On Social Security, Ignorance Is Bipartisan

Social Security myths are like cockroaches

In a previous article, I rebutted arguments from a more left-leaning publication about Social Security’s fiscal soundness and status as a “right.” However, it appears that not everyone read that piece (shame on them), so along comes a right-leaning author who makes essentially the same mistakes and some new ones. I thus felt obligated to once again go myth-busting.

The article this time comes to us from Donald Jeffries and is entitled “Trump, Shapiro, and the War on Social Security.” He contends in the piece that Social Security is “the primary income most retired people rely on” and “your money being paid back to you, very gradually…not a ‘welfare’ style perk that lazy oldsters are unfairly receiving” and that Ayn Rand followers in the Republican party believe “we have no obligation to help our neighbor,” so they are anxious to cut these programs rather than other government departments or foreign aid.

As for solutions, Mr. Jeffries provides several:

• Personal savings accounts: “How about isolating the benefits each individual paid, in their own personal fund?”

• No income cap on Social Security taxes: “Just having all that One Percent income taxed alone would make Social Security solvent. This is a simple fix. Eliminate all that government fraud and waste.”

• Eliminate other spending: “Not foreign aid, including the unfathomable amount we continue to funnel to ‘democratic’ Ukraine. Zelensky is more important that [sic] grandma. How about cutting all those worthless federal agencies? Department of Energy? Department of Education? Homeland Security? FEMA? Maybe if they raid Mar-a-Lago again, the FBI?”

Mr. Jeffries seems to be concerned for seniors, but his inaccuracy papers over the fact that such entitlement programs are fiscally unsound, are not going to be saved by taxing the “rich” or eliminating departments, and are not earned rights—all dangerous misconceptions for someone who appears to care about the future of this program.

Social Security is My Right and My Money

Let us take this brief example to see how Social Security (and Medicare) actually works:

Alex is currently employed, and Betsy is a bit older and now retired. Along comes Uncle Sam who says that it is important to give Betsy some money to help her in her old age. So, Uncle Sam forces Alex to give him 15.3% of his wages, which Uncle Sam then gives to Betsy. (However, Uncle Sam may tax Betsy on 50%–85% of the money she received.) Uncle Sam also tells Alex that he may be eligible for the same deal when he reaches the arbitrarily defined retirement age. When Alex reaches that point, Chris, a new worker, will be forced to pay 15.3% of his wages to support Alex. Then, when Chris reaches the arbitrarily defined retirement age, Dawn, a new worker, will be forced to pay 15.3% of her wages to support Chris.

Notice that at no point did anyone receive his or her money back; that money was taken via payroll taxes and then spent on current beneficiaries. It was not saved in an account and parceled out to the original payor over time. In fact, Social Security already pays out more in benefits than it receives in revenue, and by 2034, the program will be able to pay only roughly 75% of benefits, assuming no changes to the system in the interim.

Furthermore, Social Security’s status as a right or a return of capital you paid in was unequivocally debunked by the Supreme Court in 1960. In the Fleming v. Nestor decision, the Court found that Social Security benefits may be changed at any time by Congress and are not rights or any type of contract:

To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands…. It is apparent that the non‐​contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments. [Emphasis added.]

In addition to erroneously arguing for Social Security as a right, Mr. Jeffries argues that cutting Social Security would be callous, but he fails to explain (a) why his suggestion to cut people’s government jobs is not (on what will they live?) and (b) why a certain group of people even deserves other people’s expropriated money. Basing arguments on kindness or callousness is a sure road to unlimited government because every government program and intervention can be and has been couched in terms of “helping” one group or another. For instance, every school district of which I am aware in the U.S. receives some federal money, so don’t our children deserve that funding, perhaps more than the elderly? What about scientists who receive grants from the Centers for Disease Control? Do they deserve other people’s money less than people who are simply older?

To be clear, I do not think any coercive funding should exist, so I do not argue for one group over another; I simply raise these questions to point out the fallacy in Mr. Jeffries’s original argument. Essentially, if he believes Social Security is a worthwhile program deserving of forced taxation, then he needs to grapple with the numerous other programs and recipients of government’s expropriated funds and explain why, in his moral vision, the elderly deserve confiscated funds at all and why more so than do other groups.

Social Security Can Easily Be Bolstered

As I noted above, Mr. Jeffries suggests several answers for Social Security’s solvency; however, he fails to provide any data, which may explain why each of his solutions is mathematically untenable.

First, though, I will deal with the non-mathematical issue of personal savings accounts. Mr. Jeffries asks, “How about isolating the benefits each individual paid, in their own personal fund? Give people the option of taking a lump sum of their entire account?” This seems like a much better idea than the current system, except for two minor issues.

One, that system would limit recipients to what they paid in, which may strike Mr. Jeffries as callous because, currently, the lowest earners (and many middle-income earners) receive more in benefits, on average, than they paid in. For example, according to data from the Urban Institute, an average married couple earning $46,800 annually and claiming Social Security in 2025 would receive $412,000 in benefits but have paid only $288,000 in Social Security taxes (and the projected gap only grows over time). Thus, a personal savings account would run counter to Mr. Jeffries’s stated concern for the poorest workers—in this example, decreasing their benefits by roughly 30%.

Second, such a plan makes one wonder why even have the government collect Social Security taxes? If the money will be deposited into individual accounts, why can workers not do that for themselves without government intervention?

In fact, if the workers in the example above simply took 12.4% of their wages (the portion of the 15.3% in taxes specifically designated to Social Security) on their own and deposited that amount annually for 30 years into an account earning 5% interest, they would end up with $381,439, and that assumes no increase in their wages over those 30 years. Over 40 years, that amount would grow to nearly $700,000.

Mr. Jeffries also suggests shoring up Social Security by abolishing the wage cap for Social Security taxes and reducing or eliminating unnecessary government agencies. Again, though, neither of these solutions is grounded in reality.

According to a 2021 report from the Congressional Research Service, taxing all earnings above the current caps would only cover 73% of the projected shortfall over the next 75 years—and that assumes paying no extra benefits on those newly taxed wages (see Table 3).

As for phasing out federal agencies and waste, in 2023, the agencies/areas Mr. Jeffries mentioned received the following amounts:

• Department of Energy: $34.4 billion

• Department of Education: $41.1 billion

• Homeland Security: $89 billion ($40.3 billion of which went to FEMA)

• FBI: $10.7 billion

• Ukraine aid: $74.3 billion

Thus, these areas received a total of $249.5 billion. In contrast, between now and 2032, the Social Security Administration estimates a $2.491 trillion deficit for Social Security ($276.7 billion per year)—under only intermediate assumptions. Under high-cost assumptions, the deficit increases to $3.506 trillion ($389.5 billion per year). (Note I ignored the low-cost assumptions because they are already inaccurate given 2023 revenue and expenses for the program.)

Regrettably, math tells us that even eliminating tomorrow all the items Mr. Jeffries suggests would be insufficient to cover the Social Security deficit for the near future under moderate assumptions, to say nothing of the added Medicare deficit of $343 billion over the next 8 years (by 2031, the Medicare trust fund is projected to be depleted, too).

Although I appreciate fodder for article topics and Mr. Jeffries’s fervor for cutting certain government programs, I appreciate reality even more. The problem is government spending, and Social Security and Medicare are two of the largest culprits; thus, any serious work towards fiscal stability and respect for individuals (not increased taxation for some) needs to reduce all government spending and taxation, not just for favored or disfavored groups.