Michael A. Peterson, CEO of the Peter G. Peterson Foundation, discusses the fiscal challenges facing the United States and why policymakers should seek solutions.
The results of the midterm elections will play a role in the future of Social Security as the safety net program’s projected insolvency looms in 2032 and would require entitlement reforms to avoid automatic benefit cuts.
Social Security’s main trust funds are nearing depletion as increased enrollment due to the aging U.S. population and growth in benefits paid outpace payroll tax revenue. Current law requires that once trust funds are exhausted, benefits will be automatically reduced based on payroll tax revenues, which is estimated to be a 22% reduction by the end of 2032, based on the most recent projections.
Democrats have won majorities in the House and Senate for the next two years, representing the end of President Donald Trump’s second term, and for senators who were elected to full terms, they will still be in office when the insolvency date approaches if no action is taken during the remainder of Trump’s term.
Maya MacGuineas, chair of the Committee for a Responsible Federal Budget (CRFB), told FOX Business that “Social Security was squarely on the ballot last night, whether Americans realized it or not. The pension trust fund will become insolvent in 2032, meaning every senator elected to another six-year term will have to deal with this issue before their term expires.
HOW CONGRESS COULD RESPOND TO SOCIAL SECURITY’S INSOLVENCY – AND ITS HIDDEN COSTS
President Donald Trump and the new Democratic majorities in Congress will have an opportunity to address Social Security reforms. (Yuri Gripas/Abaca/Bloomberg via Getty Images)
“If they do not do so, all beneficiaries will face automatic reductions to their benefits on their watch. With a monthly reduction of $500 – more than the average retired household spends each month on groceries – Washington should act quickly to restore solvency and avoid a major affordability crisis in less than six years,” MacGuineas added.
Brett Loper, executive vice president of policy at the Peter G. Peterson Foundation, told FOX Business that “the urgency of the issue is literally increasing by the day,” and noted that the solvency of Social Security has come up in a number of campaigns and Senate debates as candidates have been expected to begin tackling the issue.
“It was clearly a problem in 2026 that questions were constantly being asked in Senate races given the six-year term that they’re being elected to,” Loper said, adding that he was encouraged by how the discussion was conducted during the campaign.
“Overwhelmingly, it was a recognition that the program was becoming insolvent and a commitment to fixing it,” Loper said. “From there, there’s sort of a range of ideas or qualifiers. On a bipartisan basis, some members were suggesting that a commission would be a good way to approach the problem. In some cases, there was interest in citing specific things that could be done.”
BISIGNANO, SOCIAL SECURITY CHIEF, SAYS PROGRAM “WILL LAST ABOUT 90 YEARS”
Senate Minority Leader Chuck Schumer, D-N.Y., and congressional Democrats will control the Legislature for the next two years. (Kayla Bartkowski/Getty Images)
Although candidates have not expressed a willingness to immediately address the issue in 2027, Loper said public awareness will continue to grow during the 2028 election cycle, which will see presidential candidates confronting the issue because “there’s no way they’re going to be able to dodge the issue.”
“The problem gets harder and harder to solve mathematically the closer you get to the cliff. I don’t think anyone really wants to sit around trying to figure it out in early 2032 with the cliff staring ahead and the seniors in near-revolt,” Loper said. “It’s not something they’re going to be able to avoid even if they wanted to avoid it because they’re focused on something else.”
Implementing Social Security reforms sooner rather than waiting until the 2032 insolvency date and 22% benefit cut approaches would give policymakers “greater ability to slowly introduce changes to the program” and potentially address related issues affecting retirees, Loper said.
“Maybe there’s a broader range of issues we can address. Maybe we can broaden the retirement issue and talk about it,” Loper said. “It gives you more options and the ability to approach this issue in a way that engages the public, which makes the dramatic nature of the changes much more manageable.
NEW BIPARTISAN PLAN AIM TO AVOID REDUCTION OF SOCIAL SECURITY BENEFITS BEFORE TRUST FUND IS EXHAUSTED
Senators elected to another six-year term in 2026 will be in office when the anticipated insolvency of Social Security arrives in 2032. (Kevin Carter/Getty Images)
Congressional budget rules require changes to Social Security to be subject to a 60-vote threshold in the Senate, meaning any reforms to the program would likely require bipartisan support.
Loper suggested that this dynamic could open the door to progress on the issue over the next two years, depending on the willingness of Trump and congressional Democrats to compromise on the issue. He said a case could be made to Democrats that “you could get a better deal from this president than you’ll ever get from any other Republican, so why not try to explore that possibility?”
“If you’re Trump, I mean talking about building a legacy. If that’s his way of life, what’s better than being the one to keep it going for, say, another 50 years,” as then-President Ronald Reagan and then-House Speaker Tip O’Neill did on a bipartisan basis in 1983, Loper said. He added that it would also have “the benefit of clearing the deck of a major issue that the next president will have to deal with, so I think those political incentives can align.”
A SINGLE TYPE OF SOCIAL SECURITY ADJUSTMENT COULD CUT THE 75-YEAR-OLD DEFICIT BY HALF
President Ronald Reagan (right) and House Speaker Tip O’Neill (left) helped negotiate Social Security reforms, beginning with a commission in 1981 and policy changes in 1983. (David Hume Kennerly/Getty Images)
“I realize there are many reasons why they would have difficulty achieving an outcome in 2027 and 2028, given the polarization of our politics,” Loper said.
“I could also argue that even if they’re not able to resolve the problem and get an O’Neill-Reagan-type deal through Congress and signed by the end of Trump’s term, they still have an opportunity to move forward by doing, frankly, what Reagan did in 1981, which was set up a commission.”
“Having the commission report at the end of 2028, having it on the shelf and ready to go in early 2029… that might be a little easier for the next president to manage if something like that is available to him,” he explained.
Loper stressed that Social Security reforms will need to be carried out on a bipartisan basis and that progress on the issue over the next two years would show that “the public is mobilizing and its awareness is increasing.”
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“I think there will be enough elected officials who will start to recognize that and get a little ahead of the curve, and that’s what gives me hope that there will be an opportunity for progress in the next Congress — again, despite the polarized nature of our politics,” Loper said.
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