Long time readers of RTE will remember the graphic below that I have posted several times over the years. Its far-seeing accuracy has been a guide to the few who recognized the danger & took appropriate steps in their own personal finances because sometime in the 2030s mandatory spending will exceed government revenues.
click on graphic to enlarge
click on graphic to enlarge
This type of warning has been made available to eligible beneficiaries for decades either online with a reminder to review your "Social Security Statement" online three months before your birthday or mailed to people over 60 who do not have an online account. Yet I have never met a TV or radio host on any program I have been on or any attendee @ one of my FairTax seminars who was aware of this.
The nearness of the shortfall should project the matter into the 2028 presidential race. But Trump, Congress, & Biden continued to not only not address the problem but in 2025 made it worse.
First, Congress passed & Biden signed the Social Security & Fairness Act of 2023 on January 5, 2025. This law repeals the Windfall Elimination Provision and Government Pension Offset, which reduced or eliminated the Social Security benefits of individuals receiving a pension based on work that was not covered by Social Security. Therefore, implementation of this law increases Social Security benefits for people who worked in jobs that were not covered by Social Security thereby contributing to the acceleration of the depletion of the OASI Trust Fund.
Second & more recently Trump promoted & signed into law the OBBBA that included a new senior deduction meant to represent no tax on Social Security benefits for tax years 2025 through 2028 (Trump's current term). Total revenue generated from income taxes on Social Security benefits totaled $54.4 billion in 2024. Trump's no tax on Social Security pledge will take money away from this total thereby exacerbating the poor condition of Social Security's finances. It was estimated by the Chief Actuary of the Social Security Administration's Office after the Trustee's report was issued & the OBBBA was signed into law that the "No Tax on Seniors' Social Security Benefits" provision of the OBBBA accelerates the cash flow insolvency of the Social Security Trust Fund from 2033 to late 2032. This is a classic "pay now or pay later (when I'm out of office)" charade that shows that not only is Trump not working on solving Social Security's solvency problem, his policies are hastening the Trust Fund's demise.
Since Trump has made it clear that he will not touch Social Security (other than no tax on benefits) this means that the United States will sooner, not later, need Congress & the 2029 or 2033 new president to take appropriate action. The following graphic shows the net present value of Social Security's unfunded obligations over the long range projection of the program with the zero line crossed in 2033.
click on graphic to enlarge
The following graphic shows the urgency of the problem even clearer in that the minimum level for the test of short-range financial adequacy is breached in 2028 - the year before the next president takes office. Notice the graphic is for the hypothetical "OASI & DI Combined Trust Funds." The OASI Trust Fund, taken by itself, declines to 89% by the beginning of 2029 & remains below100% for the remainder of the short-term period, until reserves become depleted in the first quarter of 2033. Therefore, OASI fails the test of short-range financial adequacy.
click on graphic to enlarge
The graphic below shows the financial dynamics that will be encountered when the Trust Funds are depleted if no action is taken by Congress.
click on graphic to enlarge
The above graphics tell the story that you need to know for yourself if you are near or already participating in Social Security. But also your adult children trying to raise a family or your young children & grandchildren all of whom will be affected by the facts in the Trustee's report starting in the very near future & then staying in play for the rest of their lives too. We are all in the same boat regardless of current age.
In addition to the above graphics, I present the following narrative directly from the Trustee's report that further explains the information shown on the graphics:
The OASDI program was providing benefit payments to about 68 million people at the end of 2024:
- 54 million retired workers & dependents of retired workers
- 6 million survivors of deceased workers, &
- 8 million disabled workers & dependents of disabled workers.
During the year, an estimated 184 million people had earnings covered by Social Security and paid payroll taxes on those earnings.
Total program cost in 2024 was $1,485 billion. Total income was $1,418 billion, which consisted of $1,349 billion in non-interest income and
$69 billion in interest earnings. Trust fund reserves held in special issue U.S. Treasury securities declined from $2,788 billion at the beginning of the
year to $2,721 billion at the end of the year.
Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be higher than its total income in 2025 and all later years.
Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.
Considered separately, the OASI Trust Fund fails the test of short-range financial adequacy, but the DI Trust Fund satisfies the test. The OASI
reserves are projected to become depleted during 2033 under the intermediate assumptions. The DI reserves along with projected program income
are sufficient to cover projected program cost over the next 10 years.
Expressed in present-value dollars discounted to January 1, 2025, the open-group unfunded obligation for OASDI is $25.1 trillion over the 75-year
projection period 2025-99. This is $2.5 trillion more than the measured level in last year’s report of $22.6 trillion over 2024-98, discounted to
January 1, 2024.
The actuarial deficit increased significantly in this year’s report primarily due to: (1) the implementation of the Social Security Fairness Act, (2) the
extension in the assumed year the ultimate total fertility rate is reached, and (3) the reduction in the ultimate assumption for the ratio of total labor
compensation to GDP. These changes are described in detail in section IV.B.6 of the report.
To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout
the 75-year projection period ending in 2099:
• revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.65 percentage points to
16.05 percent beginning in January 2025;
• scheduled benefits would have to either be reduced by an amount equivalent to an immediate and permanent reduction of 22.4 percent applied
to all current and future beneficiaries effective in January 2025, or by 26.8 percent if the reductions were applied only to those who become
initially eligible for benefits in 2025 or later; or
• some combination of these approaches would have to be adopted
If substantial actions are deferred for several years, the changes necessary to maintain solvency for the combined OASI and DI Trust Funds would
be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust
fund reserves become depleted in 2034. For example, maintaining 75-year solvency through 2099 with changes that begin in 2034 would require:
• an increase in revenue by an amount equivalent to a permanent 4.27 percentage point payroll tax rate increase to 16.67 percent starting in 2034,
• a reduction in scheduled benefits by an amount equivalent to a permanent 25.8 percent reduction in all benefits starting in 2034, or
• some combination of these approaches
The unfunded obligations described in the Trustee's report came about due to substantial demographic shifts that saw the number of workers per beneficiary fall from 16.5 in 1950 to 2.7 in 2024 with continuous declines projected as lower-birth-rate generations replace workers of the baby-boom generation. The ratio of workers to beneficiaries reaches 2.3 in 2040, when the baby-boom generation will have largely retired, & will generally decline thereafter to about 2.0 due to increasing longevity. The unfunded obligations came about because of the demographics detailed above - but these unfunded obligations were caused by an oblivious citizenry that let short term politicians tell them they would never let anyone touch their Social Security benefits. The demographics are a natural phenomenon. The politicians are master manipulators who just hope to be out of office when their constituents realize the imminence of one of the painful solutions detailed in the report falls on them either as an unsuspecting senior citizen ripe for benefit cuts or as a worker who will see their Social Security payroll tax rate increase over 34% applied to every dollar up to $184,500 in 2026, such sum increasing thereafter.
In addition to increased payroll taxes the unfunded obligations will be paid by today's children in the form of a markedly decreased standard of living such as the inability to buy a house or inability to send their kids to college - we are off to a terrible start regarding both of them already. There is no leadership in either party willing to solve our problems. Democrats are more interested in funding boondoggles like the Green New Deal where sea levels might increase millimeters during the next 100 years rather than strengthen Social Security which will have the problems described above become more noticed during the next presidential election. Republican Members of Congress are only too happy to take marching orders from Trump whose political career should end @ age 82 in three years leaving these poor fools holding more than one bag.
In answer to the charge that Congress needs to work together better, the late Oklahoma Senator Tom Coburn said that Congress is working together way too well – that is why the country's financial problems are not being solved as described above. In essence we have One Big Government party with Democrat & Republican wings whose jobs are so rosy Members have to be carried out of office on a stretcher.
Every politician knows that Social Security, Medicare, Medicaid, other entitlements, & interest on the national debt comprises @ least two thirds of the federal budget. And yet every congressional charade @ financial responsibility focuses on cutting the remaining one third as if therein lies the problem. And even this pretend effort never really cuts anything in the here & now but rather slows increases on future spending that still increases.
There are tens of trillions of dollars in unfunded entitlement obligations that never appear on the government's balance sheet but these are liabilities just like the national debt. Although the national debt & unfunded obligations are distinct financial concepts, they are cumulative with each adding to the government's total liabilities. The national debt represents money the government borrowed in the past & owes with interest to its creditors, while unfunded obligations are projections of future financial commitments for which there are insufficient assets or dedicated future revenue to cover the promised benefits. According to Professor Alexander William Salter of Texas Tech University the present-value costs of these liabilities range between $100 & $200 trillion - equal to one to two times the world's GDP.
This bill will start to come due in 2033 when the unfunded obligations are accounted for by large payroll tax increases or real cuts in benefits. The burden will not ease on all of us, one way or another, until it is paid off.
The Social Security problem has worsened from long term neglect by the politicians & indifference by We the People of the United States for decades, thereby showing it is getting harder by the day to find people who understand the issues they are fighting for or should be fighting against.
Reference Post - The Solution To Social Security's Funding Problem
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