Heading into the 2026 midterms, American voters consistently name the economy as a critical issue, expressing concern about the costs of housing, groceries, fuel, and healthcare. Yet when discussing economic threats, most aren’t focusing yet on Social Security. They should be.
This year’s Social Security trustees’ report shows a program speeding towards insolvency. Its retirement fund is projected to be depleted in 2032, but that date isn’t what’s important. If your doctor finds that you have a potentially lethal condition, it’s not the date it might kill you that matters, but whether treatment starts soon enough that the disease remains curable.
Without prompt treatment, Social Security’s financial condition will become terminal long before 2032. Even if lawmakers act immediately, restoring solvency requires finding savings equivalent to a 30 percent reduction in future benefit claims. Once insolvency becomes imminent, it’s far too late: by then, Social Security would go insolvent even if new claims went entirely unpaid.
When discussing economic threats, most voters aren’t focusing yet on Social Security. They should be.
It’s important to be clear about the nature of the threat. No one should worry that Social Security will go away. And although benefits would be cut 22 percent in 2032 absent legislative action, federal lawmakers surely won’t let that happen. Instead, what’s at stake is whether Social Security remains the reliable income source it has been for decades.
The reason Social Security benefits are more secure than so-called welfare is rooted in its longstanding design. Welfare programs are financed from the government’s general fund. Whether you receive welfare is based on perceived need, not on how much you paid. Beneficiaries and taxpayers represent competing interests in welfare, so there is continual renegotiation of the terms of exchange: what benefits are, who is eligible to receive them, should there be a work requirement or means test, and so forth. One can’t base a viable long-term income strategy around welfare benefits because no one knows how the whims of politics might change them in just a few years.
By contrast, the predictability of Social Security benefits enables participants to make long-term income plans. Your individual Social Security benefit is a mathematical function, written into law, of the payroll taxes you paid. The program is also forbidden to spend more than the revenues it has collected, plus interest. This construct enables beneficiaries to say to politicians that they paid for their benefits and thus they can’t arbitrarily be taken away.
There’s a price for this unique stability: it only lasts as long as lawmakers align benefits with the amounts workers’ contributions can finance. If lawmakers become unwilling to do so, Social Security will need a bailout from general revenues, ending any legitimate sense in which participants paid for their benefits. Afterward, Social Security would compete for funding from the general budget with other programs, and benefits would likely become as arbitrary and changeable as welfare.
Without prompt treatment, Social Security’s financial condition will become terminal long before 2032.
This problem could have been easily solved long ago. In the 1970s, the Consultant Panel on Social Security, appointed at the request of the Senate Finance and House Ways and Means Committees, advised that the formula going into effect for automatically increasing benefits was flawed, and could not be sustained with a stable payroll tax rate. All that was needed to fix it was to tweak the formula to grow slightly more slowly. Real benefits would still have grown over time, no further payroll tax increases would be necessary, and there would be no financing shortfall now. But lawmakers didn’t listen.
Instead, too many played cynical politics with Social Security, attacking anyone who dared to espouse such correction for seeking to “cut benefits.” Cynicism underlay the political calculation that if solutions could be stonewalled for several years, those who favored raising taxes would prevail without ever having to say so, because it would eventually become too late to do the job any other way.
These opportunistic politicians overplayed their hand, now risking the viability of a program they cherish. Even an all-Democratic Congress would be unlikely to raise Americans’ payroll tax burdens by roughly one-third – the amount now needed to avoid benefit adjustments. Instead, progressive politicians take refuge in a fashionable myth: that the problem can be fixed simply by taxing more of the earnings of rich people. But even if every penny of national earnings were exposed to the full payroll tax, it would eliminate barely one-quarter of the escalating problem.
A realistic fix will need each of: moderating the growth of benefits, adjusting eligibility ages, and collecting more payroll taxes. None of these levers can do even half the job without being more severe than is politically plausible. Lawmakers will thus need to employ all three.
Regardless of how we got here, Social Security is at a crossroads, with it yet undetermined whether it will remain the secure source of income it has historically been. Voters should be aware that the longer this corrective action is put off, the less secure their future benefits will be.
Charles Blahous is the J. Fish and Lillian F. Smith Chair and Senior Research Strategist at the Mercatus Center at George Mason University.