Social Security’s Financial Outlook: The 2023 Update in Perspective

The 2023 Trustees Report slightly increased the 75-year deficit to 3.61 percent of taxable payroll, compared to 3.42 percent in 2022, and moved up depletion of the Old-Age and Survivors Insurance (OASI) trust fund assets from 2034 to 2033. Yes, the Disability Insurance (DI) trust fund has enough to pay benefits for the full 75-year period and the date of exhaustion for the combined OASDI trust funds is 2034. But combining the two systems would require a change in the law; hence, under current law the relevant date is 2033 – a decade from now. The fact that in 2033 Social Security would be able to pay only 77 percent of scheduled benefits should focus our collective minds. Thinking of ways to restore balance to the program is not hard; the Social Security Actuaries publish an annual booklet with more than a hundred possible benefits cuts or revenue increases. Indeed, a lot can be said for maintaining a self-financed program. And if the cost of currently scheduled benefits simply exceeds what today’s workers are paying into the system, the traditional proposals to reduce benefits or raise payroll taxes would be most relevant. However, the cause of the shortfall lies elsewhere. Specifically, the program’s “pay-as-you-go†financing – with the exception of the recent build-up and spend-down of the current modest trust fund – makes the program look expensive. This financing approach is the result of a policy decision in the late 1930s to pay benefits far in excess of contributions for the early cohorts of workers. The decision essentially gave away the trust fund that would have accumulated and, importantly, gave away the interest on those contributions. The “Missing Trust Fund†provides a strong justification for an infusion of general revenues into the program. This brief updates the numbers for 2023 and emphasizes the need to act to avoid draconian benefit cuts. To that end, it also lays out the case for spreading across all taxpayers – not just today’s workers – the burden associated with giving away the trust fund. If policymakers accepted this rationale for a general revenue infusion, the pathway to eliminating OASI’s 75-year deficit would be much easier. Fixing Social Security sooner rather than later would distribute the burden more equitably across cohorts, restore confidence in the nation’s major retirement program, and give people time to adjust to needed changes.