You know you’re in deep, big trouble when Joe Biden and Donald Trump agree on anything—especially when it comes to insisting that no one should ever cut “one penny” from Social Security, the national program income for the elderly 65.
Here are three reasons why Social Security should be abolished entirely and replaced with a plan that will help those who are truly in need without impoverishing everyone else.
Social security is unsustainable. Established in 1935, Social Security is paid for by a payroll tax of 12.4 percent on income up to $160,200. Supporters pretend that Social Security is like a retirement plan, where your specific contributions increase in value over time. But the system is a Ponzi scheme, where current users are paid out of new money coming into the system. The problem is that when the program began paying benefits in 1940, there were 160 workers per retiree, creating a surplus. Today, there are only 2.8 workers per pensioner.
In a decade, not enough money will flow into the system to cover the current level of benefits. Under the law, benefits will have to be cut by 20 percent or payroll taxes will have to increase even more than they are. In 2023, we’ll be taxed on all income up to $160,200 — up from $113,700 a decade ago and $87,000 in 2003.
Social security is unfair. Payroll taxes hit younger, poorer workers harder than older, wealthier ones. A minimum wage worker may pay next to nothing in federal taxes, but they will still be forced to fork over 12.4 percent of their compensation into payroll taxes.
That’s a bad deal for retirees from an investment standpoint: According to a 2016 study by the Tax Foundation, a worker who retires after making the average salary could expect an annual payout of about $20,000. If that person instead put just 10 percent of their annual earnings into an IRA, they could expect an annual retirement income nearly three times that amount.
And don’t think the government actually owes you anything when you retire, regardless of how much you paid in. In 1960, the Supreme Court ruled Flemming vs. Nestor that there is no contractual or constitutional right to receive social security benefits.
Social security is unnecessary. When Social Security was enacted during the Great Depression, old age and poverty went hand in hand. Now, the median net worth of households headed by someone over 65 is more than double that of households headed by someone half their age. Households headed by people aged 75 or older had an average net worth of $254,800, and households headed by people aged 65 to 74 had an average net worth of $266,400. For those between the ages of 35 and 44, that figure was just $91,300.
To be fair, part of the reason older Americans are relatively fit is because of Social Security and health care. But mostly because people are living and working longer and accumulating more wealth, senior programs are becoming less important to financial stability and well-being. There is simply no good reason to pay universal 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 shut it down as soon as possible. Let people get benefits within ten years of retirement, but cut and eliminate payroll taxes for the rest of us so we have more money to fund our own pensions.
The federal government can and should continue to help older Americans — indeed, Americans of any age — who need help with food, housing, and health care. But that doesn’t require forcing us all to pay into a system that is increasingly unsustainable, unfair and unnecessary.
Edited by John Osterhoudt; additional graphics by Danielle Thompson
Photo: Gripas Yuri/ABACA/Newscom