Of all the issues plaguing our country today, the one that people are in the most denial about is Social Security. It is also the one that elicits the most anger from people when they are confronted with the facts. This shouldn’t be any surprise given that the government has been lying to us about the nature of the Social Security System since its inception.
The confusion even pervades many good, strong conservatives who have become completely delusional about Social Security. Like the general public, a lot of conservatives believe that Social Security is built around a trust fund. They also believe that Social Security is in trouble because politicians have been robbing that trust fund for decades. As we’ll see, neither of these things are true.
Government Finances 101
Before we discuss the specifics of Social Security, it’s important to understand that the federal government does not have any mechanism to save money. They can’t open a bank account. They can’t invest in the stock market. They can’t buy corporate bonds. If a government account, like Social Security runs a surplus in a given year, the only thing they can do is buy government bonds. When the government receives money from selling a bond, it puts the money in the general fund and uses it for current expenditures. And the bond is a debt obligation that must be repaid, with interest.
If the entire government manages to run a surplus in a given year, they could also use the money to pay off government bonds held by the public. This would reduce the government’s debt. But the federal government has only run an annual surplus four times since 1969.
Reality Versus Rhetoric
Many people believe that Social Security works something like this: During your working years, you contribute money into a trust fund for retirement. The money continues to accumulate in the trust fund until you retire. When you retire, you receive payments from the trust fund to supplement your other retirement income.
But the Social Security trust fund is a mere accounting fiction. It doesn’t really exist. This is the big lie that the government has been telling the public since Social Security was created. Social Security is really a pay-as-you-go system that transfers money from working people to retirees. It relies on an ever-increasing number of people contributing to the system to pay benefits to the retirees. The people who got into the system very early got back on average 15 times the amount of money they paid in. People receiving Social Security benefits today get back less than 1.5 times what they paid in. Many current retirees will receive less than they paid. And the situation is about to get worse. The American population is quickly aging. By 2034, Social Security benefits will have to be cut by 23% to support retirees because there won’t be enough people contributing to the system to sustain current benefit levels, without raising Social Security taxes. These retirees will receive far less money than they paid into the system.
But Isn’t Social Security in Trouble Because Politicians Robbed the Trust Fund?
One thing you hear often is that Social Security is in trouble because politicians have been robbing the trust fund. This is untrue because there isn’t any trust fund. The contributions you make throughout your working life pay for the benefits of current retirees. Yes, sometimes Social Security may run an annual surplus where Social Security tax revenues are larger than the benefits paid. The government uses that surplus to buy government bonds and the money is placed in the general fund and spent on things like welfare and foreign military adventures. But this represents a small amount of the total taxes that have been paid into the system since its inception. And since 2010, Social Security has been running annual deficits.
What Can Be Done to Fix the System?
People need to be able to save for their own retirements. And Social Security needs to be taken back to its roots as a program that supplements the income of retirees who didn’t make enough money to save for their own retirements. There are a few things that can be done to move us in the right direction.
First, we must finally recognize Social Security is a welfare program that transfers money from working people to retirees. But it’s a welfare program that allows wealthy people to escape paying taxes. Incomes above $160,000 are not taxed. Social Security taxes should apply to every dollar earned, like Medicare taxes. Including high income earners in the system would allow us to lower the Social Security tax rate, so people would have more money to save for their own retirements.
Second, benefits should be means tested. 25% of retirees have pension or investment incomes that place them in the wealthy category. Even millionaires and billionaires can collect Social Security benefits. Why should young struggling families hand money over to wealthy retirees? Means testing the system to remove the wealthy retirees would go a long way to ensuring the system’s solvency.
Third, the retirement age must be increased for future retirees. When Social Security was implemented, the retirement age was 65, but the average life expectancy was only 59 for men and 61 for women. Many people didn't live long enough to receive benefits. Today, the retirement age is 67, but life expectancy is 73 for men and 78 for women. The system wasn’t designed to support tens of millions of people collecting benefits for a decade or more. This will have to change to keep paying benefits for those who truly need them.
The Bottom Line
I know that a lot of people don’t want to hear any of this. Some will continue to believe that there is a trust fund that the politicians have been robbing. Many will also demand that the politicians somehow pay the non-existent trust fund back. But it’s time to face reality. The Social Security System has been a fraud from the beginning. It’s a pay-as-you-go system where a continually increasing number of workers are required to pay for current retirees. There is a name for that type of financial system. It’s called a Ponzi Scheme, which is illegal in the United States. Social Security is the largest Ponzi scheme in the history of the world, and it is being run by your government.
Americans have been warned about the long-term consequences of Social Security for decades. I wrote an article about this 12 years ago. Few people listened. Today, Social Security is on the verge of collapse. By 2034 at the latest, the system will be exposed for what it really is, and many retirees will suffer when their benefits are slashed by 23% or more.
The Blankenburg Report
Eric is a husband, father of four, technology guy, U.S. Air Force veteran, and left coast refugee. He is a lifelong conservative and “disgruntled” Republican, who has sought ways to help the GOP live up to its values. When Eric is not working or spending time with his family, he likes to write about a variety of current issues. Eric is a regular writer for Liberty First Grassroots (LFG).