Title: Did Congress Empty the Social Security Coffers? Uncovering the Truth
In January, the typical retired worker collected a $1,976 Social Security check. This modest sum aided in lifting 22.7 million individuals out of poverty in 2022, including 16.5 million seniors aged 65 and above. Despite Social Security's crucial role in securing the financial well-being of elderly Americans, the program's foundation has been eroding for decades. A multitude of factors are responsible for Social Security's deteriorating financial outlook, often leading to accusations of Congress being the culprit.
Confronting Social Security's $23 trillion financial chasm
Since 1940, the Social Security Administration (SSA) has released annual reports detailing the program's financial health, outlining income and outlays each year while forecasting its future solvency. The Trustees' ominous warning of a long-term funding obligation shortfall, present in each of the past 40 reports, signifies an expected inadequacy of income to cover outlays, including cost-of-living adjustments (COLAs).
According to the 2024 Trustees Report, Social Security's long-term cash gap amounted to a staggering $23.2 trillion through 2098, representing a substantial increase from the 2023 report's projected 75-year funding obligation shortfall. Additionally, the Trustees anticipate the anticipated exhaustion of the Old-Age and Survivors Insurance Trust Fund's (OASI) asset reserves by 2033. While the program will not be in imminent danger of bankruptcy or insolvency, the depletion of these reserves could result in a 21% reduction in monthly payouts.
So, who bears responsibility for the disintegrating financial health of Social Security? The blame is often directed towards Congress.
Is Congress the true perpetrator of Social Security's misfortune?
Social media outlets frequently perpetuate the notion that Congress is accountable for raiding or mismanaging Social Security's trust funds. Critics argue that lawmakers have utilized these funds to finance wars and other government expenditures and have failed to "repay with interest."
It's essential to discern between widely held opinions and the facts. In 1935, the Social Security Act was enacted, outlining the investment of any excess income collected, or "asset reserves," in special-issue, interest-bearing government bonds. This investment strategy ensures the continued generation of interest, protecting Social Security's funding and protecting beneficiaries from the effects of inflation.
The SSA also maintains meticulous records of its asset reserves, regularly updating the combined amount for the OASI and Disability Insurance Trust Fund and the average yield it generates. As of 2024, combined OASI and DI assets amounted to around $2.721 trillion, with an average yield of 2.557%.
Rather than stealing or misappropriating funds, the federal government employs its excess resources to fund projects and generate interest, ensuring the long-term sustainability of the program.
Ongoing demographic shifts: the root of Social Security's concerns
Upon examining the evidence, it's clear that Congress is not responsible for the depletion of Social Security's trust funds. In fact, the culprit behind the program's fiscal woes lies within a series of demographic shifts.
Some concerns you may have heard about, such as the retirement of baby boomers and their impact on the worker-to-beneficiary ratio, remain significant issues. In addition, America's extended life expectancy has outpaced the program's initial design, leading to increased spending on retirees over extended periods.
However, there are other less prominent changes that are similarly impactful. For example, since 1998, net legal migration into the U.S. has decreased by 58%. Decreased immigration levels parallel a decline in the number of younger workers contributing to the payroll tax, Social Security's primary funding source.
The aforementioned demographic shifts expose another major vulnerability: the low U.S. birth rate. Although lower birth rates do not pose an immediate threat, they could exacerbate the worker-to-beneficiary ratio problem by limiting the entry of new workers into the labor force.
Finally, rising income inequality could further exacerbate Social Security's issues. As of 2025, wages and salary between $1 and $176,100 are subject to the 12.4% payroll tax. A disproportionate percentage of earnings beyond this threshold will be exempted from the payroll tax, leading to a reduction of funds flowing into the program.
While Congress deserves criticism for inaction, there is no evidence to substantiate the allegation of fund mismanagement. It is essential to address these underlying demographic shifts to ensure the sustainability of the program.
Retiring individuals may need to consider alternative sources of finance beyond Social Security to maintain their financial stability during retirement, given the program's long-term funding issues. The deteriorating financial outlook of Social Security, as detailed in annual reports and forecasts, highlights the need for individuals to plan for their retirement income.
In light of the expected depletion of Social Security's asset reserves and potential reductions in monthly payouts, it becomes crucial for individuals approaching retirement to assess their retirement savings and consider adjusting their spending habits accordingly. This proactive approach can help mitigate the impact of any potential changes in Social Security benefits.
