Until COVID-19 hit, Social Security was the single most expensive item in the federal budget. In fiscal year 2019, the federal government spent a total of $4.4 trillion; Social Security alone cost $1.038 trillion. In other words, this one program represented 23.3 percent of total federal spending.
And even though emergency spending on COVID-19 has shrunk the program’s share of the federal budget temporarily, by 2030, Social Security’s expenses will increase to $1.629 trillion — or nearly a quarter of total federal spending.
But while in future years its share of the federal budget will remain constant, its financial woes will only worsen as its primary source of funding, payroll taxes, will soon fall short of expenses.
In 2020, payroll taxes are projected to raise $1.023 trillion, and with the special Treasury bills in the Social Security trust fund earning another $80 billion in interest, the program will have enough money to pay benefits. In fact, the trust fund is expected to see an increase of $6 billion. ss1
In 2021, however, the program is projected to see a dramatic shortfall of $119 billion. And then in 2022, it will be short $152 billion. To keep paying benefits, the program will have to redeem the Treasury bills in the trust fund, and by 2030, the trust fund’s balance is expected to drop from its current $2.9 trillion total to just $917 billion. Without a payroll-tax hike or cuts to future benefits, this drawdown will continue until the program runs out of money in 2032.
All this is to say that Social Security is such a large expenditure and it is in such precarious fiscal health that its fate is intertwined with that of the entire federal budget — and the country at large.