Last week, the Congressional Budget Office (CBO) updated its 10-year budget baseline of taxes and spending under current law. For decades, Congress has relied on the CBO’s baseline to determine the cost of—or “score”—proposed tax and spending legislation, shaping how legislators assess and debate the federal budget.
But the 10-year window can be misleading. Lawmakers can extend, phase in, or sunset policies during or after the 10 years to make what’s really a multitrillion-dollar proposal appear neutral or even deficit reducing. For example, the One Big Beautiful Bill Act (OBBBA) used tax code expirations to make tax cuts appear deficit neutral within the scoring window.
To get a more comprehensive view of future federal spending, Congress should consider an important limitation of CBO’s baseline: It doesn’t reflect that the Social Security’s trust fund is projected to reach exhaustion in 2032.
To calculate baseline, the CBO assumes the Social Security program will continue to operate under current law and pay full benefits, despite that benefits can only be paid if the Social Security Administration (SSA) has enough money. Once the trust fund is depleted, SSA will only be able to pay roughly 70 percent of those expected benefits.
The CBO even highlighted the difference between scheduled and payable benefits in one of the appendixes of its latest report. Still, policymakers could miss this nuance if they rely only on the main baseline tables to make budgetary decisions.
To avoid potential cuts or delays in benefit payments to Social Security beneficiaries, Congress should consider how to sustain the Social Security program for the long term. Addressing the projected depletion of the Social Security trust fund could also help lawmakers get a clearer and more accurate picture of the federal budget.
How does the Social Security system work?
The Social Security Act was signed into law in 1935 and for 90 years has provided crucial retirement income for many people in the US. Without the program, 22 million more adults and children would live below the poverty level.
Taxes paid into the Social Security system are paid out as benefits to retired and disabled workers and their families. There are two separate Social Security trust funds: one, the Old-Age and Survivors Insurance (OASI) fund that pays out retirement benefits, and another for the disability portions of Social Security.
If the amount of taxes collected into the system exceeds the amount paid out in benefits, the surplus is saved into what is known as the trust fund and earns a small amount of interest. If benefits paid exceed taxes collected, the gap is covered by the money in the trust fund. Simply put, the trust fund works like a personal checking account—money in, money out.
However, since the early 2010s, benefits paid into the OASI fund have exceeded taxes received. As a result, the balance of the OASI trust fund has gotten smaller over time. Ultimately, when the trust fund is empty in 2032, SSA will only be able to pay benefits using the taxes it has received.
If total taxes continue to be lower than total benefits paid and Congress takes no action, SSA will have to reduce benefits to equalize the two streams of money. Again, think of your checking account—if your balance goes to zero, you can only spend what money you put into the account.
It’s also not as simple as only paying in benefits what is collected in taxes, namely because there is a conflict between two longstanding federal laws. On the one hand, the Social Security Act says beneficiaries are legally entitled to their full scheduled benefits. On the other, the Antideficiency Act (codified in 1982) prohibits government spending that exceeds available funds, which means that SSA doesn’t have legal authority to pay full benefits on time when the trust fund is depleted.
As a result, when the trust fund is depleted, SSA will need a short-term plan for how to pay beneficiaries based on the taxes it receives in the current 10-year window—and a long-term plan on how it’ll eventually pay the full benefits promised.
The agency may have some flexibility in exactly how benefits are paid after the trust fund is depleted. It could simply reduce benefits for everyone right away—CBO estimates that would amount to a benefit cut of roughly 28 percent per year in the years after exhaustion.
Alternatively, SSA could pay full benefits to everyone but on a delayed schedule—that is, wait until taxes that come into the trust fund equal the amount of benefits owed and then pay everyone their full benefit amount. Or Congress could authorize additional spending (likely via borrowing) to cover the full cost of promised benefits.
However SSA decides to pay them, full benefits would eventually need to be paid under federal law.
What does CBO’s current forecast show?
CBO’s current 10-year budget outlook estimates that the federal government will collect more than $5.2 trillion in revenues this fiscal year (FY2026). CBO projects that in FY2026, the federal government will spend more than $6 trillion on programs and services plus approximately $1 trillion in interest payments on the existing federal debt, which is projected to exceed $32 trillion.
Social Security is the largest single federal program, with outlays projected at approximately $1.7 trillion this year—about one-fifth of total federal spending—and projected to rise to more than $2.7 trillion by 2036.
As required under federal budget law, CBO assumes the Social Security program will operate under current law and therefore continue to pay full benefits. But, as noted, SSA will not be able to pay full benefits once the trust fund exhausts, and anything that is not paid in the current 10-year baseline will get pushed outside this window.
As one possible scenario, let’s say SSA decides to cut benefits for all beneficiaries when the trust fund exhausts in 2032 and then pays the full amount of entitled benefits at some point after 2036.
According to CBO’s latest forecast, total OASI benefits in the past five years of the baseline when the trust fund is exhausted are projected to be about $11.5 trillion. However, Social Security will only have $8.7 trillion to put toward benefits during that five-year period, leaving a gap of $2.8 trillion.
Source: Author’s calculations based on data from CBO’s February 2026 10-year baseline.
Notes: CBO = Congressional Budget Office. All dollars are nominal and do not include estimates of net interest.
This is where the budget gimmicks could come in. If Congress takes no action and SSA cuts benefits to equal taxes, it could look like federal spending will be $2.8 trillion lower between 2032 and 2036. But that money will eventually need to be spent—not to mention the millions of beneficiaries who will go without their benefits in the meantime—so those savings are not real.
If Congress interprets the $2.8 trillion as savings, it could end up redirecting that money to other priorities.
Waiting to act will likely make future Social Security reforms larger and more difficult
Doing nothing now will likely make the long-run federal budget situation worse, as full benefits will need to be paid at some point.
Recent policy action has only increased the strain on the Social Security program—the Social Security Fairness Act increases benefits for some workers previously not covered, and the OBBBA reduces Social Security taxes for some seniors. Add to that a slowing labor market and lower levels of immigration—both of which lower total Social Security taxes paid—and it would not be surprising to see the next set of projections from CBO, SSA, and others move the trust fund exhaustion date sooner by a year or two, putting it within the term of the next president.
Congress can act to change the program—it can increase taxes, reduce benefits, adjust retirement ages, or enact any combination of these and other policies—and balance the system over the long run. The longer Congress waits to implement any type of policy change increases the size of any future reform designed to maintain the system’s long-term ability to pay promised benefits. Waiting only makes the changes larger and more difficult.
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