Millions of Americans have paid into Social Security their entire lives and now depend on its payments to get by. But the program is financially unstable, and according to a new report, will reach insolvency even sooner than we thought. It was previously projected that Social Security would become insolvent in 2034, but now, it’s projected to run dry in just 10 years, in 2033.
“Social Security benefits for retirees and others are primarily paid for through payroll taxes on current workers, and are supplemented by a trust fund,” NPR explains. “Benefits paid out by the program have exceeded money coming in since 2021, and the trust fund is now expected to be depleted by 2033. That’s a year earlier than forecast last year, thanks in part to slower economic growth. Unless changes are made before then to shore up the program, 66 million Social Security recipients would see their benefits cut by 23-25%.”
Social Security is now expected to run short of cash by 2033 https://t.co/CW40z5St1z
— NPR Politics (@nprpolitics) March 31, 2023
That’s right: When Social Security reaches insolvency and can no longer pay out its obligations, there will be a sharp cut in benefits enacted automatically. So, while many, including some prominent Republicans like Donald Trump and J.D. Vance, attack actual conservatives who want to reform and shore up the program for seeking to “cut benefits,” by defending the status quo they are actually advocating for even harsher de facto benefit cuts a few years from now.
The actual adults in the room know that the status quo is completely unsustainable. Why? Well, because Social Security is structured as essentially a Ponzi scheme, taking from current workers to pay out current retirees, and so on into perpetuity. But it assumed the generations would all be similar in size, and reality has worked out quite differently.
“The program’s financial shortfall is caused largely by an aging population,” The Peter G. Peterson Foundation explains. “As a result of the nation’s changing demographics, the number of workers contributing to the program is growing more slowly than the number of beneficiaries receiving monthly payments. In 1963, there were 4.1 workers per beneficiary; that ratio has dropped to 2.7 today and will continue to fall in the future.”
Why Social Security is doomed, in one graph. pic.twitter.com/6lW8CMZLGZ
— Brad Polumbo 🇺🇸⚽️🏳️🌈 (@brad_polumbo) April 3, 2023
Ideally, as Milton Friedman proposed, we would meet obligations to all current beneficiaries but start phasing out to a privatized Social Security system that would deliver much greater rates of return. But if that can’t be achieved, real cuts and reforms simply must be on the table.
Yet most policymakers are too scared of public backlash to acknowledge this reality. They claim this makes them in tune with the people, yet to defend the status quo is to simply bury your head in the sand and cover your ears as the time bomb that is Social Security’s finances keeps ticking away. It’s actually a cruel betrayal from people who know better but find it easier to pretend they don’t.