Social Security’s solvency is now one of those issues that policymakers can no longer afford to keep on the back burner. It’s not a future problem—it’s happening right now because of demographic shifts, trust fund depletion, and economic factors. The more we delay fixing it, the harder it will be to fix. The Government Accountability Office (GAO), the nonpartisan investigative arm of Congress, pointed to this in their recent report: “There Are Options for Reforming Social Security, But Action is Needed Now.”

One of the most significant issues is that the math no longer works the way it used to. In 1964, there were about four workers supporting every one beneficiary of Social Security. Fast-forward to today, and that number has shrunk to about 2.7 workers per beneficiary. Baby boomers, the generation born between 1946 and 1964, are retiring. As people continue to live longer, more people are drawing from the system and fewer people are paying into it. As long as this continues, the financial pressure on Social Security will only intensify.

Initially established in 1935, Social Security was designed to provide economic security for the nation’s workers through Old-Age Insurance. The 1939 amendments expanded the program to include benefits for workers’ dependents and survivors, shifting the focus from individual protection to family-based coverage. In 1956, the Disability Insurance program was introduced, and in 1965, Medicare was established, both funded by increases in payroll tax rates. However, by the late 1970s, financial challenges prompted reforms to ensuring solvency, such as the 1983 amendments, which increased payroll taxes, gradually raised the retirement age, and made benefits taxable for higher-income recipients. Even so, many of today’s Social Security and Medicare beneficiaries will receive more in lifetime benefits than they paid in lifetime taxes.

Now it’s 2024, and the Social Security Trust Funds are on borrowed time. According to the latest reports, the Old-Age and Survivors Insurance (OASI) Trust Fund is expected to be depleted by 2033. If no changes are made, this depletion would mean a 21% cut in benefits, as the income from payroll taxes would only cover about 79% of scheduled benefits. The Disability Insurance (DI) Trust Fund, however, is projected to remain solvent throughout the 75-year projection period, thanks to lower disability incidence rates and other factors. When considering the combined reserves of the OASI and DI Trust Funds, the depletion is projected to occur by 2035. At that point, the combined income would be sufficient to pay approximately 83% of scheduled benefits, leading to a potential 17% reduction if reforms are not enacted.

So, what can be done? There are really only two options, each with its own set of challenges.

Increasing Revenue: On the revenue side, increasing payroll taxes by raising the tax rate or eliminating the cap on taxable earnings could generate more income for the program. Expanding taxable income by including more employee benefits in taxable earnings or increasing the taxation of Social Security benefits are other options to boost revenue. However, this would likely face resistance from those who oppose higher taxes, especially on higher-income earners.

Reducing Benefits: Another option is to cut benefits. This could be done broadly, affecting all beneficiaries or by targeting specific groups such as high-income earners, dependents, or survivors of workers. Another method is to adjust Cost-of-Living Adjustments (COLAs). For instance, using a “chained CPI” to calculate COLAs would likely lower future benefit payments or COLA increases could be limited for higher-income beneficiaries. While this would help the system’s finances, it could also push more elderly Americans into poverty, which is exactly what Social Security was designed to prevent. That said, a shift to a flat benefit – not tied to career average earnings – that is less than the current average benefit would help those at the lower end of social security payments. Bottom line, many Americans, including a significant voting bloc of retirees, rely heavily on Social Security benefits, making any proposed cuts highly sensitive and contentious.

There’s also the option of creating a bipartisan commission to tackle the issue. Such a commission could recommend long-term solutions, taking politics out of the equation, in theory anyway. The Greenspan Commission, officially known as the National Commission on Social Security Reform, was established in 1981 by President Ronald Reagan to address the looming financial crisis facing Social Security at that moment in time. Chaired by Alan Greenspan, the commission was tasked with finding solutions to ensure the program’s solvency, leading to the 1983 amendments. The success of this approach depends on both sides being willing to compromise—something that’s easier said than done in today’s political climate.

Many experts believe the best solution is a mix of revenue increases and benefit adjustments. This could spread the impact across a broader range of people, making the changes more politically palatable and less painful for any one group. The GAO had some valuable suggestions for evaluating reform proposals. The changes needed to make Social Security have long-term stability – the 1983 amendments bought the program another 50 years. The changes must still ensure adequate and equitable payments to achieve the public policy goals of the program. Lastly, any reforms must address today’s realities and be explained to the public.

The bottom line is that we can’t afford to wait. It’s just math. Early reforms would allow changes to be phased in gradually, giving workers and beneficiaries time to adjust. Waiting until the last minute will mean more drastic cuts or tax increases.