As Trump steams into forever war with Iran, US savers face eroding safety net

(Originally published June 10 in “What in the World“) Oil rose and stocks fell after Trump ordered a retaliatory strike on Iran for shooting down a U.S. Apache helicopter in the Strait of Hormuz.

Brent crude futures rose more than 1% and both the benchmark S&P 500 and tech-heavy Nasdaq fell. An Iranian Shahed drone struck the Apache Monday off the coast of Oman. The helicopter’s two crewmembers were rescued Tuesday, after which Trump vowed retaliation. Hours later, U.S. Navy and Air Force jets struck several Iranian targets with precision munitions.

The U.S. social safety net, meanwhile, is increasingly threadbare. Social Security’s retirement and survivors’ trust fund will be depleted by 2032, according to the latest projections. That means, barring action to re-fund it by the U.S. Congress, Social Security will have to cut benefits to that group by 22%. Medicare’s hospital trust fund is slated to run dry by 2033, resulting in an 11% cut to hospitalization benefits. The other parts of Medicare benefits, like consultations and drugs, are okay, as are Social Security benefits for the disabled.

What’s draining the funds? Fewer babies and immigrants mean fewer people earning salaries to tax. Social Security and Medicare are funded largely with a payroll tax. But payouts are rising faster than tax revenue, hence the looming cuts.

The need for such benefits is only growing as rising economic growth and asset prices fail to lift the fortunes of most Americans. While rising stock prices are boosting wealth of households fortunate to have saved enough to invest in them, they’re rapidly increasing the gap between rich and poor. The wealthiest 1% of Americans own roughly 50% of all listed stocks, while the top 0.1% own more than double the bottom 90% combined.

Worries that inflation is eroding the purchasing power of their paycheck, thus, weigh more heavily on most U.S. households than the stock market’s performance might suggest. As do fears that inflation could prompt the Federal Reserve to raise interest rates, thus boosting borrowing costs for U.S. households. Even as jobs grow, wages aren’t keeping up with rising prices. While consumer prices are rising at 3.8% a year, average hourly earnings growth has dropped to 3.4%.