Is Social Security An “Entitlement,” And Is It Really Going Broke?

Understanding the Bedrock of American Retirement

Social Security represents one of America’s most enduring and consequential social programs, serving as a financial foundation for millions of Americans in their retirement years. But what exactly is Social Security, how did it come to be, and what challenges does it face in our current political and economic landscape?

Social Security emerged from the devastation of the Great Depression, when poverty among the elderly reached crisis levels. Prior to its establishment, retirement security was largely non-existent for most Americans. When President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, he created what would become one of the most successful anti-poverty programs in American history. Initially designed to provide income for retired workers aged 65 and older, the program expanded over decades to include survivor benefits, disability insurance, and Medicare health coverage.¹

The program operates on a beautifully simple principle: current workers contribute through payroll taxes to fund benefits for current retirees, with the understanding that future generations will do the same for them when they retire. This “pay-as-you-go” system creates an intergenerational compact that has supported American seniors for nearly nine decades.

Social Security Today: By the Numbers

The scale and impact of Social Security in contemporary America can hardly be overstated:

• 69.9 million Americans received Social Security benefits in 2023, including 51.4 million retired workers and their dependents.²
• The average monthly retirement benefit stands at $1,907 as of early 2024.³
• For approximately 37% of men and 42% of women, Social Security represents at least half of their income in retirement.⁴
• Perhaps most strikingly, Social Security keeps over 22 million Americans above the poverty line, including more than 16 million seniors.⁵

Without Social Security, the poverty rate among Americans aged 65 and older would skyrocket from about 10% to nearly 40%. For millions of Americans, these monthly checks aren’t supplemental income—they’re survival income.

The Funding Challenge

Despite its vital importance, Social Security faces significant long-term funding challenges. The program is primarily financed through dedicated payroll taxes (the FICA tax that appears on your paycheck), with additional revenue coming from taxation of benefits and interest on the Social Security Trust Fund reserves.

According to the 2023 Social Security Trustees Report, the combined trust funds that support the program are projected to be depleted by 2034 if no changes are made. This doesn’t mean Social Security would disappear—ongoing payroll taxes would still cover about 79% of promised benefits—but it would necessitate an across-the-board benefit cut of about 21% for all recipients unless Congress takes action.⁶

This looming shortfall stems from demographic shifts rather than fiscal mismanagement. As baby boomers retire and Americans live longer, the ratio of workers paying into the system versus beneficiaries drawing from it has shifted dramatically. In 1960, there were 5.1 workers for each beneficiary; today, that ratio is closer to 2.7 to 1, and projected to fall to 2.3 to 1 by 2035.⁷

Political Perspectives: A Study in Contrasts

Social Security has historically enjoyed broad bipartisan support, yet Democrats and Republicans often diverge significantly in their approaches to addressing its long-term solvency.

The Democratic Position

Democrats generally focus on protecting and expanding benefits while addressing funding shortfalls primarily through revenue increases rather than benefit reductions. Key proposals from Democratic lawmakers and the Biden administration have included:

• Raising or eliminating the payroll tax cap: Currently, the Social Security payroll tax only applies to earnings up to $168,600 (2024 figure). Income above this threshold isn’t taxed for Social Security purposes. Many Democrats propose either raising this cap significantly or eliminating it entirely, which would increase contributions from higher-income earners.⁸
• Expanding benefits: President Biden’s campaign platform included proposals to increase benefits for vulnerable seniors, including those who have been receiving benefits for 20+ years and surviving spouses who often face steep benefit reductions.
• Changing the COLA formula: Moving to the Consumer Price Index for the Elderly (CPI-E), which better reflects seniors’ spending patterns, especially on healthcare.

President Biden has repeatedly emphasized his commitment to Social Security, stating at his 2023 State of the Union address: “Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset… I’m not saying it’s the majority… But it’s being proposed by individuals. I’m not going to be quiet about it.”⁹

The Republican Position

Republican proposals generally focus more on long-term program restructuring and cost containment, though positions vary widely within the party:

• Raising the retirement age: Some Republicans have proposed gradually increasing the full retirement age beyond the current 67 (for those born in 1960 or later) to account for increased longevity.
• Means-testing benefits: Proposals to reduce benefits for higher-income retirees.
• Modified inflation adjustments: Using the “chained CPI” for cost-of-living adjustments, which generally rises more slowly than the current measure and would result in smaller benefit increases over time.

Former President Trump has repeatedly stated his intention to protect Social Security, claiming in campaign speeches that he would not cut the program. However, during his administration, his budget proposals included reductions to Social Security Disability Insurance and, in a 2020 interview, he expressed interest in “looking at” entitlement cuts.¹⁰

More recently, Senator Rick Scott’s “Rescue America” plan proposed sunsetting all federal legislation every five years, which would include Social Security—requiring Congress to actively reauthorize the program. After significant backlash, Scott modified his proposal to exclude Social Security and Medicare.¹¹

Myths and Misconceptions

Few government programs generate as many misunderstandings as Social Security. Let’s address some persistent myths:

Myth 1: “Social Security is an entitlement handout”

Reality: Social Security is not a welfare program but an earned benefit that workers pay into throughout their careers. The average worker contributes 6.2% of their paycheck to Social Security, with employers matching that amount. Self-employed individuals pay the full 12.4%. By the time they retire, most beneficiaries have contributed substantially to the system, often tens of thousands of dollars over their working lives.

Myth 2: “The government has raided the Social Security Trust Fund”

Reality: The Trust Fund hasn’t been “stolen” or “raided” in the sense many people believe. By law, any surplus Social Security funds must be invested in special Treasury securities, which are backed by the full faith and credit of the U.S. government. This money is indeed used for general government operations, but in exchange, the Trust Fund receives interest-bearing Treasury bonds, which represent legitimate government debt obligations.

Myth 3: “Social Security is going bankrupt/won’t be there for younger generations”

Reality: Even if the Trust Funds are depleted as projected, Social Security won’t disappear. Ongoing payroll taxes would still fund about 79% of scheduled benefits. The program faces a funding shortfall, not insolvency. With reasonable adjustments, the program can be preserved for future generations.

Myth 4: “Social Security adds to the federal deficit”

Reality: Social Security has its own dedicated funding source and Trust Funds, separate from the general federal budget. By law, it cannot contribute to the federal deficit because it can only pay benefits from its designated revenue sources and accumulated Trust Fund reserves.

The Human Impact of Potential Cuts

What would significant cuts to Social Security mean for real Americans? The consequences would be profound and far-reaching:

For Ellen in Minneapolis, a 72-year-old widow receiving $1,800 monthly in Social Security benefits, a 21% cut would mean $378 less each month—forcing impossible choices between medications, heating, and food. For millions like Ellen, Social Security isn’t extra spending money; it’s essential income that keeps the lights on and food on the table.

Beyond individual hardship, substantial Social Security cuts would ripple through the entire economy. Seniors spend their benefits locally on essential goods and services. The National Committee to Preserve Social Security and Medicare estimates that Social Security benefits generate about $1.4 trillion in economic activity and support approximately 9.2 million jobs.¹²

Rural communities would be particularly hard hit, as they have higher percentages of residents receiving Social Security and fewer alternative resources. In some rural counties, Social Security represents more than 20% of all local income.¹³

Solutions for Long-Term Solvency

The good news is that Social Security’s funding challenges are manageable with thoughtful policy adjustments. Here are several approaches that could help ensure the program’s long-term sustainability:

Revenue Enhancements

• Adjusting the payroll tax cap: Gradually increasing or eliminating the cap on earnings subject to Social Security taxes would significantly reduce the long-term funding gap. The Congressional Research Service estimates that eliminating the cap entirely would extend the Trust Fund’s solvency by about 35 years.¹⁴
• Modest payroll tax increases: A gradual increase of 1.1 percentage points each for employees and employers would ensure full benefits for the next 75 years, according to the Social Security Administration’s Chief Actuary.¹⁵
• Diversifying investment: Currently, the Trust Fund can only invest in special Treasury securities. Allowing a portion to be invested in a diversified portfolio of index funds could potentially generate higher returns, though this would introduce some market risk.

Benefit Adjustments

• Targeted benefit enhancements for vulnerable beneficiaries: Increasing minimum benefits for long-career, low-wage workers and improving survivor benefits could help those most dependent on Social Security.
• Progressive indexing: Adjusting the benefit formula to provide relatively higher benefits to lower-income workers while slowing the growth of benefits for higher earners.
• Adjusting the retirement age: Any increases would need to account for significant disparities in life expectancy based on income and occupation, potentially through exemptions for physically demanding jobs.

Finding Common Ground

Despite the partisan divide on Social Security reform, there are potential areas for bipartisan agreement:

1. Protection for current and near-retirees: Both parties generally agree that those already receiving benefits or nearing retirement should not face cuts.
2. Enhanced minimum benefits: There is some bipartisan support for strengthening the minimum benefit to ensure that long-career, low-wage workers can retire with dignity.
3. Improved widow(er) benefits: Proposals to prevent the steep drop in household income that surviving spouses often experience have garnered support across the political spectrum.

A Path Forward

Social Security represents one of America’s most successful social programs and embodies our collective commitment to ensuring that a lifetime of work leads to a dignified retirement. The challenges facing the program are substantial but solvable with political will and compromise.

The real question isn’t whether we can afford to preserve Social Security—it’s whether we can afford not to. For tens of millions of Americans, this program isn’t just another government initiative; it’s the foundation of their financial security in old age, disability, or following the loss of a family breadwinner.

The coming debate over Social Security’s future presents an opportunity to recommit to this fundamental promise while ensuring its sustainability for generations to come. By approaching this challenge with factual analysis rather than partisan rhetoric, we can work toward solutions that honor our obligations to seniors while securing the program for our children and grandchildren.

In a nation often divided, Social Security reminds us of our shared values and interconnected fates. The retirement security of our parents and grandparents—and eventually our own—depends on finding the political courage to address these challenges thoughtfully and fairly.