In August, the Social Security program celebrated the passage of its ninetieth year of providing financial support to vulnerable individuals across the country. Today, the program has amassed tens of millions of beneficiaries, many of whom rely at least in part on their monthly benefit income to get by. With a program as large and widely depended upon as the Social Security program, change does often need to be enacted so as to ensure the longevity of the program itself.
The program will likely be hit with a major change soon due to the findings of the latest report from the Social Security Board of Trustees. According to the report, a major trust fund is projected to become insolvent by 2033. This will result in an automatic 23% benefit cut being triggered. Lawmakers have since been debating their options in the hopes of preventing the shortfall.
A recent survey conducted by Gallup has revealed that a significant number of Republicans are in support of making major changes to both Social Security and Medicare if it means lower costs. Here is what you need to know.
Why does Social Security need change?
Social Security benefits are paid to recipients through three main sources of revenue. The first and primary source of revenue is, of course, the Social Security payroll tax. This is supplemented by funding from the Old Age and Survivors Insurance (OASI) trust fund, and the Disability Insurance (DI) trust fund. According to the annual trustees report, the OASI fund is projected to become insolvent by 2033, and the remaining revenue in the program will only be sufficient to cover 77% of scheduled benefits from then.
If the OASI and DI funds are combined into one OASDI fund, the shortfall will occur in 2034, and benefits will face a 19% cut instead of 23%. In the previous year’s report, the shortfall for the OASDI combined fund was projected to occur in 2035, and as such, the funding problem is accelerating.
The short answer as to why this is occurring is that there are more retirees claiming benefits now than there is workers paying into the payroll tax. As a result, the program has had to rely more and more on funding from its trust funds and consequently, we now have a shortfall on the horizon. The trustees also cited the recently signed into law Social Security Fairness Act as a cause for the acceleration of the shortfall.
The SSFA restored full benefits to some 3 million public sector workers. This cohort also qualified for a lump sum retroactive payment dating back to January 2024 — all of which took its toll on the program’s funding.
Survey reveals more Republicans back Social Security changes
From September 2nd to September 16th, Gallup polled 1,000 U.S. adults and found that “56 percent of Republicans backed making the changes compared to just 18 percent of Democrats,” with regards to changing Social Security and Medicare so as to reduce the deficit which is currently standing at around $2 trillion.
If the shortfall comes to pass, seniors would lose on average around $4,573 annually. The survey also found that “nearly half of U.S. adults said Congress should reduce the deficit either “mostly” (27 percent) or “only” (22 percent) by cutting spending.”
Additionally, 17 percent of participants were in favor of relying solely or mostly on tax increases to reduce the deficit, whilst 27 percent agreed that a mix of tax hikes and spending cuts were preferred.
Furthermore, 63 percent of participants were in support of increasing the income tax rates for those earning in higher income brackets, whilst 54 percent supported increasing tax revenues through changes to the federal tax code. The support for this was largely concentrated within the Democratic or Independents cohorts, and not Republicans.