There is no Social Security crisis

Last week, most of the major news outlets ran the perennial story about how the Social Security fund is set to run out of money—now by 2032—and that benefits will have to be cut substantially unless Congress acts.

Okay, so act.

It’s stupid that we are being made to worry about a problem that’s solvable, a manufactured crisis that conservative politicians are already seizing upon to claim we have no choice but to slash entitlements—here’s House Speaker Johnson eyeing them. And Social Security benefits are literally entitlements, as in, we are entitled to them because we’ve been paying for them via payroll taxes our entire working lives.

Now, it’s true that, for various reasons—an aging population; a Trumpian decline in immigration (workers who aren’t citizens pay into the system but don’t take money out); and the fact that high earners pay a relatively small portion of their incomes in payroll taxes, because the SSI tax only applies to the first $184,500 of a person’s earnings—the Social Security fund’s revenues will soon be insufficient to cover outgoing payments. A February analysis from the Urban Institute forecasts a gap of about $2.8 trillion over the five-year period from 2032 to 2036.

That’s a lot of money, sure. But there are other massive government expenditures we can do without. The nonprofit Bipartisan Policy Center, based on scores from the Congressional Budget Office and the nonpartisan Joint Committee on Taxation (JCT), reported that Trump’s One Big Beautiful bill will cost the federal government $4.5 trillion in lost tax revenues over a decade—even as it slashes $1.4 trillion from programs low-income Americans rely on, namely Medicaid, SNAP (food stamps), and federal student loans.

President Donald Trump—who just expended American blood and treasure on a war in the Middle East that accomplished nothing except, perhaps, to leave Iran’s horrible regime in a stronger position than before—is demanding a roughly 50 percent increase (to $1.5 trillion) in the US military budget, which had already exceeded the combined military budgets of the next seven countries, including China and Russia.

Our entirely predictable Social Security “crisis,” to put it bluntly, is a political choice made by a pay-to-play government that under President Donald Trump has become baldly transactional. Congress could close the gap tomorrow if lawmakers would get their priorities straight and start acting in the interests of the broader public and not just the richest 10 percent.

You actually can learn a lot about those priorities from a fun JCT document that lists what every federal tax break costs the US government. The latest version—JCX-45-25—covers the five years from 2025-2029, and it helps show how Congress could find the money to close the Social Security gap.

There are many smaller line items that it would take an accountant to explain, and that add up massively, but I’ll just focus on some bigger-ticket stuff, tax breaks worth more than $100 billion.

To help fill the Social Security gap, for instance, Congress could kill the “step-up in basis” rule. This abomination allows wealthy heirs to inherit assets like stock from their parents at the current market value, thereby erasing the substantial tax bill the estate would have owed on investment profits accumulated over a lifetime. Among America’s rich, those “unrealized” investment gains represent the lion’s share of their income, and the step-up rule lets their families escape taxation altogether. This is costing the government $379.3 billion over five years, according to the JCT.

The $500,000 in tax-free gains the government grants a couple when they sell their primary residence, combined with a combined $750,000 mortgage interest deduction for first and second homes, will run the government more than $574 billion. This one isn’t just for super-rich people, though Congress could at least scrap the second home allowance.

But what about the “deduction for qualified business income”? Sounds boring—and that’s how they get you. Passed by Congress in 2017 as part of the first round of Trump tax cuts for the rich, it’s a giveaway that overwhelmingly benefits the richest 1 percent of the population. Kill it and we’d get back $390 billion to pay for Social Security.

Want to really piss off the oligarchs? Simply increase the tax rate they pay on investment profits so it matches the rate workers pay on their wages. That’ll free up $1.25 trillion!

We’re up to more than $2 trillion now. So, can you guess which bundle of tax breaks costs the US government more than anything else?

Ironically, that would be subsidies for retirement savings. We’re talking about tax deferrals on retirement contributions or the exclusion of capital gains from taxation for accounts like 401(k)s and 403(b)s, Keogh plans, and individual retirement accounts (IRAs and Roth IRAs).

All told, these breaks will cost the treasury a whopping $2.3 trillion for 2025-2029—that’s almost as much as the Social Security gap.

Now, some of that money is well spent. Helping working people save for retirement is good—and Social Security more or less does that for everyone. Helping people save and invest more for retirement on the side is also a desirable benefit. But it’s a benefit that gets bigger the more money you have. Affluent families are not only way more likely to have one or more retirement accounts—they also have way more money in them. (Peter Thiel reportedly amassed more than $5 billion in his Roth IRA, a type of tax-advantaged account supposedly created for middle-class workers.)

The Fed’s latest Survey of Consumer Finances, from 2022, shows that less than half (about 43 percent) of families from the least-affluent three-quarters of the population had at least one retirement account, but more than 87 percent of families in the top quartile had one. The rate for families in the richest 10 percent was 91.3 percent.

Congress has since passed legislation requiring companies to create retirement accounts for all employees (opt-out style), but simply having a retirement account doesn’t mean you can afford to contribute meaningfully to it. That helps explain the huge discrepancies in savings even among families who actually have a retirement account.

Here’s a chart that ran with an earlier story I wrote about our flawed retirement system. The yellow line represents average 2019 retirement savings for households in the top 10 percent. The green line represents the next 15 percent down. The bottom line is everybody else.

Clearly, the rich get much more out of these subsidies than the poor. According to the Fed’s latest numbers, Americans held $23.8 trillion in tax-advantaged retirement accounts all told. By my calculations, here’s the average household retirement savings by wealth tier:

Bottom 25 percent: $2,548

Second 25 percent: $15,976

Third 25 percent: $66,809

Top 25 percent: $640,771

Top 10 percent: $1,183,877

Top 5 percent: $1,546,050 (minimum)

That richest 5 percent of households held nearly half the nation’s total retirement savings in 2022, $10.15 trillion—and even more now.

Congress could cap retirement savings at, say $2 million per household. After hitting the cap, families could make no more tax-free contributions and any further investment growth in their accounts would be subject to taxation.

Such caps, though more modest, were proposed under President Barack Obama and later under President Joe Biden, but Congress refused to pass them—maybe because too many lawmakers feel beholden to rich investors, and to the Wall Street banks and money managers who profit from hosting wealthy clients’ swollen investment accounts.

This isn’t rocket science. Just tell your constituents that it’s un-American for families with millions of dollars in savings to be taking handouts from the government. Boom! And then use the savings to shore up Social Security—which benefits everyone.

At the very least, let’s not hear any more talk of a crisis. This is a choice.