Actuarial Thoughts on Social Security Reform: Looking at Many (but not all) Options

This is mainly a wonky look at trade-offs in Social Security reforms — some of the changes that can be made: payroll tax rates, maximum salary amount to be taxed, salary base for benefit credits, weights in the benefit formula — but at the highest levels, the trade-offs to be made in increasing taxes and in decreasing (or even increasing) benefits. Links are below to the American Academy of Actuaries, UPenn’s Penn Wharton Budget Model applied to Social Security reform, Andrew Biggs’s commentary using the Wharton model, and a recent Congressional hearing on the matter. Episode Links American Academy of Actuaries Social Security Challenge! - try out different options to close the gap in Social Security sustainability in funding March 2026: Reforming Social Security Sooner Rather Than Later Key Points • Social Security’s combined trust fund reserves are projected to be depleted around 2034, when its income would be able to pay only about 80% of the benefits scheduled for its anticipated 81 million beneficiaries. • It is important that Congress immediately focus on this issue; delay narrows the viable options to those that rely on significant tax increases. If Congress does not act by 2034, we will be faced with: – An automatic 20% cut in benefits for those already receiving benefits, – An immediate increase in Social Security taxes of almost 25%, or – Some combination of benefit reductions and tax increases. • It is too late for benefit reductions on new beneficiaries to have much impact in avoiding the upcoming depletion. August 2026: Comments to Senate Committee on Finance on Social Security Solvency Highlights from the 2026 Social Security Trustees Report: One-Pager Placemat Congress U.S. Senate Committee on Finance **5 Aug 2026:** Exploring Process Approaches for Addressing Social Security Solvency \[video at link — starts at about 21 minutes in, btw] Member statements: Crapo Statement at Hearing on Process Approaches for Addressing Social Security Solvency “For decades, the Social Security Board of Trustees has recommended that Congress act quickly to address the program’s long-term financial challenges. According to the Trustees’ latest projections, the Old-Age and Survivor’s Insurance Trust Fund will be exhausted in late 2032. If Congress fails to act before then, incoming program revenues will be sufficient to pay only 78 percent of promised benefits. “Congress has a responsibility to protect and strengthen Social Security for current beneficiaries and future generations. The longer we wait, the more difficult this challenge will become. “The last comprehensive effort to improve Social Security’s solvency took place over 40 years ago and culminated in the Social Security Amendments of 1983. Those reforms were preceded by high-level bipartisan negotiations, informed and facilitated by the work of the National Commission on Social Security Reform, or what was known as the ‘Greenspan Commission.’ That process demonstrated the value of creating a forum where policymakers could work through difficult issues and build consensus on a bipartisan basis. “More than two decades later, I participated in another bipartisan effort to develop recommendations to address our nation’s long-term fiscal challenges, along with Senator Dick Durbin, the Democratic co-author of one of the process bills that will be discussed today. As part of its work, the National Commission on Fiscal Responsibility and Reform, often referred to as the Bowles Simpson Commission, developed a bipartisan Social Security solvency plan. While the Commission’s recommendations ultimately did not receive the support necessary to move forward, its work has informed subsequent Social Security solvency discussions. “As Social Security approaches a pivotal moment, Members of Congress have proposed a variety of process reforms designed to facilitate bipartisan discussions and help develop lasting solutions. Today’s hearing will examine those approaches and consider what lessons can be drawn from past efforts. Wyden Warns Social Security Commission is Fast Track for Gutting Benefits The Trust Fund will be depleted before the end of the next presidential administration. Today Republican members of this panel will claim they have the solution: an unaccountable “commission” that will rubber stamp benefit cuts like increasing the retirement age. Every time Republicans get their hands on these sorts of ideas for Social Security, life gets worse for older people that count on it to get by. Thanks to Trump and the “Big Beautiful Bill,” the crisis is coming even faster, in 2032 instead of 2033. Senators elected this fall will be in office when Social Security becomes insolvent. Republicans started this fire, and now they are claiming they are the only ones who can put it out. The consequences of insolvency are severe: Americans who paid into Social Security out of every paycheck during their working years will no longer receive their full benefits. 1 in 4 seniors rely on their earned Social Security benefits for virtually all of their income. That number is even higher for people receiving disability benefits or kids who lost a parent. Trump and his MAGA allies gave huge tax breaks to billionaires and massive corporations last year, and that bill plundered Social Security to the tune of $168 billion. Don’t take it from me, that number comes from the Social Security actuary’s office itself. Here’s my bottom line: I want to work on a bipartisan basis to fix this problem and protect everyday retirees from missing out on their earned benefits in a little more than six years. We can do that by updating Social Security to reflect the economy of America today and ask billionaires to pay their fair share through the payroll and income tax. That’s it. I wish the Finance Committee was here to have that substantive debate. Instead, the concept being discussed today would act as a shortcut for Republicans to carry out their long sought goal of slashing Social Security benefits for retirees and raising taxes for the middle class. Colleagues, in my view, supporting a scheme like that would be a dereliction of duty for any member of Congress. This is the work we were sent to Congress to undertake. Handing off that responsibility to someone else is passing the buck. In the words of basketball great Allen Iverson, and I quote, “We’re talking about practice. Not a game. We’re talking about practice.” Instead of “talking about talking,” this body should get to work on finding a resolution to the Social Security solvency challenge and having that debate in public view. Democrats on this committee have put forward their ideas. Through our plans, Social Security can be secured indefinitely into the future without a single dime cut to a current or future retiree. That means no raising the retirement age, no cost-of-living haircuts, and no means-testing benefits. All we need to do is require billionaires, who have seen their wealth skyrocket to over $9 trillion this year while working people struggle with their grocery bills, to pay their fair share. Andrew Biggs These are from his Substack: **Little Known Facts:** The two charts any Social Security reformer should understand **Let me give the charts before the explanation(s):** Penn Wharton Analysis Andrew Biggs is using the Penn Wharton Budget Model: Seven Social Security Reform Packages: Effects on Growth and Generations This is from 21 Sept 2026. Only Package F is keeping the tax rates the same in the Penn Wharton analysis. STUMP - Meep on public finance, pensions, mortality and more is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. Get full access to STUMP - Meep on public finance, pensions, mortality and more at marypatcampbell.substack.com/subscribe