With Social Security's annual trustees report looming, three Washington think tanks known for fiscal discipline are converging on a strategy to trim benefits from the top down, arguing it could stave off the program's projected insolvency without broad-based tax increases.
Every spring, the program's trustees release a report warning of looming shortfalls. Congress and the White House typically punt. Last year's report projected the combined trust fund would run dry by 2034, with annual drawdowns rising from $181 billion in 2025 to $405 billion in 2033. This year's update is expected to paint an even grimmer picture.
In March, Social Security's chief actuary, Karen Glenn, told the Senate Budget Committee: “The math is simple — lawmakers need to take actions that will increase program income by about one-third, lower scheduled benefits by about one-fourth, or adopt a combination of these approaches.”
Progressives typically favor raising payroll taxes on high earners. But economists at the libertarian Cato Institute, the conservative American Enterprise Institute, and the centrist Committee for a Responsible Federal Budget are pushing a different approach: cutting benefits at the top.
In a recent study, Cato proposed transforming Social Security into a targeted anti-poverty program similar to New Zealand's Superannuation, which reduces old-age poverty while containing costs. Short of that, the study urged Congress to “at a minimum reduce benefits for higher earners to prevent harmful payroll tax hikes.”
During an April 14 webinar, AEI economists presented two “chop the top” frameworks. One would cap monthly benefits at $2,050 in 2024 dollars starting in 2033, providing full scheduled benefits for about half of retirees. Reductions for higher-income retirees would be graduated.
The Committee for a Responsible Federal Budget proposed capping annual benefits at $100,000 per couple and $50,000 for single retirees. Few would hit those caps now, but since the caps wouldn't be inflation-adjusted, more high-income retirees would be affected each year.
Whether such top-down cuts would pass muster with voters remains uncertain. A recent AARP-funded survey by the National Academy of Social Insurance found that Americans prefer raising taxes — especially on higher earners — to preserve benefits. The most popular package included applying the payroll tax to earnings above $400,000, gradually raising the rate from 6.2% to 7.2%, and not raising the full retirement age.
The Congressional Budget Office estimates Social Security's 75-year actuarial deficit at roughly 1.5% of GDP — about $400 billion annually. That's comparable to the annual cost of the Trump tax cuts. While reversing those cuts isn't necessarily the best fix, the comparison shows that revenue changes of that magnitude could restore solvency. For instance, 2025 tariff revenues could cover most of the gap.
If Congress fails to act before trust fund depletion, it could shift general revenue into the fund as a loan or long-term funding source. The reserves Social Security is drawing down are essentially IOUs from the Treasury, which borrowed the surplus for other commitments. Since the government runs a deficit, drawing down those reserves is already adding to the national debt.
For more on how lawmakers are navigating security and policy challenges, see our coverage of Crow pressing the Secret Service on unimplemented reforms after the WHCA dinner attack and Graham's push for a $400 million White House ballroom.
