Social Security has 6 years left, cut benefits or raise taxes?

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Social Security is six years from insolvency. That’s not a projection buried in an actuarial footnote—it’s the opening finding of a new report from the Penn Wharton Budget Model (PWBM), released Thursday, which puts the program’s Old-Age and Survivors Insurance Trust Fund on track to run dry by 2032.?

And the fix lawmakers will likely reach for first—raising taxes—may be precisely the wrong move.

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For critics who argue the math in this analysis is cruel, though, he offered the perspective that the cruelest approach is likely the one on the books under current law, in which benefits would be cut immediately in just six years. This means a $2,500-$2,700 cut in benefits per year for a person retiring in seven years

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Under Social Security’s pay-as-you-go structure, today’s payroll taxes flow directly to today’s retirees—a transfer that carries the same economic drag as explicit Treasury borrowing but doesn’t show up on the federal balance sheet. PWBM estimates those implicit pay-as-you-go obligations are currently twice the size of the U.S.’s explicit national debt. If they were booked under standard accounting rules, America’s debt-to-GDP ratio would exceed 300%.?

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