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There is still no new leadership in Washington, D.C., but Sen. Mike Lee (R-Utah) announced this week that The future of social security In a series of posts on social media platform X.
Programs that provide monthly checks Over 65 million Beneficiaries are facing funding problems and the program may not be able to pay out its full benefits within nine years at the earliest.
“We were sold a dream, but now we have a nightmare,” Lee said in Monday's X thread. “It's time to sound the alarm. We need real reform.”
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Experts on both sides of the aisle generally agree that it's better to address Social Security's funding issues sooner rather than later.
“This is a system that needs fixing,” said Charles Blahaus, a senior research strategist at George Mason University's Mercatus Center and a former Social Security civil servant. “It will not be in the public's interest to act as if everything is fine and we can ignore it for a few years.”
Meanwhile, Lee's post about Social Security, which he said was “almost fair to compare to a Ponzi scheme that is running out of new investors,” sparked mixed reactions.
Elon Musk, who is tasked with cutting government spending under President-elect Donald Trump, shared Lee's post, calling it “interesting.” But Social Security advocacy groups were quick to defend the program they advocated. I have never forgotten to pay my benefits. For the first time in almost 90 years.
Among the issues Lee pointed to is the mechanism for holding funds used to pay benefits, commonly known as .trust fund. ”
“This money is not held in a personal account with your name on it,” Lee said in the X thread. “No, it will be deposited into a huge account called the Social Security Trust Fund.”
What is the Social Security Trust Fund?
According to a recent report, Social Security relies primarily on payroll taxes paid by both workers and employers for funding. Congressional Research Service Report.
However, the program is funded by other sources, including federal income taxes that some Social Security recipients pay on benefits, reimbursements from the Treasury Department's general fund, and interest income from investments held in trust funds. has also received funding.
The trust fund, which is the source of the latter, holds funds that are not needed in the current year to pay benefits and administrative expenses. Social Security Administration. The funds in the trust fund are invested in special government bonds guaranteed by the U.S. government.
The interest on these securities is linked to market interest rates. Trust fund bonds are redeemed as needed to pay benefits or when they expire.
“The trust fund basically tracks how much the workers pay into the system,” Blahaus said.
Social Security's trust funds make headlines each year when Social Security's trustees release their annual report on the program's financial outlook.
On April 5, 2005, while touring the Public Debt Office in Parkersburg, West Virginia, President George W. can be shown.
Luke Frazza | AFP | Getty Images
The program's two trust funds are legally separate and generally do not have the authority to borrow from each other.
Trust funds used to pay benefits in the event of death to retired workers, their spouses, children and survivors will be among the first to face crisis. Estimated depletion date Unless Congress takes action by 2033, only 79% of benefits will be paid.
Lee is not the first politician to question Social Security's trust fund structure. In 2005, then-President George W. Bush trust fund said The equivalent of a government IOU in a four-drawer filing cabinet. Most recently, during a 2023 Senate Appropriations Committee hearing, Sen. Ron Johnson, R-Wis., held up a photo of a filing cabinet while discussing funding for the program.
“This is the Social Security Trust Fund,” Johnson said. “It’s a four-drawer file in Parkersburg, West Virginia.”
In response, Stephen Goss, chief accountant at the Social Security Administration, said at the time that the funds were “all electronic.”
Andrew Biggs, a senior fellow at the American Enterprise Institute and former chief deputy administrator of the Social Security Administration, said politicians are implying that the trust funds are not real by pointing to cabinet filings. Ta. But if someone has a Vanguard retirement account or defined benefit pension, that will also be represented by a paper document, he said.
“These trust fund bonds are real,” Biggs said.
Experts say trust funds are misunderstood
Social Security trust funds are as legal as China, pension funds and government bonds issued to grandmothers on behalf of their grandchildren, said Nancy Altman, president of the advocacy group Social Security Works.
“They all have the same legal status,” Altman said. “It's a matter of law because if Congress doesn't pay, it's a default issue.”
“The government routinely raids Social Security trust funds,” Lee said in a post on X.
According to the Treasury Department's general fund, it is allowed to borrow from the Social Security Trust Fund. Congressional Research Service. If that happens, those funds are typically repaid with interest.
“This is standard accounting practice and is not considered a raid in the legal sense,” said Jason, chief economist at the Bipartisan Policy Center who previously held several senior positions at the Social Security Administration. Fichtner said.
During a July 2023 Senate hearing on protecting Social Security, Sen. Ron Johnson, R-Wis., described the program's trust fund as a “four-tier drawer file.”
Source: U.S. Senate Chamber
If Social Security has a surplus, it should be invested in the federal government, Biggs said. That means the federal government will have to borrow it, he said.
But that borrowing largely stopped 15 years ago because Social Security ran out of surplus, Biggs said.
In his X post, Lee also highlighted how you could earn additional interest on your Social Security investments if you invested your money more aggressively in stocks. Sen. Bill Cassidy (R-Louisiana) also called for equity investment on behalf of the program.
But instead of talking about Social Security as an investment, Fichtner of the Bipartisan Policy Center said the focus should be on Social Security as a Social Security program funded by payroll taxes.
The program provides both retirement and disability benefits and is designed to be progressive, allowing Americans with lower lifetime incomes to earn higher replacement rates. Fichtner said focusing on the income replacement programs provide will help identify which reforms are beneficial and necessary.
“In general, we should have an open and honest discussion about Social Security and the critical role it plays in the foundation of Americans' retirement security,” Fichtner said.
