CBO projects that Social Security funds will run out by 2033 without changes

By Brett Rowland (The Center Square)

Fresh projections from the Congressional Budget Office show that the Old-Age and Survivors Insurance Trust Fund will be depleted by 2033 if it is paid as scheduled.

In January, Social Security beneficiaries received an 8.7% increase in monthly checks, the largest cost-of-living adjustment since 1981. The increase added $146 to the average recipient’s monthly benefit. According to the Social Security Administration, the average benefit is expected to push from $1,681 to $1,827.

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The Disability Insurance Trust Fund would run out by 2048 under the same schedule, according to a recent report by the federal agency that provides budget and economic information to Congress.

To keep the money solvent through 2096, the federal government would need to immediately and permanently raise payroll tax rates by 4.9 percentage points or reduce benefits or enact some combination of tax increases and benefit cuts.

According to the CBO, “After 2096, the gap between revenues and expenditures will widen, and deficits will continue to increase.” Report.

If Social Security expenditures were limited to income payable after the trust funds were exhausted in 2033, Social Security benefits would be about 23% smaller than scheduled benefits in 2034. By 2096 they will be 35% smaller and the gap will remain constant thereafter.

Social Security, the largest single program in the federal budget, has two components. Old age and survivor insurance provides benefits to retired workers, their eligible dependents and certain survivors of deceased workers. Disability insurance provides benefits to disabled workers and their dependents.

Social Security is funded by payroll taxes and income taxes on benefits. Payroll tax is generally 12.4% of earnings up to a maximum annual amount. That amount was $147,000 in 2022. Employees and their employers each pay half of the 12.4%. Self-employed people pay the full amount, according to the CBO. To pay benefits and maintain trust fund balances through 2096 under existing law, the 12.4% tax on wages would need to rise to 17.3%, according to the report.

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“Other ways to maintain the required trust fund balances are to reduce fixed benefits by an amount equal to 4.9% of taxable wages or to combine tax increases with benefit reductions,” the report said.

Many Americans rely on Social Security payments, according to AARP. Social Security is the largest source of retirement income for most Americans, AARP research shows. It provides all income to 1 in 4 seniors AARP.

“Under no circumstances should Republicans vote to cut a dime from Medicare or Social Security to help pay for Joe Biden’s reckless spending spree, more reckless than anyone in the history of our country has ever done or had,” said former President Donald Trump. Friday in a video posted on Satya Social.

Some Republicans have said changes to Social Security and Medicare should be considered, according to media reports. Republican leaders did not heed those calls.

Syndicated with permission from The Center Square.