PRAGMATIC ISSUES

 

 

Earlier this week I saw a news headline that said social security benefits are running dry and that lawmakers are scrambling to find a solution. Its doubtful that they are scrambling in any way shape or form. Finding a solution requires the ability to work together, something we have been watching for decades Congress and Senate, State and Local Lawmakers fail to do time and time again.

 

A couple of quick clarifiers to frame solutions:

“Social Security” (OASI/DI) is an earnings‑based insurance program that pays retirees, disabled workers, and survivors. Its old‑age fund (OASI) is projected to be depleted around 2033; if Congress does nothing, benefits would be automatically cut to what payroll taxes can cover. The combined OASDI funds would hit depletion about 2034. That’s from the 2025 Trustees’ report and independent summaries.

SSI (Supplemental Security Income) is a separate, means‑tested safety‑net program for very low‑income people; it’s not funded by payroll taxes and shouldn’t be confused with Social Security retirement.

Too often politicians and the media tend to confuse the two. 

A fix that preserves Social Security (menu of options)

Policymakers usually mix revenue and benefit tweaks. The estimates below are from SSA actuaries, CBO, CBPP/CRFB, etc.

Raise more from high earners

Lift the taxable maximum (currently wages above a cap aren’t taxed for Social Security). Options include restoring coverage to ~90% of all wages or taxing earnings above a high threshold (e.g., $250k). Depending on design, this can close a meaningful share (≈20–70%) of the 75‑year gap.

Apply payroll tax to certain pre‑tax compensation (cafeteria plans, etc.) to broaden the base.

Modestly raise the payroll rate

A phased increase of about 1 percentage point on workers and employers (total +2 pts) is a standard lever; even smaller phased steps move a lot of revenue. (CRS/CBO analyze variations.)

Slow benefit growth at the top; protect the bottom

Index initial benefits a bit more slowly only for higher earners (“progressive price indexing”), while enhancing a modern minimum benefit so long‑career low earners won’t retire into poverty. SSA/Urban Institute show minimum‑benefit updates lift the bottom without cutting the middle.

Adjust COLAs carefully

Switching to chained CPI slightly trims annual cost‑of‑living increases; this saves money but hits the oldest/poorest hardest unless paired with offsets (like bigger minimums).

Retirement‑age changes (with protections)

Gradually nudging the Full Retirement Age upward adds solvency, but it’s a real benefit cut unless offset—so most balanced plans pair it with enhanced minimums, disability protections, and “hardship” exemptions for people in physically demanding jobs.

Investments & other ideas

Some bipartisan plans would seed a separate investment fund to earn higher returns than Treasuries; this adds risk and takes decades to matter, so it’s best as a supplement to core fixes, not a substitute.

Example “packages” that would solve most or all of the gap

Progressive revenue + floor boost: (a) tax wages above ~$250k without crediting all of those taxes to benefits, (b) update the minimum benefit, (c) modest, phased payroll‑rate bump. Together these can close well over half the gap and protect low earners.

Shared sacrifice, targeted protection: (a) restore taxable wage coverage to ~90%, (b) chained‑CPI with a low‑income offset, (c) very gradual FRA increase with hardship carve‑outs. That combination typically scores near full solvency depending on parameters.

Or scrap it for a Universal Basic Income?

A true UBI (say $1,000/month to every adult) is simple and progressive at the bottom—but extraordinarily expensive (≈ $3.1–$4.0 trillion per year, gross). Replacing Social Security with a flat UBI would also wipe out its insurance features (widow/widower and orphan benefits, disability insurance, wage‑indexed earnings replacement) and would likely make many middle‑ and even lower‑middle‑income retirees worse off unless the UBI were set very high (which raises the cost further). Most serious proposals that include a UBI keep Social Security and use UBI as a baseline floor.

Goals

Solvency: Close the long‑term financing gap with gradual, predictable changes.

Fairness: Strengthen the floor for low earners; keep middle earners roughly whole; trim growth at the top.

Stability: Phase everything in so people can plan; protect people in physically demanding jobs.

The Package (10 pieces)

A) Revenue (simple, progressive, phased)

Tax very high wages again (“donut” cap):

Keep today’s cap for middle earners, but re‑apply the payroll tax above $250,000 (indexed) starting 2027, phased in over 10 years. Credit only part of those extra taxes to benefits so the change actually improves finances.

Tiny payroll‑rate phase‑in:

Increase the OASDI rate by 0.05 percentage points per year for 12 years on workers and employers (total +1.2 points when fully phased in). That’s roughly a cup‑of‑coffee per week each year—small, predictable, and powerful over time.

Broaden the base (no loopholes):

Count certain tax‑preferred compensation (e.g., some salary deferrals) as wage income for Social Security purposes, so high earners can’t sidestep the system.
Prudent investing slice:

Allow up to 15% of trust‑fund assets to be invested in broad index funds (with strict firewalls). This boosts returns modestly without turning the program into a market gamble.

B) Benefits (protect the bottom, trim at the very top)

Modern minimum benefit:

Guarantee at least 125% of the federal poverty line for a 30‑year full‑time worker, scaled down to 100% at 10 years of covered work. (Automatically coordinates so people aren’t forced onto SSI late in life.)

Progressive initial‑benefit formula:

Keep today’s formula for about the lowest 70–80% of lifetime earners. For the highest earners, slow the growth rate of initial benefits (a gentle “progressive indexing”). This keeps Social Security as insurance, not a windfall.

COLA with age and income protections:

Use a slightly slower inflation index but add a one‑time 2% bump at age 82 and a small monthly COLA top‑off for low‑benefit recipients, so the very old and poorest aren’t eroded by inflation.

Caregiver credits (max 5 years):

If you care for a child under 6 or an ailing family member, you can receive deemed earnings (e.g., 50% of the national average wage) for up to five years, so stepping out of the labor force doesn’t permanently crater your benefit.

Stronger survivor benefits:

Ensure a widow(er) can receive up to 75% of the couple’s combined benefit (subject to a cap), reducing elderly poverty among survivors.

C) Retirement age & hardship carve‑outs

No blanket hikes for everyone:

Keep the Full Retirement Age at 67 for most. If lawmakers insist on an FRA rise, phase to 68 between 2032–2044 only with a clear hardship exemption (e.g., long careers in physically demanding occupations or verified health limitations), and keep early eligibility at 62. Pair any FRA move with the minimum‑benefit upgrade (Item 5) so low‑wage, short‑lived workers aren’t punished.

Who pays / who benefits

Low earners (e.g., lifetime ~$25–35k wages): Higher minimum benefit + targeted COLA top‑offs = higher monthly checks and better protection from poverty.
Middle earners (e.g., ~$50–80k): Little to no change in lifetime benefits; tiny payroll increases phased in slowly.

High earners (>$250k): More in payroll taxes above the donut threshold and slightly slower benefit growth at the top—still getting insurance value, but less subsidized by everyone else.

Caregivers and widows/widowers: Materially better off (credits + survivor boost).

Implementation timeline (clean and gradual)

2026: Law enacted; public calculators and mailers go out.

2027–2038: Revenue changes and caregiver credits phase in; minimum benefit upgrades start.

2030 onward: Survivor and COLA protections fully active.

If used: FRA changes begin no earlier than 2032 with hardship rules already in place.

Bottom line

You don’t need to scrap Social Security to fix its fairness and finances. The most durable path is: get more from the top, guarantee a stronger minimum, and phase changes in slowly so people can plan—while preserving disability and survivors’ insurance. Congress has a menu with known trade‑offs and well‑scored effects; combining a few of the options above readily averts the automatic cuts projected for the early 2030s.