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Social Security has 6 years left. The fix that sounds cruelest may be the smartest
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.
That’s the stark, counterintuitive conclusion suggested by PWBM researchers Seul Ki “Sophie” Shin and Kent Smetters, who modeled five distinct reform packages ranging from all-tax to all-cuts and found the approach most conventional analysts dismiss as politically radioactive—deep benefit reductions—generates the strongest long-term economic growth.
Run the numbers through a standard accounting lens and the tax-heavy plan, called Option A, looks like the winner. It delays insolvency from 2032 all the way to 2058 by raising the payroll tax rate one percentage point (to 13.4%), lifting the taxable earnings ceiling to $250,000 (up from $184,500 in 2026), and switching to a slower inflation index for cost-of-living adjustments.
Switch to dynamic economic modeling—the kind that tracks how people actually change their saving and working behavior in response to policy—and the picture flips. Option E, the most aggressive benefit-cut plan (no new taxes, deeper formula reductions, and a retirement age raised to 69), projects a 6.1% GDP boost and a 13.5% surge in private capital by 2060. Option A, the tax-heavy plan, delivers only a 2.4% GDP increase and a 4.4% rise in private capital over the same period.
The mechanism is straightforward: Tell Americans their Social Security checks will be smaller, and they’ll save more on their own. Smetters and Shin call this the “incentive to save.” More private savings means more capital available for productive investment, which drives up wages. By 2060, wages are projected to be 5.7% higher under Option E versus just 1.6% higher under Option A.
Smetters told Fortune his goal in this exercise isn’t to make recommendations, but to show a “range of options,” instead. If he had to guess, he added, most people would prefer Option C, somewhere in the middle, but he is leaving that to the political process. His job is to “show the tradeoffs across a wide range of options on a holistic basis without bias.”
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, versus PWBM’s Option E, the harshest scenario, which would cut benefits by $2,300 per year (for women) and $2,500 per year (for men).
