Republicans are attacking the Social Security System because they believe it is a “Ponzi scheme.”
“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk.”
First, Social Security is funded by employees who pay into the system throughout their work. Their payments accrue and earn interest. When retirement age is reached or a person becomes disabled, they receive apportioned benefits from their account as long as they live.
Managed properly, the system should remain sound, reliable and dependable.
A problem can occur if or when the number of retirees exceeds the number of new entrants. For instance, the number of baby boomers exceeds the aggregate number of new entrants. Still, the retirees who paid into the system should not be at risk because the system is based on administering their money.
What could go wrong? If Congress dipped into the system’s assets, that would destabilize the system. If too many people “qualify” for benefits without their having paid sufficiently into the system, a deficit could occur.
It is essential to understand the financial integrity of the Social Security System.
Republicans have never embraced the concept of government managed social security. Since Roosevelt, they argue that the system is socialism and prefer that people suffer their fate even if it means impoverishment. Therein is our national debate – the moneyed class against the middle class and poor.
In the news is that Republicans (Trump and Musk DOGE) want to reduce the Social Security Administration workforce. First, I know personally from having bid on IT system work at Social Security, the systems are woefully old and inefficient. Needed is a new IT infrastructure which requires investment.
Republicans argue that a privatized solution is better. However, there are no proposals, concept papers, or plans to demonstrate a better way.
Trashing the current system by destabilizing it puts retired persons and those near retirement at great risk.
What is the status?
“The Social Security system is facing a projected shortfall, with the trust fund reserves expected to be depleted in 2035, but the program will still exist, with ongoing taxes covering about 83% of scheduled benefits. Congress will need to take action to ensure full benefits are paid.” AI-generated content.
Key points about Social Security's underfunding:
ReplyDeleteDemographic shift:
The Baby Boomer generation is now reaching retirement age, leading to a surge in Social Security claims while the younger generation is smaller, contributing fewer funds to the system.
"Pay-as-you-go" structure:
Social Security operates on a "pay-as-you-go" system where current workers' taxes fund current retirees' benefits, so when the ratio of workers to retirees declines, the system becomes strained.
Lower birth rates:
Declining birth rates also contribute to a smaller workforce available to support Social Security.
What could be done to address the issue:
Increase retirement age:
Raising the age at which people can claim full Social Security benefits could help to spread out the payout over a longer period.
Raise payroll taxes:
Increasing the percentage of payroll taxes could generate more revenue for the Social Security program.
Benefit adjustments:
Modifying the benefit calculation formula to potentially reduce future payouts.
Social Security is fixable and Democrats should produce the solution.
ReplyDelete