If Congress does nothing, every Social Security beneficiary faces an across-the-board benefit cut of 25 percent, regardless of age, income or need. That is the Congressional Budget Office’s reading of what happens once the program’s trust funds run dry.
The CBO’s 2023 long-term projections put the Old-Age and Survivors Insurance (OASI) trust fund out of reserves in fiscal year 2032. Its disability fund (SSDI) would follow in calendar year 2052. The Social Security Trustees see it differently: OASI depleted by 2033, and the disability fund solvent for the next 75 years. If the two funds are treated as one, CBO says the money runs out in fiscal 2033. The Trustees put that date a year later, in 2034.
The Committee for a Responsible Federal Budget, which analyzed the numbers, noted that in 2033 today’s 57-year-olds reach the normal retirement age.
Deficits already running
Social Security is not waiting for 2033 to lose money. CBO projects a cash flow deficit of $154 billion in 2023, equal to 0.6 percent of GDP. Across the next decade the shortfalls add up to $3.5 trillion.
The gap widens with time, in CBO’s estimate. The shortfall reaches 3.9 percent of taxable payroll by 2033 and 5.1 percent by 2050. By 2097 it hits 7.4 percent.
Why the two forecasts differ
Both CBO and the Trustees expect revenue to stay between 13 and 14 percent of taxable payroll over 75 years. The disagreement is over spending. CBO expects outlays of 14.7 percent of payroll this year against the Trustees’ 14.5 percent, and by 2033 the figures are 17.1 and 16.3 percent. In 2097 CBO has spending at 21.2 percent of payroll and the Trustees at 17.8.
The assumptions behind the gap include interest rates, economic growth, disability rates and population growth. CBO’s 75-year imbalance of 5.1 percent of payroll is nearly 1.5 times the Trustees’ 3.6 percent.
Closing a gap of that size would take the equivalent of raising the 12.4 percent payroll tax rate by 41 percent, or 5.1 percentage points. Cutting benefits by 27 percent for everyone would do the same job. The committee argues that acting early would avoid abrupt cuts and give workers more time to plan for retirement.
