Summary

Social Security provides a reliable source of consumer demand in the economy, paying New Yorkers about $92 billion in 2025. With the trust fund reserves running out in late 2032, Washington may cut benefits -- again. Past cuts cost New York tens of billions of dollars in lost business activity. Raising the retirement age to 68 to 70 and increasing benefit taxes would cut the typical retiree's check further. Because women live longer, their lifetime losses are larger. Ultimately, benefit cuts reduce the consumer demand that keeps neighborhood businesses afloat.

Ask a pharmacist in the Bronx or a diner owner in Buffalo who their steadiest customers are. Many will say the older neighbors. Their spending does not rise and fall with the stock market or the business cycle. Their income arrives every month, because most of it comes from Social Security.

That makes Social Security one of the most reliable sources of consumer spending. The program paid New Yorkers about $92 billion in 2025, according to the Social Security Administration’s state and county data. Retirees spend nearly all of it close to home, on rent, groceries, prescriptions, home repairs and restaurant meals. Business has a direct stake in the size of that check.

Washington is now weighing cuts and revenue increases. It is widely known that the retirement trust fund will run out of reserves in late 2032, according to the 2026 Trustees Report. Some members of Congress and commentators want to close the gap the way the 1983 deal did: raise the retirement age and tax more benefits.

A focus on New York is a useful lens, and the findings apply to every region in the nation. A new report from my Wealth Equity Lab at The New School, written by PhD candidates Jessica Forden and Karthik Manickam and sponsored by AARP New York, shows what that approach costs. The cost is tens of billions of dollars in lost business activity.

The 1983 Cuts Left Money on the Table

The 1983 amendments rescued Social Security from a short-term cash crunch. But for the long run, they relied on cutting benefits far more than on raising revenue. The National Academy of Social Insurance tallied the damage. Raising the full retirement age from 65 to 67 cut benefits 13.3%. Taxing benefits cut another 5.1%. Delaying the cost-of-living adjustment by six months cut 1.4%. Together, the changes reduce benefits about 19% for everyone born in 1960 or later, and that group began turning 65 in 2025.

For the average New York recipient, the cuts mean about $350 less a month, more than $4,000 a year. Every one of those dollars is a sale that never happened.

$26.2 Billion in Lost Business Activity in One Year

If benefits were 19% higher” New York beneficiaries would have had another $17.5 billion to spend in 2025. That money would not have sat in a brokerage account. When a retiree buys groceries, the grocer pays a cashier, restocks from a distributor and pays rent to a landlord. Research from the National Institute on Retirement Security finds that each dollar of income for older households generates between $1.10 and $2.00 of economic output in the state.

At the midpoint of 1.5, the restored benefits would have generated $26.2 billion in added economic output in New York State in 2025 alone. At the low end of the range, the loss is $19.2 billion. At the high end, it is nearly $35 billion. New York City alone lost $8 billion, more than 30% of the state total.

That is demand businesses never saw: revenue lost to retailers, health care providers, landlords and restaurants, and wages lost to the workers they would have hired.

New Social Security Cuts Would Shrink Demand Again

We then modeled what a 1983-style deal would look like if passed today. It has two parts: raise the full retirement age from 67 to 70, and raise the maximum share of benefits subject to federal income tax from 85% to 100%. We followed typical New Yorkers receiving the median benefit who retire in 2040.

The retirement age change works through the claiming penalty. Under current rules, a worker who claims at 65 receives 86.67% of the full benefit, under the Social Security Administration’s early claiming formula. Move the full retirement age to 70 and the same 65-year-old receives 70%. The tax change adds a second hit, and because the income thresholds in IRS Publication 915 have never been adjusted for inflation, more middle-income retirees cross them every year.

Together, the two changes would cut the typical New York State retiree’s check by $433 a month, in 2024 dollars – a 20.7% cut. In New York City, where median benefits are lower, the cut is $370 a month. Measured over a retirement, using the present-value approach in the Urban Institute’s lifetime benefits model, the losses reach $84,335 statewide and $80,076 in the city.

For business, the arithmetic is simple. At the report’s midpoint multiplier, each $433 cut removes roughly $650 a month in economic activity, for each new retiree, for the rest of that retiree’s life. As each new class of retirees ages into the smaller benefit, the drain on consumer demand grows year after year. The 1983 cuts took four decades to fully phase in. A new round would stack a second drag on top of the first. Business should speak up.

Women Live Longer, So They Lose More

Longevity turns a monthly cut into a lifetime one. In New York City, a woman who reaches 65 can expect to live 23.9 more years, nearly three years longer than a man. Her monthly check would be cut by $369, slightly less than a man’s $375. Because she collects for more years, her lifetime loss is larger: $83,418, against $76,766 for a man.

Older women also rely more heavily on Social Security than older men, because they earned less, saved less, and more often outlive a spouse. A cut that lasts longer and takes a bigger bite of their income means less spending at the neighborhood businesses older women keep afloat.

Working Longer Does Not Escape the Cut

Defenders of a higher retirement age say people can work a few more years. Our numbers show what that buys. If another round of 1983-style cuts was enacted, a New Yorker who works until 67 still loses $196 a month, a 9.4% cut, and $82,382 over a lifetime. One who works until 68 avoids any additional claiming penalty. but still loses $38 a month to the new tax, collects for three fewer years and gives up $78,535 in lifetime benefits. And many workers cannot choose. Bad backs, layoffs and caregiving decide when people stop working far more often than spreadsheets do.

Business Should Back the Social Security Revenue Fix

The 1983 deal asked future retirees to pay the bill, and New York’s economy is paying it with them. Congress does not have to repeat that choice. The Social Security actuaries have scored dozens of solvency options, including raising or removing the cap on earnings subject to the payroll tax. Today, a nurse pays Social Security tax on every dollar she earns. A hedge fund manager stops paying after the first few months of the year.

Business leaders often see Social Security as a line on the payroll tax statement. It is also a line on the sales report. New York already loses $26.2 billion a year in economic activity to the last compromise. Another round of benefit cuts would take more customers out of the market, store by store and month by month. A retirement age of 70 is not reform. It is a cut in the demand that keeps Main Street open.