Social Security's finances have improved slightly in the last year. But benefits are still facing an automatic cut in less than a decade unless Congress takes steps to prop up the program.

Social Security's finances have improved slightly in the last year. But benefits are still facing an automatic cut in less than a decade unless Congress takes steps to prop up the program. / Getty Images

Congress has less than a decade to fix Social Security before the popular program runs short of cash, threatening a sharp cut in benefits for nearly 60 million retirees and family members, according to a government report released Monday.

The report from Social Security trustees predicts the retirement program's trust fund will be exhausted in November of 2033. At that point, benefits would automatically be cut by 21%, unless lawmakers adopt changes before then.

There's some good news in the new forecast. Thanks to higher-than-expected worker productivity and a decline in expected disabilities, Social Security isn't burning through cash as fast as trustees predicted a year ago.

Still, the long-term demographic challenges haven't gone away. A growing number of baby boomers are collecting benefits, while there are fewer people in the workforce paying taxes for each retiree. Given today's low birthrates, that mismatch is not expected to change for decades, although a surge in immigration helps.

Proposed fixes

Congress could fix the problem by raising taxes that support Social Security, reducing retirement benefits, or some combination of the two. But a politically palatable solution has been elusive.

"When you see the two major candidates running for president tripping over themselves to promise what they won't do to fix the problem, you have to worry because those kinds of reforms really start at the top," says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The Biden administration has pledged not to touch Social Security benefits.

"Seniors spent a lifetime working to earn the benefits they receive," Treasury Secretary Janet Yellen, who leads the trustees, said in a statement. "We are committed to steps that would protect and strengthen these programs that Americans rely on for a secure retirement."

Congressional Democrats have proposed higher taxes on the wealthy to support Social Security. Congressional Republicans have balked at that, instead calling for reducing the benefit formula and raising the retirement age for younger workers.

"Those who want to cut Social Security couch it in affordability," says Nancy Altman, who heads the advocacy group Social Security Works. "But of course, there's no question we can afford it. It's really a question of values. And as polarized as we are, we're not polarized over this."

Altman is confident that lawmakers will find a solution before automatic cuts take effect.

"If they didn't act, not only would they all be voted out of office," she says, "they couldn't even remain in Washington. They'd be chased down the street."

But the clock is ticking and delay has already been costly.

"Every year the trustees warn us we have to make changes, and the sooner we make them, the better and easier it will be," says MacGuineas. "And every year we fail to make those changes."

Medicare and disability solvency

While Social Security's retirement program is in danger of running short of cash, a separate program that supports disabled people appears to be solvent for the long term, trustees said.

Medicare's finances have also improved somewhat in the last year, thanks to a strong economy and lower-than-expected spending. Still, the program, which provides health care for nearly 67 million people, is expected to face its own cash crunch in 2036.

Tags: Social Security  Medicare  payroll taxes  U.S. economy