By Dennis W. Jansen
Social Security is one of the federal government’s biggest programs.
Roughly 67 million Americans, most of whom are 65 or older, received Social Security benefits in 2023. An estimated 183 million workers paid the Social Security payroll taxes that provided the bulk of the nearly US$1.4 trillion in benefits that year, which consumed 21% of the total federal budget.
But within a decade, Social Security could run short on funds to pay the full benefits Americans are counting on.
The retirement and disability program has been running a cash-flow deficit since 2010. The $2.7 trillion held in its two trust funds may seem immense, but those reserves are diminishing as the number of Americans getting benefits grows. Social Security’s trustees, a group that includes the secretaries of the departments of Treasury, Labor, and Health and Human Services, as well as the Social Security commissioner, projected in 2024 that both of its trust funds would be completely drained by 2035.
Under current law, when that trust fund is empty, Social Security can pay benefits only from dedicated tax revenues, which would, by that point, cover only about 79% of promised benefits. Another way to say this is that when that trust fund is depleted, the people who rely on Social Security for some or the bulk of their income would see a sudden 21% cut in their monthly checks in 2036.
As an economist who studies the Social Security system, I am alarmed that Democratic and Republican administrations alike have failed for more than three decades to take the actions necessary to keep its funding on track, either by raising taxes or cutting benefits. Instead, Congress has only made the program’s funding outlook worse. And now, the Trump administration is reducing the program’s staff, sending confusing signals about changes it intends to make, and undercutting the quality of service for the people who are eligible for these benefits.
But I do believe there are strategies that could help.
Taking steps backward
This gloomy outlook was clear to experts at least 32 years ago. In 1993, the Social Security trustees projected that the assets of the systems’ trust funds would be depleted in 2036.
Rather than resolve this now more imminent problem, Congress passed a law in December 2024 that could accelerate the crisis.
Called the Social Security Fairness Act, President Joe Biden signed it into law in early January. This measure ended the government’s prior practice of paying reduced Social Security benefits to retired teachers, firefighters and others who had pensions from their years of public service and who had not paid Social Security tax on much of their income. Now, these retirees will get full Social Security benefits. The Congressional Budget Office estimates that this change will cause the trust fund to be depleted six months earlier than previously expected.
President Donald Trump, for his part, wants the tax reform legislation Congress is working on to exempt all Social Security benefit payments from federal income taxes. Rep. Thomas Massie, a Kentucky Republican, has reintroduced a bill that would do that.
The University of Pennsylvania’s Penn Wharton Budget Model finds that should this new exemption take effect, it could make the trust fund run out of money two years earlier than the model currently predicts, hastening the day the Social Security program is forced to cut benefits.
In addition, Social Security already had record-sized backlogs of what it calls “pending actions,” according to a report from its own inspector general in August 2024.
And yet, despite this need to process paperwork faster, the agency is now less able to carry out its mission due to staffing cuts attributed to billionaire and Trump adviser Elon Musk’s so-called Department of Government Efficiency.
Principles for successful reform
Social Security is funded by a payroll tax of 12.4% on wages, which is split equally between workers and employers. Self-employed people pay the entire 12.4%. This payroll tax only applies to earnings up to $176,100 for 2025. The government increases this cap annually based on wage increases and inflation.
The program also receives about 5% of its revenue from interest generated by its trust funds and about 4% of its revenue from the tax that Trump wants to repeal.
The Committee for a Responsible Federal Budget, a nonpartisan nonprofit that focuses on fiscal policy, provides an online interactive tool to help people see for themselves what specific measures might do to shore up Social Security. Examples include increasing the retirement age by one month every two years and increasing the cap on income subject to the payroll tax that funds Social Security so it covers more of the highest-earners’ income.
The Brookings Institution, a centrist think tank, has presented its own bipartisan blueprint for making the system solvent. The Social Security Administration itself has pooled what it sees as good ideas from outside experts.
Three main principles characterize the approaches supported by the policy analysts and researchers who have considered which reforms to Social Security might strengthen its finances and long-term continuing viability:
- The program should be self-funded in the long run so that its annual revenues match its annual expenses.
- The reform burden should be shared across generations. Current retirees can share the burden through a reduction in the cost-of-living adjustment. Today’s workers can share the burden through an increase in the cap on income subjected to Social Security taxes. Gradually increasing the retirement age to keep pace with anticipated longevity gains would also be borne by current workers and young Americans who haven’t gotten their first job yet.
- The government should make sure that Social Security benefits will be adequate for lower-income retirees for years to come. That means reforms that slow the benefit growth of future retirees would be designed to affect only payments to higher-income retirees.
Ideally, in my view, any changes to Social Security should also help constrain the future growth of federal spending, given the current and projected growth in the budget deficit.
Past reform efforts
The last time the government made big changes to Social Security was in 1983, during the Reagan administration.
Back then, the government enacted reforms that slowly reduced benefits over time. These changes included raising the full retirement age, a change that is still being phased in. Because of those changes, workers born in 1960 or later cannot retire with full benefits until age 67 – two years later than the original retirement age.
The 1983 reforms also gradually increased the Social Security payroll tax rate from 10.4% to 12.4% by 1990, and for the first time levied federal income taxes on higher-income retirees’ benefits. Workers bore the burden of the payroll tax increases, and higher-income retirees bore the burden of the tax on benefits.
Those changes bolstered the program’s finances. One of those measures could potentially end if Trump manages to end the taxation of retirees’ Social Security benefits.
Today, about half of the Americans getting Social Security benefits pay some federal income taxes on that income, contributing revenue that helps finance the program as a whole. Taxpayers with annual income of at least $205,000 pay income tax that claws back about 20% of their benefits. That percentage is smaller for taxpayers with lower incomes. Individuals who get Social Security benefits and have incomes of less than $25,000 and couples making no more than $32,000 pay no income taxes on their Social Security benefits at all.
The most recent bipartisan effort to preserve the system’s solvency was in 2001. The Commission to Strengthen Social Security, during the George W. Bush administration, tried – and failed – to get Congress to enact reforms to shore up the program’s finances.
More than 20 years later, Americans and their elected representatives still seem unwilling to have a serious debate on these issues.
I believe waiting any longer is unwise.
Any solutions that might be introduced gradually today will no longer be viable in 2035 if the trust fund has been completely hollowed out. That would leave millions of older adults with lower incomes than they were counting on, plunging many of them into poverty.
Dennis W. Jansen is Professor of Economics and Director of the Private Enterprise Research Center at Texas A&M University.
JimboXYZ says
Then the national debt needs to increase for that amount & they need to print the money & pay people their Social Security, so that the Federal Government can be financially responsible like the rest of us are required to be in life. Nobody wants to hear excuses from the Federal Government anymore. Biden, Trump or whoever else is voted into power. Nice of Biden-Harris to be spending all that money on illegals, wasn’t it ? With this uncertainty, maybe the Liberals can now see why Biden-Harris should’ve never happened. Inflation needs to be rolled back to reality. Nobody is going to have a sense of humor about SS & Medicare failing. Anyone still think Musk/DOGE are the bad guys in all of this ? If SS runs out, not a single Government pension needs to be paid to anyone just the same. And those pensions need to be the 1st casualties when SS bankruptcy occurs.
Atwp says
Who cares about social security? Washington don’t give a hoot about the working class. As long as the rich get their part that is all that matters. It is time we save what money we can save.
joe says
THIS!!! – “Today’s workers can share the burden through AN INCREASE IN THE CAP ON INCOME SUBJECTED TO SOCIAL SECURITY TAXES.”
Leila says
And yet, the amount going into the welfare system seems to be endless. Most people don’t realize that every dime of government money is our money.
Maybe they need to stop the spending?
Kathleen Duffy says
No where in that article does it mention that twice Congress raided the Social Security Fund and took money that it NEVER replaced. Perhaps the government should begin to discuss returning the money to say nothing of the interest rate it would have accumulated.
Pogo says
@Real solutions exist
… which none of the first 5 commenters evidence any knowledge of, or attention to, but are presented here.
In other words, situation normal; forecast for tonight: dark.
Laurel says
Kathleen Duffy: Thank you for your often ignored observation. There is no excuse for our Social Security becoming insolvent. Our politicians do what’s best for them personally, unless we hold them to task. We have yet to do that for Social Security.
Deborah Coffey says
Elon Musk will get Social Security checks. Should he?
“Earnings over $176,100 per year, which is the cap on earnings taxed by Social Security, escape tax. A civil engineer earning $176,100 per year looks the same as Elon Musk in the eyes of the Social Security system.” (House.gov)
Samuel L. Bronkowitz says
You voted for smaller government and a balanced budget, and guess what? You’re “getting” it. Too bad you didn’t read the fine print.
Thomas Hutson says
Professor Jansen,
Why on all the op-eds ever written threaten the complete meltdown of Social Security? Social security has always been since its inception the mainstay of the American workers retirement. The American worker pays and has paid into this benefit. There is no doubt that if any of our elected leaders , red, blue, white, pink or any color really believes they can let this earned benefit fail , then I have a bridge in Arizona to sell you. They continue to give trillions of dollars away to foreign governments to be the big kid on the block. They simply need to stop being the free bank to all the countries in the world. The voters need to tell our leaders to start taking care of their own, and we will have all the money we need. Don’t believe for one minute their going to let social security fail, every elected government we have had uses this scare tactic to scare the elderly population and retirees.
Sherry says
Which political party took Social Security from the independent trust fund and put it into the general fund so that Congress could spend it?
There has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been “put into the general fund of the government.”
Most likely this question comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the “unified budget.” This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are “on-budget.” This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken “off-budget.” This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are “on-budget” or “off-budget” is primarily a question of accounting practices–it has no effect on the actual operations of the Trust Fund itself.
kathy Duffy says
On the comment concerning welfare — it amazes me that they don’t seem to correlate forcing women who can’t afford
a child and now can not get an abortion — where do you think they will wind up…. on WELFARE. Especially with the almost
total lack of childcare that is available these days.
Tony Mack says
President Ronald Reagan stated in October 1984: “Social Security has nothing to do with the deficit… Social Security is totally funded by the payroll tax levied on employer and employee. If you reduce the outgo of Social Security that money would not go into the general fund to reduce the deficit.
Laurel says
Sherry: You are correct. I stand corrected on my previous statement. I tried to copied a portion of an article from Motley Fool, but my pointer has left the laptop…again. Anyway, Congress has borrowed money from the trust, but does pay it back with interest. Where Congress has failed, and continues to fail, is they can fix it but won’t.
Skibum says
My dad was a successful insurance agent for Farmers Insurance in the L.A. area of southern CA for more than 30 years. Over the course of 3 decades, he had built up a very large client base, and when he retired his plan was to give his longtime insurance clients to his closest friend and fellow Farmers agent in the office that they shared. Farmers Group instead stole every singe one of them and gave them out to other agents against my dad’s will. Then to top it all off, the huge insurance conglomerate took one more thankless coup de gras for all of my dad’s dedication and commitment over that 30 year career and attempted to deny him the compensation he was entitled to. So much for well deserved appreciation and dedication to a singe corporation over that long period, huh? So my parents filed a lawsuit against Farmers Insurance Corp. The company consistently refused to negotiate despite numerous mediation efforts until the day before the trial was set to start and the judge called both sides into his chambers and told the attorneys for Farmers that they would be well served to agree to my dad’s attorneys’ settlement offer because if they chose to take their case to trial they were very likely to lose! They settled on the spot, so my parents had some retirement funds in addition to their Social Security to sustain them for the remainder of their lives. However, without the SS, what my dad won in the lawsuit settlement from Farmers would not have been enough to live on for the long-term.
Fast forward several years when I visited my parents who were now in Texas, living with my sister and her family. We were driving to have lunch somewhere, and my dad had the car radio tuned to a conservative radio station because they ONLY watched Fauxinfotainment nuse on TV and ONLY listened to conservative talk show radio for as long as I can remember. Whoever was rambling on spouting BS on the radio station was lambasting our nation’s Social Security, and my dad suddenly said to me, “Yes that is right… Social Security is just a ponzi scheme that should be eliminated.” I looked over at my dad and my mouth dropped open, and I remember telling him, “Dad, I can’t bellieve what you just said. Thank God for Social Security that YOU paid into all those years you were working, because if it weren’t for Social Security and the checks that you and mom get every month now, from YOUR money that was paid into the system all those years, both you and mom would likely be in the poor house right now because you have no savings, no investments and very little money except that which you had to go to court and fight hard for from Farmers. You should be thanking your lucky stars that America actually has a Social Security retirement program so that you and mom can live fairly comfortably in retirement!” My dad just looked straight ahead while driving and didn’t reply, but I bet he was thinking about his own circumstance and how lucky he was, even if he was a conservative (R) who only listened to and believed the idiotic talking heads at wacko media outlets.
The vast majority of rural America, mostly “red” states along with millions and millions of conservative, republican voting retired and future retirees are going to get a very unwelcome surprise and will have to learn a very hard lesson about their voting habits if Social Security does end up taking a hit in the near future. It is republicans who want Social Security, Medicare, Medicaid and all other “entitlement programs GONE while advocating for tax cuts for the billionaires and multi-millionaires who DO NOT need more money! It is incomprehensible to me why these rural Americans continue to vote against their own interests… except that they continue to drink the kook-aid and are completely brainwashed and numbed into thinking somehow that unethical and immoral jackasses like dirty diaper Don somehow care about them and are looking out for them when that is the furthest thing from the truth!
Sherry says
AGAIN. . . Budgets are balanced using TWO levers:
1. Increase Income- AGAIN. . . If only the loopholes were taken out of the IRS TAX CODE. . . Requiring “Billionaires” to actually “PAY ALL’ the taxes shown on the tax table, the national deficit would be greatly diminished.
2. Cut Spending- OK DOGE has literally ripped apart our federal government and cruelly fired thousands of “experts” looking for that goddamned “deep state”. Please post links to the credible evidence that proves DOGE lowered the deficit by the hundreds of millions of dollars they claim. Yet trump’s military defense budget has increased to over one TRILLION dollars!
MEANWHILE- Our personal privacy is in great peril, our national security has been greatly compromised, flying is less safe now, our allies now distrust/hate us, prices for almost all consumer goods are about to go sky high, lethal contagious diseases have been unleashed, the wars are still raging with no end in sight. . . shall I go on???
Maga. . . are you starting to “Get It” yet? Yep, you voted and your lord and master, the criminal fascist dictator, won. Now Comes the LOSING! Are ya happy now????
Sherry says
Millions are worried about Social Security going broke. . .
Meanwhile. . . trump is adding millions to his personal “Billions” directly by being President:
https://www.youtube.com/watch?v=zGWbZSavFus
Why is this OK with you Maga????
Laurel says
Meanwhile, Trump kills grant for PBS children’s programming.
This is what America wants? He has saved you one dollar and sixty cents per year. Proud? How about killing Medicaid for disabled children? The 1% doesn’t need such help. What about you?
As an Independent, it will be a cold day in hell before I vote for a Republican ever again.