Social Security: What Crisis?

WC gets lots of email and snail mail about Social Security. Most of it is borderline hysteria: the Social Security system is going broke tomorrow, or doubling the deficit, or is in some other kind of deep crisis. WC had even assumed some of it might be true. A search on Google using “social security going broke” produces almost 12 million hits. The Cato Institute, a famously conservative think tank, has dozens of articles on the problems facing Social Security. But after an email from, WC decided to look instead of simply accepting what others were saying. As it turns out, most of what you hear is untrue. Using’s structure, WC sets out what he found:

Myth #1: Social Security is going broke.

Reality: There is no immediate Social Security crisis.  By 2023, Social Security will have a $4.6 trillion surplus (yes, trillion with a ‘T’).  It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.

The last 5 Trustees Reports have indicated that Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds would become exhausted between 2037 and 2041 under the intermediate set of economic and demographic assumptions provided in each report. If no legislative change in enacted, scheduled tax revenues will be sufficient to pay only about three fourths of the scheduled benefits after trust fund exhaustion

So even after 2037, it’ll still be able to pay out 75% of scheduled benefits—and again, that’s without any changes. The program started preparing for the Baby Boomers’ retirement decades ago.  Anyone who insists Social Security is broke is misinformed or parroting someone else’s agenda.

Myth #2: We have to raise the retirement age because people are living longer.

Reality: calls this a red-herring to trick you into agreeing to benefit cuts. WC agrees. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than they did 70 years ago. What’s more, what gains there have been are distributed very unevenly—since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half. But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth #3: Benefit cuts are the only way to fix Social Security.

Reality: Social Security isn’t broken. But if you want to strengthen it, and fund it past 2037, there’s a much better way: either raise or eliminate the cap on social security contributions. If the wealthy rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income.  When conservatives insist benefit cuts are the only way to “save” social security, it’s because they want to protect the wealthy from paying more to the Social Security fund.

Myth #4: The Social Security Trust Fund has been raided and is full of IOUs.

Reality: Actually, the Social Security Trust Fund is full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States. The reason Social Security holds only treasury bonds is the same reason many Americans do: the federal government has never missed a single interest payment on its debts. Former President Bush wanted to put Social Security funds in the stock market—that wouldn’t have worked so well, would it?—but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be. Anyone with a safer investment, offering a higher rate of return is invited to contact WC by comment with details.

Myth #5: Social Security adds to the deficit.

Reality: By law, Social Security’s funds are separate from the budget, and it must pay its own way. That means that Social Security can’t add one penny to the deficit. The T-bonds would have been sold to someone else, if not to the Social Security Fund.

The fact is, Americans rely on Social Security. Consider the following chart:

The reality is that half of Americans over 65 rely on social security for 80% or more of their income. Three-quarters of Americans rely on it for more than half of their income. And they don’t live all that well, either: 43% of all Americans 75 years old or older get by on less than 200% of poverty level. And those numbers aren’t likely to change. Folks still working have a savings rate of less than 4% of disposable income. Gen-X and Gen-Y are counting on Social Security, too.

WC doesn’t expect to convert any neocons on this issue. The “social security is broke” story has been told so long, in so many ways, that it’s gotten into the political DNA. But maybe these comments will at least force folks to think a bit before parroting the myths.


3 thoughts on “Social Security: What Crisis?

  1. Greetings WC – Interesting rebuttal on a timeless topic of political debate. As a Gen ex’er I don’t expect to receive any true measure of ‘Value’ for my lifelong SS contribution. Oh sure, I’ll get what I am scheduled to receive in 30 years. But for my, then, 55 YEAR investment it will likely be a pittance in actual “value”.

    But most of your myth busting appears technically accurare. But I do have one issue-

    Myth #4: The Social Security Trust Fund has been raided and is full of IOUs. – Actually, the Social Security Trust Fund is full of U.S. Treasury Bonds.

    True – But just where do you think the US Gov’t will get the money to ‘pay’ for those Bonds? Two guesses, ‘print’ it or borrow it. Oh wait, they already ‘borrowed’ it to create the Bond. It’s not like they ‘Bought’ the bond with the money I invested. But I guess theoretically it’s possible, so I’ll give you the benefit of the doubt.

    So while I would argue that semantically you are correct, the Gov’t will never renege on SS Bene’s. I would point out that they’ll just print or borrow whatever it takes to pay back the bene’s. period. Because, there is no ‘money’ our Gov’t only uses currency now. And that’s fine, except that they have a now historically poor track record of returning the true value of the currency invested in them. And that, dear sir, is fact. Unless mabey your ‘investment’ consisted of a political contribution. That, I understand, can be quite profitable.

    • As recently as 1999, the federal government was running a substantial surplus. Sensible tax policies and control of health care expense (the fastest growing element of the federal budget) and defense spending (the biggest single element) could return us to those days. So the T-bonds don’t have to be paid with additional deficit.

  2. Yes, I agree. He did have “help” though. The combination of that particular point in time being one of maximum Boomer Earnings, combined with the introduction of (genius) hedonomics. But it was enough to turn the ship. It’s just too bad that Capt Ahab stepped in to take his place.

    To turn the ship this time is going to take more than sensible policy and numbers massage. As we find ourselves, once again, living in interesting times.

Comments are closed.