Three Major Myths That Undermine Social Security - And Why They Are Wrong

 

Myths about Social Security and how it works have been spread almost from the time it commenced under FDR nearly 90 years ago. As with other forms of misinformation and rumors there's little that can be done to completely snuff them, but they can be exposed especially after promoted for a significant time.  In that regard I want to examine the three major myths about the program that seem to have had the longest 'half-lives'.

1) Social Security is "going broke":

One need only check the mainstream media from time to time to see the extent to which this myth is alive and well. Doing so, one will encounter headlines such as 'Social Security is running out of money - what to do?' and "How soon will Social Security be bankrupted?'  

Well, the hard fact is that Social Security is not "going broke" or going "bankrupt".  The system can't go bankrupt because it has no creditors. The government? Hell, it's the one managing the system.  Outside creditors or banks? Nope, Social Security has none given it depends entirely on a self-contained stream of revenue from workers' payroll contributions.   As for "going broke", the only feasible way that could happen is if we had 100% unemployment with no one paying into the system.  That has never happened in the history of the program and never will, even if Trump should somehow get voted back in by too many dummies who believe he's an economic genius.

2) Social Security contributes to the federal debt.

Politicos and fiscal hawks on the Right love to tag Social Security (along with the defense establishment) as the biggest generators of red ink. Some even insist Social Security is the 'number one driver of debt'.  Clearly these yokels need an education as the opposite is true.  Since the system is self-financed by workers' payroll contributions it isn't drawing down federal revenue. Indeed, it is other federal agencies - including the Pentagon- which have drawn down on Social Security's Trust fund. (One reason Al Gore often proposed a "lockbox" when he ran for president in 2000 against Bush Jr.)

Further, the program is not legally allowed to borrow money from any other federal agency so no debt is created. The true fact is Social Security is actually one of the biggest creditors given all the special Treasury notes it holds, from having its revenue shared with other agencies.

Want to know what's the biggest source of debt up to now?  It was the GOP-Trump tax cuts of 2017 which propelled debt to historic levels.

3) Politicians are stealing from Social Security:

This stems from a misunderstanding of the nature of Social Security financing and the fact its funds can also be used for general revenues.  Thus, given the government can use the money in the Trust Funds (which are a special form of Treasury bonds) for everything from F-35 jet fighters to Meals on Wheels to federal cancer research, some people think the money is being misallocated or 'pilfered'.  No it is not, it's merely being borrowed, but the money must be repaid in a fixed timeline.

Bonds purchased by private citizens, companies etc. work basically the same way but no one accuses the parties or lawmakers of 'stealing'.  Clearly, what is needed is a lot more education on Social Security and how it works. The bottom line is even if the Trust Fund monies are depleted (as predicted, if congress does nada) by 2035, the program will still be able to pay out 83% of scheduled benefits.

See Also:

 Why The Swedish Social Security System Would Not Be Practical In The U.S.