Trump budget expects economic growth to improve Social Security deficit

The Trump administration’s 2021 budget proposal projects robust economic growth over the next decade, and in turn higher payroll receipts that would shrink Social Security’s swelling deficit.

The budget proposal, released Monday, projects Real Gross Domestic Product will be 2.8 percent in 2020 and 3.1 percent in 2021. From 2022 to 2025, the proposal projects 3 percent GDP growth, ultimately settling at 2.8 percent in 2030.

That kind of robust growth would translate to higher payroll taxes to fund Social Security. According to the White House’s budget proposal, Social Security’s portion of the payroll tax will generate $1.23 trillion in 2025, $1.59 trillion in 2030, and $12.8 trillion for the next decade.

Rose-colored glasses?

None of those receipts will be enough to cover Social Security’s costs.

But they would substantially lower the government’s largest mandatory spending program’s deficits, in turn making it easier to pass reforms to avoid its impending insolvency, which will happen by 2035.

Under the White House’s most recent assumptions, Social Security’s deficit will be about $133 billion in 2020, $200 billion in 2025, and more than $300 billion by 2030. Between 2021 and 2030, the budget projects Social Security will run a $2 trillion deficit.

While considerable, it would be about $1.2 trillion less than estimates under the Congressional Budget Office’s Social Security projections for the decade between 2021 and 2030.

That gap is explained by the vast difference between the White House’s and CBO’s growth assumptions, said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a non-partisan think-tank that advocates for sustainable fiscal policy.

“The President thinks economic growth will be way faster than pretty much every other economist,” said Goldwein.

CBO is projecting an average 1.7 percent annual GDP growth over the next decade, far below the White House’s 2.9 percent average.

CRFB surveyed 13 different forecasters, including the CBO, said Goldwein. Average annual projected growth was between 1.6 percent and 2.2 percent.

As the decade progresses, the disparity between the White House’s and CBO’s Social Security revenue projections widens.

They are roughly the same in 2020. By 2025, CBO projects receipts will be about $1.16 trillion, compared to the White House’s $1.4 trillion.

By 2030, CBO projects about $1.4 trillion in Social Security taxes, compared to the White House’s nearly $1.6 trillion, a $200 billion difference.

Between 2021 to 2030, the White House’s GDP projections would generate more than $1 trillion more in Social Security revenue than the under the CBO’s growth projections.