You know you’re in deep, deep trouble when Joe Biden and Donald Trump agree on something—and that’s especially true when it comes to insisting that no one should ever cut “a dime” from Social Security, which provides income for the people of the country. program 65.
Here are three reasons why Social Security should be scrapped entirely and replaced with a plan that helps the truly needy without impoverishing everyone else.
Social Security is not sustainable. Created in 1935, Social Security is paid for by a 12.4 percent payroll tax on earnings up to $160,200. Proponents pretend that Social Security is like a retirement plan, where your fixed contributions build value over time. But the system is a Ponzi scheme, where current beneficiaries are paid from new money coming into the system. The problem is that when the program began paying benefits in 1940, there were 160 workers per retiree, so a surplus was created. Currently, only 2.8 per retired worker.
In a decade, there won’t be enough money coming into the system to cover the current level of benefits. By law, benefits must be cut by 20 percent or payroll taxes jacked up more than they already are. In 2023, we will be taxed on all income up to $160,200—a number up from $113,700 a decade ago and $87,000 in 2003.
Social Security is unfair. Payroll taxes hit younger, poorer workers more than older and wealthier people. A minimum wage worker may pay virtually nothing in federal taxes, but will still be required to fork over 12.4 percent of his compensation in payroll taxes.
That’s a bad deal for retirees from an investment perspective: According to a 2016 Tax Foundation study, a retired worker making the median wage can expect an annual salary of about $20,000. If that person instead puts just 10 percent of their annual income into an IRA, they can expect to have nearly three times as much annual retirement income.
And don’t think the government actually owes you anything when you retire, no matter how much you pay. In 1960, the Supreme Court ruled Fleming v. Nestor There is no contractual or constitutional right to Social Security benefits.
Social Security is unnecessary. When Social Security was passed during the Great Depression, aging and poverty went hand in hand. Now the average net worth of household heads over 65 is more than double that of household heads half their age. The median value of households headed by persons 75 years of age or older was $254,800 and $266,400 for those headed by persons 65 to 74 years of age. Between the ages of 35 and 44, the figure was just $91,300.
To be fair, one reason older Americans are relatively flush is Social Security and Medicare. But that’s mostly because people are living and working longer and acquiring more wealth, so old-age programs are less important to financial stability and well-being. There is no good reason to give public benefits to millionaires like Biden and billionaires like Trump.
Instead of plotting ways to save Social Security, politicians—and voters—should be talking about ways to end it as soon as possible. Let people get benefits within a decade of retirement, but cut and eliminate payroll taxes for the rest of us so we have more money to fund our own retirements.
The federal government can and will continue to help older Americans — indeed, Americans of any age — who need assistance with food, housing, and health care. But it doesn’t need to force us all to pay into a system that is increasingly unstable, unfair and unnecessary.
Edited by John Osterhoud; Additional graphics by Daniel Thompson
Photo: Grippus Yuri/ABACA/Newscom