This is not the moment for Social Security reform
I’ve been doing my Summer 2025 Grandchild Tour this month (they’re on both coasts!), so I’m catching up a bit late on last week’s annual report of the Social Security trustees.
The financial projections contained in these reports don’t vary much from year to year, which speaks to the high level of competence of the Social Security actuaries. The retirement fund still is projected to run dry in 2033 - at that point benefits would be cut roughly 23% across the board unless action is taken before that time.
But this is not the moment to rush into Social Security reform, despite what you may read in the media commentary.
The report triggered the usual panicked media coverage; the Washington Post led the charge with an opinion piece demanding appointment of a commission to develop solutions. That’s a useful strategy for politicians who want to keep their fingerprints off unpopular proposals to cut benefits, but not good for a public that should demand accountability from their elected officials.
This is typical fare from the Post. The paper has done a great job covering the crisis at the Social Security Administration this year but otherwise has had a miserable record covering the program. The Post has repeatedly (and incorrectly) tied the program to the national debt, claimed it is "running out of money” and promoted false equivalency between the two political parties on solutions. More on that here.
Reform seems unlikely during the current administration, since Donald Trump has pledged not to touch benefits. And the current Congress would only cut benefits anyway, since the GOP refuses to accept tax increases for Social Security or, frankly, anything else.
That leaves us hurtling toward the aforementioned 23% benefit cuts in just eight years—an outcome that is both unacceptable and entirely avoidable.
There are just two ways to avoid that:
When the solvency cliff is reached, Congress can inject general revenue into Social Security on an emergency basis to maintain benefits. Social Security would be partially financed through debt for the first time.
We elect a Congress and president willing to push through a strong, progressive solution that does include tax increases.
And both of those things could occur - probably in that order. First a crisis, then a progressive solution that gets the program back on track.
A couple brief notes on this year’s trustee report:
The retirement trust fund still is projected to be depleted in 2033, as it was last year. But the date moved up by nine months, partlly due to passage of the Social Security Fairness Act, which took effect this year and increased benefits for certain government and public sector workers affected by the Windfall Elimination Provision. Another contributing factor is a projected further decline in birthrates, weakening payroll tax contributions from future workers. And,a smaller share of GDP is projected to come from wages, with more income coming from capital gains and other non-wage sources (in other words, wealth inequality).
The disability trust fund is in good shape - it can meet all of its obligations through 2099. “Disability incidence rates remain near historically low levels,” said Karen Glenn, chief actuary of the SSA, during a recent webinar convened by the National Academy of Social Insurance. Disability rates were at historic high levels during the Great Recession, she noted, but the incidence rate has declined significantly since then. She noted several contributing factors, including the changing nature of work. “People are more able to stay in employment these days for various reasons - jobs are not as physically taxing as they used to be, and there are more accommodations by employers and more use of telework.”
Social Security’s challenges are real—but they’re not unmanageable, nor are they new. What’s needed now isn’t panic or backroom commissions, but public pressure, political courage and a commitment to preserving the most successful anti-poverty program in American history for the generations to come—including, I hope, my grandchildren.
What I’m reading
Supreme Court allows DOGE access to Social Security data . . . Expensive Alzheimer’s lifestyle plan offers false hope, experts say . . . Health risks from cannabis may grow with age . . . . Education Department halts plan to garnish Social Security wages for defaulted student loan holders . . . Economists raise questions about the quality of U.S. inflation data . . . Watch out for varying withdrawal rules in 401(k) plans . . . Get ready for inflation to matter again in markets . . . Agency chief says DOGE figures heavily in Social Security plans . . . Americans finally are saving enough for retirement . . . A new story is emerging about dementia . . . Blackrock deepens push into private equity in 401(k) plans.