Social Security is not a retirement fund—it's a transfer program, taking income from the payrolls of current workers and giving it to retirees. Generally, these retirees are already wealthier than the workers subsidizing them. Social Security's retirement payments (Old-Age and Survivors Insurance) should be phased out because of the program's unsustainable and regressive nature, freeing workers to better use their earnings to plan for their own retirement.
This should be easy to grasp: Retirees have had a lifetime to work, pay off their mortgages as their homes appreciate in value, and let their retirement accounts grow. Meanwhile, young workers are starting at the bottom of the labor market, have much less in savings to draw on in case of emergency, and often struggle to make rental payments or find an affordable home to buy. The median household wealth of those under 35 years old is $30,500, compared to $341,400 for the 65- to-69-year-old age group, according to the latest Census Bureau data from 2021.
Who do you think can better handle a financial emergency? It's retirees, according to 2023 data from the Federal Reserve's Survey of Household Economics and Decisionmaking. Only 39 percent of people aged 18–29 have three months of emergency savings, compared to 69 percent of the 64-plus age group. "The same pattern holds for nearly every financial question the Fed survey asks," writes Andrew G. Biggs of the American Enterprise Institute.
Perhaps the retirement payments would be more defensible if their taxation hit only the wealthy and the benefits went only to retirees with little income or savings. But most aspects of Social Security are not means tested. That means very wealthy people receive core Social Security benefits. Forcing workers to fund current retirees is indefensible, and forcing poor workers to help rich retirees is contemptible. (The other element of Social Security, payments to people with disabilities, is not regressive. It is also odd to house it in the same program as a retirement plan.)
Even if the program were progressive, or at least not regressive, it still robs Peter to pay Paul. "But retirees aren't stealing from workers; we paid into Social Security and earned those benefits," outraged baby boomers and present workers alike might respond.
Aren't contributors entitled to receive as much money as they paid? You'd think so, but legally it's not the case. That's why Social Security's pay-as-you-go setup is as morally bankrupt as the program's so-called trust fund—mere claims on Treasury deposits—is financially so.
In Flemming v. Nestor (1960), the Supreme Court ruled that workers "have no legally binding contractual or property right to their Social Security benefits." No matter how much you paid in payroll taxes for decades, Congress could cut or take away your Social Security benefits.
There is "no direct relationship" between the taxes a generation (involuntarily) pays into Social Security and the benefits that generation eventually receives, explains Michael Tanner, senior fellow at the Foundation for Research on Equal Opportunity. In short, a dollar a worker pays into Social Security now isn't saved for his or her retirement—it briefly goes into the Treasury's coffers before being sent to retirees.
Lacking rights to Social Security benefits is not surprising considering the trust fund is not an investment portfolio but a mere accounting mechanism. Don't take my word for it; read what the Clinton administration's Office of Management and Budget had to say: Trust fund balances "are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense." Today, the main source of the fund's revenue is not interest earnings on Treasury deposits (4 percent of total revenue) or taxes on Social Security benefits (5 percent) but the payroll tax (90 percent).
Social Security's trust fund fits the Securities and Exchange Commission's definition of a Ponzi scheme as "an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors." In other words, the payment of purported returns to retirees from taxes contributed by current workers, who will later have returns funded by future workers, and so on and so forth.
Ponzi schemes are unsustainable; Social Security is no exception. The 2024 Trustees Report states that Social Security's costs have exceeded noninterest revenue since 2010. The program's benefit payments have exceeded total revenue (including interest) since 2021, and the trust fund's reserves (read: claims on Treasury deposits) are projected to be depleted by 2033.
When that day comes—barring major reforms from politicians who have largely shown little to negative interest in doing so—Social Security will be forced to automatically cut benefits by about 20 percent. Instead of waiting, stop robbing poor, hard-working Peter to pay well-off, retired Paul. Abolish Social Security.
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