Without action from Congress, the fund that pays retirement and survivor benefits could run dry in late 2032 — triggering a 22% cut in payments.
Ninety-one years ago today, President Franklin D. Roosevelt signed the Social Security Act of 1935 into law, creating what is now the country’s largest federal program, and which provides benefits to more than 70 million Americans.
But Social Security now faces a looming insolvency crisis, with the trust fund that pays retirement and survivor benefits projected to run out of reserves in late 2032, according to a June report from the program’s trustees.
If Congress does not act, by 2032 incoming revenue would cover just 78% of scheduled retirement and survivor benefits, resulting in a 22% cut in monthly payments.
Leading experts, speaking ahead of today’s anniversary, have warned that time is running out to safeguard the program.
“The window for saving this program is closing fast,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement Thursday.
“Policymakers must enact a solvency package — or establish a process to develop a solvency package — as soon as humanly possible. This is fast becoming a national emergency, and it’s time our leaders take this crisis seriously.”
Lawmakers remain divided
Congress is beginning to grapple with how to avert a shortfall. The Senate Finance Committee held a hearing last week on how to address Social Security’s solvency — but lawmakers remain divided over the best path forward.
The hearing grew heated, with Democrats accusing Republicans of wanting to slash benefits in backroom deals, while Louisiana Republican Sen. Bill Cassidy seemed to express frustration as lawmakers sparred over how Congress should approach the problem.
“Today we are only talking about setting up a process,” Cassidy told the committee.
The hearing also highlighted sharply divergent views on where to find the money needed to stabliize the program.
Multiple witnesses, including AARP, pointed to a source of revenue Social Security currently leaves untapped: the cap on taxable earnings, currently $184,500, above which income isn’t subject to Social Security taxes.
A bipartisan proposal from Democratic Sen. Elizabeth Warren of Massachusetts and Republican Sen. Bernie Moreno of Ohio would eliminate the cap entirely.
That proposal represents an unusual point of agreement across party lines. The change would generate roughly $3.4 trillion in additional Social Security tax revenue over a decade, according to the Peter G. Peterson Foundation. It would still close only about half of the funding gap, according to the Committee for a Responsible Federal Budget.
“Social Security is a promise,” Warren said at the hearing. “You pay in year after year, and then when you need it, at the end, it will always, always, always be there for you.”
Lawmakers also heard warnings about an alternative way of filling the gap by tapping general government revenue — money raised outside of Social Security’s payroll tax — to cover the shortfall.
Marc Goldwein of the Committee for a Responsible Federal Budget testified that doing so could trigger a “debt spiral” and would effectively “end Social Security as we know it as a self-financed contributory” program.
Others cautioned that relying too heavily on tax increases carries its own risk. Charles Blahous of the libertarian Mercatus Center said raising taxes alone would simply shift the financial burden from today’s beneficiaries onto younger workers.
Facing a crossroads
While there is broad agreement that Social Security’s finances need to be addressed, there is far less consensus on how to do so.
As politicians grapple with how to fix the crisis, the average American seems clear on their preference.
The National Academy of Social Insurance, a nonpartisan group, points to its own polling showing 85% of Americans, when presented with the program’s potential financial shortfall, say benefits should not be reduced even if avoiding cuts means raising taxes.
Testifying before the Senate Finance Committee last week, the organization argued that the best path forward starts with listening to the public.
“Social Security belongs to the American people,” Rebecca Vallas, CEO of the National Academy of Social Insurance, said. “We should listen to them as this crossroads approaches.”
