Some people are optimistic about Social Security. But it's shrinking as the number of retirees grows.

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There was a rather cheerful piece on Social Security from the Motley Fool on Paste BN recently. It suggested that the future of this gargantuan retirement program isn’t as rocky as many folks think. In my judgment, it glossed over or underplayed several very important things that add needed context to this discussion. 

This is important because in a country in which Americans are divided on just about everything, Social Security is one thing we all have in common. We pay into the system over our working lives, and when we retire, we get a monthly check for the remainder of our days. Since President Franklin D. Roosevelt began this wondrous program nearly 90 years ago, it has worked marvelously. Today, about 65 million Americans get an average $1,543 a month – making Social Security the largest single source of federal spending. 

The Motley Fool article said, correctly, that Social Security's primary source of revenue is payroll taxes. “As long as we still have a workforce and keep imposing payroll taxes, the program will have a steady stream of funding,” it said. 

How long will Social Security last?

True, but this glosses over three things. First, more people are retiring today than entering the workforce. About 10,000 baby boomers (born between 1946 and 1964) turn 65 each day, and by 2030, says the Census Bureau, all boomers will be at least age 65. Meanwhile, Generation Xers (born between 1965 and 1980) will become eligible for Social Security in a decade, a trickle that will gradually grow into a flood. 

Second, all these retirees are living longer. The Census says that between 2010 and 2020, “the 65-and-older population grew by over a third (34.2% or 13,787,044). ... The growth of this population contributed to an increase in the national median age from 37.2 years in 2010 to 38.4 in 2019.”

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Separately, another federal report notes that the number of Americans age 85 and older is soaring and will more than double from 6.4 million in 2016 to 14.6 million by 2040.

Which brings us to the third thing: The workforce itself. It is shrinking. The U.S. birth rate, which fell 4% last year alone, now stands at a four-decade low, which means a much smaller future workforce. We’re already looking at huge worker shortages. As of July 31, there were 10.9 million job openings across the USA, says the Bureau of Labor Statistics – 10.9 million fewer people paying Social Security. And yet some Americans complain that immigrants are stealing our jobs. Really? Look around you. Employers are desperate for workers. Nearly 11 million of them.

There are jobs. Where are workers?

So fewer workers are supporting a lot more long-living retirees. This helps explain one ominous fact: Social Security is now paying out more than it’s taking in. Its Board of Trustees – led by Treasury Secretary Janet Yellen – warn that Social Security will burn through its cash reserves (officially called the “Trust Funds”) by 2034. What happens then? Income from payroll taxes “would be sufficient to pay 78% of program cost.”   

Translation: That’s a 22% cut. 

What can Congress do before the ax falls? “For one thing,” said the  Motley Fool, “they can raise payroll taxes.” Yes, of course, raise taxes! That was easy.

They could also raise or eliminate the wage cap – currently $142,800 – that is subject to Social Security taxes. Lawmakers could also lift the full eligibility age for Social Security – which is nothing less than a benefit cut. Look at the difficulty President Joe Biden and Democrats are having trying to raise taxes on high-income earners for things like school lunches, climate change mitigation and hearing aids for seniors.  

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There’s a reason we haven’t had meaningful Social Security reform since the 1980s, when President Ronald Reagan, of all people, signed a Social Security rescue bill that raised taxes. Good luck finding lawmakers today who are willing to inflict that kind of pain on voters. Why do you think Social Security, Medicare and Medicaid – which have problems of their own – are called the third rail of politics? No one wants to touch them.

When it comes to Social Security, I wish I could be as cheerful as the Motley Fool. If we had politicians capable of looking beyond the next election, politicians willing to be more honest with the American people about the difficult problems that are fast approaching, and politicians more willing to cooperate with one another to fix those problems, I would be. 

Paul Brandus is the founder and White House bureau chief of West Wing Reports and a member of Paste BN's Board of Contributors. His latest book is "Jackie: Her Transformation from First Lady to Jackie O." Follow him on Twitter: @WestWingReport