In January, the average retired employee brought home a $1,976 check from Social Security. While the average monthly payment may not seem like a lot, Social Security helped lift 22.7 million people out of poverty in 2022, including 16.5 million adults ages 65 and older.
Despite the undeniable important role Social security This pioneering retirement program plays a role in helping elderly Americans make ends meet, and the foundation of this pioneering retirement program collapsed decades ago. While a host of factors are responsible for Social Security’s deteriorating fiscal outlook, the finger of blame is often pointed at Congress.
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In January 1940, the Social Security Administration (SSA) mailed the first check for benefits to retired workers. Since this point, the Social Security Board of Trustees has issued an annual report detailing the program’s financial status. This includes taking a close look at Social Security income and spending each year, as well as forecasting the future solvency of America’s leading retirement program.
In each of the last 40 reports, trustees have warned of a lack of long-term funding commitments. In other words, the trustees projected the cumulative income received over the 75 years following the release of the report and decided that: Including cost of living adjustments (COLAs)expenses will easily exceed income.
In the Trustees’ 2024 report, Social Security’s long-term cash shortfall was estimated at $23.2 trillion through 2098. This represents an $800 billion increase over the projected shortfall in 75-year funding commitments included in the Trustees’ 2023 report.
In addition, the trustees are calling for the expected depletion of the Old Age and Survivors’ Insurance (OASI) Trust Fund’s asset reserves by 2033. Although the fund responsible for distributing benefits to retired workers and survivors of deceased workers is not in danger of bankruptcy. or become insolvent, exhausting OASI’s asset reserves within eight years would result in an expected decline in monthly payments of 21%.
If you were to look at social media message boards about Social Security topics/articles, you would usually find that Congress is the scapegoat. Specifically, some commentators point to the idea of lawmakers stealing or raiding Social Security trust funds to fund wars and other items, and failing to “return the money, with interest.”
The thing about popular opinions about Social Security is that what’s popular isn’t always what’s true. In this case, the idea that Congress is stealing trillions from Social Security is completely baseless.
In August 1935, President Franklin Roosevelt signed the Social Security Act into law. Among the list of provisions and rules set forth in the Social Security Act of 1935 is the treatment of any excess income (asset reserves) collected—that is, income collected in excess of what is paid in benefits and used to cover the Social Security Administration’s (SSA’s) administrative expenses and program operating expenses. .
By law, any excess income collected by Social Security must be invested in special-issue, interest-bearing government bonds. US Treasury securities are exceptionally safe and backed by the full faith of the US government.
What is most important to note is that every cent of these special-issue government bonds is accounted for. In fact, the Social Security Administration (SSA) updates the combined asset reserve amount of the OASI Fund and the Disability Insurance (DI) Trust Fund, along with the average interest rate it generates on its asset reserves, every month. As of the end of December 2024, OASI and DI together held approximately $2.721 trillion in asset reserves, with an average return of 2.557%.
The idea that Congress “stole” this money is like misunderstanding how a bank certificate of deposit works. If you buy a $10,000 CD from your local bank that yields 4%, your bank isn’t going to put your money in a vault and let it gather dust. Instead, you will use this money to work through loans to generate a return of more than 4%. Your money is not stolen by the bank. It still gets fully accounted for, and the bank can make interest and principal payments when the time comes.
Likewise, the federal government will lose $2.721 trillion in excess cash to the prevailing inflation rate. This money is invested in government bonds (as required by law), generating much-needed interest for Social Security. If the program is no longer allowed to buy US Treasuries, it will lose one of its three sources of income, which would lead to sweeping interest rate cuts at an accelerated pace.
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The answer is as clear as day until Congress steals from Social Security trust funds. If you want to know the real reason behind the program’s financial problems, just look at a variety of ongoing demographic shifts.
You may be aware of some of these ongoing changes and have been hearing about them for years. For example, the retirement of baby boomers from the labor force reduces the ratio of workers to beneficiaries.
Likewise, we’re living much longer now than we were when retired Social Security workers’ checks were first sent out in 1940. The program wasn’t designed to distribute benefits to retirees for decades.
But there are other, more subtle demographic shifts that will have a big impact on Social Security. For example, net legal immigration to the United States decreased by 58% from 1998 to 2023. Immigrants to the United States tend to be younger, which means they will spend decades in the workforce contributing through the payroll tax, which is the primary funding for the Security Social. mechanism. In short, one of the biggest problems is that not enough legal immigrants are arriving in the United States
The birth rate in the United States has also reached its lowest levels ever. Although a declining birth rate does not hurt Social Security immediately, the worker-beneficiary ratio will come under greater pressure 10 to 20 years from now when not enough new workers enter the labor force to cover eligible beneficiaries.
The other issue is the widening gap in income inequality. In 2025, all earned income (wages and salaries, but not investment income) between $0.01 and $176,100 is subject to a 12.4% payroll tax. Nearly 94% of all workers will earn less than $176,100 and thus pay Social Security for every dollar they earn.
On the other hand, about 6% of workers earn more than $176,100, and would have any income above that number exempt from payroll tax. Over time, a higher percentage of earned income “evades” the payroll tax.
Lawmakers deserve blame for not getting their act together sooner to strengthen Social Security. But there is absolutely no evidence that Congress has stolen from America’s leading retirement program.
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