Social Security’s 2032 Cliff: The Countdown That Congress Would Prefer to Ignore

Social Security is an insolvent and unsustainable retirement program. That much I wrote about last year during Social Security's 90th anniversary. It has become that much more apparent with the latest Trustees Report that was released earlier this week. The big finding from that report is that the retirement benefits, under the Old-Age and Survivors Insurance (OASI), is set to expire at the end of 2032. This is one year sooner than was projected last year. 

Why was this deadline accelerated? To quote the Peter G. Peterson Foundation, "Legislation includes the January 2025 passage of the Social Security Fairness Act that repealed the Windfall Elimination Provision and the Government Pension Offset, and the July 2025 One Big Beautiful Bill Act that expanded the income tax deduction for seniors. The former legislation increases program outlays, while the latter decreases revenues." 

What does this mean once the Trust Fund is depleted? All beneficiaries regardless of age, income, or need will see their benefits slashed by 22 percent. This decrease in benefits is to allow Social Security to keep going for the next 75 years. But here's the thing: even after the depletion of the Trust Fund, "Social Security will still spend more than it earns in payroll tax revenue. Over the next decade, Social Security will spend $3.8 trillion more than it collects, which is 2.7 percent of taxable payroll or 0.9 percent of GDP." 

Additionally, lower fertility and lower immigration are both contributing to Social Security's deteriorating state. The Cato Institute argues that the Social Security Administration is being overly optimistic on their fertility rate assumptions, which creates rosier financial projections for Social Security.

The Trustees Report reinforces a familiar but uncomfortable reality: Social Security’s imbalance is no longer marginal. Even after the Trust Fund is depleted, the program is projected to spend trillions more than it collects over the following decade.

What makes this particularly consequential is that the system does not gradually adjust as insolvency approaches. It waits, then it cuts. That design choice means policymakers are not managing a slow-moving problem. They are managing a countdown. 

In that sense, the choice facing policymakers is not whether Social Security will change, but whether change will be deliberate or forced. And the window for choosing the former is closing.

When Housing Meets Immigration: Is the Swiss Referendum Capping Its Population Asking the Wrong Question?

Next week, Swiss voters are going to head to the ballot box to decide whether to cap the Swiss population at 10 million by 2050. Supporters of immigration caps can often be presented as Far Right, fearful, and parochial. I have felt this way in a U.S. context. But then I have to remind myself that the U.S. and Switzerland have two different contexts. Switzerland does not even have the integration issues that many of its European neighbors have. This is in part that Switzerland is able to integrate its immigrants better because they mainly come from countries like France, Italy, and Germany. Although the primer on the initiative lists Islamic culture as a reason, the main reasons for the Swiss ballot is a combination of housing and infrastructure strain.

In 2014, I expressed concerns about a similar Swiss referendum for a quota on immigration. Switzerland's immigration quota was a self-defeating policy because immigration is driven by labor demand and it is empirically shown to strengthen employment and economic performance. Less immigration means less economic output and less revenue. 

But I keep coming back to the housing component. In the United States, J.D. Vance wrongfully blamed housing affordability on immigrants. In the U.S. case, it is true that immigrants consume housing, but they also disproportionately build housing, so much so that stifling off the construction labor with strict immigration policy makes matters worse. I cannot help but think that something similar is going on here. It seems like Switzerland is trying to solve a housing problem with immigration policy. 

On the one hand, Zurich has made strides by boosting housing supply by 9 percent with upzoning. On the other hand, only land inside designated "building zones' can be developed, and done so over a 15-year demand rule (Swiss Spatial Planning Act [RPG], Article 15). The RPG also has agricultural zoning laws that further limit sprawl (Art. 16) to construct more housing. On top of that, each canton has their own zoning regulations and permitting rules that get in the way of housing construction. 

The Swiss case against immigration is not reactionary restrictionism. Switzerland faces housing and infrastructure strains. At the same time, Swiss housing scarcity is not occurring in a vacuum. The land use restrictions, zoning regulations, and permitting laws fundamentally limit Switzerland's housing supply. If this referendum passes, Switzerland will be treating a housing supply problem as a population problem, and will be doing so to its own detriment. 

The Retirement of the RCP8.5: Why Apocalyptic Modeling Should Not Dictate Climate Change Policy

While I was on vacation in Portugal last month, I really made sure I wasn't paying attention to politics or the media circus. One of those moments that I missed around that time was this post from President Trump:

It was in reference to some recent news about climate change modeling. In its 2014 Intergovernmental Panel on Climate Change (IPCC) report, the United Nations prepared four main scenarios. The gloomiest of these scenarios was the RCP8.5 scenario. 

In late April of this year, the IPCC retired the RCP8.5 scenario as a plausible future emissions pathway. There are those who believe, including the authors of the IPCC paper, that this is being scrapped because there has been enough progress with climate change policy intervention to merit its retirement. I did not buy in 2018 that the RCP8.5 scenario was plausible back then. 

American Enterprise Institute scholar Roger Pielke, Jr. and Competitive Enterprise Institute scholar Marlo Lewis Jr. explain why the scenario was never plausible to begin with. For one, coal production would have had to implausibly increase by 900 percent and become the predominant form of energy, which is peculiar given that coal was already declining as a form of energy in the 2010s. The RCP8.5 also assumed that the population would reach 12 billion, which is a far cry from the 10.2 billion that is projected. And the idea that low-income countries would stay considerably poorer than other countries? Then there are the assumptions of unabated fossil fuel use and no negative emissions technologies. 

The problem here was not mere theoretical modeling for its own sake. As this article from Carbon Brief details, RCP8.5 was treated as a "business as usual" and likely outcome when it came to climate change policy and activism. At best, it was meant to be an upper-bound, highly improbable stress test. When such scenarios are used as a baseline, they exaggerate projections of future warming and damages. 

This exaggeration leads to a form of policy overcorrection, and results in regulatory and fiscal responses that are larger, faster, and more intrusive than would be justified if a more accurate model were being used. That is how we get such policies as emission standards for electric vehicles, gas stove bans, carbon capture & sequestration mandates, and energy efficiency standards.

Trying to prevent a scenario that is essentially not going to happen is a waste of money, time, and resources. If we are basing policy on false assumptions, it means that we cannot begin to understand the costs and benefits of each policy decision. As we learned during the COVID pandemic, a miscalibration at that scale is a form of harm in which the cure is worse than the disease. Retiring RCP8.5 is a "better late than never" moment, but this whole debate acts as a reminder that we should let skepticism be at the helm of energy and climate policy instead of hyperbole and alarmism. 

Portugal's Economic Recovery Looks Real, But So Do the Warning Signs of Another Crisis

Last week, I went on a lovely trip to Portugal. I went cycling and surfing. I tried the extreme sport of coasteering for the first time. I got to try pastel de nata, bacalhau, and frango piri-piri. Being there for a week, I got notice the way things work, from public transportation and work ethic to housing and health care. 

Then you learn things like Portugal needed a €78 billion bailout during the eurozone crisis last decade. In response, Portugal was able to reduce its deficit spending and close the gap on its bond spreads with fiscal restraint. The Organization of Economic Co-operation and Development (OECD) recently called Portugal's fiscal performance "among the strongest in the OECD and the Euro Area in the past few years." Continued debt reduction, disciplined budgets, strong nominal GDP growth all help explain why both Fitch's and Standard & Poor's have a positive outlook for Portugal. 

These are certainly reasons to be hopeful. Yet there are some concerns about the Portuguese economy:

• Portugal has a birth rate of 1.4, which is well below the replacement rate of 2.1. 
• Portugal is the third country in Europe with the lowest proportion of young people, which makes it more difficult to pay for social programs and to keep the economy growing with a stable labor force. 
• A study from the University of Lisbon reminds us that brain drain is compounding these effects. Up to 40 percent of Portugal's graduates emigrate to other countries.
• A recent report from the European Commission found that Portugal has the most overvalued housing prices, which makes it that much more difficult for everyday Portuguese citizens to afford housing.
• If the conflict in the Middle East is prolonged, it could weaken economic growth and exacerbate inflation for Portugal. 

Portugal does not fit neatly into an optimistic or pessimistic narrative. On the one hand, Portugal has made impressive fiscal strides since requiring a bailout just over a decade ago. Compared to some larger European economies, Portugal's fiscal trajectory actually looks relatively disciplined. 

On the other hand, strong tourism, balanced budgets, and improved credit ratings do not solve deeper structural problems. Low birth rates, emigration of educated workers, and housing affordability issues could create significant economic pressures in the years ahead. Portugal seems to have escaped one crisis while gradually wading into another one. 

Trump's Golden Dome Is More Costly Than Simply Not Striking Gold

There is something alluring about the idea of a "Golden Dome": a single, encompassing shield that can render a nation like the United States untouchable. Missile defense systems have long made that psychological appeal that enough technology can be a security risk and neutralize all potential risks. Similar to Reagan's "Star Wars" initiative, the result is a cycle of ambition, technical constraints, and spiraling costs. The question is whether Trump's Golden Dome is a sincere military strategy or a political blunder wrapped in a security blanket. 

Trump's recent "Golden Dome" proposal is a multilayered missile defense system intended to shield the U.S. from ballistic, hypersonic, cruise, and potentially space-launched missiles. The most controversial part of this proposal is thinking about missile defense from space because it would place interceptors in orbit. The idea is to technologically be at the cutting edge while expanding the strategic military scope of the United States.

There are a few reasons to question the proposal, one of them being technological feasibility. As the Cato Institute points out in its Golden Dome analysis, this proposal is based on Israel's Iron Dome. Israel only has to worry about covering 8,500 square miles, as opposed to the U.S.' 3.8 million square miles. Also, ballistic missiles are much more difficult to intercept than short-ranged missiles, which is noteworthy because the U.S. would be more likely to be attacked by long-range missiles. 

Furthermore, this report from the American Physical Society details how defending a country even from a few ballistic missiles is a challenge due to timing and geometry limits, as well as the ability for a defense system to discriminate the warhead from the rest of the "threat cloud." Once a missile is launched, a defender only has minutes to track, detect, and intercept the missile. Even under highly simplified scenarios, reliability drops quickly as the number of missiles increases. The challenge is developing a system at scale.

Even if proponents were to bypass the physical limitations, there is the issue of the price tag. According to a recent report from the Congressional Budget Office (CBO), this system will cost $1.2 trillion over a 20-year period, an amount significantly higher than Trump's estimated $175 billion. In terms of composition, up to $540 billion of that $1.2 trillion is due to the deployment and operation of the space-based interceptors.

The price tag also begs the question about opportunity cost. A trillion-dollar-plus commitment to missile defense necessarily crowds out other investments, including conventional force readiness, cyber defense, or a call towards greater fiscal restraint from the government more generally. This goes beyond the actual price tag. It is a question of whether such a large investment is justifiable given other priorities. 

Aside from the costs, a core issue that such a system might actually provoke adversaries to escalate their military behavior. As the Cato Institute argues, the U.S. upping its interception architecture could incentivize other countries to expand missile inventories, more sophisticated decoys, or systems that would be designed to saturate and overwhelm the U.S.' missile system.

We already have seen this escalatory spiral take place. The situation between the U.S. and the USSR became so destabilizing during the Cold War that they needed to create the Anti-Ballistic Missile Treaty of 1972. Similarly, MERV development and Reagan's Star Wars initiative also escalated tensions rather than de-escalating. History "dealt" with these issues through arms control agreements and strategic stabilization to counter the escalatory nature of enhanced defense systems. 

The Golden Dome tries to soothe people by promising the promise that enough technology can help avoid all risk. However, such promises provide a false sense that we can avoid all risk, much like during the COVID pandemic. The truth is that the Golden Dome cannot override the physical limitations, the absurdly high costs, and the escalation dynamics. A golden dome may project strength, but projection is not the same thing as protection of the American people. 

It Would Be a Gas If Trump Took the Fast Lane and Eliminated the Gas Tax

Every few years, when gas prices get high enough to be politically dangerous, politicians "discover" the idea of a gas tax holiday. Senator John McCain proposed it in 2008, President Joe Biden in 2022, and now President Donald Trump this week. It is peculiar to have politicians tacitly admit that high taxes harm consumers, but I will set aside that irony. Nevertheless, it does set an uncomfortable question: If temporarily suspending the tax would help consumers, why should the tax exist in the first place?

After all, nobody proposes a hiatus from something that is harmless or helpful. The very existence of multiple calls for a gas tax holiday should give us good reason to pause. Much like emergency waivers of the Jones Act after natural disasters, gas tax holidays inadvertently expose the hidden costs of a policy that politicians generally insist is reasonable. 

Before delving into issues about the gas tax, it would be worth noting that the gas tax is 18.4 cents per gallon, which will not do that much to alleviate the average cost of a gallon, which is $4.50. Now let's get into the main issue of its regressive nature, meaning that it takes a larger share of income from lower-income households than from higher-income ones. That is hardly a surprise for a consumption tax tied to a necessity like transportation fuel. For many Americans, driving is a price of participating in the labor market. 

The burden is uneven because transportation is not evenly substitutable. Higher-income households are more likely to have flexible work arrangements, shorter commutes, and/or access to multiple modes of transportation. Conversely, lower-income households are more likely to rely on older vehicles, need to take longer commutes, and have jobs that require physical presence. Rural commuters similarly have constraints, whether with longer baseline distances or fewer substitutes for automobile travel. 

The broader economic problems with the gas tax are longstanding. I previously examined its inefficiencies in detail, including its distortion of transportation choices, weak alignment with actual road usage, and broader market-side effects. Much like the Cato Institute argues, this is why state governments should  meet their infrastructure needs instead of the federal government.

The recurring gas tax holiday debate implicitly admits that the tax is burdensome. The question should be what to replace the federal gas tax with. States could implement their own, especially since most roads are not federally owned. But greater fuel efficiency and higher prevalence of electric vehicles is making the gas tax more passé. There is the option of mile-based user fees, as well as a "quant" framework that accounts for usage. Regardless of what it is replaced with, one thing is for certain: it is difficult to call a gas tax "necessary infrastructure funding" when it regularly needs a vacation to survive public opinion. 

You Can't Deport Supply and Demand: How ICE Enforcement Contributes to Labor Shortages

For years, advocates of mass deportation insisted that aggressive immigration enforcement would strengthen the economy and help natives born in the U.S. find a job. The theory is that you remove enough workers, somehow businesses, customers, and local economies adjust without any pain. Beyond this political rhetoric begs an important empirical question: what actually happens to labor markets when Immigrant and Custom Enforcement (ICE) enforcement increases? Is ICE actually making the labor market better? A recent paper from the National Economic Bureau of Research (NBER) using data from areas affected by immigration raids and related enforcement policies. 

Instead of relying on simple "before-and-after" comparisons, the author of this NBER paper use regional differences in ICE enforcement to examine how labor market outcomes diverged over time. One of the big conclusions is that greater ICE enforcement led to less employment for undocumented workers. But the effects did not stop there. The study found little evidence that this enforcement helped native workers. Meanwhile, businesses with immigrant-heavy sectors experienced labor shortages and operational disruption. The fact that this study compared changes across regions, as opposed to simple national trends, provides a stronger analysis than a basic correlation analysis.  

Broader economic literature on immigration explains why this NBER study's findings are unsurprising. Despite the political rhetoric of immigrants taking jobs from native-born workers, economists have found very little evidence that immigration substantially reduces native employment overall. If that claim were true, we would have seen ICE enforcement generate clear increases in employment opportunities for native workers. Yet no such clear increase emerged in the study. As a matter of fact, the study points toward labor-market disruption and spillover effects. 

That is because the economy is not a fixed pie. Economic literature already indicates that immigrants are often complements rather than simple substitutes for native labor. In industries such as housing construction, hospitality, agriculture, and food processing, different categories of workers frequently depend on one another to maintain production. Removing that part of the workforce can and does reduce productivity and labor demand elsewhere in the economy. 

There is also evidence that immigrant workers can increase wages for native workers. That is because immigrants are not only workers competing for jobs. They are also consumers, renters, entrepreneurs, and customers. When policymakers treat the labor market like a fixed pie, they ignore this high level of interconnectedness. 

It is that level of interdependence that makes these findings unexpected. Large-scale immigration enforcement acts as a supply shock. That shock propagates throughout supply chains and affects firms, consumers, and workers beyond the targeted population of the mass deportation. The fact that the pro-mass deportation argument is based in a simplistic view of the economy is part of why I was against mass deportation in 2024. 

None of this determines the question of how much immigration enforcement is appropriate. What it does show is that mass deportation is not costless or uniformly beneficial. While "deport them and it will work out" is a snazzy political slogan, it still does not repeal arithmetic or basic laws of economics.