This is the latest in a series of columns about Social Security and retirement income planning.
Utah’s senior senator, Mike Lee, took to the social media platform X this week to compare the U.S. Social Security system to a Ponzi scheme set up to cheat the American people out of freedom and security in retirement.
The lengthy thread immediately drew condemnation from advocacy groups focused on protecting and expanding the Social Security system, including Social Security Works and the National Committee to Preserve Social Security and Medicare. The groups called Lee’s comments damaging and misleading, and they challenged federal lawmakers to reject the position.
“Of all the deceptive sales techniques the U.S. government has used on the American people, one of them — the Social Security Act — gets far too little attention,” Lee wrote. “In 1935, the American people were sold a bill of goods.”
Lee’s thread characterizes the Social Security system as a “bait and switch” — essentially a ploy by Congress to raise taxes in order to create a big pool of money that federal lawmakers can “routinely raid” and use for “whatever the current Congress deems ‘necessary.’”
It’s a scary suggestion, but as a number of independent Social Security experts have expressed to me, it’s just not a fair portrait of the program.
Yes, Social Security has its flaws and its funding challenges, but to suggest that the program is some kind of conspiracy aimed at harming or misleading the working public is false. The reality is that Social Security remains a fundamental part of the U.S. retirement system — one that is admittedly showing its age.
To give Senator Lee due credit, there is no doubt that reform is needed and that tough questions need to be asked and answered about the long-term future of the program. But if there’s one thing I know about the path ahead, it is that fearmongering and dissembling won’t help us find the right approach to long-term solvency.
An Important History Lesson
Lee’s thread starts by recounting the early history of the Social Security system, and particularly its first constitutionality test in a case known as Helvering v. Davis, which was ruled on by the Supreme Court in 1937.
As recounted on the Social Security Administration’s website, the case involved a shareholder who tried to stop a corporation from paying taxes and making wage deductions required by the Social Security Act. The shareholder argued that the taxes were void and that compliance would cause irreparable damage to workers and their employers.
After extensive litigation and argumentation, the Supreme Court eventually ruled that the Social Security Act was constitutional — because Congress has the power to tax and spend money for the general welfare of the public. The court also adopted a liberal interpretation of the “welfare clause” in the Constitution, determining that the Social Security Act did not violate the Tenth Amendment.
That determination allowed the Social Security system to operate as its designers intended, drawing funds from current workers in the form of payroll taxes in order to fund the benefits owed to retirees. At times in the program’s 90-year history, this framework has facilitated the creation of sizable trust funds used to support the payment of both disability and retirement benefits.
Over time, however, the aging of the population and the increase in the amount of earnings that aren’t subject to Social Security taxation have created big funding gaps, such that the program is now facing an insolvency date in the early to mid-2030s.
An Unfair Interpretation
Lee’s tweet thread uses this very real history to suggest that workers’ payments into the Social Security system are the same as any other dollar paid in taxes. In his view, that means “wasted.”
“Now, let’s talk about what happens to ‘your money’ once it’s in the government's hands,” Lee wrote. “Spoiler alert: It’s not managed like your IRA or 401(k). … First of all, this money doesn’t sit in a nice, individual account with your name on it. No, it goes into a huge account called the ‘Social Security Trust Fund.’”
Lee then implied that the government “routinely raids this fund.”
“Yes, you heard that right,” he wrote. “They take ‘your money’ and use it for whatever the current Congress deems ‘necessary.’”
Again, it’s a scary proposition, but it’s misleading.
As explained in the Social Security trust fund guide published by the Center on Budget and Policy Priorities, money that the federal government borrows — whether from investors or from Social Security — is used to finance the ongoing operations of the government in the same way that money deposited in a bank is used to finance spending by consumers and businesses.
“The bank depositors will get their money back when needed, and so will the Social Security trust funds,” the guide explains. “In fact, that has been happening since 2021, as the combined trust funds have been drawing down their accumulated reserves.”
