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Posted on 07/31/2026 5:17:33 AM PDT by Red Badger
As the United States careens toward the day when the Social Security trust fund runs out, now estimated at 2032, press reports of reform proposals have been arriving with greater frequency and mounting expressions of fear.
The government transparency organization Open the Books reported in March that the total amount of unfunded Medicare and Social Security obligations is now an unimaginable $193.6 trillion.
The most recent proposed fix comes from the Committee for a Responsible Federal Budget (CRFB). It includes a cap on the annual cost-of-living adjustment (COLA), which increases recipients’ monthly checks to make up for inflation. CRFB co-chair Tim Penny first introduced a similar cap in Congress in 1987, where it has never gone anywhere.
Penny’s plan would cap every Social Security recipient’s annual COLA increase to the dollar amount that applies to the 20th or 30th percentile beneficiary. It would amount to a highly progressive benefit cut.
“If set at the 20th percentile, the bottom fifth of lifetime earners would see their benefits fall by just 3% in 2065, versus 19% for the top fifth of retirees,” the CRFB states. “Set at the 30th percentile instead, the bottom quintile would enjoy a 1% benefit increase, while benefits for the top fifth would fall by 17%.”
The plan would combine that with other policies, such as the proposed Employer Compensation Tax, which would remove the $176,100 annual wage cap on the employer half of the Social Security payroll tax and apply it to all fringe benefits as well. That provision would raise an estimated $2.5 trillion over a decade and 0.7 percent of GDP over 75 years.
The CRFB estimates that multiple “Revenue Options,” meaning tax hikes, and “Spending Options,” meaning benefit cuts, could compose “a full solvency package.”
I appreciate any individual or organization that dares to touch the “third rail” by offering a plan to reform Social Security. These reform plans always raise furious objections, and for very good reasons: nobody wants his or her own taxes raised, and no politician is eager to become the star of political attack ads showing Senator Evil pushing Granny off a cliff in her wheelchair.
John Hart, president of Open the Books, told Fox Business News the only way to save the system is to means-test recipients and eliminate everyone but the indigent. Host Stuart Varney rightly pointed out that no politician could survive the firestorm that would result from that.
The big problem with all Social Security reform proposals is that they involve breaking a promise and infuriating millions of Americans. President Franklin Roosevelt sold the idea to Depression-era Americans as a savings plan in which the government would take 1 percent of an individual’s pay and an additional 1 percent “from the employer” and put it aside for that person’s retirement.
The government has raised the tax 15 times since then, to the current total of 15.3 percent. The Social Security trust fund is running out of money anyway, even though it pays off very poorly: individual, privatized Social Security accounts invested in good American companies would provide retirees with “benefits three to four times higher than the rip off that Social Security pays,” Unleash Prosperity reports.
Since 2005, the S&P 500 has risen by 844 percent, an 11 percent annual return on investment. Social Security pays a pittance compared to that.
Like nearly everything else the federal government does, Social Security is a grossly wasteful rip-off. Americans are dragooned into paying for it, and they ultimately get back whatever Congress and the president decide.
That is the entire problem with Social Security: it is run by the government. The government does not produce things. It only redistributes resources—and pain, which is the one thing it reliably creates. The plans to “save” Social Security all involve changing who pays how much and who gets how much in the coming years. They don’t expand the nation’s wealth, so there is no solution that works for everybody. Only market exchanges benefit both parties.
The CRFB’s COLA Cap would redistribute the pain by using inflation to cut the benefits of the great majority of Social Security recipients. It would ease the burden on current workers by placing it on retirees. It would expand the burden on everybody, however, by increasing inflation. It would also reward the federal government for inflation-inducing deficit spending. Funny how that works.
Meanwhile, raising the payroll tax would reduce employment by making it more expensive to hire people and pay them. That would reduce Social Security revenue well below the expected amount, and it would lower the national standard of living by reducing the production of goods and services. In addition, it would increase inflation by cutting tax revenues and causing bigger deficits, which are inflationary.
Social Security always was an income-transfer program sold via a phony “investment” public relations spin. The people who were forced to “invest” in the program believe the government should pay them their due dividend. The people who are forced to pay out that dividend don’t want to get ripped off like their parents were.
There is no magic solution to that dilemma. The only way around it is to expand economic output.
Those who call for privatization of Social Security are offering a sound long-term plan that is based on economic expansion. We will never get there before 2032 because people are afraid to have the government “speculate” with their potential benefits. They prefer the assurance of a poor return and getting robbed by the system.
However, any plan to fix the system through fiscal maneuvers founders on the hard fact that displeasure at benefit cuts will not be limited to the 77.5 million current retirees and others who receive Social Security. Millions of people about to retire will be affected, and tens of millions of other Americans will feel the sting of watching their parents’ or grandparents’ incomes decline and their ability to pay for desperately needed healthcare and other necessities.
No politician is going to want to be known for that. That is why we were always going to head for a fiscal collapse, now scheduled for 2032.
S. T. Karnick (https://stkarnick.substack.com/) is a senior fellow at The Heartland Institute and author of the Life, Liberty, Property weekly e-newsletter.
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“No politician is going to want to be known for that. That is why we were always going to head for a fiscal collapse, now scheduled for 2032.”
Politicians only care about two closely related things: money and power. That’s why they’ll do nothing, because any fix would hurt them, so they ignore it and hope they’ve fattened their bank accounts enough so they can withstand being fired in 2032.
Politicians just don’t care what happens to the public, in fact, I’d wager most politicians hate us.
Not saying it won’t happen and of course eventually the “math” financially will destroy SS if nothing is done.
However this is not the first time SS have been doomed in a few years, While it needs fixed I am not going to panic of such a prediction.
Several institutes make it a cottage industry to make the worst possible case in the shortest amount of time on SS.
The only thing government ever protects is itself..................
They need to stop pulling SS from the peoples checks and make sure the fund is secure for those that have paid too that point. They give Billions away to countries that hate us ,they can take care of the people that have carried their fat asses . The young people need to invest and save on their own. Government needs to get off the Peoples Teat.
When I was expressing my everyday worries during the medical examination, my doctor said that I won’t have to worry about Social Security running out in 2032, I guess he is also an expert in finances or something.
At age 35 I was willing to walk away from social security with just what I paid in and what my employers paid in plus a modest 3% return. In exchange I would be free from paying into the system ever again. I could have taken that 7ish % that I pay in and invest it.
Now I am 56 and closer to retirement and they have taken away that chance to invest and grow my own funds. I have taken care of myself and would be prepared if the program does become insolvent but I now want the full payout I am entitled to.
They will come for the 401k’s to fund the system, comrade.
The government tapped into the “trust” to pay for the “Great Society” programs.
How has that been working out?
the easy solution is to simply remove the cap on the social security tax (currently stops at $184,500)
That is kind of ominous from your doctor. Was he saying don’t worry about it cause you aren’t going to be here or don’t worry they will fix it?
“...I won’t have to worry about Social Security running out in 2032...”
He’s right. It will collapse before then..................
The medical spending acct’s (whatever they’r called now) should not have their unused balances confiscated, the money should continue to accumulate. Employee deposits already come out of before-tax earnings, employee health insurance premiums should come out of those, and the spending acc’t card (similar to a debit card) be able to be used to pay deductibles for care and Rx (at least until the money runs out).
By the time working life is done, there’d be some, maybe quite a bit, waiting when the employee retires. It’s common knowledge that we use most of our health care dollars in the last years of life.
Retiree Medicare premiums already come out of Social Security payments. When I retired I had a defined benefit (old-style pension) trickle available from a job years ago, and that offered excellent an Medicare Advantage (parts C & D) which is paid out of the pension. Being able to use the accumulated spending acc’t dollars to cover MA premiums would be another option.
There really only need to be two kinds of retirement acct’s — IRA and Roth IRA — instead of the overlapping and duplicative options (IRA, Roth, 401, 403, 457). This would alas eliminate the borrowing option available on some plans, but the other way to have that is to, oh, I dunno, start a savings acc’t? Develop a credit rating by paying bills on time?
Social Security isn’t going anywhere, and won’t implode, no need to have open borders to bring in low-end unskilled labor to (allegedly) contribute premiums to support the system. Once we Baby Boomers finish riding our demographic bulge through the pages of history, the fund will be fine. If there hadn’t been all the panic porn concern trolling in favor of zero population growth, we’d have literally nothing to worry about vis a vis.
Why isn’t welfare/food stamps/EBT/SNAP running out?
Rolled mine over into an IRA 8 years ago, took out some in the process and paid off 30 year mortgage at 16 years.
Got hefty bank account.
Sitting pretty at 71..............
elon musk has said that gdp growth is going to be +-10% in 2027 and rise from there.
If he is right that’s going to throw off astounding revenues to the federal government.
it was the dot com boom that balanced the federal government budget from 1995-2000.
The AI boom is going to dwarf that.
what’s more it won’t crash and burn after 5 years. this growth has decades of legs under it.
The social security will be just fine. In a generation or two the trump accounts will be gigantic and sufficient to pay for the following generations.
As long as there are printing presses they will never run out..............
> They will come for the 401k’s to fund the system, comrade. <
A while back there was some talk of seizing those accounts, and replacing them with special government bonds paying 2% or so. See, it’s not theft because you get those bonds in return.
But I don’t think that will happen. My guess: The Feds will inflate their way out of this. Just print more money. Of course that means Weimar Republic, here we come.
Read the Social Security Trustees own annual report. They’ve had exhaustion of the trust fund pegged within a year for decades at this point.
To keep the system as intended, a program to assuage elderly destitution, the system could be means tested. By simply means testing out households making above the median household income (~83k/yr) the reimbursements for those households making under the median could remain whole.
But mentioning this proposal on FreeRepublic brings out loads of people who imagine they have a property right to their FICA taxes. People who have no need for a government check damn sure want one.
He’s right. It will collapse before then
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It might be interesting to create a betting game. What will collapse first? Social security or the dollar?
(if the dollar collapses and that causes social security to collapse, we consider for betting purposes that the dollar collapsed first)
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