Sen. Rand Paul Discusses Economic Implications of Government Shutdown

Senator Rand Paul from Kentucky recently appeared on Mornings with Malia. He talked about the economic fallout from the current government shutdown and what he thinks might happen next regarding the reopening of government operations.

There’s growing concern over significant trust funds intended to finance social security. A new report warns that these benefits could hit bankruptcy by 2032. If the government doesn’t take action, automatic cuts in benefits are expected at that time.

The nonpartisan Congressional Budget Office (CBO) recently published its 10-year budget and economic forecast. It predicts that the Old Age and Survivors Insurance (OASI) trust fund for Social Security will run out of money in 2032. The report indicates that spending will exceed what the trust fund collects, creating a widening gap.

According to the CBO, spending from the OASI trust fund is projected to rise from $1.5 trillion this year to over $2.5 trillion by 2036. Taking into account tax and interest income, the anticipated deficit will escalate from $207 billion this year to $525 billion by the time the fund is depleted in 2032, eventually reaching $691 billion in 2036 if benefits are fully paid.

Social Security benefits rely heavily on payroll tax contributions. Consequently, without Congressional intervention, these benefits will be reduced.

Projected Budget Deficits and National Debt

The CBO mentioned that while the government continues to collect revenue through consumption and payroll taxes, it legally cannot pay out more than it receives. As such, full payment of benefits as currently scheduled is no longer feasible.

Scenarios examined by the CBO suggest that beneficiaries might see their payments cut by 7% in 2032, and potentially by an average of 28% annually between 2033 and 2036. The report also highlights a lack of clarity in federal law regarding how benefits would be reduced, meaning various approaches could lead to differing impacts on the economy and the budget.

A nonpartisan think tank, the Responsible Federal Budget Board (CRFB), previously estimated that a 24% cut in benefits could mean a typical married couple, both aged 60 and planning for retirement, might face an annual benefit decrease of about $18,400.

Rising Spending and National Debt

The looming bankruptcy of Social Security’s primary trust fund is further exacerbated by soaring spending on entitlement programs, partly driven by the aging U.S. population.

From 1976 to 2025, Social Security expenditure as a percentage of Gross Domestic Product (GDP) averaged 4.5%. This figure is expected to rise from 5.2% this year to 5.9% in 2036. In actual dollar amounts, spending for Social Security is estimated to surpass $1.6 trillion in 2026, potentially exceeding $2.7 trillion in the next decade.

Mandatory spending programs like Social Security and Medicare are significant contributors to increasing federal expenses. The gross budget deficit, already reaching $38 trillion, is projected to further escalate.

Projected Mandatory Spending Growth

Mandatory program costs are anticipated to reach $4.5 trillion by 2026, dominating this year’s federal spending, which exceeds $7.4 trillion. Estimates show that in ten years, such spending could exceed $7 trillion out of an $11.4 trillion federal budget.

On the other hand, discretionary spending—which funds federal agencies annually through Congressional appropriations—is expected to grow from nearly $1.9 trillion in 2026 to over $2.2 trillion within a decade.

In addition, interest expenses for repaying national debt are forecasted to rise from $1 trillion in 2026 to more than $2.1 trillion by 2036.