What's the Deal With Who Broke Social Security?

If I understand Social Security funding correctly, we contribute to it throughout our working lives, with the expectation of receiving benefits in retirement. However, at some point, Congress began using these funds for other purposes, shifting the system to rely on younger workers to pay for current retirees.

To fix this, we need to stop diverting Social Security funds, accept the financial burden of covering current and soon-to-retire beneficiaries, and transition to a system where each generation's contributions are preserved for their own future benefits. This would make Social Security self-sustaining and potentially even profitable.

Sounds good, but let's look at that more closely, as there are a few clarifications and nuances to consider:

1. How Social Security is Funded:

   • Workers pay into Social Security via payroll taxes (FICA), which are split between employees and employers.
   • These funds go into the Social Security Trust Fund, which is used to pay current beneficiaries.
   • Originally, the program operated on a "pay-as-you-go" system, meaning today's workers fund today's retirees.

2. Congress and the Trust Fund:

   • In years when Social Security collected more than it paid out, the surplus was placed in the Social Security Trust Fund, which was legally required to be invested in U.S. Treasury bonds (essentially loaning money to the federal government).
   • Congress has indeed spent this money on other government expenses, but Social Security still holds Treasury bonds as IOUs that the government is obligated to repay.

3. The Current Problem:

   • With an aging population, fewer workers are paying in compared to the number of retirees collecting benefits.
   • The Trust Fund is projected to be depleted around the 2030s, at which point Social Security will only be able to pay out what it collects from current workers, leading to an estimated 20-25% cut in benefits unless changes are made.

4. Proposed Fix & Challenges:

   • Stop using Social Security funds elsewhere: This would require Congress to change how surplus funds are handled (e.g., investing them differently or keeping them separate from general government spending).
   • Continue paying current retirees: This means we still have to cover benefits for those who paid in under the old system. That could require raising taxes, cutting benefits, or using other government funds to bridge the gap.
   • Phase into a self-sustaining system: If we ensure that every worker's contributions stay within the system and are not used elsewhere, it could eventually become fully self-funding—but this transition period would be financially painful.

5. Alternative Fixes Being Considered:

   • Raising or eliminating the payroll tax cap (currently, only income up to ~$168,600 is taxed for Social Security).
   • Gradually increasing the retirement age.
   • Adjusting benefit formulas to reduce payments for wealthier retirees.
   • Creating new sources of revenue (e.g., taxing investment income for Social Security).

In short, Social Security could become self-sustaining again, but getting there would require either temporary sacrifices (higher taxes, lower benefits, or both) or major restructuring of how it's funded and invested.

So it's correct in that the money was mismanaged by Congress and it can indeed be made a functional payout system if it's not abused.

Congress has used Social Security funds for other government expenses by requiring the surplus to be invested in U.S. Treasury bonds rather than keeping it separate. This means that while Social Security technically has its own trust fund, the money has been loaned to the government, which must pay it back with interest. Some see this as mismanagement because it allows Congress to use Social Security funds for other budgetary needs instead of ensuring they remain exclusively for future retirees.

And yes, if Social Security funds were protected from being used elsewhere and properly managed, it could function as a self-sustaining system—especially if adjustments were made to address demographic changes (like fewer workers per retiree). The challenge is getting Congress to make those changes instead of continuing to use Social Security as a stopgap for other spending.

This doesn't seem complicated. Fixing what was broken does.

The concept is simple: stop raiding the Social Security Trust Fund, ensure contributions are used only for their intended purpose, and adjust for demographic shifts.

The hard part is fixing the damage already done:

• Paying back the money that was "borrowed" through Treasury bonds.
• Covering the gap as fewer workers support more retirees.
• Overcoming political gridlock, since no one wants to be the politician who raises taxes or cuts benefits.

If the system had been managed properly from the start, we wouldn’t be facing a crisis. Now, fixing it requires tough choices—ones that politicians have been kicking down the road for decades.

Elon Musk has labeled Social Security as "the biggest Ponzi scheme of all time," suggesting that it is unsustainable and fraught with fraud and waste.

Regarding his role with the Department of Government Efficiency (DOGE), Musk has been granted significant authority by President Trump to streamline federal operations and reduce waste. This includes targeting entitlement programs like Social Security for potential cuts.

However, this concentration of power has raised concerns. A federal judge recently ordered the urgent release of DOGE records, citing "unprecedented" authority and "unusual secrecy" within the department.

In summary, while Musk's characterization of Social Security as a Ponzi scheme reflects his critical stance, his expanded role under the current administration has sparked debates about transparency and the potential impact on essential social programs.

No, Social Security is not a Ponzi scheme in the classic sense. A Ponzi scheme is a fraudulent investment scam where returns are paid to earlier investors using money from new investors, rather than from actual profits. The scheme collapses when there aren't enough new investors to pay the older ones.

Social Security, on the other hand, is a pay-as-you-go system where current workers fund the benefits of current retirees. While it shares some characteristics with a Ponzi scheme—relying on new participants to sustain payouts—it is not fraudulent, as it's a government program designed to be transparent and structured for long-term sustainability (even if mismanaged at times).

The real issue isn't fraud but demographics—fewer workers per retiree and longer life expectancies, which strain the system. Fixing it requires adjustments, not scrapping it altogether.

The best way to fix Social Security without harming retirees or workers requires a balanced approach that spreads the burden fairly. A mix of these solutions could restore long-term stability:

1. Stop Using Social Security Funds Elsewhere

• Ensure payroll taxes go only to Social Security, not other government spending.
• Invest surplus funds in higher-yield but safe assets instead of just U.S. Treasury bonds.

2. Gradually Adjust Payroll Taxes (Without Overburdening Workers)

• Raise or eliminate the payroll tax cap (currently ~$168,600). Wealthier individuals would contribute more.
• Slightly increase payroll tax rates (e.g., by 1% over time) to strengthen funding without major financial strain.

3. Small, Gradual Adjustments to Benefits

• Protect lower-income retirees from cuts.
• Slightly adjust the benefit formula for higher earners so they receive proportionally less.
• Raise full retirement age gradually (e.g., by a few months per year), but not so much that it harms those in physically demanding jobs.

4. Expand the Revenue Base

• Tax investment income for Social Security (e.g., capital gains or dividends above a certain threshold).
• Implement a Social Security surtax on very high earners to help close the funding gap.

5. Phase in Changes Over Time

• Any tax or benefit adjustments should be gradual, preventing financial shocks to current retirees or workers.

By combining these steps without drastic cuts or sudden tax hikes, Social Security can return to sustainability while ensuring that people get the benefits they paid for.

President Trump's appointment of Elon Musk to lead the Department of Government Efficiency (DOGE) has sparked both support and criticism. Supporters argue that Musk's innovative approach could streamline federal operations and reduce waste. Critics, however, express concerns over the concentration of power and potential lack of transparency in DOGE's operations.

Additionally, Musk's recent comments labeling Social Security as "the biggest Ponzi scheme of all time" have intensified debates about his suitability for this role, given the sensitivity surrounding entitlement programs.

In summary, while Musk's appointment aligns with Trump's agenda to overhaul federal efficiency, it raises valid concerns about transparency, accountability, and the potential impact on essential social programs

Compiled with aid from ChatGPT

Social Security Shortfall: Decades of Neglect, Borrowed Funds, & Political Inaction

DOGE wants to cut $1 trillion this year. But it's not looking at big spending drivers

One thing can be sure, the Trump administration will do what they can to make this more difficule than it needs to be. Cutting "21% within 6-8 years for those currently on Social Seucirity" will be devestating for millions of reitred Americans who did nothing wrong and do not deserve this.

It's very important to be aware of what the Ambassador is saying here in this video, it's not long, excuse the stupid ad for a minute at the beginning...Conservatives inspired by Hungary should "dig into the facts," Fmr US Ambassador to Hungary Pressman says, a Trump administration position now still empty.

So. It appears that the 21% reduction in Social Security benefits refers to projections indicating that, without legislative action, the Social Security Trust Funds are expected to be depleted by 2033. At that point, beneficiaries could face an automatic 21% cut in benefits.

 
npr.org This situation underscores the urgency for policymakers to implement reforms to ensure the program's long-term solvency.

While President Trump has publicly committed to preserving Social Security benefits, his administration's budget proposals have included significant cuts to related programs, such as Social Security Disability Insurance, Medicare, and Medicaid.
en.wikipedia.org These proposed reductions have raised concerns about the future of Social Security and the potential for benefit cuts if the program's financial challenges are not addressed.

In summary, the mentioned 21% cut reflects projected automatic reductions in Social Security benefits anticipated to occur by 2033 if no corrective measures are taken. While the Trump administration has not explicitly proposed such a cut, its budgetary actions have sparked discussions about the program's sustainability and the need for legislative intervention to prevent future benefit reductions.

The projected depletion of the Social Security Trust Fund by 2033 isn't due to a single administration’s mismanagement, but rather decades of systemic issues, demographic shifts, and policy decisions. Here are some key factors:

1. Demographic Shifts

• The Baby Boomer generation is retiring in large numbers, significantly increasing the number of beneficiaries.
• At the same time, birth rates have declined, leading to fewer workers paying into the system.
• People are living longer, meaning they collect benefits for more years than originally anticipated when Social Security was designed.

2. Payroll Tax Shortfalls

• Social Security is primarily funded by payroll taxes (FICA).
• The Reagan administration raised payroll taxes in 1983 to pre-fund the system for Boomers, but that surplus is now running out.
• Wages have not kept pace with inflation, meaning payroll tax revenue hasn’t grown fast enough.
• The payroll tax cap (currently $168,600) means high earners stop paying into Social Security beyond a certain income level.

3. Policy Decisions

• Bush Tax Cuts (2001, 2003): These cuts reduced overall revenue but were not offset by spending cuts or tax increases elsewhere.
• Obama Payroll Tax Holiday (2011-2012): Temporarily lowered payroll tax rates to boost the economy but slightly reduced Social Security revenues.
• Trump Payroll Tax Deferral (2020): Allowed employers to delay payroll taxes during COVID-19, impacting Social Security revenue.

4. Congressional Inaction

• Congress has known about Social Security’s financial challenges for decades but has failed to act.
• Past fixes (Reagan-era reforms) extended solvency but didn’t make permanent structural changes.
• Proposals to raise the payroll tax cap, adjust benefit formulas, or increase retirement ages have been debated but not implemented due to political gridlock.

Bottom Line

No single president or party is solely responsible. The issue has been decades in the making, with demographic changes, wage stagnation, and policy decisions all playing a role. Without reforms, automatic benefit cuts (~21%) will occur around 2033 when the trust fund runs dry, leaving only payroll tax revenue to sustain payments.

The financial instability of Social Security is primarily due to a combination of government mismanagement, demographic shifts, and a failure to make necessary adjustments over time. Here’s a breakdown of where the fault lies and why the system is in its current state.

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Who’s Most Responsible for the Shortfall?

1. Congress (Both Parties) - Kicking the Can Down the Road

   • Lawmakers have known for decades that Social Security would face funding issues, yet they’ve avoided making politically difficult decisions to fix it.
   • Since the 1983 reforms under Reagan, Congress has made few major adjustments, despite clear warnings from the Social Security trustees.
   • Both Democrats and Republicans have refused to take decisive action, fearing voter backlash.

2. Presidents and Tax Policies That Reduced Revenue

   • The Bush Tax Cuts (2001, 2003) significantly reduced government revenue without offsetting spending cuts or other sources of funding.
   • The Trump-era payroll tax deferral (2020) allowed businesses to delay payments, impacting Social Security’s revenue stream.
   • Payroll tax holidays (Obama, 2011-2012) also reduced short-term funding for Social Security.

3. The Payroll Tax Structure Itself

   • Social Security is primarily funded by current workers paying for retirees (a pay-as-you-go system), rather than individual savings accounts.
   • The cap on taxable earnings (currently $168,600) means high earners stop contributing after a certain point, limiting revenue.
   • Wages have not kept up with inflation, meaning contributions have not increased as much as necessary.

4. Funds Being ‘Borrowed’ from Social Security

   • The Social Security Trust Fund was not "raided" in the sense of money being stolen, but its surplus has been borrowed by the federal government for decades and replaced with Treasury bonds.
   • This means Social Security holds IOUs from the government, and when it needs money, the government has to find funds elsewhere to repay those bonds.

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Where Did the Money Go?

1. It’s in U.S. Government Bonds

   • The Social Security Trust Fund has been loaned to the federal government in exchange for Treasury bonds, which have to be repaid from general revenue.
   • This allowed Congress to use Social Security surpluses to fund other government programs without raising taxes or cutting spending elsewhere.

2. Wars, Tax Cuts, and Other Spending Priorities

   • The surplus was used to fund wars (Iraq, Afghanistan), tax cuts, and other spending priorities instead of being saved strictly for Social Security.
   • This wasn’t technically “theft,” but rather a way for the government to finance operations without raising taxes or borrowing from external sources.

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Why Do Today’s Workers Fund Retirees?

Social Security was never designed as an individual retirement account where your contributions are saved for you. Instead, it’s a pay-as-you-go system, where current workers pay for today’s retirees.

• When the program started in 1935, there were 16 workers per retiree—plenty of contributions to sustain the system.
• Today, that ratio is about 2.7 workers per retiree and shrinking.
• Because Baby Boomers are retiring in massive numbers, the amount being paid out is exceeding what’s being collected.

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How Could This Have Been Avoided?

1. Gradual Adjustments Over Time

   • Raising the payroll tax cap (so higher earners contribute more) decades ago could have kept the system stable.
   • Small increases in the payroll tax rate over time could have built a larger reserve.

2. Keeping Social Security Funds Separate from General Government Spending

   • Had the government not borrowed from Social Security, the trust fund would be in a stronger position today.

3. Investing Surplus Funds More Effectively

   • Some argue that allowing Social Security to invest in the stock market (like private pensions do) could have generated more revenue.

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Bottom Line: Who’s to Blame the Most?

• Congress (Both Parties) for failing to act despite decades of warnings.
• Presidents who supported tax cuts and policies that reduced Social Security revenue.
• The structure of the system itself, which relies on a shrinking workforce supporting a growing retiree population.

Had lawmakers made modest adjustments decades ago, we wouldn’t be facing the prospect of automatic benefit cuts today. Instead, political fear and short-term thinking have left us in a position where drastic measures will be needed to maintain Social Security's solvency.

The confusion caused by Elon Musk's DOGE team regarding Social Security data stems from a misinterpretation of how the SSA's antiquated computer systems handle birth dates. The SSA's database, which still relies on COBOL-based systems, sometimes uses placeholder or default birth dates when actual birth records are missing or improperly formatted.

For example, if a person’s birthdate is unknown or was never properly entered, the system might assign a default date like January 1, 1900, or even January 1, 1800 in older records. This can create the illusion that there are beneficiaries listed as being over 150 years old when, in reality, these are simply clerical placeholders rather than actual living recipients.

Musk’s DOGE team allegedly found these entries and misinterpreted them as proof that deceased individuals were still receiving benefits. They then exaggerated the scale of the issue, claiming that over a million Social Security beneficiaries were between 150 and 159 years old. This led to unfounded accusations of fraud and waste.

Former SSA commissioner Martin O'Malley later debunked these claims, clarifying that these were just database anomalies rather than evidence of widespread fraud. The SSA does have mechanisms to verify whether beneficiaries are still alive, including cross-referencing with death reports from hospitals, funeral homes, and Medicare data.

In summary, the issue was a mix of outdated database practices, placeholder birth dates, and a lack of understanding of how government computer systems work, which led to misleading accusations about fraudulent Social Security payments.

Compiled with aid of ChatGPT