The Worst Thing That Can Happen To Social Security

There are several “known knowns” about Social Security. (The term was coined by the Secretary of Defense of the United States, Donald Rumsfeld, in 2002.) Among these is the fact that, according to the 2025 Trustees Report, the Old-Age and Survivors Insurance (OASI) trust fund will become insolvent by 2033. The combined OASI and Disability Insurance (DI) funds will suffer that same fate in 2034. The truly frightening thing is that, according to the same report, if Congress does nothing, the situation will become catastrophic. “At that time (2034), there would be sufficient income coming in to pay 81 percent of scheduled benefits.”

The Trustees have repeatedly begged Congress to act.

The solutions are easy to calculate, but hard to implement because they will be unpopular to one large group of voters or another. The Social Security tax could be increased from 12.4% to a higher rate. Depending on other remedies, this might have to go as high as 15%. Another is to raise the cap on what current employees pay. According to Social Security, “In 2026, the maximum amount of earnings on which you must pay Social Security tax is $184,500.” This cap could be moved up to $250,000 to $400,000 to make a meaningful contribution. The more radical decision would be to eliminate the cap.

Each of the increased tax options will cause political problems for Congress. People who would have to pay more will see themselves as bailing out a system that some may not use for decades. They don’t want a solution that is balanced on their backs financially.

The other most ready solution is to raise the age at which people can take benefits. Today, the payments are available from age 62 to 70, with full benefits starting at 67. It would take an actuary to calculate figures, which would be wrong anyway because of the size of the universe. However, the range would likely need to move higher to a 65 to 72 years old range.

The challenge with retired or soon-to-retire voters is that they have paid for their entire working lives and should not be cheated out of their benefits. Older Americans are more likely to vote than younger ones. That paints many Congressmen into a corner.

The decision on what is the “worst choice” is with Congress. Think tank Brookings says, “The major proposals to stabilize its finances would increase the taxable maximum earnings to cover 90% of wages, slightly increase the payroll tax, and close a loophole through which some business owners now are escaping the payroll tax.”

So, what is the worst thing that could happen? It is that Congress kicks the can down the road. Social Security hits the disaster points of 2033/2034. It will then require a radical solution, because the years during which there might have been solutions, no matter how painful, have passed.