Author: R. Alan Harrop PhD
A recent report indicated that Social Security is in worse condition than previously estimated and will be operating at a deficit by at least 2033 if not before. If no changes are made by Congress, social security benefits will have to be cut by about 23% to match payments into the program. Let’s take a look at what is causing the problem and potential solutions.
Currently, 74.2 million Americans receive Social Security benefits. This is about one fifth of the population. Eighty-seven percent of people over 65 years of age are currently receiving benefits. In 2023, this amounted to 1.4 trillion dollars or 23% of the federal budget. There are three types of benefits. The largest group, 67 million, is retirees who receive an average of $1,999 per month. The second group is 4.9 million people receiving Supplemental Security Income of an average of $1,581 per month. Lastly, there are 2.5 million receiving both types of benefits.
There are a few reasons for the solvency issues with social security. First is the percentage of employed workers paying into the system compared to the number receiving benefits. For example, in 1965 there were 4 workers for every person receiving retirement benefits. Now it is 2.7 workers per retiree. This trend is expected to continue. Second, people are living longer and due to the so-called Baby Boomer generation, the number retiring is at an all-time high. Also, the number of manufacturing jobs has been decreasing. This is due in part to allowing cheaper imports and the increasing use of machine-based manufacturing which lowers the number of workers needed. The third issue is the expansion of the Social Security programs from strictly a benefit for retirees, as intended by the original legislation creating the program in the 1930s, to income supplementation for the disabled. The definition of a disabled person has expanded from clear physical limitations to vague and less certain psychological disorders. The final problem is the declining birthrate. It takes a birthrate of 2.1 children per woman just to maintain a stable population. The current birthrate is 1.4 and declining.
The question is, “What options are available to keep the social security system solvent?” The Social Security program is not allowed to operate at a deficit, and therefore the problem must be solved before benefits exceed revenues. One option is to reduce the benefits paid to retirees. This would break the promise made by the program to workers who have paid into the system all their working years. This would also be a problem as the cost of living continues to increase. A second option would be to increase the qualifying age for receiving benefits. Because people are living longer, this would still allow a considerable number of years for the average person to receive benefits before they die. It would also maintain more people in the workforce to continue to contribute to social security program revenues. A third option would be to increase the rate of payment into the system by those employed. The question of fairness becomes a problem with this option since we would be increasingly requiring workers to pay for the retirement of others. More socialism. Also, the Big Beautiful Bill included a unique program that awards $1000 for each child born from 2025 through 2029 for parents to establish nontaxable-interest accounts that can be added to over the years.
None of these potential solutions will be easy for Congress since they all have potential political blow back. This is another example of social programs that continue to grow and expand until they threaten to bankrupt the system. In a truly free society, each individual should be responsible for earning and saving enough so they can finance their own retirement. Many people have done that and do not have to rely on Social Security. This needs to be encouraged, and perhaps if Trump’s plans to expand the economy succeed, it will allow more people to achieve this goal. Relying on the government is always a bad idea.




