Lying about Social Security
President Musk recently called Social Security a “Ponzi Scheme.” He’s hardly the first to repeat this lie, but he and his mini-me’s in DOGE have painted a target on Social Security.
I’m sorry it’s necessary to explain this again, but we are being lied to. Here are the facts about Social Security.
• No, it’s not a Ponzi scheme. Anyone who believes that SS is a Ponzi scheme either doesn’t know what a Ponzi scheme is or doesn’t understand how SS works. If you need an explainer, here’s a good one:
Why Social Security Is Not a Ponzi Scheme
* No, SS isn’t going bankrupt. As long as there are humans working for paychecks in the United States, it is fiscally impossible for SS to be bankrupt.
* No, the federal government isn’t stealing your SS money. By law, any money collected beyond what is paid to current beneficiaries goes into the Trust Fund. By law, the Trust Fund is invested in special treasury bonds that cannot be traded on the open market. These bonds, like all treasuries, are backed by the full faith and credit of the United States. When the bonds mature, they must and will be repaid. The government is no more stealing your SS than your bank is stealing your passbook savings when it lends it out so it can pay you interest.
Hope this helps.
The special, non-tradable condition of the bonds in the Trust Fund is a risk, not a security measure. These could eventually get targeted for haircuts without impact on the broader bond market. In fact, you can make a case that hair-cutting these bonds one day could be tempting to Treasury. The Trust Fund is net redeeming its holdings and this is going to get heavier as we move through the next decade. Maybe there will be some major tax and spending reforms and this redemption will be funded, but good chance the bulk of the Trust Fund just rolls over to tradable debt. There is kind of an important difference between a customer that must buy and hold your debt and customers that can actually negotiate the purchase and sell it later if they want to. All the debt equally shares the full faith and credit, but all the animals in Animal Farm were equal, too. So far, so good, but there is a lot left to redeem.