A new report from the Social Security trustees warns that the program is in deep trouble. The retirement and social insurance program is already spending more on benefits than it raises in dedicated revenue, due in large part to a decline in birth rates and a decreasing ratio of workers to retirees. By 2034, beneficiaries face the prospect of a sudden 21 percent benefit cut when trust fund savings from the program’s prior surpluses are exhausted.
It’s a real problem, but a solvable one. Despite a lot of posturing and politics, Congress can shore up Social Security’s finances by reducing benefits, raising the retirement age for when workers can collect benefits, raising the Social Security payroll tax rate, or raising the income level at which workers stop paying said taxes — $128,400 this year based on a formula in law. Making such changes would generate sufficient revenue to keep Social Security on firm footing.
Some of these ideas are more popular than others. Raising the payroll tax income limits would help preserve the progressivity of Social Security, but that idea, in practice a tax increase, is politically challenging and insufficient to solve the program’s shortfall by itself.
