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True or False: Social Security is on the brink of bankruptcy, and you can kiss your future benefits goodbye.
Answer: False. Believe it or not, totally false.
You can be forgiven for believing the statement is true, because that is all you hear in the news about Social Security. That, and that Baby Boomers are the principal cause of this disaster, now that they are retiring in hordes.
It seems logical, on its face. But guess what? It’s all political propaganda. Some might even call it fake news.
That’s not to say Social Security is trouble-free. There are some issues that must be fixed. But the fixes are surprisingly easy.
This positive report comes courtesy of Kathryn Anne Edwards, an economic policy consultant who has been studying Social Security for two decades. She writes a weekly column for Bloomberg News and has testified before Congress. She also makes her scholarship accessible to non-academics, sharing her insights via TikTok (@keds_economist) and a podcast (Optimist Economy).
Let’s first dispense with the blame-the-Boomers storyline. As Edwards relates, the demographic bulge of people born between 1946 and 1964 (sometimes described graphically as a pig in a python) did not come as a surprise. When Congress last tweaked Social Security, back in the early 1980s, it accelerated the payroll tax rate on workers – Boomers were in the early stages of their careers at the time – to effectively pre-fund their Retirement. In other words, Social Security collected more than it needed, pumping the excess revenues into the Social Security Trust Fund. That fund accumulated trillions of dollars, and beginning about 2010, those funds were drawn down as payroll taxes became insufficient to cover benefit payments.
It’s the Trust Fund that is expected to be depleted by 2035. Because payroll taxes are still not covering the full cost of benefits, once the Trust Fund is depleted, benefits would have to be cut by 20% or more to balance the ledger – IF nothing is done before then to correct the imbalance.
In other words, the Social Security Administration did foresee the impact of the Baby Boom, and asked Congress to fix the problem.
The real problem, says Edwards, was that the analysts “did not predict how slowly wages would grow.” In the 40 years preceding the last reform, wages across all income levels had grown at a healthy clip. They assumed that would continue. Instead, the succeeding 40 years saw a growing inequality of wage Growth. Those in the top income tiers saw their incomes increase, while “wages at the bottom of the distribution have almost completely flat-lined.” Economists estimate that between 30% and 50% of the revenue shortfall is caused by what has been called the “Great Wage Stagnation.”
The growing affluence of those at the top of the pyramid created a related problem. The reform in the 1980s placed a cap on how much income could be taxed for Social Security. The goal was to fix the limit at 90% of all wages in the U.S. Once a person’s income goes above the cap, it is not taxed for Social Security. Each year the cap rose. In 2026 it is $184,500. But the widening gap between the top tier earners and everyone else means that the cap now stands at only 81% of all wages.
So, the bottom line is that Social Security needs to raise more revenue to pay current and future claims. Edwards maintains that fixing the system is easy – so easy, she says, that if you assigned a high school social studies class to find a workable plan, they could do it in 10 minutes.
The Office of the Actuary within Social Security analyzes policies that have been proposed (or even mentioned) by members of Congress, scoring them on how each proposal would impact Social Security’s 75-year shortfall. The most popular proposal, doing away with the cap on taxes, would take care of 70% of the gap. It would only affect the top 5% of wage earners, but polls show that 85% of workers would prefer to see their own taxes raised over having benefits cuts, Edwards says.
“The policy is easy,” she says. “The politics is a disaster.” She asserts that Congress’s unwillingness to fix Social Security is “the biggest disconnect between D.C. and Main Street USA.”
Despite the looming shortfall, Edwards points out that Social Security is perhaps the most successful government policy in U.S. history. In its 90-year existence, it has never missed a payment. It has the lowest rate of fraud (0.3%) of any public program. Its approval is high and bipartisan. These achievements ought to inspire faith in its strength and soundness. Instead, a steady barrage of trash talk from certain special interests who want to privatize the system has convinced millions that Social Security is on its last legs.
Edwards remains optimistic that the popular demand for Social Security will force Congress to remedy its shortfall before 2035, when benefits would need to be reduced. She even predicts when Congress will act: before November 2034.
