President Donald Trump’s utter failure to address the cost-of-living concerns that put him back in the White House has once again made them the top issue for voters heading into this year’s midterm elections. And the budget-busting policies he’s pitched as his solution to the problem are actually making it worse.

In the short term, high budget deficits fuel inflation and push the Federal Reserve to raise interest rates in response, as it did last week for the first time since 2023. That leads to higher borrowing costs for mortgages, credit cards, and other types of credit that Americans rely on to meet their needs. In the long term, high debt accumulation crowds out investment spending and slows economic growth, thereby reducing household incomes.

National policymakers who actually want to tackle the cost-of-living challenge will need to tackle our government’s growing fiscal imbalance. Unfortunately, both parties’ “affordability agendas” are pushing in the opposite direction.

The president’s first move was to put more money in people’s pockets via a giant tax cut in the One Big Beautiful Bill Act, which is responsible for roughly a quarter of this year’s roughly $2 trillion budget deficit. Now, he’s promised (somewhat unconvincingly) to send every adult a $5,000 check if Republicans keep Congress in November. That would add another trillion dollars on top.

Although far less reckless, Democrats are campaigning on some expensive plans of their own, including sweeping middle-class tax cuts and subsidies for health care, child care, housing, energy, and virtually every other source of strain on Americans’ pocketbooks. House Minority Leader Hakeem Jeffries will likely draw from that pool of ideas to craft Democrats’ first major bill should they take the majority. Many in the party have proposed raising taxes on the rich to pay for some of these proposals, but those are unlikely to cover the full cost.

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Eliminating the payroll tax cap would waste money on wealthy seniors and break the principles of Social Security without fixing its finances.

Capitol Hill has begun waking up to the fact that Social Security now faces insolvency before the end of the next presidential administration, threatening seniors with an automatic 22% benefit cut. In response, some lawmakers are already reaching for the simplest solution they can think of: eliminating the payroll tax cap.

Currently, the payroll tax that funds Social Security applies to just the first $184,500 of a worker’s wages. In a recent New York Times op-ed, Sens. Elizabeth Warren, a Democrat from Massachusetts, and Bernie Moreno, a Republican from Ohio, argued that Congress should do away with the limit to stabilize the program’s finances.

“Why should a middle-class nurse pay a larger share of her paycheck than a wealthy corporate lawyer?” the bipartisan duo wrote. “This is doubly unfair in an economy in which top earners’ wages, over time, have pulled far ahead of those of the average worker.”

Warren and Moreno are right to be concerned about the fairness of our present payroll tax system, which makes U.S. income taxes less progressive and eats into wages. And new revenue, particularly from the wealthiest Americans, must be part of any reasonable solution to our fiscal challenges. But simply eliminating the cap and pouring all the new money into Social Security would be an irresponsible waste — one that would put wealthy seniors above working Americans and would make it more difficult to address other pressing national priorities.

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With insolvency just 6 years away, only a new approach can save FDR’s vision of an earned benefit that keeps older Americans out of poverty.

Ever since Franklin Roosevelt created Social Security in 1935, it has rested on the principle that Americans should earn their retirement benefits. The president was a deep believer in the moral importance of work, who also knew his plan would be more politically durable if voters felt as if they had personally paid into it. So the program was designed to mimic a traditional pension, where payroll taxes represented a worker’s contributions and benefits increased for higher earners.

Nearly a century later, the social compact behind Social Security is fraying. Americans have not paid nearly enough into the program to cover the benefits they’ve been promised. As a result, its primary trust fund is now officially projected to run out of money in 2032. If policymakers fail to act in the next president’s term, beneficiaries will face an automatic 22% cut in order to keep payouts in line with contributions. 

Policymakers could have saved the system as we know it with modest tweaks had they acted earlier. For example, today’s retirees could have paid slightly higher tax rates over their working lives to adequately fund their benefits. But instead, they elected lawmakers who either ignored the problem or actively made it worse. 

Now, it’s effectively too late to prevent massive cuts without abandoning the notion that today’s Social Security beneficiaries actually paid for their benefits. Every dollar that must be raised from higher taxes on today’s workers to prevent a cut for current retirees is a wealth transfer from young to old — from a generation that inherited this shortfall to the one that let it grow.

But policymakers can uphold FDR’s vision of a program in which benefits are earned through work without binding themselves to the false pretense that seniors paid for their benefits. It just requires them to redefine the mechanism by which benefits are earned.

To show them how, my team at the Progressive Policy Institute (PPI) developed a package of reforms built around an innovative new concept: Instead of calculating benefits based on how much income a person earns throughout their career, Social Security would award benefits based on how many years someone works. In other words, a riveter who earns $60,000 annually and a lawyer who earns $300,000 would get the same monthly check in retirement as long as they put in the same number of years on the job.

This redesign would strengthen Social Security’s finances by reducing the outsized benefits that go to high-earners. It would also increase support for seniors with the greatest financial need: under our plan, anyone who works for at least 20 years would receive a benefit large enough to keep them out of poverty, which isn’t guaranteed under today’s system. And it would protect older Americans by preventing automatic benefit cuts slated to take effect in just six years — all without drastically higher taxes on today’s workers. 

Importantly, this reform would reinforce Social Security’s premise as a benefit people earn rather than transforming it into a stereotypical redistributive welfare program, affirming the basic Rooseveltian vision. 

Our proposal is not without its critics, however. Wendell Primus —– a longtime aide to former Speaker Nancy Pelosi —– and three of his colleagues at Brookings earlier this year published a critique titled “Insufficient financing should not provoke dramatic changes to Social Security.” Notably, the authors did not object to the specific merits of PPI’s proposal. Instead, they argued that policymakers should reject any plan that weakens the link between an individual’s Social Security benefits and their tax contributions into the program. In short, they want to maintain the popular fiction that Social Security works sort of like a normal retirement account. 

I don’t want to get into an endless debate over the merits of every specific detail of each proposal, because those will almost certainly be iterated upon between now and when Congress ultimately comes around to seriously considering solutions. But exploring the fundamental weaknesses of their criticism and the alternatives they propose actually shows the impracticality of clinging to the thin pretense that seniors have paid for their benefits — namely, that tying benefits to income necessitates showering benefits on rich seniors who don’t need them or cutting benefits for poor seniors who actually depend on them. It’d be better for policymakers to unshackle themselves from the failing approach of yesteryear and embrace some unconventional ideas.

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The newest fiscal forecast from the Congressional Budget Office (CBO), released this Wednesday, amounts to a damning report card on the Trump administration’s first-year tax and economic policies. It projects staggering deficits, a deteriorating debt path, and rising interest costs. But what makes the assessment especially striking is how much worse these numbers  are compared to just a year ago, before the White House’s profligate, short-sighted agenda was put into effect.

The report’s topline numbers are sobering. Annual deficits are projected to exceed $3 trillion by the end of the decade, up from $1.9 trillion this year and nearly $500 billion higher than last year’s forecast. Over the longer term, the picture is equally troubling. The CBO now projects that over the next three decades, our deficit-to-GDP ratio will increase roughly four times faster than it previously anticipated. As a result, federal debt held by the public is expected to rise to 172% of GDP by 2055, well above last year’s 156% estimate.

This deterioration from previous projections is not coincidental. It reflects deliberate choices made by the Trump administration over the past year. Take the One Big Beautiful Budget Act (OBBBA), the administration’s domestic policy centerpiece. The law’s extension and expansion of trillions of dollars in unpaid-for tax cuts is projected to add roughly $4.7 trillion to the deficit over the next decade. This large cost was no secret during the legislative process, yet many supporters argued that rapid growth would cover the gap. CBO’s analysis tells a different story, pointing to a modest and temporary boost to GDP, with long-run economic growth largely unchanged from a year ago.

The administration’s immigration agenda has also taken a toll on America’s fiscal outlook. By ramping up deportations — while also sharply cutting legal immigration — the administration is precipitously shrinking the labor force, constraining long-term economic output, and eroding the future tax base. CBO projects that overall, the administration’s immigration policies will cumulatively increase the deficit by roughly $500 billion over the next decade.

Even more worrisome is that CBO projections are likely overestimating the government’s only major new source of revenue. It credits the Trump administration with roughly $3 trillion in new tariff revenue, which, despite tariffs’ many other damaging economic effects, has partially offset the impact of their deficit-fueling policies elsewhere. But the bulk of this new tariff revenue is built on legally dubious emergency declarations currently being litigated in the Supreme Court. If the justices strike down the tariffs, America’s fiscal trajectory could soon look even worse than CBO’s already somber projections. 

This lack of fiscal discipline in Washington is especially reckless given the nation already pays more than $1 trillion annually for debt servicing, which reached its all-time high as a percent of GDP in 2025. Now should be the time for lawmakers to reduce the deficit and bring interest payments down to a manageable level. But instead, the CBO projects that debt servicing costs will continuously break new records going forward. By 2047, interest costs are expected to eclipse Social Security to become the largest federal expenditure. By 2055, they will constitute a whopping 6.8% of GDP, more than double what they are today and 25% higher than last year’s projections. 

Beneath these interest projections lies an equally troubling structural shift. When the government’s average interest rate rises above the economy’s nominal growth rate, debt begins to compound faster than the economy can grow its way out of it, setting up a dangerous spiral. In that environment, even modest deficits can cause the debt-to-GDP ratio to climb, forcing policymakers to embrace extreme austerity measures and run sustained primary surpluses just to stabilize the fiscal outlook. The CBO projects that this will be the case within the next few years — far earlier than its previous forecast of 2045 — making today’s deficit binge even more perilous than it may appear. 

A worsening fiscal outlook ultimately means lower living standards. Americans face the prospect of  higher interest rates across the economy, appearing as higher mortgage payments, auto loans, and small business financing costs. Persistent deficits can also crowd out private or public investments, dampening productivity and wage growth over time. And for the millions of people that rely on government programs, rapidly increasing interest costs will force more and more revenue just to pay for yesterday’s consumption, leaving less available for critical public services and programs. 

This administration remains wholly uninterested in fiscal discipline, choosing to embrace fantastical promises about cost-cutting and growth rather than confront the dismal reality its policies are ushering in. But to prevent the biggest consequences of runaway debt, Washington must act as soon as possible to reverse course and confront our nation’s fiscal challenges. Bringing the deficit down to 3% of GDP, as one recent bipartisan resolution proposes, would be a sensible step in the right direction. But words alone won’t be enough. Lawmakers must deliver a comprehensive, balanced package to do so, including pro-growth tax reform that raises adequate revenue, sensible entitlement adjustments that reflect demographic realities, and a retreat from this administration’s economically damaging trade and immigration policies. 

Six months after the One Big Beautiful Bill Act was signed into law, the country is already beginning to feel its consequences. Cuts to state-administered programs like Medicaid and SNAP have left massive holes in state budgets, forcing cuts to important programs. Meanwhile, the law’s tax cuts have kept deficits near record highs, leading to stubbornly high inflation. But tucked within this regressive and fiscally irresponsible tax law, there is one change that will benefit everyone. This provision, known as full expensing, will reduce our tax code’s penalty on business investment and lead to heightened economic growth.

In America, corporations are taxed based on their profits, meaning companies may deduct most business expenses from their taxable income every year.  Historically, however, the corporate tax code included one major exception. When companies invested in long-lived assets — such as vehicles, machinery, or computers — they were required to spread deductions over several years, rather than immediately deducting the full cost. Because a tax deduction received in the future is worth less in inflation-adjusted terms than one received today, this feature of the tax code effectively penalizes investment. In some cases, the penalty was extreme — businesses had to wait 39 years to fully deduct spending on some classes of investment, for example, reducing the real value of the deduction by over half.

To eliminate this bias against productivity-enhancing investment, the One Big Beautiful Bill Act (OBBBA) added new permanent full expensing provisions for most business investments, including research and development, and allows businesses to now immediately deduct the cost of many of their capital investments. It also temporarily extended full expensing to manufacturing structures like factories, though the provision is set to expire in 2031. In the long run, the bill’s permanent expensing provisions account roughly for just 5% of its projected cost. Yet their economic impact could be substantial: one analysis estimates that the changes could increase America’s economic output by more than $200 billion per year.

Unfortunately, however, much of full expensing’s benefits will be offset by the rest of the Republican tax bill’s provisions, which will severely damage our economy. The majority of the law’s tax cuts were spent on needless giveaways to wealthy Americans and special interest groups. These costly provisions left limited space for pro-growth reforms, so full expensing for most physical structures was excluded from the final law. Worst of all, Congress refused to pay for the law’s multitrillion-dollar price tag, which is projected to increase our national debt by 50% of GDP over the next 30 years. This debt burden will lead to higher inflation and lower economic growth, which will completely crowd out and overtake full expensing’s economic benefits.

Both policymakers and Americans might wonder why they should care about a tax penalty placed on profitable corporations; some progressive Democrats even oppose full expensing as a windfall for wealthy corporations. But this critique overlooks that business’s investment decisions don’t just impact shareholders — they affect the entire economy. When profitable firms reinvest earnings in new capital, they expand production, raise worker productivity, and support job creation. Over time, these gains all translate to higher living standards, increased wages, and more opportunities for American workers. By contrast, when the tax code discourages investment, firms are more likely to return profits to shareholders, a choice that does little to improve wages or economic opportunity for most Americans.

So how can lawmakers build on the success of full expensing, while also addressing the GOP tax bill’s economic harm? Comprehensive reforms to the corporate tax code, outlined in PPI’s 2024 budget blueprint, would allow it to raise more revenue from profitable companies without compromising economic growth. To start, Congress should expand pro-growth full expensing by permanently enabling it for physical structures, which would promote investments in housing, factories, and more.

It should also prioritize paying for not only new expensing provisions, but the mountain of spending it has already piled onto the national debt. Phasing out inefficient tax expenditures and loopholes such as the deduction for interest on corporate debt, the corporate state and local tax deduction, and more would be a promising start. To increase revenue even further, it should also raise the corporate tax rate from 21% to 25%, closer to the average rate in the developed world.

Lawmakers across the political spectrum should agree: America needs a corporate tax code that raises more revenue without sacrificing economic growth. Building on existing full-expensing provisions to encourage investment, while pursuing other tax reforms to offset the cost, would move our tax code decisively in that direction.