How to Fund Social Security with the Economy We Have

For more than 90 years, Social Security has rested on three promises: Benefits will be there when people need them; they will remain progressive, helping protect workers with lower lifetime earnings; and they will be reliable and easily accessible to people across the country. Workers contribute throughout their careers and rightly regard Social Security as something they have paid into. But the program’s deeper logic is social insurance: Contributions are pooled across workers, families, and generations to protect people in retirement and against the shared risks of disability and death.

Over the decades, the program has changed in order to better keep those promises. Social Security’s architects regarded the 1935 law as a foundation on which to build, not a finished product. Congress substantially revised the program just four years after its passage and has passed other major reforms throughout the 20th century. Updating Social Security in response to economic and social change is not a departure from its history; it is how the program has endured.

The financing challenge now approaching presents another such moment. The 2026 Social Security Trustees Report projects that the Old-Age and Survivors Insurance Trust Fund reserves will be depleted in the fourth quarter of 2032 (a timeline similar to the Congressional Budget Office estimates). At that point, Social Security would not disappear, but without congressional action to rightsize the program’s revenues, beneficiaries would likely see a more than 20 percent across-the-board cut.

Financing Rules Have Fallen Behind the Economy

Recent Roosevelt research highlights how unanticipated changes in the broader economy have gotten us here. The last major reform, in 1983, largely prepared Social Security for the retirement of the baby boom generation, but Congress did not anticipate how sharply earnings would become concentrated among those above the payroll-tax cap or how much lasting damage the Great Recession and its slow recovery would cause. Congress could have acted years ago when it became apparent that incoming revenues would fall short of what would be required. While we’ve lost time, lawmakers can still address these changes in our economy as they take on Social Security reform.

But being specific about the root causes of the revenue shortfall is important. Mismatches between Social Security’s structure and other parts of today’s economy have further weakened the system’s revenue base:

• More economic gains at the top take the form of capital income, accumulated wealth, inheritances, and business income rather than conventional wages.
• Companies increasingly organize work through contractors, subcontractors, staffing arrangements, and digital platforms.
• Some active business owners can receive compensation for their work as business profit rather than wages.

In each case, Social Security may collect less—not because the economic activity or income has disappeared, but because the program’s rules do not fully reflect how work is organized and how economic gains are taxed today.

While there are critical decisions regarding how benefits are designed and delivered, the essays in this series explore three complementary ways to update how the program is funded to better match our economic reality.

A Standard for Good Reform

Our principles must therefore begin with a firm commitment: Cuts to existing benefits are unnecessary. A cuts-first approach undermines the collective coverage Social Security represents and, in any event, would be disingenuous given the multitude of creative approaches our authors present and that will be available to lawmakers.

These essays also outline principles for reform: restore and expand the wage base, reach gains that have moved outside of payroll taxation, and prevent employers and high earners from avoiding contributions.

Yet closing the solvency gap should not be the outer limit of our ambition. Reform should preserve the guarantee, progressivity, and broad accessibility that have defined Social Security at its best while creating room to expand the program—to improve benefit adequacy, recognize caregiving more fairly, reflect new forms of work, and offer more complete protection against the risks workers and families face in today’s economy.

Social Security’s promises remain sound, which is, in part, why the program has remained incredibly popular. The task now is to modernize the financing rules and the economy that supports them so that we can build a program that provides even greater security for the generations that follow.