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Benefit Cuts of 23%—and 4 Other Things to Know About the Government’s New Social Security Projections

Social Security Benefit Cuts

A new Congressional Budget Office report projects a dire outlook for Social Security. Without action, huge benefit cuts for recipients begin in 2033—or massive tax increases for working Americans need to begin immediately. (Photo: Zinkevych, iStock/Getty Images)

A new Congressional Budget Office report projects an even more dire outlook for Social Security’s future than was previously calculated. Without action to fix the situation, huge benefit cuts for recipients will begin in 2033. And preventing those cuts will require massive tax increases for working Americans beginning immediately.

In contrast to the Social Security trustees’ own projections, the CBO estimates that Social Security’s combined retirement and disability insurance programs will run out of money two years earlier—2033 instead of 2035—and that the tax increases necessary to fund scheduled benefits are higher than the Social Security trustees projected—4.9 percentage points instead of 3.24.

The divergence comes from different economic and demographic assumptions—of which the CBO’s are significantly more realistic.

For example, the CBO uses a lower fertility rate that is more in line with current trends while the trustees assumed fertility rates will significantly increase. The fertility rate is the total number of births in a year per 1,000 women of reproductive age.

The trustees also assumed only 4.5% price inflation in 2022 and 2.3% in 2023 while the CBO report accounted for the recent 8.7% cost-of-living increase for 2023.

Under either set of projections, Social Security’s future is not secure. The program is running out of time and money, recent increases in government spending and debt have crowded out options for reform, and virtually all Americans stand to lose from policymakers’ inaction.  

Americans deserve to know the truth about Social Security’s future so that they can assess the best options for reform. The CBO report reveals five hard truths:

The CBO report reveals a bleak future for the majority of Americans who have been forced to pay into Social Security’s broken system.

While there’s no way to undo past excesses that have made Social Security both popular and bankrupt, the good news is that there’s a way to protect the most vulnerable Americans while improving Social Security for current and future generations. Heritage’s Budget Blueprint provides an entire plan of reforms.

For years, politicians have turned a blind eye to Social Security’s insolvency—even as its deficits have surged to $20.4 trillion, or $157,000 per household. But policymakers should embrace Social Security reform as a way to benefit all Americans.

By focusing the program on its purpose of providing financial security and protecting seniors from poverty, modernizing the program to today’s economy and labor market, and allowing workers the option of using part of their Social Security taxes to build wealth in personal accounts that they own, it’s possible to make more people—and the entire economy—better off.

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