Social Security shortfall & looming benefit reductions

[nycfan]

Social Security’s Finances Erode Further and Could Spell Benefit Cuts​

The nation’s key program for retiree benefits continues to see financing shortfalls. Unless Congress acts, those drops could lead to payment cuts in eight years.

—> https://www.nytimes.com/2025/06/18/...e_code=1.P08.NrLy.chRcRTtrV0TZ&smid=url-share

“… The deteriorating financial outlook for the retirement program, which supports roughly 61 million Americans, was released in its annual trustees report on Wednesday. It is now expected to run out of money nine months earlier than previously projected, which means benefits could be reduced by 23 percent if Congress does not act to bolster the program.

That puts the Social Security Old-Age and Survivors Insurance Trust Fund, which pays retiree and survivor benefits, on schedule to be depleted in 2033, or when today’s 59-year-olds turn 67. At that time, the program will have enough revenue coming in to pay only 77 percent of total scheduled benefits.

The most recent setback was driven largely by a policy change, known as the Social Security Fairness Act, which took effect in January and increased benefits for about 2.8 million government and public sector workers. But there were other factors: Government actuaries now assume that the birthrate will remain lower for longer, while projecting that workers’ compensation would weaken over time as they capture a lower share of the nation’s economic output. …”

 

[nycfan]

We’ve gotten serious enough about it to fix this before but not sure if we can gather support to do it again.

 

[nycfan]

Cont’d

“… In their report, the trustees urged lawmakers to address the shortfalls in a timely way so that any changes could be phased in gradually, giving workers and beneficiaries time to adjust.

“Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits,” the trustees said in the report.

… Social Security and Medicare have long faced a financing shortfall, partly because of demographic changes. Dwindling birthrates mean fewer workers are paying taxes into the programs, 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 only up to $176,100 in income, and rising income inequality means a greater share of Americans’ earnings exceeds that cap and is not taxed.

… To put the magnitude of the financing shortfall in perspective, the trustees noted that revenue would need to rise by an amount that would raise the payroll tax by 3.65 percentage points. That would keep the combined retirement and disability trust funds solvent for the next 75 years, and bring the total tax to 16.05 percent.

In many cases, workers split the payroll tax burden with their employers; each currently pays 6.2 percent on earnings up to $176,100, for a total of 12.4 percent. By law, Social Security (unlike parts of Medicare) cannot use money from the federal budget’s general revenues to pay benefits….”

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Some of us pay both the employer and employee portion of payroll taxes, so an increase in the cap (a necessity) and the rate is potentially a pretty substantial tax increase. I’m ok with that if it is universal and that’s what it takes. Would love to see capital gains over some reasonably high threshold taxed (at least prior to retirement) as well (with a deduction for payroll tax amount paid on regular income to avoid double dipping), though doubt that will ever fly.

 

[nycfan]

Cont’d

“… Government actuaries have estimated that fixing Medicare’s trust fund over the long term would also require significant changes. To make sure Medicare had enough money to pay all its bills over the long term, Medicare would need to either reduce its overall spending on hospital care by 9 percent or lawmakers would have to raise the payroll tax that funds it to 3.32 percent from 2.9 percent, according to the report.…”

 

[Kingpin]

Easy fix. Raise the income cap on SS tax payments. It’s currently something like $175K (?). Should have happened years ago.

 

[ChileG]

Easy fix. Raise the income cap on SS tax payments. It’s currently something like $175K (?). Should have happened years ago.

If given the choice between receiving social security and also helping starving children or working until they die so Trump and Musk can have just a little bit more, every single Trump voter would choose the latter.

 

[1moretimeagain]

So long as the boomers get paid in full.

 

[Mulberry Heel]

Easy fix. Raise the income cap on SS tax payments. It’s currently something like $175K (?). Should have happened years ago.

There are fixes for Social Security, but the problem is that too many conservatives don't want it to be fixed, so they won't. They've become masters at screwing things up so the whole government doesn't work as well as it should. They then say "oh, look, this program or government agency doesn't work!" and use that to justify cutting it even more. Look at what the NC GOP legislature has very successfully done to NC public ed over the past fifteen years. They're steadily starving it to death by a variety of underhanded ways, and then when it doesn't work as well as it should and buildings are falling apart and there's a teacher shortage because of shitty pay (one of the worst in the country) they just say "oh, look, our public schools are failing! Let's spend even more on vouchers and charters and not give veteran teachers a raise again!" And most voters just play right along.