The real issues facing the Social Security program aren’t inefficiency or fraud

The Social Security program faces a large—and growing—financial shortfall

Social Security serves over 73 million beneficiaries, providing essential retirement, survivors, and disability benefits to one in five Americans. These benefits are paid by a trust fund that operates like a checking account—it collects payroll taxes on current workers’ earnings and pays out benefits to current beneficiaries. 

The 2025 Trustees Report, released on June 18th, finds that the Social Security trust fund will no longer be able to make all of its promised benefit payments by 2034, and future deficits between scheduled payroll tax revenue and program expenditures are large and growing. Over the 75-year window, the shortfall amounts to 3.82% of taxable payroll, meaning that the payroll tax rate would have to be raised immediately—and permanently—from the current rate of 12.4% of taxable earnings to 16.1% in order for the program to be able to pay all promised benefits through 2099.¹ In 2025, that increase would have amounted to an extra $374 billion in program revenue.

While the financial status of the program worsened since last year’s report was released in large part due to the passage of the Social Security Fairness Act, the financial troubles are not new—in fact, the Social Security trustees have found that the program faces a shortfall over a 75-year horizon for every single report published since the last major set of reforms to the program in 1983.² The Social Security trust fund accumulated a balance while the baby boom generation was in their prime working years, but in more recent years, the balance has dwindled as benefits paid have exceeded the payroll taxes coming in.

Can serious efforts to reduce waste, fraud, and abuse address Social Security’s challenges?  Not even close.

Administering the program costs 0.5% of the program’s annual costs, meaning that out of every dollar the agency pays, 99.5 cents goes directly to beneficiaries. By contrast, recent estimates suggest that 65-year-olds who purchase annuity contracts from insurance companies can expect to receive about 92 cents back from every dollar they pay in premiums.

This efficiency has been achieved with a relatively small— and still shrinking—workforce. In 2024, the Social Security Administration (SSA) employed approximately 57,000 total employees at its Baltimore headquarters and in 1,231 field offices across the country. This is down from 68,000 employees and 1,297 field offices in 2010 despite the rise in the number of beneficiaries as the baby boom generation has aged into eligibility for retirement benefits over this period.

So, Social Security is already a lean operation. Further, it is very likely that any additional cuts in staffing will make it harder for Americans—particularly the most vulnerable—to access benefits they have earned, with dire consequences. Evidence shows that when field offices close, fewer people apply for disability benefits, and those who were discouraged from applying are also those who would have been more likely to have been approved.

Increases in processing times for disability benefits—already at historically high levels—are also particularly costly for this population: The Government Accountability Office (GAO) reviewed data on applicants who filed an appeal prior to 2019 and found that 1.3%, or 48,000 people, filed for bankruptcy while waiting for a decision between 2014 and 2019. From 2008 to 2019, 1.2%, or 109,725 applicants, died before getting a final verdict.

In short, any further decrease in administrative costs for the program will almost certainly lead to a decline in applicants and a decline in service quality for enrollees. So, how much money could the program save by reducing or eliminating fraud? 

In February 2025, the Social Security Office of the Inspector General reported that overpayments of retirement and disability benefits made over the last four years averaged $3.4 billion per year. About 17.6% of overpayments were recovered in 2023 by direct billing, withholding other federal payments, or garnishing wages. After accounting for this recovery, overpayments cost the program, or approximately 0.2% of total benefits paid. 

Of course, recovering and preventing overpayments likely requires more administrative costs, not less. SSA has made recommendations to better prevent, detect, and recover improper payments, all of which would require additional resources. Specifically, the agency estimates that it costs approximately $0.08 to recover every dollar of overpayment.

Suppose we were to wave a magic wand to eliminate SSA’s administrative cost budget and prevent all overpayments while still preserving service and benefits. Even this unrealistic, pie-in-the-sky scenario would only yield “savings” of $10.2 billion per year, barely moving the needle in terms of the program’s $1.48 trillion annual cost. In other words, eliminating all of the program’s administrative costs budget and overpayments combined would save an amount equal to what the program pays out in benefits over just 2.5 days, or about 2.7% of the annual amount needed to close the 75-year actuarial deficit.

So what can be done?

Researchers and policy experts have developed a number of proposals to close the financing gap.  Policy options that raise revenues include increasing the payroll tax rate or broadening the income base to which that the payroll tax is applied. Options for reducing benefits include cutting benefits across the board, raising the retirement age at which a beneficiary is eligible for full benefits, reducing benefits disproportionately for higher earners, or changing the growth rate of benefits. These policy levers can be combined in a number of sensible ways to address the shortfalls and strengthen the program’s future. But there is no free lunch—all of these changes would involve difficult tradeoffs between beneficiaries and workers as well as current and future generations. 

Regardless of how it’s done, some action will be necessary within the next decade to avoid significant cuts in benefits and to preserve the program’s ability to provide retirees, survivors, and the disabled with essential benefits well into the future. The sooner action is taken, the better the economy can adapt and the more confidence current and future beneficiaries will have in the program. While making the program more efficient remains important, it misses the real issues facing the program’s future.