There is a silly, dumb and totally misleading email about Social Security that is floating around online — being passed around from one uniformed email recipient to the next. Not a day goes by that a copy of it doesn’t land in my inbox, usually with a comment similar to the one I got today: “I knew the system was rigged, and this email proves it!”
I simply can’t believe how gullible some people can be. But I guess if you are predisposed to think that Social Security is the biggest scam ever perpetrated, then you will believe anything you read on the internet.
The email starts off with this headline in big bold letters: “Who died before they collected Social Security?” It then goes on to make this twisted point: “The only thing wrong with the government’s calculation of available Social Security is they forgot to figure in the people who died before they ever collected a Social Security check. Where did that money go?”
Of course it’s true that over the 80-year history of the Social Security program, millions of people died before they ever had a chance to collect Social Security checks. So where did their Social Security contributions go? Well, the email’s author failed to take into account that the vast majority of those deceased taxpayers left behind widows or widowers who received Social Security benefits on their accounts. Or in the case of deceased younger workers, they left behind tens of millions of minor children who got billions of dollars in monthly survivor’s benefits. (I was one of those kids about 55 years ago — although my share of the billion-dollar pot was all of $22 per month.)
And for every deceased worker who died with no eligible dependents, there are hundreds of Social Security recipients who lived well into their 80s, 90s, or even beyond and who received far more in benefit payouts then they ever paid in Social Security taxes.
If you want more precise data about where all the Social Security money went, it’s available. The Social Security Administration’s actuaries can account for every nickel ever collected in Social Security taxes — from 1937 to present. Go to the Social Security government website. Under “Menu” at the top of the homepage, click on “Actuarial Resources” in the “Research, Policy, and Planning” section, and then on “Trust Funds.” There you’ll find all the information about all those nickels.
Just as an example, here is a snapshot of Social Security’s balance sheet for 2014 (the most recent complete data I could find).
Total income: $884.3 billion — 85.5 percent of that came from payroll and self-employment taxes, 11.1 percent came from interest earned on trust fund assets and 3.4 percent came from taxation of Social Security benefits.
Total outgo: $884.3 billion — 96 percent of that went to pay monthly checks to Social Security beneficiaries, 0.7 percent went to administrative expenses, 0.5 percent went to the Railroad Retirement Board to cover Social Security benefits paid to RRB beneficiaries, and 2.8 percent remained as assets in the Social Security trust funds.
The silly email then goes on to try to make the point that Social Security is a rotten deal for all Americans. Using some cockamamie math, it determines that had the big bad government not stolen your money from you (in the form of Social Security payroll taxes), you would have accumulated a nest egg of $892,919.98. Gosh, they figured that right down to the penny. They sure must be smart people!
What a deal! Every working man and woman in this country would have been almost a millionaire if it wasn’t for that awful, money-wasting Social Security program. Old-timers or historians reading this column will remember how wonderful things were before the Social Security program was enacted. Everyone was living the good life and all senior citizens retired with Warren Buffet-sized nest eggs. Those sure were the good old days.
(Actually, more than half of all senior citizens were living below the poverty level before Social Security. After 80 years of Social Security, that rate is well below 10 percent.)
Then the email trots out the timeworn Ponzi scheme argument. In really big and bold letters, the email states: “The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madoff ever did!”
As I have pointed out so many times in this column, Social Security is not an investment scheme. It is what its name clearly implies: a “social” insurance system.
Because Social Security’s potential beneficiary pool includes almost every man, woman and child in this country, you simply cannot set aside enough capital to fund all future benefits. Like ours, almost every Social Security system on earth (and there are about 165 Social Security programs around the world) runs on a “pay as you go” basis — with the taxes collected from today’s workers funding benefits payable to today’s Social Security recipients. If you want to call that a Ponzi scheme, go ahead. But it’s worked in this country for 80 years, and it’s worked in other countries for over 100 years. It’s simply the only viable way to run a large nationwide social insurance program.
Finally, the viral email goes off on a big rant about Social Security being labeled an “entitlement.” After offering a lot of misleading arguments about the alleged benefits received by members of Congress, the email says: “And they have the nerve to call my Social Security an entitlement!”
It’s too bad that word has taken on such a negative connotation. Because you see, Social Security is an “entitlement” in the truest sense of the term. Social Security benefits make up Title II of the Social Security Act.
So when you become eligible for Social Security benefits, and sign an application for such benefits and your claim is approved, then you are legally “entitled” to those monthly checks. Social Security is just one of many government “entitlements.” It’s simply a legal term. But so many people, including the author of this goofy email, get so darn worked up about it.
