Social Security: Reform or Runout

Photo Credit: (last visited on December 9, 2021).

Authored By: Claire Young

Member, American Journal of Trial Advocacy

          Picture this: You’ve worked hard at whatever job of your choosing and now its payday. Those hours spent hustling will—should—translate into instant money your pocket.  However, upon looking at the breakdown of your compensation, you notice that your bottom-line figure has been reduced by a “Social Security Tax” totaling 6.2% of your pre-tax income.  But that’s fine, right?  After all, workers have been paying this tax since 1937 and it will be worth it when you’re older and can qualify for the guaranteed financial benefits that are dispersed from this trust fund—right?

          Well, it depends.  Social Security is the single largest program in the federal budget.  As of August 2021, the two parts of the program, Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), pay out benefits to approximately 65 million people.[1]  They are funded by dedicated tax revenues from a payroll tax and an income tax on the Social Security benefits.[2]  The OASI program is characterized as a retirement program because 72% of its beneficiaries are retired workers or their dependents.  To qualify for benefits under the program, an individual must be over the age of 62 and have paid Social Security taxes for 10 or more years.[3]

Solvency of the Social Security Program

          There is a strong possibility that you, the reader, might never see a Social Security check ever, as the program stands today.  The question of whether you will get the benefits depends on the solvency of the trust. Solvency, as it pertains to the Social Security program, is defined as “the ability of the trust funds at any point in time to pay the full scheduled benefits in the law on a timely basis.”[4]  Unlike other federal government operations, the two programs under Social Security do not have the ability to borrow in order to continue paying benefits when the dedicated taxes and trust fund reserves run out.

          Short run and long run projections and assumptions for the livelihood of this program are evaluated by the Social Security Board of Trustees.  Currently, the program’s cost exceeds the tax revenues dedicated to the trust funds and will remain this way in all later years.[5]  As for the timeline on when total depletion will occur—in the 2021 report, the Trustees’ assumptions were that OASI will be depleted in 2034 and DI Trust Fund reserves in 2057.[6]  While the Congressional Budget Office (CBO) projected that if there are no changes to the current Social Security program, the OASI funds will run out in 2032—two years sooner than speculated by the Social Security Trustees.

Where did we go wrong?[7]

          While it is easy to point fingers at the ‘government’ for any mass institutional failure, the blame for the impending doom of this social welfare program cannot be put on the shoulders of any one government administration.  Though exploring all of the factors that have led to the disproportional depletion of Social Security is a bit wide for the scope of this post, it would be an injustice not to briefly expand on the contributory demographic shifts.

          It goes without saying that the size and age composition of the U.S. population affects the federal budget and our economy.  Further, it influences the size of the labor force and the number of Social Security beneficiaries.[8]  To start, the life expectancy of U.S. citizens is now longer than it was when the program was designed in 1937.  This increase is due in part to advancements in medical care and improved living standards.  The percentage of the population that is over the age of 65 is increasing and it is forecasted that by 2049, nearly 22% of the population will be 65 or older, as compared to the 16% in 2016.[9]  Therefore, because OASI benefits are received from claiming age until death, the amount of money that the program pays out is increasing.[10]

          Next, fertility and birth rates are decreasing as the baby-boomer generation reaches retirement age.  That conclusion is based on assessments of historical fertility data and effects of the pandemic.  Fewer births mean less individuals contributing to the working population than previous decades and therefore less taxable income to pull from.[11]  To magnify that, the baby-boomer generation is retiring at a faster rate than is being replaced by workers who pay into Social Security.  The result here being that the number of beneficiaries of OASI increases with time but when that is paired with lower birth rates to replace them in the workforce, economic output and economic growth suffer.[12]

Covid-19 Impacts on the program

          The Social Security trustees report released in August 2021 was the first report to take the Covid-19 pandemic into consideration for their projections.[13]  Due to the pandemic and local restrictions attempting to slow down the spread, many businesses were forced to close, and unemployment rates were relatively high.  This produced a recession which significantly decreased the amount of payroll tax income that the Social Secuirty program received.  However, that hit to the program’s funding source was moderately offset by the high rates of death, especially in the retired elderly.[14]  The report also acknowledges that the full extent of the effect Covid-19 will have on Social Security is somewhat uncertain.[15]

Social Security Reform

          While there have been various potential benefit-formula adjustments studied by analysts and policy makers, most agree that Social Security could regain future stability by reducing the gap between the system’s revenues and disbursements through either increasing taxes, reducing benefits, or a combination of the two.[16]   Other considerations by researchers include raising the age of eligibility for people to draw on the benefits,[17] modifying benefits for specific groups, and cost-of-living adjustments.  In 2019, the CBO projections held that Social Security benefits, as the current law prescribes, could be paid in full through 2093 if payroll taxes were raised by 4.3%.[18]

          As concluded by the Social Security Trustees: “if substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations.”[19]  Thus, deferred reform action will result in significantly larger changes that won’t allow workers and beneficiaries to timely adjust and prepare.[20]  This could potentially be devastating for the US economy as a whole, as people depend on this program as a source of income to support them when they age.  Without reform to the Social Security Program or a new program to replace it when it inevitably runs out, the US federal government will have severely let its constituents down with a problem that could have been mitigated.

[1] 2021 Annual Report, Social Security Administration, (2021),

[2] Congressional Budget Office, The 2019 Long-Term Budget Outlook (2019),

[3] Congressional Budget Office, Social Security Policy Options 2015 (2015),

[4] Steven C. Goss, The Future Financial Status of the Social Security Program, Social Security Bulletin, Vol. 70, No. 3, 2010,

[5] 2021 Annual Report, Social Security Admin. (2021),

[6] Id.; In 2010, it was forecasted that by 2035 the taxes collected will only be able to cover 75% of the scheduled benefits.

[7] Gayle L. Reznik et al., Changing Longevity, Social Security Retirement Benefits, and Potential Adjustments, Social Security Bulletin, Vol. 81 No. 3 (2021),

[8] Congressional Budget Office, The 2019 Long-Term Budget Outlook (2019)

[9] Id.

[10] The Growing Gap in Life Expectancy by Income: Implications for Federal Programs and Policy Responses. Washington, DC: The National Academies Press.

[11] Congressional Budget Office, The 2019 Long-Term Budget Outlook (2019),

[12] 2021 Annual Report, Social Security Admin. (2021).

[13] Id.; Kate Davidson, Social Security Costs Expected to Exceed Total Income in 2021, Wall S. J. (April 22, 2020),

[14] Id.

[15] Kate Davidson, supra note 14.

[16] Congressional Budget Office, Social Security Policy Options, 2015 (2015),

[17] Social Security Advisory Board, Social Security: Why Action Should Be Taken Soon (2010),; Anya Olsen, Social Security Bulletin 72, Mind the Gap: The Distributional Effects of Raising the Early Eligibility Age and the Full Retirement Age (2012),; Individuals are able to receive their Social Security benefits as early as age 62 but will face a reduced amount of benefits by electing to not wait until their FRA (Full Retirement Age). See generally Retirement Benefits, Social Security, Starting Your Retirement Benefits Early,

[18] Congressional Budget Office, The 2019 Long-Term Budget Outlook (2019),; Cost estimates for policy alternatives and proposals can be viewed online. See Office of the Chief Actuary, Social Security, Estimates of Individual Changes Modifying Social Security More,

[19] 2021 Annual Report, Social Security Admin. (2021).

[20] Id.  

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