Picture this: a few years down the line, your income takes a hit, and you can only sock away 80% of your mortgage payments. So, after some thought, you approach your banker to ask for extra funds to throw into the stock market.
What do you think the banker would say?
Two U.S. Senators—Bill Cassidy (R-La.) and Tim Kaine (D-Va.)—might want to ponder similar scenarios. They’ve proposed an idea worth serious contemplation: investing a slice of the Social Security Trust Fund in stocks. Yet, pulling cash to plow into the stock market could end up increasing U.S. public debt, which is already at a staggering high. A downturn on Wall Street might hasten the bankruptcy of Social Security.
At the moment, Social Security Trust Funds—though allowed to invest in stocks and real estate—lack any solid assets. More cash is currently filtering out of the trust fund for benefits than what’s coming in from taxes.
Since 2010, Social Security expenses have surpassed non-interest income. To bridge that gap, the program is dipping into reserves. In essence, the finances are intertwined with the Treasury, which must repay borrowed surplus funds at a time when the federal government has spent beyond its means. The $2.7 trillion in “special” government bonds held by the trust fund are not valuable on the open market.
The Senate Budget Committee has pointed out that while Social Security reserves are “outside of budget,” reducing them will impact government’s finances and the broader economy. The ongoing federal budget deficit complicates the challenge of meeting obligations to 74 million beneficiaries, and issuing more bonds simply means adding to national debt.
According to last month’s Annual Social Security Report, the program is expected to cut its total funds for old age and disability insurance trusts by $181 billion in 2025, with further increases anticipated by 2033. These estimates may vary based on recent changes in budgetary laws.
A calculation from the Responsible Federal Budget Committee indicates that a significant measure proposed by President Trump could reduce Social Security Income Tax revenue by $30 billion each year. This could deplete the trust fund earlier than predicted—by 2032 instead of 2033. Once it runs dry, Social Security’s tax revenue would only cover about 80% of obligations.
There are various paths Congress could take to ensure Social Security remains viable long-term, but they would necessitate substantial tax hikes, benefit reductions, or some blend of both.
To put things in perspective, Congress would need to gather about $28 trillion over the next 75 years—roughly $375 billion a year—to maintain solvency. That’s pretty close to what the budget bill adds to citizen debt yearly. For context, annual U.S. GDP is around $30 trillion, and estimates project that public debt will soar to 128% of GDP by the end of 2034.
Now think about the billions Cassidy and Kaine would need to invest in trust fund shares and other assets. Alongside that, consider the inherent volatility and risks. Sudden recessions or market corrections could hasten depletion. Analysts are already weighing whether rising U.S. debt might stifle economic growth and even jeopardize national security. What happens if, say, an unexpected crisis or war arises, requiring immediate funding?
Long-term, higher returns on investments from the Social Security Trust Funds could be beneficial. But, given the current financial downturn, borrowing for this purpose seems counterproductive. It would be quite surprising if a committee could muster the resolve to tackle the challenging politics of approaching insolvency for the program.
Karl Polzer is the founder of an organization focusing on capital and social equity. He contributes to Social Security through taxes and receives benefits from it.
