Summary
Elon Musk called Social Security a “Ponzi scheme” on “The Joe Rogan Experience,” claiming it’s unsustainable due to long-term obligations exceeding tax revenue.
Critics, including Sen. Bernie Sanders, accused him of pushing privatization to benefit the wealthy. Musk also made false claims about Social Security mispayments.
His comments come amid looming Social Security cuts and restructuring. The Social Security Administration warns of potential fund shortages by 2035.
Democrats advocate for raising the tax cap on high earners to strengthen the program.
No, what happened during the Reagan administration is that the government recognized that decades in the future, the predicted change in the age pyramid would mean more retirees and fewer workers to support them. So rather than slightly increasing SS taxes in the future to cover this, they started increasing SS taxes immediately and investing that overpayment in Treasury bonds (this is the origin of the Social Security “trust fund” which is routinely misrepresented as the entirely of the SS system). This SS trust fund money is primarily what allowed Reagan to run enormous deficits (“fiscal conservative” lol) without causing interest rates to spiral out of control.
There is absolutely nothing about Social Security which is in any way like a Ponzi scheme. It is simply a pension plan applied to the whole country instead of just an individual company.
Ah interesting, thanks for the correction. Though since treasuries are paid by the government is it not then still a ponzi scheme, in the fact the bonds must be redeemed to pay for shortfalls, in which case the government must tax the existing population to pay for the redeemed bond to fund the old?
If we are looking at our existing scenario with the baby boomers I’d assume we must be close to being forced to liquidate, and taxes will rise on the young for the bond repayment?
If they allowed people to opt out would it not be the case that as people opt out you’d need to raise taxes on the young as more people opted out, since none of the money actually still exists, cascading into an insolvent system just like how a standard ponzi scheme unwinds?
Just forget about the “trust fund” because as I mentioned, it’s not central to the way the SS system works. Social Security is simply a system whereby a large base of workers pays taxes to fund the (modest) retirement of a much smaller number of retirees. These are rough numbers, but: the average man starts work at age 21 and retires at age 65 (meaning he pays into the system for 44 years); the average male retiree then dies at age 76 (meaning he collects SS benefits for 11 years). So on average, four workers pay SS taxes to support one retiree. The average SS benefit is $1,583 per month, which means the average worker needs to pay just $396 per month in SS taxes for the system to remain solvent indefinitely. The median annual salary in the US is $59,384 (or $4949 per month) which means the SS tax rate only needs to be 8% (it’s currently 6.2% because the trust fund is being dipped into). Any shortfall could be easily made good by 1) raising the tax rate, and/or 2) raising the cap on taxable income.
This is why the “Ponzi scheme SS” meme is bullshit. A Ponzi scheme provides fake returns to investors by returning part of the money invested by new suckers; as soon as you run out of new suckers, the scheme collapses. Social Security does not in any way rely on perpetually finding new suckers, it only relies on the demographic reality of human beings having a much longer working life than retired life.
No, social security is investing in treasuries just like any other retirement fund might
Well yeah, kind of. The government issues bonds to finance its debt. Some amount of that is a good thing, to fund large projects. However a poorly run government running a constantly increasing deficit and funding a constantly increasing debt with constantly increasing bonds is mortgaging its future to pay for its present. Think of the analogy of living off your credit cards. At some point you’ll hit a limit, everything comes due and you’re going to have a very bad time.
This is poor governance, regardless of who is buying the bonds. It has nothing to do with social security.
This is also why the idea of a smaller government is so compelling: we need to do something about ever increasing debt. However the political party that talks most about that is the one most responsible for that debt. You don’t reduce debt by more and more tax cuts for the wealthy nor ever increasing military.
There had been the expectation by some that our debt doesn’t matter as long as the dollar acts as the world’s reserve currency, but what happens when this stops? What happens when chaos spite and narcissism disrupts global trade and alliances, driving other countries away from trade with US, away from the dollar as an exchange currency? What happens when those countries no longer buy the enormous amounts of US Bonds they have been and no longer find our debt? And Social Security is at an inflection where it needs to pay out more than it’s bringing in do starts selling the bonds it’s invested in? We might be in for a very bad time, decades of government mismanagement under taxing the wealthy and overspending coming due at once, triggered by the idiot we voted for