Ernest Hemingway once wrote that there are two ways to go bankrupt: “gradually and then suddenly.”
For Social Security, the “gradually” phase is coming to an end. According to the latest report from the trustees who oversee Social Security, the program will hit insolvency in late 2032—and, at that point, benefits will be cut by about 22 percent. That moment of crisis is no longer some distant problem to be worried about in the future. Senators elected later this year will be serving their terms when the “suddenly” arrives.
But there are two other ways in which to go bankrupt: by spending too much money, or by not taking in enough to cover those expenditures.
Often, Social Security’s fiscal problems are thought of as being the latter. For years, Social Security has run deficits, and that literally means that the program is not collecting enough tax revenue to cover the benefits being paid.
But that’s not actually the most accurate way to think about Social Security’s problems. To a significant degree, Social Security (like the rest of the federal government) has a spending problem, not a revenue problem. It is the program’s overly generous benefits that are actually driving Social Security into insolvency.
To illustrate that point, look at the Social Security Administration’s own data. A two-income middle-class couple who retired in 1990 would have earned about $44,000 in annual benefits (in inflation-adjusted 2026 dollars). That same couple retiring this year would expect to receive more than $60,000 in annual Social Security benefits.
If you’re more of a visual learner, here’s a chart showing how those benefits have increased. And, remember, this is adjusted for inflation.
There’s a third factor: Rising benefits, even after adjusting for inflation. In 1990, a 2-earner middle-income couple received about $44,000 in annual benefits. In 2026, a middle-income couple gets $60,000. By 2050, $86,000. /2 pic.twitter.com/npN3YRQ924
— Andrew G. Biggs (@biggsag) June 9, 2026
Those surging benefits have put a serious strain on Social Security’s finances. As Andrew Biggs, senior fellow at the American Enterprise Institute, pointed out in a post on Twitter this week, the average American who will retire in the 2030s is promised more than 30 percent more in benefits than what they contributed in taxes. “If retirees simply got back what they paid in, Social Security would be solvent,” he wrote.
That is a problem with deep roots. In December 1977, Congress voted to automatically increase future Social Security benefits by indexing those payments to national average wage growth. Previously, Social Security benefits could only increase when Congress voted to allow it.
When the change was made, Congress also considered a plan to index benefits to inflation. That would have made more sense. But wages have consistently grown faster than inflation in recent decades—which is a good thing for workers—and that dynamic has created a situation where Social Security is obligated to pay benefits far in excess of what payroll taxes can cover.
There is no reason for Social Security to pay out such generous benefits. The program’s stated goal is to keep senior citizens out of poverty. But, according to Biggs’ calculations, that average two-income household getting $60,000 in annual Social Security benefits is receiving more than twice the amount needed to keep them above the poverty line—and that’s before they dip into any private savings.
In short: Benefits to most Social Security recipients could be cut significantly without pushing anyone into poverty. And that’s what should happen. Social Security is a safety net program, not one meant to finance a lavish retirement lifestyle.
The question of whether Social Security has a spending or revenue problem is going to be extremely relevant in the very near future. Raising taxes (or borrowing more heavily) to close Social Security’s funding gap makes little sense when the benefits side of the ledger caused this crisis.
