Social Security and Federal Budget

The Congressional Budget Office now projects that Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund will be exhausted in 2032, a year earlier than its prior 2033 estimate, raising the stakes for Congress to shore up the program. The revision stems from CBO’s updated economic outlook, which assumes hotter inflation, larger cost-of-living adjustments for beneficiaries, and somewhat weaker income from payroll and individual income taxes. Once the trust fund reserves run dry, Social Security would still pay benefits out of ongoing payroll tax receipts, but outside analysts like the Center on Budget and Policy Priorities estimate that benefits would drop to about 81% of what’s currently promised unless lawmakers act. The new forecast assumes a 2.8% COLA in 2026 and about 3.1% in 2027, increases that protect retirees’ purchasing power in the short term but accelerate the drawdown of the trust fund. Advocates warn that the earlier depletion date underscores how little time Congress has left to agree on revenue increases, benefit changes, or both before automatic cuts hit tens of millions of Americans.