Why Did Congress Deliberately Schedule Social Security Insolvency?

Social Security’s upcoming insolvency—its failure without new legislation to pay annual benefits upon which recipients have come to rely—is no accident. It has always been part of the plan. It’s one more way current and past politicians attempt to force future politicians to maximize future benefits.

Politicians enjoy leaving lasting legacies. Large and impressive buildings and statues are one way, but once constructed, many of the costs are already paid. The bigger arena where elected officials seek to create permanent legacies is through the country’s spending and tax programs.

In its budget process, Congress designates programs that require no annual appropriation as mandated programs. The largest of these tend to have permanent or ongoing mandates to both continue and grow steadily over time. For decades, Congress has left Social Security, Medicare, and many healthcare programs on autopilot and expanding faster than the nation’s gross domestic product (GDP) or income. Current law requires that they continue doing so indefinitely. In fact, they alone, along with interest, now account for more than 100 percent of projected future inflation-adjusted spending growth and over 125 percent of revenue growth.

The overlooked and less acknowledged part of this story is that Congress designed these programs to fail financially. Regarding the Social Security trust fund, our elected officials have been aware of this issue for decades but have failed to act (see the chart above). In fact, they have often tinkered with this unsustainable program, making it even more unsustainable. In 2024, for instance, they increased benefits but not revenues by granting many state and local government employees who had for years avoided paying any Social Security tax a very high rate of return on what modest tax they may have paid.

Let’s be clear. Social Security, our nation’s largest program, is a significant success story. Successful on average, that is, not at many margins, and not in how it is increasingly transferring from a younger, poorer population to an older, wealthier one.

How Social Security Reformers Scheduled Failure

In 1983, Congress enacted a Social Security reform that it projected would have enough funds for the next 75 years—until about 2058—before the trust funds would be depleted. At the scheduled depletion point, benefit payments would exceed revenues, mainly from payroll taxes. Essentially, a modest buildup of trust funds paid in during the baby boomers’ peak earning years, along with interest credited to those funds, would gradually but increasingly be spent down. In the later years, benefits would increasingly surpass incoming revenues until the trust funds were exhausted. After the 75^th year, Congress would need either to raise taxes or cut existing benefit levels.

Note that in 1983, Congress could have designed the programto avoid this inherent problem, but it chose not to. Instead, it left the issue for future Congresses.

Congress has also consistently failed to address a related issue: how conditions, especially demographic ones, could change. For example, it could have designed Social Security so that the number of years of benefits would remain constant even as people lived longer. It could have made other adjustments to account for changes in the birth rate and the number of workers paying taxes into the system. Again, it didn’t.

Just a few years after the 1983 agreement, the Social Security actuaries significantly adjusted the projected exhaustion date of the trust funds. Today, the estimated date is 2034, nearly a quarter of a century earlier than projected in 1983. Still, Congress and previous presidents have taken no action.

Why Did Congress Schedule And Then Refuse To Address Failure?

Elected officials like giveaways such as benefit increases and tax cuts. They dislike benefit reductions and tax hikes. They also like to enact temporary giveaways with expiration dates that future Congresses would feel forced to override. For those following the press, debates in 2025 over sustaining higher temporary benefit levels for marketplace health insurance exchange subsidies and lower temporary tax levels first enacted in 2017 are only two examples. Successive Congresses usually continue most, if not all, such giveaways.

The same logic appealed to the 1983 reformers. Many wanted to maximize future benefits, or at least minimize the taxes needed to pay for whatever benefits were promised. Everyone also understood that future Congresses would be especially unlikely to cut benefits already being paid to recipients below the previous year’s levels. That means that the closer reform is delayed to the date of exhaustion, the more that any future Congress must focus on increasing taxes or borrowing from general revenues. It would be forced politically to phase any benefit cut in gradually for future retirees, while protecting existing retirees. Consider a gradual increase in the retirement age. Had it started 10 years ago, that age would be higher now. Delaying the date of enactment preserves the retirement age for those who reach it during the delay.

Will The Next Reform Schedule Failure?

That the next reform will again schedule failure is highly probable. So far, many proposals still play the 75-year insolvency game the same way it was played in 1983. Under current projections, the bad years at the end of that period will require much higher benefits as a share of GDP than in the early years. That is, insolvency, with outlays projected to exceed revenues, will again occur near the end of the 75 years. More importantly, most (all?) recent major proposals to date fail to include adjustments over time to prevent insolvency in the face of unpredictable economic and demographic changes. Some proposals even provide only short-term revenues that simply push out the date of insolvency and sustain an even higher level of benefits on which beneficiaries have come to rely. Congress has long used this latter strategy for the Medicare trust fund.

For anyone who becomes engaged in future Social Security (and Medicare) reform, my advice is straightforward. Agree up front that no reform can deliberately schedule failure.