Social Security will pay out $154 billion more than it takes in during 2023, according to the Congressional Budget Office. Over the following decade the gap adds up to $3.5 trillion. Those are the opening numbers in CBO’s long-term projections, which the Committee for a Responsible Federal Budget summarized in mid-2023, and they point to a trust fund shortfall that arrives within about ten years.
The deficit equals 1.6 percent of taxable payroll, or 0.6 percent of GDP, this year. CBO expects it to widen to 3.9 percent of payroll by 2033, 5.1 percent by 2050, 6.8 percent by 2075 and 7.4 percent by 2097.
Which year the money runs out
The answer depends on who is counting. CBO says the Old-Age and Survivors Insurance trust fund will exhaust its reserves in fiscal 2032 and the Disability Insurance fund will be insolvent by calendar year 2052. The Social Security Trustees put the retirement fund’s depletion in 2033 and expect the disability fund to stay solvent for the next 75 years.
Treat the two funds as one, shifting revenue between them, and CBO sees insolvency in fiscal 2033. The Trustees say 2034. In 2033, today’s 57-year-olds will reach normal retirement age and the youngest current retirees will be 72.
When the money is gone, every beneficiary faces the same result. Benefits would be cut by 25 percent across the board, whatever the person’s age, income or need.
Why CBO and the Trustees differ
CBO’s 75-year actuarial shortfall is 5.1 percent of taxable payroll, or 1.7 percent of GDP. The Trustees’ estimate is 3.6 percent of payroll, so CBO’s figure is nearly 1.5 times larger. The agency points to differing assumptions about interest rates, economic growth, disability incidence and population growth.
Both sides expect revenue to stay between 13 and 14 percent of taxable payroll. Spending is where they split. CBO projects 14.7 percent this year against the Trustees’ 14.5 percent. By 2033 it is 17.1 percent versus 16.3 percent, and by 2097 it is 21.2 percent versus 17.8 percent.
What closing the gap would take
To restore solvency for 75 years, the 12.4 percent payroll tax rate would have to rise by 41 percent, which is 5.1 percentage points. The alternative is a 27 percent benefit cut for everyone.
The Committee for a Responsible Federal Budget argues that waiting makes the fix harder. In its view, acting sooner would avoid abrupt across-the-board cuts, allow adjustments aimed at those who can most afford them, spread the burden across generations and give workers more time to plan.
