The Biggest Changes To Social Security Ever Made

Social Security is a bedrock American program covering a staggering 94% of the population, with 69 million people receiving payouts in any given month. Since its inception, the nationwide welfare plan has offered crucial services to the elderly and disabled, allowing those out of the labor force to live more comfortably and healthily. Although nearly all employees today pay directly into the system, younger generations are increasingly concerned that this cornerstone social program will cease to operate in their golden years.

Despite its extreme popularity, Social Security is no stranger to controversy. Over the years, several highly-contested changes have altered who gets coverage, how much they receive, and even how much the government can claw back. Adding to the debate, the public pension system faces existential fiscal challenges. Exploring the biggest changes to the Social Security system is vital to understanding how this initiative has evolved over the years and what shape it might take.

In a political environment marred by partisanship and cynicism, Social Security stands out as perhaps the single most beloved government initiative in history. Surveys routinely find near-total support for the program, reaching across political lines, income strata, and other demographic differences. For example, 93% of independents, 95% of Republicans, and 98% of Democrats think Social Security is essential for everyone's financial health, according to a recent AARP survey. This widespread backing doesn't buckle under the program's immense financial burden, either. According to the National Institute on Retirement Security (NIRS), 87% of the country believes the safety net should remain a primary concern even in the face of rising insolvency concerns. Similarly, Pew Research reported that nearly 80% of Americans are against cutting the program in any way. 

With a mammoth $1.5 trillion budget, Social Security comprised 21% of federal outflows in 2024, being one of the country's largest expenses. Part of the reason for this broad-based support is the inclusive nature of the program. No other government resources positively impact so many Americans. Furthermore, nearly all citizens see a portion of their paycheck going to the Federal Insurance Contributions Act (FICA), the main funding arm of Social Security and other welfare programs. This automatic buy-in encourages far-reaching support as contributors are incentivized to see the program last long enough to fund their payouts.

The Social Security Act, passed by President Franklin D. Roosevelt in 1935, established America's first and longest-running welfare program. In its original language, the program aimed to protect "against the hazards and vicissitudes of life." Falling short of this objective, the bill only covered workers in industry and commerce, leaving nearly half the country without benefits. This carveout disproportionately affected Black Americans, who comprised an outsized proportion of domestic and agricultural workers. Three decades before the Civil Rights Act, the United States still grappled with structural inequality.

Scholars continue to fiercely debate the motivation behind the unbalanced outcome. Some argue it was a clear example of biased policies targeting minorities, with Southern politicians looking to enact revenge upon Black Americans. Others maintain that the limited coverage was a harsh reality of budget limitations. Regardless, the decision to cover only half the population at the initiative's onset sparked outrage. Presidents Harry Truman and Dwight D. Eisenhower rectified the problem by expanding coverage to farm and domestic workers with a series of correcting amendments between 1940 and 1954.

Another original sin of the program was stagnant benefits. Instead of automatically increasing payouts to match the rising cost of living, the Social Security Act initially required Congressional approval for payout increases. For the first few decades, the program's benefits remained idle due to government inaction, even as inflation skyrocketed. Between 1937 and 1950, retirees above 65 received a lump-sum pension representing 3.5% of their covered income. During this period, World War II — the costliest war in the country's history — pushed annual inflation above 20%. The combination of sky-high costs and frozen benefits led to a strong push for payment adjustments.

In 1950, Congress finally intervened to restore balance between Social Security disbursements and the rising cost of living. The government had waited so long that the first payout adjustment was an eye-popping 77%. Although these impromptu changes became more frequent over the next few decades, automatic cost-of-living adjustments (COLAs) wouldn't be enacted until 1972, and only take effect in 1975. Now, Social Security benefits receive annual reviews in light of the Consumer Price Index, ensuring recipients are receiving payouts that mirror the real cost of living.

Following heavy backlash in its original form, Social Security underwent significant improvements throughout the 1940s, 1950s, and 1960s, including increased benefits, expanded coverage, and the creation of Medicare. This trend of refinements hit a stumbling block in 1977 when the Government Pension Offset (GPO) cut some payouts to some spouses and widowers of Social Security beneficiaries. As more women entered the workforce, accelerated by WWII-era labor changes, the number of people eligible for Social Security skyrocketed, stressing the program's limited funding. The government's solution was to restrict the pool of recipients.

The GPO targeted spouses receiving spousal benefits based on their partner's employment and standard retirement or disability payouts from their own employment. While perfectly legal at the time, many argued that this double-dipping was an unnecessary drain on the system. When in effect, this initiative cut funding for nearly three-quarters of a million retirees and disabled individuals on an annual basis. Targeted individuals saw a two-thirds reduction in benefits from their retirement or disability disbursement. To the celebration of GPO critics, the Social Security Fairness Act repealed this amendment in early 2025, restoring full coverage for spouses across the country.

The government's cost-cutting initiatives didn't stop with slashing spousal benefits. As the program's financial health came under intensifying scrutiny, some legislators turned their attention to state and municipal employees who also took on employment covered by Social Security. In these cases, individuals were eligible for both local and federal benefits. Attempting to right this perceived wrong, Congress passed the Windfall Elimination Program (WEP) in 1983. The amendment tightened Social Security's eligibility requirements by reducing coverage for retirees and disabled individuals qualifying for a pension from employment not included in the program.

More than two million retirees across the country were affected by the legislation, especially police officers, firefighters, teachers, and other state employees. Those in favor of WEP argue it was a protective measure to secure full benefits for those who relied solely on Social Security. However, others highlight that it unfairly singles out government employees at the state and local level who earned Social Security benefits by holding a job covered in the program. The recent Social Security Fairness Act that eliminated GPO also wiped out the WEP provision, making regional government employees eligible once again.

Social Security is by far the country's most expensive program, comprising over one-fifth of the federal budget annually. The system is mainly funded through payroll taxes, meaning the government withholds a certain percentage of wages or salaries from the majority of Americans. Generally, this burden is split between employees and employers, excluding self-employed individuals. Although most people support funding Social Security on paper, some of the program's most controversial changes have been increases in taxes.

In 1977, President Jimmy Carter scheduled subsequent increases in the employee portion of the payroll tax for combined Social Security and Medicare from 6.05% to 7.65%. This tax hike was reflected in payroll taxes for employers, too, effectively boosting the programs' annual revenue by roughly 3%. The changes were supposed to be eased into effect through 1990, but President Ronald Reagan accelerated their implementation as part of his sweeping Social Security changes. Currently, the employee payroll tax remains at 7.65%, breaking down to 1.45% for Medicare and 6.2% for Social Security.

In 1983, President Ronald Reagan oversaw one of the largest Social Security makeovers in the program's long history. Among the most detested changes was the decision to start taxing benefits. This had been a third rail of politics for decades, with most politicians steering clear of even suggesting such a measure. As part of his comprehensive reform package, Reagan enacted the first tax on social security benefits. The bill opened up 50% of recipients' benefits to federal income tax when earning over a certain threshold. At the time, individuals or couples earning more than $25,000 and $32,000, respectively, were impacted.

Critics cautioned that this additional tax would only invite the government to deprive recipients of more deserved benefits. These prophetic warnings were realized when President Bill Clinton followed in Reagan's footsteps, boosting the taxable share of payouts by 35%. Yet, he only increased the income thresholds to $34,000 for singles and $44,000 for joint-filers. For decades, up to 85% of Social Security benefits were subject to federal income tax. However, the One Big Beautiful Bill Act effectively eliminated taxes on Social Security benefits for 88% of eligible recipients.

Raising the retirement age from 65 to 67 was another major component of Reagan's transformative Social Security overhaul. Lawmakers justified the change by pointing to the country's rising life expectancy. When the program was launched, the average man lived to 58 and the average woman to 62. Ironically, most people didn't survive past the retirement age of 65. Due to medical advancements and an improved quality of life, people started living much longer, with the average life expectancy reaching 74 by 1983. The government planned to raise the retirement age gradually over three decades, with those turning 62 years old in 2022 or later having a full retirement age (FRA) of 67.

Although this remains the sole upward adjustment in the program's FRA, there's fierce debate over whether another revision is needed to address the program's exploding budget. However, an unexpected reversal in America's life expectancy has complicated the argument. Johns Hopkins points out how the country's current drop in life expectancy mirrors those following World War I and the Great Influenza. Still, increasing the FRA remains a favored solution by many people warning about Social Security's solvency issues.

In 1935, President Roosevelt passed the Economic Security Bill, which contained a little-known yet highly impactful provision known as the retirement earnings test (RET). The legislation stated that, "No person shall receive such old-age annuity unless...He is not employed by another in a gainful occupation." In other words, people who continued working at or past retirement age weren't eligible for benefits. In 2000, President Clinton pushed for a complete repeal of RET. In the end, both houses of Congress voted unanimously to modify the clause, allowing eligible retirees to join the workforce without being penalized for supplemental income.

On its face, this might not seem like a controversial change, but detractors argue that the penalties discourage near-retirement individuals from holding down a job. Although Social Security primarily covers retired individuals, the extensive program also provides benefits to younger groups, including disabled workers, spouses or dependents of disabled workers, or survivors of deceased employees. These individuals are still penalized for attempting to remain in the workforce. Many contend that RET unfairly punishes those trying to hold down a job. Unfortunately, RET remains one of the most misunderstood and obscure parts of the Social Security system, making it even more challenging for those impacted.

As concerns over the ballooning national debt seep into public discussion, Social Security has fallen under increased criticism for improper payments. A growing chorus of detractors maintains that the program is losing too much money due to improper oversight. This can come in the form of overpaying eligible beneficiaries or covering unqualified individuals. Internal records suggest overpayments have a prevalence of roughly 7% to 8%. Furthermore, reclaiming those overpaid funds costs around $0.08 for every dollar. (That's more than double what it costs the government to make a dollar.)

To address this loss of revenue, President Donald Trump threatened to withhold a lofty 100% of a recipient's monthly benefits in the event of an overpayment until the overpaid amount was returned. While it's common practice for Social Security to levy a penalty on those who fail to repay improper distributions, the withholding has historically been placed at 10%. Amid public outcry over the proposed fine, the Trump administration scaled back the penalty amount to 50%. This amount is half what was anticipated, yet it breaks with a long tradition of placing the financial burden on the administrative state rather than individuals.

To streamline federal operations, the Trump administration has sought to digitize much of the antiquated Social Security apparatus. Earlier this year, the government announced plans to eliminate paper mail disbursements, opting to send payments in digital form. This transition to electronic payments takes effect on September 30, 2025. The government claims that only 1% of recipients receive paper checks, but advocacy groups argue that many elderly and disabled recipients struggle with access to electronics and digital literacy, making it harder for them to receive their deserved payouts.

Another digitization change will remove the ability of beneficiaries to edit bank information over the phone, a move projected to force two million retirees and disabled individuals to visit regional offices. This unwelcome news was accompanied by rumors that the government planned to close dozens of field offices, although the administration has denied such reports. While championed by the government as a cost-saving success story, many warn that the digitization trend will make it harder for retirees to receive their benefits.

While Social Security is mainly financed via payroll taxes, not every dollar earned is subject to these federal withholdings. Since the program's inception, the government has placed a ceiling on how much income it can target to fund the safety net. This payroll tax cap was set at $3,000 in 1937, meaning every dollar earned beyond this threshold couldn't be taxed for Social Security purposes. The program's initial tax limit equals $66,000 in modern dollars, yet the current payroll cap is $160,000. There have been several adjustments to this tax limit over the years, and discussions have been reignited as the program faces insolvency issues.

Some complain that the payroll tax cap disproportionately advantages higher-income individuals by taxing lower-income earners at the same rate. Furthermore, there's a widespread assumption that FICA is a regressive tax unfairly burdening those earning less. In a comprehensive study, the Social Security Administration claims that "the program generally provides a higher internal rate of return for lower earners and earners with family members than it does for higher earners and workers."

Since its inception, Social Security has been publicly funded, meaning the government has been the sole financier and all excess funds have been reinvested. Until 2010, the program actually operated in a surplus, with income from payroll and benefit taxes completely covering payouts. Over the past 15 years, however, the welfare system has run up an annual cash deficit, totaling nearly half a trillion dollars. Once these insolvency issues arose, lawmakers started discussing the potential privatization of the program, in part or in whole.

President George W. Bush floated the idea in 2005, pushing Congress to permit Americans to invest parts of their contributions. Most recently, Treasury Secretary Scott Bessent openly discussed using the $1,000 "Trump accounts" as a backdoor means of privatizing Social Security. To date, this may stand out as the most contentious proposal. A survey by the Data for Progress found that a combined 77% of voters (79% Democrats, 76% of Republicans, and 74% of Independents) are against attempts to privatize the program.

Social Security controversies aren't a fixture of the past. The Republican-led One Big Beautiful Bill Act has thrust the country's core safety net into the national spotlight, reigniting debate surrounding its budget, purpose, and future. With less than one-third of Americans supporting the bill, it remains one of the most unpopular bills in recent memory.

A key area of pushback is the legislation's negative effects on Social Security. While many champion the reduction of taxable benefits, others contend that the resulting cut in funding will further kneecap an already hobbled budget. Furthermore, Treasury Secretary Bessent's comments surrounding the program's privatization raised alarms over the direction of the Social Security structure under this administration. At this point, experts can only speculate what kind of changes the comprehensive tax bill will have on the welfare system, as any serious shifts could take years to develop. 

In July 2025, Social Security celebrated its 90th anniversary, marking nine decades of offering crucial coverage to the elderly and the disabled. As the cornerstone welfare program looks to the future, question marks linger. Throughout its history, Social Security has had to walk a thin line between fiduciary responsibility and guaranteed coverage. That balance is only becoming more delicate as underlying fiscal weaknesses rub against an aging population and soaring cost of living.

According to the Board of Trustees, Social Security and Medicaid "face significant financing issues," projecting that combined funds would run dry by 2034, with ongoing income only covering 81% of scheduled coverage. At the same time, the cost of living is skyrocketing with inflation rising more than 30% in the past 10 years alone. To make matters worse, low and middle-wage workers have seen their income change by -5% and +6%, respectively. This widening gap between the program's constricted budget and out-of-control living expenses has set the stage for more controversial Social Security changes down the line.