Social Security

Social Security's Real Problem? Not Money, but Time.

When the program becomes insolvent in the 2030s, the inevitable cuts will hit today's workers and retirees.


According to the latest report from the Social Security Trustees, the program's official accounting guardians, Social Security will be insolvent by the middle of the 2030s. Looked at one way, the problem might seem obvious: too many obligations, not enough money. But the program already spends more than $1 trillion annually, more than any other federal program today. The real problem isn't money. It's time.

Since 2010, the program's annual costs have exceeded its income—an arrangement that is slowly draining the program's two trust funds. The Trustees' report projects that Social Security's Old Age and Survivors Insurance trust fund will run out in 2035 (the trust fund for the separate Social Security Disability Insurance program will remain solvent until the 2050s), at which point the program will be able to pay out only as much money as it takes in each year—effectively implementing a 20 percent across-the-board cut for all beneficiaries. Over the long run, Social Security is going to need an additional $13.9 trillion in today's money to cover the expected deficit over the next 75 years.

But as time passes and Congress declines to act, the program's long-term problems draw nearer.

"This isn't your grandchildren's problem. It's your grandparents' problem," says Marc Goldwein, senior policy director with the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for balanced budgets and sustainable entitlements.

What he means is that 2035 is not as far off as it might seem. It's significantly closer to today than 9/11 is. It's just barely further into the future than the introduction of the first iPhone is in the past. Workers who are in their early 50s today will be hitting retirement age when the mandatory cuts kick-in, and today's retirees will still be in their early 80s. This is no longer a problem for future generations to confront—it's one that will confront the current generation of workers and retirees, whether they like it or not.

If you think Congress is bad with money (see the $22 trillion national debt) you probably don't want to know how it handles time. Perhaps more so than at any other point in our history, legislating on big-ticket items seems possible only in the crucible of a hard deadline. But by the time that deadline arrives for Social Security, it will be too late. It's a problem that seems uniquely designed to stump our current political state of affairs.

Over the last 25 years, the Social Security Trustees have predicted the program's insolvency will fall somewhere between 2029 and 2040. It's not a precise measure, but the expiration date has remained more or less stationary. All that really changes is how much time Congress has to act—and much of that time is already gone.

"Even with changes in the economy—recession, economic growth, tax cuts—we basically find there is a narrow range in which you know the trust fund is going to be depleted," says Jason Fichtner, a former secretary of the Social Security Board of Trustees. "It is going to happen."

The trust fund itself is actually an accounting fiction—it contains nothing except IOUs that the government has written over the years. Still, it's a useful accounting tool for understanding the long-term obligations that are built into the system. What we're nearing, then, is not so much the Social Security program's insolvency as the moment when the federal government will no longer be able to rely on the pleasant fiction of the trust fund as a backstop for its largest entitlement program.

If you want to fix Social Security, the math is actually pretty straightforward.

The bulk of Social Security's funding comes from a 12.4 percent payroll tax that's split 50/50 between employers and employees. Only the first $132,900 of income is subject to the tax. Lifting or removing the cap, or raising the tax rate, would generate more revenue for the system. Alternatively, reducing benefits for some or all beneficiaries—either by instituting across-the-board reductions or by means-testing in some way—could bring Social Security's liabilities in line with its assets.

But the changes required wouldn't be minor. Maintaining Social Security's long-term solvency would require "the equivalent of immediately raising payroll taxes by 22 percent, reducing all benefits by about 17 percent, reducing new benefits by 20 percent, or some combination of the three," according to a CRFB analysis.

Politics make potential fixes even more difficult. Raising the cap on the payroll tax is likely to be dismissed by Republicans, while Democrats (and President Trump) are generally opposed to benefit cuts. Time matters here, too. If Congress had removed the payroll tax cap a decade ago, it would have added about 75 years to Social Security's solvency, says Fichtner. "Now if we do that, it probably buys us 10 years," he says. "We've lost that option. The cost of delay is huge."

Congress hasn't touched Social Security in a substantial way since the early 1980s, when the program was facing a problem similar to the one stalking it today. The reforms passed by Congress in 1983 added decades to Social Security's solvency. They were effective, in part, because they took the long view. One of the most notable changes was a gradual increase in the retirement age from 65 to 67—a change that was scheduled to phase in over three decades, and which won't be fully adopted until 2027.

In in the short term, it doesn't seem likely that Congress will do much of anything on Social Security. But there are a few proposals floating around. The one most likely to get attention is a joint effort by Sen. Bernie Sanders (I–Vt.), a 2020 Democratic presidential candidate, and Rep. Peter DeFazio (D–Ore.), which would hike both payroll taxes and Social Security benefits. It would keep the current payroll tax cap in place, but would also apply it to workers making more than $250,000 per year. It would also create a new "wealth tax" of 6.2 percent on investment income. The package of changes would put Social Security on solvent footing until 2070, according to a Social Security Trustees' assessment of the Sanders-DeFazio plan.

Sanders' plan has already picked up co-sponsorships from several of his 2020 Democratic presidential primary opponents, including Sens. Cory Booker (D–N.J.), Kirsten Gillibrand (D–N.Y.), and Kamala Harris (D–Calif.).

Earlier this year, Sen. Mazie Hirono (D–Hawaii) introduced a more modest proposal. Her bill would phase out the payroll tax cap over seven years, eventually resulting in all income being subject to the tax.

Republicans are a step behind when it comes to offering concrete plans to deal with the coming shortfall, and they face a more difficult political reality. Trump has promised not to touch Social Security benefits, but reducing benefits (or at least shifting who gets how much) is likely to be a key component of any proposal that could clear the GOP-controlled Senate.

There are two important things to keep in mind when considering reforms. First, Social Security needs to be restored to its proper place as an old-age insurance program, rather than as a retirement entitlement. When Social Security launched in 1935, the average life expectancy for Americans was 61. That means the average person died four years before qualifying for benefits. It should be a safety net for the truly needy, not a conveyer belt to transfer wealth from the younger, working population to the older, relatively wealthier retired population.

Second, given the federal government's record of fiscal mismanagement, individuals should be empowered to control more of their own retirement savings. Still scarred from the political backlash over George W. Bush's attempt to privatize Social Security, it's unlikely that the GOP will want to venture down that road again. But there are other options that could be considered, including a plan that Fichtner crafted with researchers from the Brookings Institution and the American Association of Retired Persons (AARP).

That plan would create a new retirement program, funded by a 1 percentage point increase in the payroll tax for both employees and employers. It would effectively top-off Social Security with a private account that would be automatically funded and then left for individual workers to control.

There are options that either major party could probably get behind and options that both are likely to reject out of hand. In the wonky world of entitlement policy, most experts who've looked at the problem seem to agree that a combination of tax increases and benefit changes will be necessary—for reasons both fiscal and political.

"It's not that the math is hard. It's the political will," says Fichtner. "If we get to the point where we are waiting for the 'crisis' to be when checks aren't going out, as opposed to recognizing that the crisis is here today. If we wait until then, we are probably going to have to hit current beneficiaries. That's what we're going to be left with because we waited too long."

The problem facing Social Security is time. And time, as it turns out, is money.

NEXT: Joe Biden and the Limits of Moderate Politics

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  1. Social security is no more going to become “insolvent” than the defense department. There is no trust fund. That is a bullshit lie. Social security is a welfare program for old people. Can we afford it going forward? Probably not but never underestimate the power of old people and the government’s ability and willingness to print money.

    The way I look at it is sending money to old people, while objectionable, is one of the least damaging things government can do. If Social Security and Medicaid end up eating the entire budget, I am really not seeing the downside here.

    1. Using words like “fund” and “insolvent” just adds to the lie.
      Also it’s not even a welfare program for old people it’s a wealth transfer from working poor to the wealthiest cohort of people who have ever lived.

      1. “Also it’s not even a welfare program for old people it’s a wealth transfer from working poor to the wealthiest cohort of people who have ever lived.”
        And one which took from me when I was young and poor and transferred it to the old and wealthy at that time.
        It pays me nothing like what I paid in and the company I founded after retirement pays me far more than it ever will.
        If it were canceled today, here’s what you’d hear from me:

    2. Want to end Social Security, fine. Send me everything that was stolen from me and my employer in my name over the last 48 years, plus a measly 4% interest compounded monthly and I will be happy to see it end.

      1. Depending on how old you are it’s pretty likely that if the choice was to eliminate the program today, both payments and the payroll tax, or do nothing, you’d come out ahead with them keeping what they’ve already taken and simply not taking anymore. I’ve done the math from time to time and IIRC it’s something like age 55 before the amount they’re likely to pay me out after retiring at age 70 exceeds what I have yet to pay in before 65.

    3. Social security is a welfare program for old people.
      People are forced to put money into the scheme, so calling it
      welfare is kind of harsh.

    4. It’s only “insolvent” in that it pays out more than it takes in, which has been the case since 2010. It’s no more insolvent now so what’s the problem? This isn’t like real world money, it’s a Federal Financial Fantasy – probably one of many.

  2. Since 2010, the program’s annual costs have exceeded its income—an arrangement that is slowly draining the program’s two trust funds.

    There IS no social security trust fund. They will merely continue to pay benefits out of the general fund, just as they always have, they will just do it at the cost of increasing deficits (and debt). Social Security taxes are merely window dressing which allows politicians to convince themselves (and the public) that the program is “paid for”.

  3. “It’s time for truth, the Barker said, and he poured himself a beer.
    Oh yea, forsooth, said Ben the geek, but who’ll be left to hear?”
    There is a trust fund. It is, by law, 100% invested in US government bonds. This to eliminate the risk involved in any other investment. As revenues fail to meet obligations, those bonds are sold, just like selling off 401k stocks to pay off your mortgage.
    So the two most obvious ways to adjust the imbalance between revenues and expenses is to increase revenue (pop the cap off the payroll tax, after all that ‘only’ hits the wealthy) and reduce expenses (slightly increase the pace of raising the retirement age until it reaches the proper relationship to life expectancy).
    Now all we need is politicians with balls.

    1. Do those exist any more? It seems like they stuff theirs into cans, and kick them down the road.

    2. There is no trust fund. It is a fiction.

      If I write an IOU to myself for eleventy billion dollars it doesn’t mean i now have “fund”. Wake up

    3. “pop the cap off the payroll tax, after all that ‘only’ hits the wealthy”

      The cap is about 120k

      that’s not wealthy. fuck off slaver

      1. All democrats disagree with you – – – –
        (and I freed all my slaves two years ago)

    4. As revenues fail to meet obligations, those bonds are sold
      They are non-marketable treasuries that can only be redeemed by the government.

      1. Since government bonds are an investment in an entity that never makes a profit, the only way they can pay interest is by taking from other government spending – yeah, right – or taxing more.
        Along with the fiction of a SS trust fund, we also need to be honest about the interest paid on government bonds.

  4. Social Security’s Real Problem? Not Money, but Time.

    The SSA is just ticking away the monents that make up a dull day.

    1. fritter and waste our money in an offhand way.

  5. We could, perhaps, look at Chile’s SS program, which is less-reliant on taxed income and rather more reliant on personal (though required), long-term investments. Taxing capital gains seems counterintuitive, since private and public, are the largest single investment category in the stock market, and taxing capital gains would have a negative effect on both investments and the income received from those investments. Concurrently, we might also look at redistribution of payroll taxes collected supporting SS on the basis of need rather than the current formula.

    1. “private and public “PENSIONS”

  6. Social Security’s real problem is confiscation.

  7. “the equivalent of immediately raising payroll taxes by 22 percent, reducing all benefits by about 17 percent, reducing new benefits by 20 percent, or some combination of the three,” according to a CRFB analysis.

    Stump our current political state of affairs indeed. Not even Flake would have touched that.

  8. >>>Social Security will be insolvent by the middle of the 2030s.

    apathy now and forward will soften the blow.

      1. exactly. love that one.

  9. “Alternatively, reducing benefits for some or all beneficiaries … by means-testing in some way—could bring Social Security’s liabilities in line with its assets.”

    Yes, by all means, let’s reward people who didn’t save for their old age by punishing those who did. I’m sure that will encourage the young to save even more, right?

    1. Nailed it!

    2. +100

    3. “It’s only fair.”


    4. I’ll take moral hazard for eleventy trillion, Alex!

      1. Ant and the grasshopper.

  10. Politics make potential fixes even more difficult.

    Politics make potential fixes impossible. The first step to fixing Social Security is admitting the truth – Social Security is not and never has been a retirement plan, it’s welfare for old folks built on a Ponzi scheme. No politician is ever going to stand up before the American public and tell the truth, ” You fucked up. You trusted us. We stole your money to give to your grandparents in return for a promise that when you got old we’d steal your grandchildren’s money and give it to you. Unfortunately, you don’t have enough grandchildren and your grandchildren don’t have enough money, so some of you are going to have to step out of line.” Admit that Social Security is welfare and means test the payout and there you go, problem solved. Except for the part where the taxpayers realize how much fucking money the government spends on welfare.

    1. If only Social Security were just given to old people. It’s not, it’s given to young healthy people as well– and the children of young healthy people.

    2. Politics is the only reason Social Security ever got enacted in the first place.

      Social Security and programs like it are entirely predicated on a particular political ideology. It is a socialist ideology. One cannot expect those who never agreed with that ideology to begin with to consider there duty to find some way to fix it.

      By the way, the particular political shenanigans that resulted in Social Security being enacted into law involves the route of the Blue Ridge Parkway.

      When FDR was trying to get Social Security through Congress, North Carolina Congressman Robert Doughton (Democrat) was the Chairman of the House Ways and Means committee and he was opposed to Social Security. FDR knew he would need Doughton’s support to get the legislation enacted.

      At the time, the Blue Ridge Parkway was in the works as one of FDR’s “New Deal” WPA projects. The route originally was planned to go through Tennessee and Virginia.

      In order to get Doughton to change his position and support Social Security, FDR bribed him by changing the route of the Blue Ridge Parkway so that it went through North Carolina and Virginia instead of Tennessee and Virginia.

      And that is how Social Security got enacted into law.

      1. +100

  11. No, the root problem is neither time nor money, it’s demographics.

    The problem is that SS has never been a program where your taxes are invested to pay your future benefits (how the system was sold to the public from the beginning).

    It is and always has been a pay as you go system where the payroll taxes from current workers pay the benefits of current beneficiaries.

    In 1940 there were more than 159 workers for every beneficiary. In 2013 there were 2.8 workers/beneficiary. By the time the last baby boomer retires that ratio is likely to be under 2.0

    Ratio of Covered Workers to Beneficiaries

    1. P.S.

      Understand Your SS taxes pay for your parent’s and grandparent’s SS benefits. Your children’s (and/or future immigrants) will pay for yours.

      1. You understand this. I understand this. Most people on this blog understand this. The problem is, the general public, especially Democrats do not, and in my experience, Democrats cannot be made to understand this. No matter how carefully and thoroughly you explain it to them, they either cannot or refuse to understand this, and until they do (maybe in 2035), it is impossible to fix the system that they designed.

  12. People should have the option of allowing their funds be invested for them in the market so they will probably have more money for them when they choose to retire. Also, these funds that were made from the market should be tax free (like all 401ks should be) as should all retirement and savings plans.
    But that won’t go over with the democrats and republicans since they would be losing their power over all us little people. So I don’t foresee privatizing SS, even if the people would be given the choice.

    1. The problem with this proposal is that the funds that are received through SS taxes that are not used to fund current benefits are spent by the federal government as if they were general revenue funds, so having to pay out money to purchase real assets would reduce the amount of money that the government has to spend elsewhere. Good luck with that.

      1. Yep, and what many don’t understand is that this is not new/recent.

        The SSA as originally passed back in the 1930s requires every dollar in SS payroll tax money in excess of what is needed to cover current benefits be placed in a trust fund. But then that original unamended SSA requires every $ in the trust fund to be invested in securities at least as safe as sovereign debt.

        Now what government official is going to consider any private security as being as safe as sovereign debt? So the entire trust fund is invested in US treasury bonds (and a form of US treasury bond that is ONLY sold to the SS administration) and the real money all went to the general fund (just like every other dollar used to buy a US treasury bond) from the very first dollar in the trust fund.

        Democrats like to accuse the GOP of stealing from the SS trust fund, but do you want to know who really robbed the SS trust fund? FDR, that’s who.

  13. We could start be redistributing the $50b in foreign “aid” we send out from the country every year.
    Just a thought.

    1. Drop->bucket.

    2. K now we’ve got January covered. Any solution for the other 11 months?

      1. a closed Homeland Security might get us to Valentine’s Day.

      2. “We could start”

        I think eliminating the tribute we pay to half the world is a good place – to start

      3. $50 bil. doesn’t even get us all of the way through January.

  14. QE is the answer. Just print money when SS cashes in their bonds. And just print more money when the fund runs out.

  15. cut the defense budget 50% or equal to everybody else on planet earth combined.

    raise retirement age on office and brain workers.
    eliminate the cap.

    problem solved.

    1. Brain workers huh? And they get to work longer. You are generous.

      Based on your post, I can tell you’ll be retired early.

    2. Not even close. For 2017, DOD was 15% of the total federal budget. SS was 24% of the budget.

      Policy Basics: Where Do Our Federal Tax Dollars Go?

      Medicare, Medicaid, CHIP, and marketplace subsidies: 26%

      Safety net programs AKA welfare: 9%

      Interest on national debt: 7%

      SS spending, Medicare et al, welfare, and the interest paid on the national debt are “non-discretionary” spending that is not determined by annual Congressional budgets. Put them together and they account for 66% of the total federal budget.

  16. As someone who does not pay into Social Security and will never get anything out of it, I cannot wait for Social Security to collapse under its own stupidity.

    We would save almost $1 trillion per year by ending or gutting this program.

    1. I would like to know how you do that.

      It is near impossible legally.

      1. For anyone born after the end of the baby boom not getting anything out of SS is not only not impossible, it’s becoming increasingly likely.

        However, you are correct, that for a US Citizen and/or resident, not paying into SS is nearly impossible if not impossible to do legally. About the only way to do that legally is to be a rich bastard who gets all of his income from capital gains/investments.

  17. This article perpetuates a myth that we are significantly longer lived than in the past. 100 people are born in year 1910. 20 die from various childhood diseases and accidents. The remaining 80 live to age 75 when they die. The average lifespan for the 100 people is 61 years as in the example given in the story. You still have 80 people that will collect SS benefits for 10 years.

  18. Let’s be honest, all we’re arguing over at this point is who’s gonna get screwed from the socialist security ponzi scheme. If benefits are reduced right now (fat chance), current retirees will get screwed. If taxes are raised right now (again, fat chance), current workers will get screwed. If nothing is done and a 20% benefit cut will happen naturally in 10 years (possible, but still not likely), future retirees will get screwed. If benefits stay the same and taxes aren’t raised and money is printed or borrowed to pay for it (most likely case), everybody who isn’t gonna outlive the next decade will get screwed with inflation and stunted economic growth.
    Having it collapse more catastrophically than a 20% benefit reduction would be the best outcome in my opinion as hopefully people will wise up to the fact that a promise from the government is about as trustworthy as Bernie Maddoff and never trust the government again.

    1. End all social security, medicare, and medicaid immediately. Keep social security taxes near current levels for 10 years. Give all eligible old people a lump sum that is as much as they paid in and some interest.

      Use the 10 years of SS taxes to pay down the national debt.

      After 10 years end all government welfare and retirement ponzii schemes.

      1. Unfortunately there is no trust fund to give old people a lump sum from. If the lump sum comes from a huge one time increase in national debt that’s paid off over the next 10 years worth of social security taxes, it unfortunately can’t be used to pay off government debt.
        Again, somebody is going to get screwed. Current retirees did pay into it, so getting stiffed when it’s their turn to collect is pretty messed up, but no less messed up than making current workers pay into it knowing damn well they won’t get anywhere near what they put in when it’s their time to collect. I’d personally be perfectly willing to forfeit my eligibility for social security and medicare despite the fact that I’ve paid into it for the last 20 years if I’m never taxed for it again, but that’s not an option.
        Social security is a ponzi scheme and the fact that it’s mandatory is a disgusting violation of personal choice. At least in theory though, you should get out of it roughly what you put in which makes it slightly less jacked up than your average government program. Medicaid, section 8, food stamps, etc… are 100% nothing but theft from productive people to social parasites and should be shutdown cold turkey immediately, but that’ll never happen.

      2. The problem with a lump sum payment to current retirees is also politically impractical because a substantial portion of them, if not an outright majority, will spend all of the money before they die, and when these voters, and their voter children, grandchildren, and great-grandchildren see Gamgam and Poppop destitute, they will be clamoring for the government to “do something.”

        1. In addition to all of the other problems with this suggestion, of course.

  19. This is supposed to be a Libertarian site and the writer can’t even mention one plan to terminate social security and replace it with a private retirement system. It boarders on insanity!

    1. This site is just a test bed for unindoctrinated / educated people’s sentiments. In all likelihood, they measure how much they can sway our opinions – as well as our outlooks – via standard propaganda and astroturfing techniques. I wouldn’t be surprised if hasbora-type infiltration into the comments is also going on.

      Ultimately, whatever works on us, easily works on everyone else.

    2. This is supposed to be a Libertarian site and the writer can’t even mention one plan to terminate social security and replace it with a private retirement system. It boarders on insanity!

      No $hit. All the author had to do was at least to propose making SS voluntary.

    3. yeah, how about a retrospective look at W’s plan to switch to private accounts? what if that had been implemented back in the day?

      Or Harry Browne’s plan to end the program at the end of his first fiscal year in office?

  20. Well, politically, benefits will never be cut.
    So the payroll tax rate will be hiked, and the cap will go up (or skip the 150K to 250K range, then start taxing again after that).

    Nice of them to raise the retirement age after I signed up, thinking I had agreed to one set of rules.
    Nice of them to force me to sign up so I could work, when I would prefer not to.
    Nice of them to make me sign up as a minor, how is that even legal?

  21. This is the stupidest article I’ve read in a long time. There is no trust fund. It doesn’t matter if we tripled the taxes we pay this year, there will still be no trust fund

    Social Security benefits are paid out of the revenue generated that year. This years benefits are paid out of the money taxed/borrowed this year and 2035 benefits will be paid out of revenue of the year 2035

  22. […] The problem facing Social Security is time. And time, as it turns out, is money. Read More > at Reason […]

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