A Quick-ish Update on Social Security in the Post-Rational World
Is Social Security "going broke"? Is it doomed? Is it a Ponzi scheme? No to all of those things. Two months ago, I returned to those questions in a two-part Verdict column and a complementary Dorf on Law column, emphasizing in particular Elon Musk's completely ignorant but predictable endorsement of the Ponzi scheme accusation. For as long as Republicans have been trying to undermine Social Security (decades before Trump came along, and really from the moment of its creation in 1935), they have never come up with anything remotely resembling a coherent and defensible argument to support any of their outlandish claims.
Had things in the United States continued on their merry way, the worst that could have happened is that the Social Security trust fund would have reached a zero balance sooner than planned. That might (or might not) have happened in 2034 or so, in which case one of two things would have happened next: (1) benefits would have been reduced by 20 percent below the scheduled amounts going forward, with benefits financed on the pay-as-you-go basis on which Social Security was built (paying current benefits with current payroll taxes, which is exactly how a system would work in long-run equilibrium ) or (2) a successful lawsuit could have resulted in a requirement that the government pay scheduled benefits in full, even if doing so required raising funds from other sources (including from federal borrowing).
Option (1) is what everyone has been expecting, whereas (2) has never been tested. But does anyone think that an across-the-board 20 percent cut in benefits would not have been challenged in court? Even so, we probably would never have known whether the courts would have validated (2), for two reasons. First, it is possible that in fact the economy would have done well enough over the next decade that the trust fund would not have been prematurely depleted. The Social Security Administration's own required-by-law-to-be-pessimistic annual reports repeatedly showed that as a possible scenario, which made the focus in news reports on the more pessimistic scenarios more than a bit slanted. We have spent so much time being inundated with prophecies of doom that no one even thought to notice that none of this might happen at all.
And again, "doom" here is what the anti-Social Security types want you to think when you hear about the possible early depletion of the trust fund. It is, however, not the reality. No one wants to receive 20 percent less than their full benefit -- although it is notable that almost no one knows what their full benefit would be, meaning that they could be told that the $3200 per month that they receive is the full amount, and $4000 per month would have been nice but ended up not being possible. That information has been available online for as long as I can remember, with ssa.gov providing calculators that provide average benefits as well as secure logins to allow people to access their individual earnings histories and receive to-the-dollar forecasts of their (inflation-protected) benefits based on when they might choose to retire.
The second reason that we might never have received court rulings regarding reductions in benefits below scheduled levels is that Congress almost certainly would have prevented it from happening in 2034 (or whenever). In late 2021, I wrote "Dear Young People: You WANT Congress to Kick the Can Down the Road on Social Security" on Verdict. There, I argued that early action by Congress to "fix" Social Security would almost certainly have resulted in future generations of retirees receiving reduced benefits, whereas waiting until the last minute would instead almost certainly have resulted in Congress stepping in and preventing benefits from going down (either by legislating to allow tax revenues from non-payroll sources to be used to fund benefits or, as above, authorizing additional debt issuance to keep the system whole).
Because the same reporters and commentators who emphasize the pessimistic story for Social Security similarly buy into the anti-deficit mania that is ubiquitous in the US (mostly as a result of an expensive, decades-long PR campaign financed by billionaires), it is important to emphasize why borrowing to continue to finance Social Security would have been the right thing to do. Allowing benefits to be cut by 20 percent would have been a huge fiscal death blow to the economy. As it stands, the government is borrowing money to pay back Social Security for its decades of surpluses, and continuing to do that would not increase the overall deficit but would rather keep it on pace with where it currently is rather than veering into a contractionary disaster. The bottom line is that the now-real concerns about overall federal debt and deficits are entirely a matter of Republicans' endlessly successful efforts to under-fund the government, and there is no reason why Social Security beneficiaries should lose any of the money that they are scheduled by law to receive.
But all of the analysis above was based on the assumption that Congress would continue to treat Social Security as a politically popular program and that telling people that their benefits will suddenly drop by 20 percent through no fault of their own would have been unthinkable. What if Republicans are able to get people to give up on Social Security before any of that could happen? They spent years convincing naive young people that "Social Security won't be there for you when you retire," which (I have emphasized repeatedly over the years) was only true as a political matter. That is, Social Security did not have to be abandoned for technical, legal, or accounting reasons. If enough people can be convinced that it is dying or is a bad idea, however, the Republicans can finally see their long-cherished wish come to fruition with the death of the world's most successful social program.
In my columns two months ago, I noted that the Trump people could indeed go about undermining public confidence in Social Security by sabotaging the program. That is in fact what the Musk-ovites have done, and the strategy is apparently working. Martin O'Malley is the former governor of Maryland, an unsuccessful candidate for President in 2016, and of relevance here the Commissioner of Social Security in 2023 and 2024. In a short video that I watched this morning, O'Malley warns that the firings of 7,000 to 10,000 Social Security employees are doing exactly what Trump and Musk appear to want, making everyone believe that the system is broken.
And it is breaking, because the Republicans and Trump are sabotaging it. But "it" is, again, not the finances but the administration of the system. O'Malley points out that Republicans had spent the last nine years cutting funding for Social Security's operations just when the Baby Boomers were retiring in large numbers, which means that the administrative side was already in rough shape before the second Trump term began. Unsurprisingly, one of Trump's hatchet jobs eliminated the Office of Civil Rights and Equal Opportunity, but his people also eliminated the Office of Customer Service Transformation, which is not in any way "DEI," or "woke," or whatever.
Among other things, this has caused the online services that I mentioned above (the calculators and other useful services that are very cheap to provide) to go down with increasing regularity and severity. And that is to say nothing of the services that do require actual living administrators to interact with and assist citizens. In addition, the new reality gives people who otherwise would have delayed receiving retirement benefits good reason to take them as soon as possible, in case the whole thing collapses -- which is more likely if more people take early benefits than if they had waited.
To repeat, this all has the effect of undermining political support for Social Security going forward -- not that I am at all convinced that political support is necessary in the increasingly authoritarian regime that is the United States. O'Malley emphasized that point as well, making it clear that breaking the system is part of the Trumpist game plan.
At this point, for the first time in my career of writing about Social Security, there is truly reason to be pessimistic. Again, that is not because of anything about the design of the system, the economic forecasts, demographic changes, or anything as objective and external as all of those factors. It is for the same reason that we should all be worried about the rule of law in general. People who want to end these things can get their way by acting with incompetence and malice. And the people surrounding Trump certainly possess those two things in abundance.
- Neil H. Buchanan