Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV.
The United States’ pay-as-you-go Social Security program was established on August 14, 1935. Social Security came about during the Great Depression, the most impactful economic recession America has ever experienced. The program’s objective was to offer benefits to retirees and others who were jobless at the time. The idea was that if everyone had to pay out a portion of their earnings and pool them together to redistribute to the most economically vulnerable, they could avoid financial hardship.
Although it has been reformed and refined over the years, the social security program still faces insurmountable and complex issues. Social Security funding is such a touchy subject within politics. The issue has even been labeled the “third rail of American politics.” As such, Congress has historically not done anything to address that aspect of the program. But as the subject has returned to the limelight following Rep. Kevin McCarthy’s victory as the House speaker, I wanted to highlight the reasons that I believe the concept of Social Security should be done away with.
First, Social Security operates much like a Ponzi scheme in that workers are investing their money into a system with the promise of a payout later. Much like a Ponzi scheme, Social Security has no real way to guarantee that the money invested will be paid out at a later date. That’s because our money isn’t being put away for us to use at a later date. Instead, it is being used to fund the current generation of retirees.
This is a bewildering fact that I did not know before researching. The concept that anyone would have to forcibly pay for another person’s well-being (that is not their children) is crazy. People should have the option of participating in Social Security, the program should not be mandatory. It’s a one-size-fits-all solution to a problem that needs a more nuanced approach if the program is to stay in place. It’s intrusive and the government is putting the onus of protecting citizens in our pockets.
Next, I am not a fan of the moving goalposts for the age of retirement. Life expectancy has increased, and people are living longer than they did in previous generations. The ratio of workers-to-beneficiaries has decreased every year. Additionally, birth rates have been alarmingly low. As these trends continue, there is an incentive for Congress to raise the retirement age to keep up with the program’s costs and revenue. The Congressional Budget Office says,
“People are not dying as young as they used to and the age for retirement could change in those projections, spending for Social Security increases rapidly in relation to the gross domestic product (GDP) over the next decade as the large baby-boom generation retires. That growth then slows as members of that generation die, but spending continues to rise throughout the 75-year projection period because of increases in life expectancy.” This is unfair. It is basically an open-ended contract between American citizens and the government that can continuously be amended, but we are not allowed at the table to negotiate it.
At this current rate, it’s dubious whether the system is sustainable long past the next generation. Every generation of beneficiaries has, to date, gotten a lower rate of return than the one before it. This pattern is anticipated to last long into the twenty-first century. This means that we may never break even on the amount we paid into the system once we retire.
Additionally, the Social Security trust fund has been disbursing more benefits than it is receiving in employee taxes since 2010. Without legislation to expand social security, it is anticipated that it will run out of money by 2035. In particular, it is anticipated that the Old-Age and Survivors Insurance Trust Fund will run out in 2034. That is one year later than the previous estimate, with 77% of benefits becoming payable at that time.
Delaying reforms to Social Security is only going to make things worse in the long run. There is only so long you can outrun a problem before you are forced to address it. So far, the proposed options of increasing the amount it takes out of our paychecks or decreasing the benefits are not attractive. This is probably another reason Congress has stalled reform.
In conclusion, approximately 26% of millennials do not believe that they will be able to rely on Social Security funding in the future, and for good reason. We would be a lot better off keeping Social Security dollars to ourselves and investing them how we see fit to increase our retirement savings. I understand that the goal of Social Security is to make sure older and disabled people are not left without money, however, this system is flawed. We are past due for Congress to either reform it or abolish the concept altogether.
Subscribe to get early access to podcasts, events, and more!