Twenty-nine years ago, I published an article in Culture Wars (July-August 1996), “Contracepting Social Security,” which pointed out that falling birth rates would eventually doom the program. In the years since, public awareness of the actuarial unsoundness of the Social Security promises in the U.S. has been increasing as the program moves closer and closer to bankruptcy.
In my original article, I pointed out that the widespread practice of contraception and abortion had reduced U.S. fertility rates from 3.4 children per female in 1963 to 1.8 children per female in the mid 1970’s. With fewer workers paying into the system, and a huge Boomer retirement pool coming of age beginning in 2012, the system’s Ponzi-style financing scheme was simply not financially solvent in the long-run.
As the years have passed, the problem has gotten worse. Social Security is not only showing its age—ninety—it is in what can only be termed a demographic death spiral. The 2024 report from the Trustees of the Old Age and Survivors Insurance and Federal Disability Insurance Trust (OASDI) funds tells a dismal tale:
“At the end of 2023, the OASDI program was providing benefit payments to about 67 million people: 53 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers. During the year, an estimated 183 million people had earnings covered by Social Security and paid payroll taxes on those earnings.
The total cost of the program in 2023 was $1,392 billion. Total income was $1,351 billion, which consisted of $1,284 billion in non-interest income and $67 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities declined from $2,830 billion at the beginning of the year to $2,788 billion at the end of the year.” (italics added)
The Old Age and Survivors part of the system, for retirement pay and survivor benefits, is supposed to be financed “Ponzi style.” That is to say, it’s a “pay as you go” system. Enough money is supposed to be collected from insured workers and their employers to meet the payouts to retirees and beneficiaries. The problem is that the payout for 2023 was $1,392 billion, while the employer/employee collections amounted to only $1,284 billion. That’s classified as “non-interest income” in the report. The shortfall was $108 billion. Where did that money come from?
The report shows that $67 billion was paid by the U.S. Treasury to the Trust fund as interest on the Trust Fund securities, which are all Treasury notes. The fund began the year with $2.8 trillion, a significant part of the U.S. National Debt. The fund cashed in $40 billion in securities to make up the difference during 2023.
All of this is so much accounting smoke and mirrors.
Actually, the $67 billion in interest and $40 billion in surrendered Treasury securities was paid by running up the National Debt by $107 billion. In 2023 the U.S. National Debt increased by $2.239 trillion, October to October.
Right now, nearly 8% of every Social Security check is being financed “by the printing press.” Without a drastic reduction in federal spending, or a reduction in benefits, the imbalance will only get worse and worse, until finally the Trust Fund runs out of securities to cash in.
Considered separately from the small disability fund, the Old Age and Survivors fund securities will last only eight more years. By 2033 the securities will have evaporated, and the program will be bankrupt.
The latest Trustees Report even admits this. It points out that after 2033, under current assumptions of demographics and economics, benefits will either have to be slashed, taxes increased, or both.
Strong economic growth during the years to come would help to postpone the problem, but would not solve it entirely. If American birth rates remain low, Social Security as currently constituted is unsustainable.
The only way to keep Social Security benefits and taxes at their current levels over the long term, as I have written in the PRI Review in the past, is to significantly raise the birth rate from its current 1.62 children per women over her reproductive lifetime to over 2.5.
The Trump administration intends to put robust pro-natal policies in place, but it remains to be seen whether America can once again welcome children in sufficient numbers to guarantee the future not only of Social Security, but of America itself.
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Deacon W. Patrick Cunningham received his B.A. and M.A. in theology from St. Mary’s University of Texas. He also earned an M.A. in education from Stanford University. He has taught business ethics at Incarnate Word College and is a Research Scientist in Residence at St. Mary’s University.
