The Social Security Administration said Friday that its main trust fund will run out of money in 2033, leaving the program with no reserves and forcing an immediate 23% cut in benefits unless Congress acts to shore up the program before then.
That deadline is a year earlier than the previous projection last spring and reflects the slightly worsening overall fiscal health of the federal government.
Social Security’s trustees said they had to cut their economic projections for the next decade, based on new data about high inflation and total economic output.
Even with that grim economic news, another key trust fund — Medicare‘s Hospital Insurance program, also known as Medicare Part A — improved by three years, and will now be solvent through 2031, the trustees said.
After that point, Medicare beneficiaries would see an 11% cut.
Both programs now see their trust funds dry up within the 10-year budget window that Congress and the White House operate on. That means the insolvency problem is now a real issue for budgeteers, who must either grapple with the shortfall or acknowledge that benefit cuts will happen.
President Biden has accused Republicans of secretly plotting cuts to Social Security. But the budget he delivered to Congress earlier in March did not include a fix for the looming shortfall.
Former President Donald Trump, a potential 2024 rival to Mr. Biden, has also chided fellow Republicans, telling them not to touch the program.
The problem, experts said, is that doing nothing is now akin to supporting benefit cuts.
“Politicians who promise not to ‘touch’ these programs are leaving seniors with a false sense of security because doing nothing puts them in serious jeopardy,” said Michael A. Peterson, CEO of the Peter G. Peterson Foundation, a prominent watchdog group.
Social Security’s main trust fund, the Old-Age and Survivors Insurance fund, has been struggling for more than a decade as the aging of the population has left fewer workers paying in and more retirees claiming benefits.
The program began to run a cash-flow deficit — calculated by yearly payroll taxes versus benefits paid out — in 2010. And in 2021 annual benefits outstripped both taxes and interest income, and Social Security began to deplete the principal balance.
Friday’s projection says the OASI Trust Fund will be depleted in 2033.
A smaller Social Security trust fund, the Disability Insurance program, is in better shape. It is cash-flow positive through 2044. With interest income, it can last throughout the 75-year actuarial window without depleting the trust fund.
In 2022, OASI started with $2.753 trillion in its trust fund. It collected $1.057 trillion but spent $1.098 trillion, depleting its reserves by nearly $41 billion.