Without Congressional Action, Social Security Can Pay Just 78% of Scheduled Benefits

The Social Security trust fund is projected to be depleted around 2032. That would not mean the program was bankrupt or unable to pay anything. It would mean that, under current law, Social Security could pay benefits only from the revenue it collects. If Congress made no changes, that revenue would cover about 78% of scheduled benefits, Jason Fichtner said.

The distinction matters because “don’t touch Social Security” is not a way to preserve current payments. If Congress does nothing, the law produces an across-the-board reduction in what the program can pay. The policy choice is whether to allow that cut, raise revenue, or combine changes to taxes and benefits. Fichtner, who previously served as Social Security’s deputy commissioner and chief economist, said the depletion date has appeared in trustees’ projections for decades; what has changed is how little time remains to respond.

The scale of the program makes that choice more than an accounting problem. Moderator Jeff Stein described Social Security as an unusually ambitious public program, one that reaches older people and people with disabilities and embodies a broader question about what the country owes them—and what it owes the next generation. Kathryn Edwards argued that its record as economic policy is exceptional. A cut, she said, would risk higher poverty among older people and would not affect seniors alone.

An older person who loses income may not return to work to replace it. They may turn instead to their children. Edwards used her own family to make the point: her mother’s independent income lets Edwards spend more on her children rather than support her mother. Social Security, in this account, gives one generation economic independence and frees resources for the generations around it. A benefit cut can therefore reach younger households indirectly, through the care and financial support they provide to parents and grandparents.

The effects would also vary by place. Edwards said Social Security payments account for 20% to 30% of total income in some rural counties. Those communities do not have the same economic base as large cities, she argued, and a reduction in benefits would not land evenly across the country. Fichtner agreed that both sides of the financing debate have economic costs: higher taxes take money out of the economy, while lower benefits reduce spending by seniors. The question is not whether a change has consequences, but which households and local economies bear them.

Fichtner described Social Security as a program that has changed substantially since its creation in 1935. It operates largely on a pay-as-you-go basis: today’s workers’ payroll taxes help pay today’s beneficiaries. That structure becomes harder to sustain when the number of workers supporting each beneficiary falls.

The shift is especially visible in what Fichtner called the “peak 65” period. From 2024 through 2027, he said, about 4.1 million Americans are turning 65 each year—roughly 11,200 a day. As more baby boomers retire and claim benefits, the number of people drawing from the program grows. Behind them are smaller generations, and falling birth rates mean fewer workers entering the system. The result, in Fichtner’s account, is a widening mismatch between benefits and the revenue coming in to support them.

He also pointed to longer lives and a change in what the program is expected to provide. Social Security began as old-age and survivors insurance, alongside disability insurance. Fichtner described insurance as protection against an unlikely event with a high cost, such as a house fire—not a way to pay for something expected to happen. In his view, the program has increasingly functioned as a retirement plan, financing decades of retirement for more people than its original design anticipated. He said one in three 65-year-olds will now live to 90 and one in seven to 95.

Edwards did not deny that people are living longer or that the baby boom was predictable. She challenged the emphasis on those facts as the explanation for Social Security’s shortfall. The boomers were already young when the program was last substantially reformed, she noted, and Social Security’s former chief actuary had told her the agency had projected longevity accurately through roughly 2010 or 2012. For Edwards, the problem is not simply that there are more older people. It is that the program’s revenue base has weakened as workers have lost economic power.

She identified three changes in the treatment and distribution of wages. First, Social Security taxes wages only up to a taxable maximum. In 1983, Edwards said, that maximum covered about 90% of wages earned in the United States; it now covers about 82%. Most of that decline occurred between 1983 and 1999, as wages at the top rose faster than the tax base. In effect, she argued, the program experienced a tax cut without Congress passing one.

Second, employer-provided health insurance and retirement contributions are not subject to Social Security payroll taxes. As health care has become more expensive and more compensation has taken those forms, Edwards said, more of what workers receive has fallen outside the program’s tax base. Third, labor’s share of total national income has declined over decades: a smaller share of the economy goes to workers as wages or other compensation.

That difference in diagnosis changes the proposed remedy. Fichtner said the demographic gap can be addressed within Social Security through benefit or tax changes; Edwards argued that the wage problem cannot be solved by changing Social Security alone. The wider question, she said, is whether reformers look only at the program’s finances or also at the economic conditions that have eroded its revenue.

The two economists agreed on several possible revenue changes, though not every detail. Fichtner said raising the taxable wage maximum to cover 90% of wages again could bring in more revenue. He also agreed that taxing some employer-provided benefits merits consideration, while expressing more hesitation about taxing retirement contributions. He connected the exclusion of employer-sponsored health benefits to a tax arrangement developed after World War II, when employers were encouraged to provide health coverage through favorable tax treatment.

But Fichtner cautioned against relying entirely on payroll taxes. The Social Security payroll tax is 12.4%, split between employers and employees; self-employed workers pay both shares. He said closing the shortfall through payroll taxes alone would require an increase of 4.4 percentage points now, and about five points if Congress waits until trust-fund depletion. That would raise the rate to around 20%. Because labor is already a major cost for employers, Fichtner worried that increasing payroll taxes could encourage employers to seek ways to use less labor, including as technology changes work. He said other revenue sources, such as customs duties or a carbon tax, should also be discussed.

Fichtner said the cost of waiting is visible in the size of the adjustment now required. About 15 years earlier, when he worked at Social Security, a two-percentage-point payroll tax increase—one point each for employers and employees—would have been enough to achieve 75-year solvency, he said. The comparable increase is now 4.4 points, and could reach five if action is postponed until depletion.

The 75-year measure is an actuarial calculation of whether revenue and costs balance over the projection period. Fichtner said making a change earlier would have put more money into reserves for longer; waiting means a larger adjustment is needed to address the same projected shortfall. He put the program’s unfunded liability at more than $40 trillion—the amount that would need to be set aside today to cover the projected gap over 75 years. The annual gap at depletion, he said, would be about $800 billion and could approach $1 trillion.

That prospect sits alongside an already large federal deficit and debt. Fichtner described a future in which the government would need to borrow roughly another trillion dollars a year to cover the gap, and questioned whether financial markets would allow that to continue. His concern was that a fiscal crisis could force action on Social Security after Congress had lost the chance to make more gradual changes.

The panelists’ proposed reforms differed in emphasis, but both argued that preserving the program does not require treating its current design as untouchable. Fichtner favored a mix that could include a modest payroll-tax increase, a higher retirement age for future workers, and slower growth in the cost-of-living adjustment. He stressed that slowing a scheduled increase is not the same as reducing the nominal check: if benefits rise from $100 to $103 rather than $103.60, the payment has still gone up. He said the aim should be to avoid a real cut to benefits already being received.

Fichtner also argued for considering retirement income as a whole, rather than treating Social Security in isolation. He noted that traditional defined-benefit pensions have largely given way to 401(k)-style savings, which do not automatically provide the same paycheck-like income in retirement. He suggested converting more retirement savings into protected income, such as annuities, alongside Social Security. For financing, he raised the possibility of a more holistic tax treatment of retirement income, including what he called “backdoor means testing.”

Under the current system, some Social Security benefits become subject to income tax for retirees with enough other income, and that revenue goes back to Social Security. Fichtner said the mechanism could be expanded so that people with higher income pay tax on a larger share of their benefits, while the share could fall if their finances worsen. That flexibility matters, he argued, because a person who is wealthy at 70 may be poor at 80 after health problems or other setbacks. He distinguished this from directly reducing a person’s benefit check, which he said would be politically unpopular.

Edwards’s vision was broader. She described Social Security as having been actively adjusted between 1935 and the major 1983 reform, then largely placed in a “glass box.” The resulting reluctance to change it has constrained not only financial reform but also the program’s potential to address risks that have changed since its creation. She proposed using Social Security to provide paid family and medical leave, and potentially to manage risks such as short- and long-term unemployment.

She also argued that retirement benefits should better reflect the way people actually work and retire. People can phase into retirement, return to work, or change their plans, whereas Social Security’s claiming rules are structured around age. Edwards said a person who spent years in education and entered the workforce later can face the same claiming age as someone who started working at 18. She proposed partial benefits and a more flexible retirement age tied to work history.

Fichtner agreed that the program’s original assumptions need updating. He pointed to its historical basis in a household model with a working husband, a stay-at-home wife, and children, and argued that modern rules should account for people leaving work to care for children or older relatives. One option, he said, would be to credit some of those years with an average wage, or otherwise fill in years without earnings, so that caregiving does not undermine a person’s later benefit.

The disagreement over reform is not only about actuarial math. Stein raised a challenge from the populist left: why should Congress begin changing Social Security when wealth and income are so unequal, and very wealthy people hold enormous resources? Why not first raise revenue from them rather than alter benefits that millions of people expect?

Edwards said Social Security cannot solve the broader problem of extreme wealth concentration by itself. She argued that inequality is produced by wider failures to invest in children and families and protect workers, and that simply taxing the very wealthy would not change those underlying conditions. She acknowledged the political difficulty of asking Congress to address Social Security while also taking on other economic problems, but said leaders should be expected to do both.

The question of what Social Security is shapes which remedies seem fair. Some people understand it as an individual account: they paid in and are entitled to claim the money back. Others understand it as social insurance, pooling contributions to protect people against the risks of old age and disability. Fichtner said the program’s popularity rests partly on the sense that benefits are earned: people support it because they have paid in and expect something in return. But that expectation does not make the program a personal savings account. Its pay-as-you-go structure means current workers help finance current beneficiaries.

Those competing understandings are especially visible in the dispute over the taxable wage cap. Social Security taxes apply to wages only up to a maximum; wages above that amount are not taxed for the program. Edwards said roughly 6% of wage earners are affected. She argued that raising or removing the cap is among the most popular proposed changes, and that people often object when they realize their Social Security withholding stops later in the year. From her perspective, preserving the cap while asking other workers to accept tax increases or benefit changes risks telling voters that their preferred way to share the burden is off limits.

Fichtner warned that changing the cap cannot be separated from the program’s benefit structure. Taxes and benefits are both capped now, he said. If the tax cap were removed while the benefit cap stayed in place, high earners would pay more without receiving a correspondingly larger benefit. In his view, Social Security could then look less like a shared insurance program and more like a welfare program—a characterization he associated with the risk that programs identified as being for the poor lose broad support. If benefits rose along with uncapped contributions, he argued, high earners could receive very large checks.

The disagreement is not simply over whether people with higher wages should contribute more. It is over what that change would do to the relationship between contributions and benefits that helps make Social Security feel universal. Edwards’s argument is that the current cap is an unpopular exception in a program everyone pays into and receives from, and that public support for removing it should matter in a democracy. Fichtner’s concern is that a tax change without a corresponding benefit change could weaken the earned-benefit character that sustains the program’s appeal. Raising both taxes and benefits, meanwhile, raises a different concern about larger payments to high earners.

Edwards framed the political question as a matter of which consequences Americans are willing to accept. If the program has to change, she said, the public should be able to weigh the economic effects of higher taxes or lower benefits against the political cost of rejecting a widely supported proposal to tax wages above the cap. Fichtner countered that relying only on taxes on the very wealthy may not preserve a sense of shared responsibility. It is easy, he said, to support raising someone else’s taxes; a program with broad support may require people to share its costs.

For Fichtner, reform should begin by setting out what happens if Congress does nothing, then making the choices and trade-offs clear: what benefits people want, what taxes they will accept, and how costs fall across generations. He warned that raising the retirement age and payroll taxes could leave millennials paying more while receiving less. Edwards emphasized that younger people often doubt Social Security will be there for them, even as the program remains broadly popular across divisions. The durability of that support, in their exchange, depends not just on the arithmetic but on whether people see the bargain as fair.

Fichtner warned against assuming Congress could resolve the problem at the last moment without consequences. Retirement and disability are legally separate Social Security trust funds, though they are often discussed together as OASDI. He said the disability fund is solvent over the 75-year projection period, but transferring its resources to retirement would buy only about one year. Combining the funds would still leave benefits below their scheduled level—about 83%, in his estimate—and would mean cuts for disabled beneficiaries too.

The political calendar could bring the issue into sharper focus. Fichtner noted that senators elected in 2026 would serve terms extending to the 2032 depletion point. Candidates, he predicted, would increasingly be pressed to say whether they would accept an automatic benefit reduction or raise taxes. But he doubted that Congress currently had the political courage to reach a bipartisan agreement.

Edwards added that Social Security can become a convenient target for broader fiscal failures. She argued that the program is blamed for the country’s financial strains even though it has not had a major reform since 1983, while Congress has passed tax cuts and avoided addressing the revenue side of the budget. Her point was not that Social Security has no financing problem, but that treating it as the sole cause obscures the choices that created the wider fiscal situation.

The panel left the central bargain unresolved. Fichtner stressed that waiting makes the eventual adjustment larger and that any durable solution will need bipartisan support. Edwards stressed that the program’s problems cannot be understood only as a demographic imbalance, and that reform should respond to changes in wages, work, caregiving, and retirement. Their common ground was that the current path is itself a decision: absent legislation, the law produces a cut. The remaining dispute is what to preserve, what to modernize, and who should bear the cost.