Social Security insolvency is ‘entirely solvable,’ says commissioner under Biden

There are ways to tackle Social Security's insolvency problem, says Martin O'Malley, who served as Social Security commissioner during the Biden administration.  

Fixing Social Security's looming financial crisis may not be easy, but it's doable - as long as the rich pay more in taxes.  

"The insolvency date is an entirely solvable problem," Martin O'Malley, who served as Social Security commissioner under the Biden administration, told MarketWatch.  

His solution?  

"Scrap the cap," O'Malley said.  

He was referring to what's known as the taxable maximum for Social Security, which is set at $184,500 in 2026. That means U.S. workers pay Social Security payroll taxes on the first $184,500 of their earnings - but not on earnings above that. As a result, a billionaire pays the same amount in Social Security taxes as someone making $184,500 a year.  

"We need all the people to pay into Social Security," O'Malley said.  

There have been proposals in Congress to make that change, but they have failed to pass.  

The Social Security 2100 Act, proposed by U.S. Rep. John Larson, a Connecticut Democrat, would expand the tax base by applying the Social Security payroll tax to earnings above $400,000 a year. It would keep the taxable maximum in place below that, creating a temporary "donut hole" between the existing cap and $400,000.  

Meanwhile, the Social Security Expansion Act, sponsored by lawmakers including U.S. Sen. Bernie Sanders, an independent from Vermont, would raise the taxable-earnings cap to $250,000 and require some high-income households to pay taxes on some investment income.  

Eliminating the taxable maximum has support across the political spectrum. Sen. Bernie Moreno, an Ohio Republican, said in March that "there should be no reason we should have a cap at all."  

The debate over the taxable maximum comes as Social Security's trustees said this week that the program, which provides benefits to more than 70 million retired workers and people with disabilities, faces insolvency in 2032, at which point only 78% of benefits would be paid. The program's finances are affected by reduced immigration and lower fertility rates, as well as increased financial pressure from last year's "One Big Beautiful Bill Act," which was signed into law in July, according to the Trustees Report.  

When asked about the insolvency date during a House Ways and Means subcommittee hearing on Wednesday, current Social Security Commissioner Frank Bisignano said that as one of the trustees, his role was to "produce a report that tells everyone the facts," but that it's up to Congress to tackle the insolvency issue.  

Earlier this week, House Speaker Mike Johnson, a Louisiana Republican, said Social Security, as well as Medicare and Medicaid, needed to be "adjusted and fixed," but he did not outline a specific plan.  

"The reason we are in trouble is because over 74% of federal spending is on autopilot, mandatory spending," Johnson said on Monday. "That's your entitlement programs like Medicare, Medicaid and then things like Social Security. They have to be adjusted and fixed."  

"We have a plan to do that next year," Johnson added.  

The Social Security Administration has outlined more than 140 different scenarios on its website to address the insolvency issue.  

The last time Congress passed major Social Security reform was in the 1980s. At that time, lawmakers waited until the 11th hour to put through changes that included gradually raising the age for claiming full benefits to 67 for those born in 1960 or later.