.

Trump has said he would "protect" Social Security and Medicare, but it's not clear what, exactly, that means and it is even less clear how he plans to do it. He has publicly floated talk in the past of "cuts" to these programs, before backtracking.

Meanwhile, follow the math.

It is not news that America's looming retirement crisis is heavily focused on the two programs that are the essential safety nets for almost all seniors: Social Security and Medicare.

The U.S. Treasury estimates that these programs will need an extra $78 trillion in taxpayer funds to meet their obligations. Those figures, technically, apply to the total needs over the next 75 years. But they are calculated in today's money; in other words, if we wait until the money is needed each year to pay it, the figures involved will be vastly higher.

Social Security's trust fund is expected to be depleted in 2033. At that point, it would only be able to pay 79% of benefits. It could keep going for another two years by borrowing from the Disability Insurance fund before the combined operation runs out of cash reserves in 2035.

Medicare's Part A trust fund is expected to run out of cash in 2036. The rest of Medicare relies on extra cash from taxpayers year after year. Hence the total funding gap of $78 trillion.

Where will this money come from? You tell me. The federal government is already in trouble. Even though unemployment is just 4%, Uncle Sam is running deficits worthy of the depths of the Great Depression: 7% of annual gross domestic product in 2024, and 6.5% in 2025.

National debt, at 99% of gross domestic product, will soon exceed the post-World War II record and by 2034 is expected to hit 122% of GDP.

Meanwhile, Donald Trump has already said that if he is elected he wants to renew his 2017 tax cuts. That will cut revenues, and therefore raise deficits, by an extra $4 trillion.

He has also said he wants to cut other taxes, though we shall have to wait and see.

The usual argument here is that these tax cuts will be paid for by cutting "waste." Politicians have been promising that since Ronald Reagan's first term and we are still waiting.

Meanwhile, take a look at the numbers. According to the Congressional Budget Office, over the next 10 years, federal revenue is forecast to total $63 trillion. Include a renewed 2017 tax cut and that falls to $59 trillion.

Spending over the same period is forecast to total $85 trillion. But CBO numbers show that about 70% of that, or $60 trillion, will go to just five things: Social Security, Medicare, debt interest, defense and veterans (just $3 trillion).

Those alone add up to more than all forecast revenues.

So, all we'd have to do to bring the budget into balance is ... just abolish the rest of the federal government. No problem.

Incidentally, these numbers don't include any possible increase in defense spending. Trump has said he wants to build up the U.S. military to a position of greater strength. Unless the defense contractors agree to work for free, which is unlikely, this will add to federal spending.

I'm assuming that Trump will not do to the federal government what he has done to his private corporations - run it into bankruptcy and shortchange the creditors.

Without tax increases, Social Security and Medicare were already heading for cuts. With extra tax cuts, it's pretty much a dead cert.

Rightly or wrongly, this will put more emphasis on everybody to save more for their own retirement. Your future Social Security payments may not be as big as you had hoped. You may be facing more cost sharing on Medicare. That's especially true because more than 10% of the total Medicare budget now goes to the extra costs of the privatized "Medicare Advantage" program. That leaves even less for the rest of us.

Trump has spoken up for Medicare and Social Security on the campaign trail, but his past comments have been more ambiguous than most people realize, and have left him wiggle room. (I've written about this before here and here.)

Trump campaign spokesperson Karoline Leavitt, when asked to comment, told MarketWatch in a statement: "President Trump delivered on his promise to protect Social Security and Medicare in his first term, and President Trump will continue to strongly protect Social Security and Medicare in his second term. ... By unleashing American energy, slashing job-killing regulations, and adopting pro-growth America First tax and trade policies, President Trump will quickly rebuild the greatest economy in history and put Social Security and Medicare on a stronger footing for generations to come."

We shall see.

But when doing a deal with someone who calls dealmaking an "art," always read the fine print.

Medicare can be "cut" in all sorts of ways without anyone admitting to cuts, because the program is complex. Social Security is more straightforward, but Trump could slow the increase in future benefits and still say he hadn't actually "cut" them.

You can argue America's entitlements crisis was going to hit no matter what happened in the election. But if Trump is heading for victory, as seems likely at the moment, it's here.

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-30-24 1741ET

Copyright (c) 2024 Dow Jones & Company, Inc.