Many find themselves unintentionally reliant on the federal government, often without realizing its implications. This dependency stems from systems promising wealth without the need for production and government assistance that seems free but often isn’t.
These assurances are often tied to central government authorities who promote comfort and security in exchange for your compliance. They guarantee secure retirements and accessible healthcare while operating schemes that resemble classic Ponzi structures more than sound fiscal policy.
Social Security is one such example. The government takes a portion of your paycheck over many years, with the promise that after decades of contributions, you’ll receive a comfortable retirement foundation.
As noted by Rachel Greszler, a research fellow at the Heritage Foundation:
“[Social Security’s] America’s favorite entitlement program, and part of the reason it’s so popular is it’s not solvent.”
Indeed, the allure of programs promising more than what you invest is difficult to resist, breeding trust in government leaders. Unfortunately, for those relying on Social Security, disillusionment may be on the horizon.
A Path to Crisis
From the outset, it was evident that Social Security was on a trajectory towards insolvency. Any realistic analysis could foresee its eventual collapse—just as all Ponzi schemes are bound to fail.
In 1939, well before the first checks were issued, John T. Flynn foresaw Social Security’s impending financial difficulties by the 1970s. Although ridiculed by the political class, his predictions were alarmingly accurate. Without the intervention of the Greenspan Commission and the Social Security Reform Act of 1983, Flynn’s timeline would have been off by a mere three years.
However, Greenspan’s measures did not resolve the underlying issues; they merely postponed the crisis, setting up future generations for dependency at a precarious time.
Currently, we are heading towards a catastrophic reckoning. Consider the staggering government debt. In the last decade, real gross domestic product (GDP) climbed from approximately $15.6 trillion to $18.6 trillion. Concurrently, the national debt swelled from $13.5 trillion to an alarming $27.8 trillion.
This stark contrast raises questions about the sustainability of our growth. Real GDP increased by $3 trillion—19.2 percent—while national debt skyrocketed by $14.3 trillion, or 105.9 percent.
This divergence creates two vastly different financial trajectories. Today, government debt surpasses GDP by $9.2 trillion. Do you believe we can simply outgrow this imbalance?
And it gets even grimmer. The disparity between GDP growth and government debt is a significant concern, but it pales in comparison to the larger issue of unfunded liabilities…
Examining Unfunded Liabilities
The current estimate for unfunded liabilities—including Social Security, Medicare (Parts A, B, and D), federal debt held by the public, and federal employee and veteran benefits—stands at a staggering $158.9 trillion. By comparison, GDP is just $18.6 trillion. Anyone under 50 relying on Social Security for retirement support likely faces bleak prospects.
Each generation fosters issues that will plague the following one. Previous decisions shape today’s realities, just as present choices will mold tomorrow’s landscape.
Right now, we are grappling with burdens inherited from past policies that are no longer sustainable. These outdated social safety nets are buckling under pressure just when millions of Baby Boomers need them the most.
Initially, those who entered the Social Security system reaped significant rewards. For example, Ida May Fuller cashed the first Social Security check on January 31, 1940, for a mere $22.54, having contributed just $24.75 to the system. Throughout her lifetime, she collected a remarkable total of $22,888.92.
According to the Social Security Administration, by 2035, only 79 percent of promised benefits may be available due to the depletion of trust funds. Despite widespread acknowledgment of Social Security’s imminent challenges, many have failed to prepare for its fallout, choosing to ignore the looming crisis.
Astonishingly, three out of five families headed by someone aged 65 or older lack retirement savings. The misshaped faith in Social Security has left them exposed to significant risks.
While President Biden focuses on combating COVID-19 and addressing climate change, he also intends to reform Social Security. According to CNBC:
“Under his [Biden’s] plan, eligible workers would receive a guaranteed minimum benefit equal to at least 125 percent of the federal poverty level. Individuals receiving benefits for over 20 years would see a 5 percent increase. Widows and widowers would receive around 20 percent more each month.”
To finance these proposals, Biden suggests imposing additional payroll taxes on individuals earning $400,000 and above. However, these superficial adjustments appear to be little more than rearranging deck chairs on a sinking ship.
Does Biden truly believe that Social Security can be reformed, or has he lost his grip on reality?
Sincerely,
MN Gordon
for Economic Prism
