Social Security: One of America's Greatest Success Stories—And Why Its Biggest Threat Is Inaction
- Britni Kendrick
- Jun 15
- 5 min read
Few government programs have been as effective, enduring, and impactful as Social Security. Over 68 million citizens receive Social Security benefits, and approximately 22% of every federal dollar spent goes toward the program.2,4 That scale makes it a frequent target in political debates, but many of the common narratives surrounding Social Security simply don't match reality.
What is Social Security?
At its core, Social Security is not an individual retirement account. It was never designed to be. Instead, it is a risk-sharing social insurance program that protects workers and their families against the financial risks associated with old age, disability, and death. The program pools resources across generations and across society, ensuring that millions of Americans can maintain a basic level of financial security when they can no longer work.
Imagine a world without Social Security. Could most working-age Americans realistically support every elderly relative in their family while simultaneously raising children, paying mortgages, saving for their own retirement, and managing everyday expenses? For most people, the answer is no. Social Security allows younger generations to build their own financial futures rather than bearing the full burden of supporting aging family members who no longer work.
Stay tuned for the next blog post which will outline the practical ins and outs of social security benefits.
Does Social Security contribute to the national deficit?
Despite what some critics claim, Social Security has not historically contributed to the federal budget deficit. For decades, the program collected more in payroll taxes than it paid out in benefits. Those excess funds were invested in U.S. Treasury bonds, creating a reserve intended to help pay for future retirees. Until 2010, Social Security consistently ran surpluses. Since 2010, however, benefit payments have exceeded payroll tax collections, requiring the program to redeem some of those Treasury bonds.5 Importantly, the federal government paying back money it borrowed from Social Security does not mean Social Security is causing the deficit. It means the government is honoring obligations it owes to the program.
So what caused the current funding shortfall?
Contrary to popular belief, the problem is not the Baby Boomer generation. Policymakers knew the Boomers were coming. In fact, the last major Social Security reform in 1983 was specifically designed with their retirement in mind. Lawmakers accelerated payroll tax collections on working Boomers to pre-fund a portion of their future benefits.
The real challenge has been something less discussed but equally important: slow wage growth.
For roughly 40 years before the 1983 reforms, wages grew robustly across the income spectrum. Policymakers reasonably expected that trend to continue. Instead, much of the workforce experienced what economists often call the "Great Wage Stagnation." Wages for many workers, especially at the bottom and middle of the income distribution, grew far more slowly than anticipated.
Another major factor is the erosion of Social Security's tax base.
In 2026, Social Security payroll taxes apply only to wages up to $184,500. Earnings above that threshold are exempt from Social Security payroll taxes. When the cap was reformed in the early 1980s, it was designed to always cover approximately 90% of all wages earned in America and to rise each year with average wage growth.
Today, however, only about 83% of national earnings fall below the cap.6 Why? Because income growth at the very top has dramatically outpaced income growth for everyone else. As more earnings concentrate above the taxable maximum, a growing share of national wages escapes Social Security taxation altogether. The result is a shrinking tax base relative to the size of the economy.
Perhaps the greatest threat facing Social Security is not demographics, wage growth, or even the wage cap. It is congressional inaction.
Since Social Security was created in 1935, lawmakers routinely adjusted the program to reflect changing economic and demographic realities. Between 1935 and 1983, Congress amended Social Security approximately every two to four years. Those regular updates helped maintain the program's long-term stability.
Since 1983, however, Congress has made no major comprehensive reforms. As a result, known financing challenges have been allowed to grow larger over time. As of the time of writing, current projections indicate that the Old-Age and Survivors Insurance Trust Fund is expected to exhaust its reserves around 2032.7 That does not mean Social Security disappears. In fact, Social Security cannot disappear while there are still workers paying taxes unless Congress were to scrap it completely. Payroll taxes would continue to fund a substantial majority of benefits. However, without legislative action, beneficiaries could face automatic reductions in future payments, estimated at roughly 22 to 24%.8
The good news is that Social Security's challenges are manageable. The program remains one of the most successful anti-poverty and retirement security initiatives in American history. The real question is not whether Social Security can be saved—it can. The question is whether policymakers will act before manageable adjustments become more difficult choices.
For more than 90 years, Social Security has helped millions of Americans achieve financial security and independence. Its future depends less on economics than on the willingness of elected officials to address challenges they have known about for decades.
How Can Social Security Be Fixed?
One of the most important facts about Social Security's financing challenge is that there is no shortage of potential solutions. The Social Security Administration's Office of the Chief Actuary maintains a public database estimating the effects of dozens of policy changes, ranging from benefit adjustments to tax reforms.
Many proposals focus on increasing revenue rather than reducing benefits. For example, the Social Security payroll tax currently applies only to earnings up to an annual wage cap. The SSA estimates that gradually restoring the taxable wage base so that 90% of national earnings are covered—as was originally intended—would eliminate roughly 22% of the long-term financing shortfall.
Other proposals would apply Social Security taxes to all earnings, eliminating the tax cap completely. The SSA estimates such approaches could close approximately 67% of the long-range funding gap.
Additional options include modest payroll tax increases. According to SSA estimates, raising the combined payroll tax rate from 12.4% to 16.4% would fully eliminate the program's long-term actuarial shortfall and restore long-range solvency.
Lawmakers could also combine several smaller reforms rather than relying on a single large change. A package that includes modest revenue increases, adjustments to the wage cap, and targeted benefit reforms could spread the burden broadly while preserving the program's core promise.
Note- these are simply real examples of some of the scenarios run by the Social Security Administration's Office of the Chief Actuary, not my preferred choices.
For readers who want to explore the options themselves, the Social Security Administration publishes a comprehensive list of solvency proposals and their estimated effects here:
SSA Solvency Provisions Summary (January 13, 2026)
Sources:
1. https://www.ssa.gov/oact/solvency/provisions/summary.pdf (January 13, 2026)
2. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ (data as of May 31, 2026)
3. https://www.ssa.gov/history/50mm2.html (August 14, 1985)
4. https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ (data as of April 30, 2026)
5. https://www.asppa-net.org/news/2026/6/social-security-depletion-date-moved-up-trustees-report/ (June 9, 2026)
6. https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2025/fast_facts25.html#page5 (September 2025)
8. https://www.crfb.org/nostatespared (June 3, 2026)
These concepts were derived under current laws and regulations. Changes in the law or regulations may affect the information provided.
