DOGE and Congress Should Look Hard at Reforming Social Security

Means-test Social Security, raise the retirement age, and let us invest our own money.

The Department of Government Efficiency (DOGE) is off to a decent start in making initial cuts in federal waste and overall cost and—importantly—normalizing the reality that reducing government expenditures is a good thing. But if the DOGE is to live up to its avowed mission of making the bloated federal government even slightly affordable, at some point it's going to have to take on the big dogs of government excess. That requires congressional cooperation, and it means targeting Social Security.

Social Security Is Expensive and Foundering

"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report," the Social Security trustees revealed in the most recent annual report. "At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits."

Disability insurance is in better shape. But rolling that "trust fund" (keep in mind that there's no such thing—it's just claims on future tax revenues) into OASI would buy just two more years of full benefits.

Well, then we'll have to spend more to keep benefits up, right? In fact, two-thirds of Americans say they want the government to spend more on Social Security, according to A.P.–NORC pollsters. But here's the thing: Social Security already constitutes more than one dollar out of every five spent by the federal government. Other entitlements—Medicare, in particular—raise entitlements' share of the federal budget to half. In 2024, the federal government spent over $1.8 trillion dollars more than it collected in taxes, which is expected to rise to a $1.9 trillion deficit this year and to grow to $2.7 trillion in 2035, adding to an already $36 trillion national debt.

To spend more on Social Security, either taxes must be raised by a huge amount to eliminate that deficit and allow for more generous benefits, or other federal programs will have to be gutted.

But majorities of Americans already say taxes are too high. "Two-thirds of U.S. taxpayers say they spend 'too much' on federal income taxes," A.P.–NORC found last January. "Ninety-three percent (93%) believe American families and businesses are already paying enough in taxes," a U.S. Chamber of Commerce survey revealed in September.

Social Security is the biggest federal expense. The next priciest items are other entitlements including Medicare and Medicaid, and Americans want to spend more on them, too. Defense is next, and while there's room for cutting there, it's nowhere near enough to close the deficit and save Social Security.

Some politicians claim that we can grow our economy enough to make up for Social Security's shortfalls. But that won't work. "Because Social Security benefits are indexed to wage growth, as wages increase, so do benefits," explains the Cato Institute's Romina Boccia and Dominik Lett. "Therefore, while higher wage growth boosts revenues, it simultaneously raises the future benefits owed to retirees."

Complicating the issue, add Boccia and Lett, is that "improvements in life expectancy and a declining birth rate mean that a shrinking group of workers is supporting an increasing number of retirees even if macroeconomic conditions are sound."

The federal government is in a fiscal mess. At some point, either the U.S. government defaults on the debt and cripples the economy; pays it off in inflated dollars that will have little purchasing power, crippling the economy; or gets its house in order. The DOGE's founders know that.

"America is going bankrupt extremely quickly, and everyone seems to be sort of whistling past the graveyard on this one," Elon Musk warned last October.

If the federal government can't pay benefits—or, just as bad, pays them in devalued dollars that buy virtually nothing—nobody gets anything of value. To survive at all, Social Security needs to change.

Reforms To Make Social Security Affordable

Cato's Boccia proposes that the Social Security eligibility age be raised by three years (to 65 for early retirement and 70 for full retirement). That makes sense. When the program was introduced in 1935, with retirement age at 65, the average life expectancy for men was 59.9 and for women it was 63.9. Infant mortality was higher at that time than now, which pulled down life expectancy. But still, the creators of Social Security anticipated that fewer than 40 percent of women who made it to adulthood and roughly 46 percent of men would die before collecting a penny. With many more Americans living longer and healthier, 70 is a modest adjustment to the retirement age.

Boccia also points out that retirees over the age of 65 have on average triple the net worth of workers between the ages of 35–44. It's perverse to tax hard-working younger Americans for the benefit of wealthier older ones. She suggests that "Congress should means-test Social Security, returning to the program's stated purpose of antipoverty protection in old age."

Some more savings could be found by linking cost-of-living adjustments in Social Security benefits to the chained CPI, which is more accurate than other measures in reflecting how consumers respond to changing prices.

Better Benefits Through Personal Planning

But if Social Security is turned into a means-tested support program for lower-income Americans retiring a little later in life than in the past, what becomes of the rest of us? We all can and should plan for our own future. A reformed Social Security would be cheaper and would presumably be paid to low-income earners from general revenues rather than based on today's high payroll taxes, leaving more room for private investment. With Social Security's finances so rocky and benefits in question, everybody should be making their own plans anyway. It's an opportunity for a more prosperous retirement than Social Security could ever realistically offer.

"Over 99 percent of the U.S. population would have earned a greater return by investing in the S&P 500, and over 95 percent would have earned a greater return by investing in 6-month CDs relative to the current Social Security system," Thomas Garrett and Russell Rhine wrote in a 2005 analysis for the Federal Reserve Bank of St. Louis comparing Social Security with private retirement accounts. The math hasn't changed since then.

Social Security isn't just bloated and unaffordable, it also stands in the way of a better old age for the vast majority of Americans. Fixing Social Security would improve the federal government's finances while offering us all better benefits.