Social Security at risk for cuts by 2032, unless Congress acts
- The San Juan Daily Star
- 7 hours ago
- 4 min read
By TARA SIEGEL BERNARD and MARGOT SANGER-KATZ
The financial forecast for Social Security worsened this year, according to the annual financial report released earlier this week by the program’s trustees. If Congress does not develop a plan to shore up the program, it will need to cut benefits for millions of Americans in just a little more than six years.
Social Security’s deteriorating finances have long been thought of as a future problem — for another president, or another Congress, to resolve. But now, it is creeping ever closer because funds will run out before the end of the next president’s term.
The Social Security Old-Age and Survivors Insurance trust fund, which helps pay retiree and survivor benefits to more than 68 million beneficiaries, is now expected to run out of money at the end of 2032, one quarter earlier than projected last year. That means incoming revenue would be enough to pay only 78% of benefits, in other words, a reduction of 22%, according to Tuesday’s report.
But that situation would come to fruition only if lawmakers don’t act to strengthen the program before then, through some combination of higher taxes or reduced checks.
“This should be a wake-up call: Congress needs to act,” said Myechia Minter-Jordan, CEO of AARP. “Americans have worked hard and paid into Social Security their entire lives, and they deserve to count on it when they retire. No family should see any cuts to what they’ve earned in Social Security.”
Medicare’s hospital trust fund is expected to run out of money in 2033, slightly earlier in the same year than the trustees had estimated last year. In the second quarter of that year, Medicare is projected to have only enough money to pay 89% of the program’s hospital bills. Future spending in other parts of the Medicare program, which is not financed using a dedicated fund, is expected to increase. That spending growth on doctors’ visits and prescription drugs will nevertheless increase the federal budget deficit and long-term federal debts.
Social Security has long faced a financing shortfall, but it has worsened in the short term for several reasons. The trustees assumed that fertility and immigration rates would be lower, posing a drag on the program. And the trust fund will collect less tax revenue from Social Security beneficiaries because of the big tax and policy bill passed last summer. The trustees also assumed that workers’ earnings would grow faster, helping the program’s finances.
Some experts believe that the Trump administration’s aggressive stance on immigration may not be fully reflected in the report, which assumes lawful immigration at levels similar to those during the Biden administration and only a short-term reduction in “temporary and unlawfully present” immigrants.
That “would make the Social Security picture even worse, because immigrant workers strengthen Social Security’s finances by contributing to the trust fund through payroll taxes,” said Kathleen Romig, a senior fellow at the Center on Budget and Policy Priorities, a research group.
Social Security must also confront its more long-standing challenges, driven in part by demographic changes. Dwindling birthrates mean fewer workers are paying taxes into the program, all while thousands of baby boomers are retiring daily and collecting their benefits for longer periods.
In addition, a larger share of the country’s wage base is not subject to payroll taxes — Social Security’s lifeblood — compared with years past. The taxes are applied up to only $184,500 in income, and rising income inequality means a greater share of Americans’ earnings exceeds that cap and is not taxed.
A separate trust fund, which finances Social Security disability benefits for another 8.1 million people, is on more solid ground. It will be able to pay its bills for the next 75 years, the report said.
Many Americans believe Social Security is in shakier shape than it actually is: A recent AARP poll found that 39% of respondents believed that the program would not be able to make any payments when the trust fund ran dry.
There’s a broad misunderstanding about how the program works. It is generally financed by a combination of payroll taxes, ordinary income taxes on benefits and interest earned from the trust fund. If the amount of taxes collected exceeds the amount paid out, that surplus is held in the trust fund. And if benefits exceed the taxes collected, that gap is covered by the money in the fund.
“Simply put, the trust fund works like a personal checking account — money in, money out,” Jonathan Schwabish, a senior fellow at the Urban Institute, said this year in a report.
But since the early 2010s, benefits paid have exceeded the taxes received, which has led the trust fund balance to shrink, he added. Once the fund is empty, the program will be able to pay benefits using only the taxes it has received.
By law, Social Security (unlike parts of Medicare) cannot use money from the federal budget’s general revenue to pay benefits.
Earlier Tuesday, two members of Congress — Reps. Tom Cole, R-Okla., and Tom Suozzi, D-N.Y. — introduced a bill that would create an independent commission made up of 13 members appointed by the president and congressional leaders in both parties. The commission would be charged with finding “common-sense solutions” to bolster the program’s long-term survival.
President Donald Trump has repeatedly said he wants to protect and strengthen Social Security but has not come forth with realistic plans. During a Cabinet meeting on May 27, he said he believed that reducing rampant fraud would be enough to put the program’s finances back on track, echoing false ideas spread by Elon Musk and others last year, including the claim that millions of dead people were receiving payments.
“I think we have a chance to save Social Security without doing anything to it,” Trump said last month, “by just the numbers of fraudulent people on Social Security — people that are 115 years old, 125 years old, getting payments.”
Those allegations have been debunked, including in a New York Times investigation.
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