Robert Reich: The Real Reason Social Security Is Going Broke – OpEd


I run into lots of young people who don’t believe Social Security will be there for them when they retire. 

They have reason for concern. The trustees of the Social Security Trust Fund — of which yours truly was once a member — just released their annual report on Social Security’s future. The report says Social Security will be able to pay full benefits until 2034 but then faces a significant funding shortfall. After 2034, it can pay only about 80 percent of scheduled benefits.

The biggest reason Social Security is running out of money is not what you (and the media) think it is: that boomer retirees are, or will soon be, soaking it all up. 

The Social Security trustees anticipated the boom in boomer retirements. This is why Social Security was amended back in 1983, to gradually increase the age for collecting full retirement benefits from age 65 to 67. That change is helping finance the boomers’ retirement.

So what did the trustees fail to anticipate? Answer: the degree of income inequality in 21st century America.

Put simply, a big part of the American working population is earning less than the Social Security trustees (including me) anticipated decades ago — and therefore paying less in Social Security payroll tax.

Had the pay of American workers kept up with what had been the trend decades ago — and kept up with their own increasing productivity — their Social Security payroll tax payments would have been enough to keep the program flush.

At the same time, a much larger chunk of the nation’s total income is going to the top than was expected decades ago.

Here’s the thing: Income subject to the payroll tax is capped. Every dollar of earnings in excess of the cap is not subject to Social Security payroll taxes. This year’s cap is $160,200.

The Social Security cap is adjusted every year for inflation, but the adjustment is tiny compared to what’s happened to incomes at the top.

As the rich have become far richer, more and more of the total income earned by Americans has become concentrated at the top. Therefore, more and more total income escapes the Social Security payroll tax. 

The obvious solution to Social Security’s funding shortfall 11 years from now is to lift the cap so that the super-rich pay more in Social Security taxes.

To make sure it’s the super-rich — and not the upper middle class — who pay, it makes sense to eliminate the cap altogether on earnings in excess of, say, $400,000.

As it happens, Joe Biden campaigned for the White House on a plan to do exactly this.

What happened to that plan? The budget Biden proposed last month made no mention of any tax increase linked to Social Security (although it did include tax increases on high earners and corporations as a way to extend the solvency of Medicare by 25 years). 

I suspect Biden’s plan for Social Security was a casualty of the bare-knuckled politics surrounding both Social Security and the debt ceiling. Biden doesn’t want to give Republicans any opening to debate Social Security in the coming fight over lifting the ceiling. 

Hopefully, he’ll revive his plan for Social Security after that brawl. The long-term future of Social Security depends on it. 

Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, and writes at Reich served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fifteen books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good," which is available in bookstores now. He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

7 thoughts on “Robert Reich: The Real Reason Social Security Is Going Broke – OpEd

  • April 26, 2023 at 10:14 pm

    I’ve said time and again, that the GOP effort to kill Minimum Wage increases has not only caused part of the underfunding of Social Security through FICA, but it has doomed those who retire at those ridiculous wages to receive a slap in the face on retirement… “Many more workers 55 and older earn minimum wages than those 19 and younger — 15% versus 10%. There are about 5 million minimum-wage workers who are 55 and older. And low-wage employees late in their work lives have an enormous stake in the fight to raise the federal minimum wage from its current $7.25 an hour to the leading proposal of $15.”… It’s just more dirty business from the #RabidRepublicans!

  • April 26, 2023 at 10:42 pm

    While I understand the sentiment in this argument, I will pose a counter argument that needs to be examine. Social Security was always presented as a “forced retirement income plan” where everyone receives a benefit based upon the contribution level to the plan. If we raise the cap to require higher income earners to pay more into Social Security without increasing the benefit to those contributors, then we have effectively converted Social Security from a retirement income plan to a tax (and a regressive tax at that as all income is taxed even for low wage earners). Converting from a mandatory retirement income plan to a forced tax may ultimately be what needs to happen, but we should be clear that it is a tax and not a retirement plan. This then changes the benefit to a transfer of income plan from the high earners in the country to the lower wage earners. This may seem like semantics, the distinction is real. Social Security has always been “sold” on the idea that we all contribute to the plan and we all are entitled to our respective benefit based on our contribution level (similar to a traditional private pension plan).

  • April 26, 2023 at 10:44 pm

    Why do you not talk about the impact of the 8 trillion dollars the federal government took from Social Security. I am tired to talking about inequality and you liberals constantly bringing it up!

  • April 27, 2023 at 2:08 am

    Reich is a self serving liberal with no standards. Income inequality – with the income cap, it’s not upper income people, he is blaming the middle class. The issue is the trustees (him included) did a poor job.

  • April 30, 2023 at 2:46 pm

    You pose an interesting argument using a base of assumptions tied to an earlier act that raised the social security age. It would be helpful to all to understand all of the assumptions used for the social security solvency. Can you provide a link to the original report and associated assumptions? I would greatly appreciate it.

  • April 30, 2023 at 5:27 pm

    I believe that every earned dollar should be subject to the social security tax. There should be no caps or “donut holes” in this table. Every dollar of earned income form EVERYONE (including elected officials) should be subject to this taxation. Furthermore, the amount individuals receive should remain to be capped (currently $4555/mo.) and all other regulations/rules for benefits should remain in place “as-is”.

  • April 30, 2023 at 6:41 pm

    the reason that ss has an upcoming problem is that everytime the republicans want to try to solve some of the SS issues the Democrats start their standard scare line that Republicans want to eliminate SS. Pure BS .but it has worked for them since the J. Carter admin.


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