The recent enactment of the Social Security Fairness Act, which increased retirement benefits for 2.8 million public sector workers at the cost of $196 billion, foreshadows what Americans can expect of entitlement reforms in the future, an economist warns.

“The main trend that we’re observing is that politicians in Washington are far less willing to consider trade-offs, and far more motivated to bestow new benefits and handouts to favored groups, without considering the long-run fiscal implications of those actions,” Romina Boccia, director of budget and entitlement policy at the Cato Institute, told The Center Square.

The Social Security trust fund is set to become insolvent in seven years, resulting in a 20% to 25% automatic cut in benefits unless Congress acts.

The main problem, Boccia said, is that lawmakers would rather take harmful but politically popular actions – such as the Social Security Fairness Act – rather than reduce the deficit and make serious reforms.

As the insolvency deadline looms, politicians will likely try to take the easy way out, such as ignoring the trust fund depletion and authorizing unlimited borrowing, ultimately leading to a fiscal crisis, she said.

Another “quick fix” that lawmakers are currently eyeing is the “speculative gains” strategy, where the federal government would borrow $1.5 trillion and then invest it in the U.S. stock market, hoping the market goes up sufficiently to where the gains can be used to pay for future benefits.

“It sounds really good, and it sounds like there’s no tradeoffs,” Boccia said. “What proponents of this measure do not mention is that one, it’s a very risky strategy – you’re going into debt now to see if you can make money down the road from that.”

In fiscal year 2024 alone, the national debt grew by $2.5 trillion, reaching $36.3 trillion.

Additionally, the speculative gains option would cause the federal government over time to become a major shareholder of the U.S. stock market, which could significantly meddle with market outcomes and lead to political and socially driven investing.

But most importantly, by buying up stocks that would otherwise be held by private citizens, the proposal is essentially a tax increase in disguise, Boccia said.

With the newest estimate from the Congressional Budget Office predicting the national debt will hit $52 trillion by 2035, Congress has two feasible options to protect current Social Security benefits without inflicting fiscal harm, according to Boccia.

One is to change how the Social Security Administration calculates initial benefits when people first apply to Social Security, indexing individual earnings to inflation, rather than to wage gains as is currently done.

“[This] could close up to 85 percent of the long-term shortfall in the Social Security programs,” Boccia said. “So we could actually preserve the level of current benefits and adjust them with inflation so they maintain their purchasing power, but we would get rid of this additional benefits boost.”

Another option is to eliminate the cost-of-living adjustment for higher earners who receive Social Security benefits, which would preserve the benefits at the current level, but not increase them in line with inflation going forward.

Whichever path Congress chooses, Boccia said, “it's going to be a very tough battle as broader Social Security reforms become necessary.”