Selling Lies: The Attack on Social Security

“President Trump has made absolutely clear that he will not cut one penny from Medicare or Social Security.” Those were the words of the 2024 Republican presidential platform. Candidate Donald Trump repeated that promise over and over again on the campaign trail. 

Nonetheless, upon taking office President Trump appointed Elon Musk, who said “Social Security is the biggest Ponzi scheme of all time,” to head up his Department of Government Efficiency (DOGE). When asked in a February 2024 press conference if there were limits to Musk’s mandate to combat fraud and abuse in government spending, Trump responded, “We're not going to touch Social Security other than to make it stronger.”   

And then, at the end of February 2025, the Social Security Administration announced that it would cut its workforce by 12%—from 57,000 to 50,000. And its staffing levels were already at its lowest level in this century. The DOGE staffing cuts led to longer wait times, especially for disability claimants, and in February and March 2025 applications for disabilities benefits were down 20% compared to the same period in 2024.  

A Lean Operation That Works

Social Security is already a lean operation, as Brookings Institution authors Gopi Shah Goda and Lily Nevo put it. Just 0.5% of Social Security Administration spending goes toward administering the program, while 99.5% of its spending goes directly to beneficiaries. By contrast, a recent National Bureau of Economic Research studyestimates that 65 year olds who purchase annuity contracts (which provide guaranteed payments) from insurance companies typically receive only about 92 cents back for every dollar they pay in premiums.

Social Security is also reliable. In its 90-year history the Social Security Administration has never missed a payment. Their payments are the chief source of income for three-fifths of U.S. retirees, lifting millions of seniors out of poverty. Without Social Security payments the poverty rate for seniors would be four times higher.

Social Security operates largely on a pay-as-you-go basis, taxing the wages of current workers to pay for the retirement benefits of current retirees. In that way, each generation depends on the next generation of workers to pay for its retirement.

Social Security benefits are progressive, replacing nearly half of the prior earnings of  low-income retirees and about a third of the prior earnings of high-income retirees. But the payroll taxes that finance Social Security are quite regressive. They take a much larger share of income from poor and moderate-income workers than from better paid workers. In addition, wages above its cap on the maximum amount of taxable earnings, which is currently set at $184,500, go untaxed.

The Math Doesn’t Have to Be “Brutal”

In June, the Social Security Board of Trustees released its 2025 annual report. It found that by 2034, if no changes were made, the Social Security Trust Fund would not be able make all of its promised benefits payments, and that the shortfall would grow over time. Over the next 75 years, the shortfall would add up to 3.82% of taxable payroll, or $25.1 trillion.   

The pressure to fix the projected shortfall in Social Security funding has only mounted in 2026. On January 2, a front page story in the Wall Street Journal warned that, “The math is brutal for the program.” And it sure looked brutal. In 1965 there were 4.0 workers paying payroll taxes for every Social Security retiree. By 2024 there were 2.7 workers, and the number would fall to 2.3 in 2035, and 2.0 by 2080, according to the trustees' projections.

But the math of the Social Security program is neither preordained nor insurmountable. To begin with, the trustees have issued similar warnings for more than three decades. And their warning is not that Social Security will go bankrupt, but that it faces a crisis still eight years away—a system that would continue paying 81% of its retirement benefits in 2034, while a disaster for seniors, is still a system that can be fixed.

In addition, the Social Security trustees don’t have a crystal ball that allows them to peer into the future of the program. Rather, they make their projections about the future of the system, which they readily admit involve “significant uncertainty.” In their report, the trustees emphasize their intermediate projection, “their best estimate,” which falls somewhere between their more pessimistic high-cost and more optimistic low-cost projections.

More Equitable Economic Policies Would Reduce the Trust Fund Shortfall

But the panic spreaders take the trustees’ intermediate projections as a given. They also fail to examine the impact of ever-increasing economic inequality, wage stagnation, and draconian U.S. immigration policies on the imbalance between the trust fund and its future obligations.

The president promised  to “weed out” illegal immigrants who shouldn’t be on Social Security or “even in the country.” But slowing immigration and deportations would add to Social Security's projected deficit, not reduce it. From 2019 to 2024, foreign-born workers accounted for 88.3% of the increase of the U.S. workforce, according to the National Foundation for American Policy. Not surprisingly, the trustees’ 2025 report found that accepting their “low cost estimate,” which allowed for higher levels of net immigration (including documented and undocumented immigration), would reduce the projected long-term shortfall in Social Security funding from 3.82% to 3.40% of taxable payroll, an 11% drop. 

Not only does a larger workforce increase payroll tax revenues, but higher wages do as well. Yet U.S. wages have grown much more slowly than earlier in the post-World War II period. From 1960 to 1970, the average wages of workers covered by Social Security increased 1.75% a year, after correcting for inflation. But since then (from 1970 to 2024) the real wages of covered workers have increased just 0.82%.

With faster real wage growth, Social Security’s long-term funding shortfall would shrink. Using the trustees’ “low cost estimate” of faster real wage growth of 1.73% a year (which is still slower than the wage growth during the 1960s) would reduce the projected shortfall in Social Security’s long-term funding from 3.82% to 2.64% of taxable payroll, a 31% drop.

As real wage growth has stagnated, wage inequality has increased. And a larger and larger share of the wages of the highest earners have escaped payroll taxation. In 1983, some 90% of wages fell below the cap. But with the increased concentration of wages among the highest-paid that number has fallen to just 83% in recent years.

The Social Security Administration’s chief actuary estimates that eliminating the cap on taxable earnings would cut the projected shortfall in Social Security funding somewhere between 48% to 67% (depending on whether the benefits for higher wage earners increase with their payroll tax payments).

There is a clear precedent for eliminating the cap. A similar cap used to apply to funding for Medicare, but a 1993 tax bill removed the cap and now every dollar of wage income is taxed to help fund the Medicare system. And scrapping the cap has quite a following.

Better Choices 

Taken together, restoring the inflow of immigrant workers, increasing the bargaining power of workers and reviving wage growth, and eliminating the cap on payroll taxes would provide 90% to 109% of the funding necessary to close the gap in Social Security’s long-term funding over the next 75 years, as reported by the trustees. 

The lessons here are clear: Political choices, not economic forces alone, have shaped the future prospects of the Social Security system. And working to bring about more equitable economic policies will improve the future prospects, not just of Social Security, but of all of us.

John Miller is professor emeritus of economics at Wheaton College and a member of the Dollars & Sense collective.