Social Security Trust Fund May Deplete Three Months Earlier
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- Mercatus Center research by Veronique de Rugy and Jason Fichtner, published June 26, warns that pushing reform closer to the OASI trust fund's depletion date increases the likelihood of large-scale borrowing that would strain Treasury markets and the broader economy.
- The Social Security trustees report projects the OASI trust fund may be depleted in Q4 2032 — three months earlier than last year's estimate — with only 78% of benefits payable at that time, while combining the trust funds would only extend the date to Q3 2034 at 83% of benefits.
- Social Security's annual shortfall may grow from $600 billion in 2033 to roughly $700 billion by 2036, per the research, stacked on top of a projected $2.7 trillion deficit and $46.5 trillion national debt.
- The Committee for a Responsible Federal Budget estimates that if general revenue were used to fund Social Security, the 10-year Treasury neutral rate could climb from 4% to 6.6%, pushing 30-year fixed mortgage rates from 6.3% to nearly 9%.
- CRFB's Marc Goldwein said abandoning Social Security's 90-year self-financing promise would "open the floodgate to borrowing far more than the country can afford," with potential 75-year borrowing totaling $800 trillion in nominal terms ($180 trillion inflation-adjusted).
- CRFB's 2019 reform proposal — combining retirement age increases with protections for vulnerable 62-year-olds, automatic supplemental retirement enrollment, and counting all work years toward benefits — could grow the economy 3.5% to 13% by 2050 and boost per-person income by about $8,000.
- Early warning signs already flagged in the research include declining foreign holdings of U.S. Treasuries amid tariff uncertainty, persistent inflation above the Fed's 2% target, and recent disruptions to Treasury auctions.
Why it matters: Every year of inaction makes the eventual fix more disruptive: a 2.6-point jump in the 10-year Treasury yield would cascade into a 30-year mortgage rate near 9%, higher credit card and auto loan costs, and crowding out of private investment — with the depletion clock just moved up another full quarter.
