Rutgers Law Expert Explains Social Security Funding Crisis
New projections warn that Social Security’s primary trust fund could be depleted within the next decade. If no action is taken by Congress, beneficiaries could face automatic, across-the-board reductions in payments. This raises urgent legal, economic, and policy questions about the sustainability of one of the nation’s most critical programs. To help unpack what these developments mean, we asked 10 questions to Distinguished Professor Jon Dubin, director of the Economic Justice and Public Benefits Clinic and author of five books on Social Security, including The Color of Social Security: Race, Retirement, Disability and Disparity (Cambridge University Press) set for release this month. The following Q&A explores what is at stake for millions of Americans who rely on Social Security.
The latest reporting warns that Social Security could face across-the-board benefit cuts in the coming years. Is it accurate to describe Social Security as “running out of money?”
No (and yes to some degree). No, because as long as Americans keep working--and 184.7 million Americans worked and paid into the social security trust fund through payroll deductions in the form of Federal Insurance Contribution Act (FICA) taxes in 2025--there will be money coming into the trust fund. Yes, in the sense that as early as sometime in 2032, the fund will only have sufficient resources to pay somewhere in the range of only 76-80% of benefits to social security beneficiaries.
How quickly would changes need to be implemented to avoid or minimize benefit cuts? What would happen, legally, if Congress takes no action before the projected depletion date?
In the absence of Congressional action in the next six years to solidify trust fund financing, social security recipients will suffer automatic 20-24% across-the-board reductions in benefits.
What would a reduction of roughly 20% in benefits mean for the average recipient’s monthly income and financial security?
More than half (52-56%) of social security beneficiaries derive 50% or more of their total income from social security and approximately a quarter (24-27%) garner 90% or more from these benefits. A 20-24% cut would be quite significant for most and devastating for at least a quarter of all recipients.
How might these cuts disproportionately affect low-income seniors, people with disabilities, women, or people of color?
It will hit Black and Latino/a recipients the hardest. The poverty rate for Black and Latino/a recipients is approximately twice that of white recipients and Black/Brown persons disproportionately possess less generational wealth, savings, pensions or 401(K)-type plans to fall back upon. Most all low-income recipients will suffer material hardships and women will experience greater than average hardship with poverty rates about 2% higher than male recipients. Because a somewhat greater percentage of persons with disabilities and receiving social security disability insurance benefits live in poverty than social security old age or other recipients, they too will suffer somewhat greater hardship. All recipients living in poverty, near poverty, or falling to those levels due to loss of crucial social security benefits will likely experience privations such as inability to pay rent or other housing or utility expenses and more limited access to food, clothing, and uncovered medical treatment and expenses.
Who would be most affected by potential benefit cuts—current retirees, future beneficiaries, or both?
Both will be affected with reduced benefits if Congress fails to act and the degree of hardships will vary based on their individual circumstances including their baseline benefit levels and access to alternative wealth/income.
Rutgers Law alumna Elizabeth Warren, a democratic senator, co-authored a New York Times op-ed with Republican Senator Bernie Moreno proposing that a common-sense solution would be to lift the Social Security payroll tax cap of $184,500 so wealthier earners contribute the same percentage of their income as do lower wage workers. Why hasn’t this been done yet?
There are a few likely reasons for inaction. A significant portion of Congressional and present Trump Administration officials have expressed general opposition (or reluctance) to enact measures that increase tax burdens on America’s wealthier persons. Indeed, the Trump Administration (and several leaders of the present governing Republican majorities in both chambers of Congress) tout the large tax cuts inuring mostly to wealthy Americans in last year’s “One Big Beautiful Bill Act (OBBBA) of 2025” as their signature achievement since the start of the second Trump presidency. While several proposals for solidifying the trust fund, including some predicated principally around lifting the social security payroll tax cap, emerged during the Obama and Biden administrations, the lack of perceived temporal urgency (and the unpopularity of either raising taxes or cutting benefits in some form or both), along with other initiatives deemed more urgent, likely contributed to proverbially “kicking the can down the road” until closer to 2032.
Other proposed reforms include raising the retirement age, reducing benefit amounts, and increasing payroll taxes. How do these differ in impact? What kinds of reforms are most realistic?
Raising revenues, if done through lifting or raising the payroll tax cap (or commencing social security taxes on investment and business pass-through income) will have the greatest impact on workers earning greater than $184,500/year and those with investment and business pass-through income. Raising the tax rate will affect all but will be somewhat regressive since flat rate tax increases take a greater percentage of income, and needed income, from lower earners. Cutting benefits, either through raising the retirement age or reducing benefits by some percentage, will have the greatest impact on those most in need of the benefits based on financial circumstances. Raising the retirement age beyond the present age 67 will particularly harm Black workers since life expectancy is more than four years less for Blacks than all other Americans (age 74 vs 78.4), and the disparity is even more pronounced for Black Men (age 70). For example, if the retirement age were raised to 70 as some in Congress have proposed, the average Black man waiting for full retirement benefits might never receive a check, or be encouraged to take early retirement with significantly reduced benefits at/after age 62.
What should individuals—especially younger workers or those nearing retirement—be thinking about or doing right now?
All concerned should urge their congressional representatives to take action as soon as possible to pass legislation to solidify the trust fund. While there are two ways lawmakers can do so--by increasing revenues into the trust fund, reducing benefits paid out from the fund, or some combination of both, in public polling--a significant majority of voters (republican, democrat and independent alike) prefer solutions that raise revenue without reducing benefits. There are several bills pending in Congress now (and presumably another soon when Senators Warren and Moreno submit a formal bill based on their proposal) that would secure the trust fund and payment of full benefits for decades without reducing benefits. Voters should implore their representatives to get behind and pass one of them. The delay in Congressional action reduces flexibility and available options to address the problem.
If you were advising lawmakers, what guiding principle(s) should shape the next major reform effort?
Broad Principles: Act promptly (although that might realistically mean January of 2029 at the start of a new Administration), retain social security’s basic historical structure and character, and do no harm to those most in need. More specifically, in polling, most Americans seek not only trust fund solvency through lifting the FICA tax cap on high earners but also reforming the program to strengthen and improve it for persons less well-served such as: 1) low earners; 2) workers with earnings records diminished or interrupted with significant family caregiving (predominantly women); and 3) workers with long histories of physically demanding work who are at least 62 and are no longer capable of such arduous work. Measures discussed and present in various proposed reform legislation from 2020-present, which should be considered, include: 1) provisions to tweak the social security benefits calculation formula to return a greater percentage of earnings to lower earners; 2) raising the minimum social security benefit to, at least, the poverty line (or raising the Supplemental Security Income (SSI) floor for indigent elderly and disabled persons to the poverty line and modernizing SSI resource rules); 3) creating caretaker credits for workers who spent years out of the workforce for family caretaking; and 4) establishing “bridge” benefits to offset and bridge the lifetime reduction of benefits at early retirement for persons with long histories of arduous work who can no longer perform that work at age 62.