Fixing Social Security

I have written more than once on how to fix Social Security. The main components are:

Change the entitlement into a contract,

Freeze the current program, such that Congress cannot amend it, up or down, in the future,

Distribute worker contributions first, tax free,

Change the death benefit so that workers or their survivors will, at a minimum, receive a refund of their contributions,

Congress to come clean and confirm to all Americans, those who are paying FICA today and those who are receiving benefits, and those who are not currently employed of all ages, that they have lied to Americans for 90 years, and have consistently promised more than they are willing to fund,

Congress to confirm to all Americans that they have borrowed the Social Security assets by investing them in treasury securities, and using those monies to fund other aspects of the federal government – enabling the federal government to spend more than it was willing to tax.

Require the Social Security Administration to calculate just how much each worker should have paid that would have made the system sustainable for 1, 2, 5, 10, 20, 25, 50, 75 years and all lives in being today,

Confirm the amount to each individual, working or receiving benefits, and, giving them choices (increased taxes or reductions in benefits, or combinations) on how they are going to individually pay that bill, converted into individual elections,

True up the pricetags and repeat that process once each year and allow every American to change their election.

Outcome: Every worker knows that they have contributed only what they were supposed to contribute to this indefinitely sustainable system

Else, all you have is a variant of a ponzi scheme. From last week’s WSJ

https://www.wsj.com/opinion/politifact-vs-elon-musk-f5a1c560?mod=opinion_feat5_bestoftheweb_pos3

PolitiFact vs. Elon Musk
Do victims feel any better if Ponzi schemes are legal?

By
James Freeman
March 20, 2025 5:52 pm ET

It seems that neither party in Washington wants to reform entitlement programs, and most of the press corps doesn’t either. Now along comes the opinion site PolitiFact with another bold but dubious defense of the Beltway status quo. Fortunately the media watchdogs at NewsBusters are ready to poke holes in it.

PolitiFact is grading the following comment Elon Musk made last month in an interview with podcaster Joe Rogan: “Social Security is the biggest Ponzi scheme of all time.”

PolitiFact calls this statement false. But as Alex Christy of NewsBusters notes, much of PolitiFact’s argument rests on the fact that Social Security is a government program. When it comes to describing how the program actually operates, the following PolitiFact passage is bound to convince a number of readers that Mr. Musk has spoken the truth:

The Social Security system, which started in 1935, works on a “pay-as-you-go” basis that transfers current workers’ payroll tax payments to people who are already retired.
“The vast majority of those taxes have always been paid out immediately from the young to the old, with the promise that tomorrow’s old will in turn receive benefits covered by the taxes paid by tomorrow’s young,” said Eugene Steuerle, a fellow and Social Security specialist at the Urban Institute think tank.

This structure has some similarities to how new Ponzi scheme investors provide payouts to earlier investors.

“If there are no longer enough workers to provide enough payroll tax contributions to pay out benefits to retired workers, then the system would fail similar to how a Ponzi scheme would fail in the same manner,” [the University of Akron’s professor Eric] Brisker said…

At the current pace, Social Security’s trust funds won’t be able to pay 100% of benefits by 2035, the 2024 Social Security Trustees Report said.

Mr. Christy at NewsBusters notes that PolitiFact might have just said “Musk was correct or that it was a legitimate opinion akin to saying a politician is acting corruptly or unethically even if he technically hasn’t violated any laws.”

In its defense, PolitiFact does acknowledge that in the past even a number of left-of-center columnists have called Social Security a Ponzi scheme.

…

These dynamics can cause havoc in pay-as-you-go retirement programs, where younger workers pay for their elders’ benefits through taxes. In 1958, Dr. Paul A. Samuelson, a Nobel laureate and professor emeritus of economics at the Massachusetts Institute of Technology, demonstrated what is sometimes called the “biological rate of return.” The benefits paid can keep rising, as long as each generation grows in size.

“The pay-as-you-go systems work as a nice Ponzi game when you have a big increase in population,” Dr. Samuelson said in an interview last week. “Everything goes in reverse when you’re in a declining population.”

Back in 1999, the Times permitted another Nobel Prize-winning economist, Milton Friedman, to explain how Social Security works—including the fact that there is no money in the program’s “trust fund”:

…

Writing recently at the Marginal Revolution website, George Mason University economist Alex Tabarrok quotes another Nobelist, Paul Krugman, writing in 1996:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).
Mr. Tabarrok added the italics.

LikeLike