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There is a Simple Fix for the Alleged Social Security “Crisis.” [1]

['Dan K', 'Greg Dworkin']

Date: 2026-08-08  

The usual suspects – Republicans, the Peterson Institute, right wing think tanks, and even “third way” Dem groups – that want to cut social security rolled out their annual scare tactics based on the most recent Social Security Trustee’s Report. According to the Report, as of 2032, the Social Security Trust Fund (“OASI”) will only be able to pay 78% of benefits. They’ve been so successful in scaring us that more than 75% of people thing they won’t get full benefits when they retire. Millennials and GenZ are especially concerned.

The scare tactics are nonsense. A simple change in the law can allow full benefits for many years to come. And it’s not raising the cap.

FDR and the origins of social security

To pass Social Security in the ’30s, FDR had to “sell” it by tying it to funding from workers contributions. By making this contribution visible, FDR reasoned, each of us would develop such a strong sense of entitlement that “no damn politician can ever scrap my social security program.” Stephanie Kelton, The Deficit Myth p. 194. But this funding mechanism ultimately provided social security’s enemies with grounds for cuts or other damage to social security when and if the contributions are insufficient, because – by law- funds to pay social security benefits cannot come from the Treasury. Stephanie Kelton, The Deficit Myth, p. 195.

A Tale of Two Trust Funds

Contrary to Social Security funding, the Trust Fund for Medicare Parts B (outpatient services) and D (prescription drugs) is set up so that – by law – benefits must come from the Treasury when worker contributions are insufficient. This Trust fund is known as the Supplemental Medical Insurance Trust (“SMI”).

The tables below show the difference in the two trust funds:

OASDI and SMI Trustee’s Report

Note the difference: About 70% of funding for Medicare B and D (SMI) comes from government contributions while only about 28% comes from premiums paid by workers. The government must provide this funding.

But the social security trust fund (OASI) is based entirely on payroll taxes, taxes on social security benefits, and interest on social security bonds. The government cannot provide any contribution, even if payroll taxes are insufficient.

Stephanie Kelton summarizes:

Social Security’s programs and Medicare’s Hospital Insurance are considered fiscally unsustainable because the government isn’t committed to making payments, while Medicare Parts B and D get a clean bill of health because Congress has granted the legal authority to make the payments no matter what else happens.



Congress could in fact change the current law so that the same language applies to the other programs. That it hasn’t done so is a political choice, not an economic one. You wouldn’t know that by reading most newspapers, however, or by listening to most pundits. All we hear is that Social Security is going broke.



It’s that simple. Change the law. Treat the Social Security Trust Fund the same way the Medicare Parts B and D Trust Fund is treated now.

It’s estimated that the cost of closing the alleged shortfall is 1.5% of GDP, compared with the current defense budget, which is 3.42% of GDP

Bills have been introduced to raise the cap on earnings (currently $184,500) subject to FICA taxes. Other proposals provide for a “donut hole” where income between $184,500 and $400,000 is not taxed under FICA – but income over $400,000 is subject to income above this amount.

These are unnecessary measures in light of the better option of having the government fund any trust fund shortfall.

Why?

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[1] Url: https://www.dailykos.com/stories/2026/8/8/800060451/community/what-almost-nobody-knows-about-social-security/

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