Social Security Has Quietly Crossed Yet Another Financial Rubicon of Systemic Decay

The cost of grandfathering Social Security benefits for existing retirees is now more expensive for future retirees than doing nothing.

This article was first published on Marketwatch.

There is one fact about Social Security on which all policy analysts agree: the longer Congress waits, the harder it will be to fix the program’s finances.

The extension of that axiom is: every dollar of delay today costs future Americans — whether workers or retirees — more than a dollar to fix. Over the past two years, Social Security has collected less than $2 trillion and generated about $6 trillion of unfunded liabilities. In other words, for every dollar of revenue that the program has collected since 2018, it created $3 of promises that no one expects will be kept.

The only material question remaining is for whom this bell tolls. In the words of Donne, it tolls for thee. We are the people over whom so many hands have been wrung over the past few decades as Congress has pursued a path of wait-and-see politics.

Americans have heard for decades that Social Security might not be there for them when they retire. While that cliché has loomed over Americans almost since inception, its meaning has evolved as time has passed. In 1984, Social Security benefits were generally at risk for barely born millennials. By 2005, people who are part of Generation X were likely to experience a disruption of benefits in retirement. Now, almost every baby boomer expects to outlive the system’s ability to pay scheduled benefits — and that assumes that the economy cooperates.

According to the Social Security Administration, an average 77-year-old woman expects to outlive the system’s ability to pay its bills in full. That fact should elicit some action from Congress, but lawmakers do not appear to have even noticed.

Every year the Social Security trustees put the magnitude of the financial gaps in the context of an immediate and permanent (“I&P”) reductions to benefits. In 2021, the program quietly crossed yet another financial Rubicon of systemic decay. The cost of grandfathering existing retirees—that means not touching benefits of those already collecting while reducing what future retirees would get — is now more expensive for future retirees than doing nothing.

Specifically, if everyone born 1959 and later took a 25% reduction in scheduled benefits right now, they could be spared the horror of a 22% reduction starting in 2034 when the exhaustion of the Trust Fund would force the issue of the systemic imbalances on the public as a whole.

Social Security and the passage of time

Trustees Report yearProjected insolvency dateProjected benefits cut at insolvencyI&P reduction if applied to all beneficiariesI&P reduction if applied only to future retirees
Source: Social Security Administration Trustees Reports (2010, 2016, and 2021)

To complicate matters, any proposal to grandfather existing retirees is a tough sell to working voters—the same who absorbed the brunt of the increase in payroll taxes in 1977 and the benefit cuts gradually enacted in 1983. Thus, the concept of grandfathering existing beneficiaries today means that the people who saved Social Security in 1983 will be the same people asked to save it in 2022, 2023, 2024 or whenever Congress finally takes up the question of the program’s stability.

While no one suggests that benefit reductions are the only policy option, everyone needs to acknowledge that the efficacy of tax policy falls as the size of the problem grows. To grasp of the degree of the decline, two years ago legislation proposed under the “Social Security 2100” brand meant that program would pay increased levels of benefits for 75 years. The latest version of the legislation (“Social Security 2100: A Sacred Trust”) would create temporary benefit increases and extend the program’s prospects by four years to 2038.

Gradual change is no longer part of a serious discussion. Essentially, keeping the solemn promise of Social Security for one voter comes at the expense of another. The difference between the situation today and that of the past is the cost of fixing the system will be carried by existing voters — whether they are retired or not. There is simply no way to shift the entire burden of $19.8 trillion across generations again.

Despite the large and growing gaps in the program’s finances, policy experts suggest that adding revenue to solve financing challenges of Social Security is the easy part. The harder part of this approach is getting younger voters to accept an even smaller share of government services. 

If fixing Social Security were easy, it would already be done.

About the Author

Brenton Smith (A.K.A. Joe The Economist) writes nationally on the issue of Social Security reform with work appearing in Forbes,, MarketWatch,, and regional media like The Denver Post.