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The far right’s unceasing efforts to privatize Social Security continue. Wisconsin’s Senator Ron Johnson recently called Social Security a “Ponzi scheme.” At a June 3rd private meeting of supporters in Oshkosh Johnson said “We’ve got to convince more of our fellow citizens that Social Security really is ...a legal Ponzi scheme.” This statement is not only false but it threatens our future financial well being.
Social Security is not a fraudulent scam. It is an essential, and very successful, insurance program that protects all of us from financial disaster. We all pay into the program through payroll taxes. Social Security provides income for loss of a spouse or parent and for becoming disabled. Many people receive survivor’s and disability benefits and all of us will eventually need the stable retirement income provided by Social Security.
Senator Johnson’s “Ponzi scheme” statement is not original. Rep. Paul Ryan of Wisconsin and other Republicans have made the same accusation. Hypocritically, Rep. Ryan received Social Security survivors benefits as a young man. Senator Johnson, being a millionaire business owner, probably does not expect to need Social Security. Conservatives opposed the creation of Social Security in the 1930’s so it is not surprising that they want to cut it or privatize it now.
They want to make it voluntary and create individual accounts that can be invested in various ways. Essentially Social Security would become similar to IRA’s, 401ks, or other tax exempt deferred savings plans. The financial services industry would manage the accounts. Needless to say, this would be profitable for the industry and costly for the rest of us. Profit, rather than retirement security for ordinary people, is the goal.
The same advocates for privatizing Social Security are currently working to weaken protections from investment fraud. They oppose the new Labor Department rules requiring investment sales agents to act in the best interest of their clients. They oppose the new Consumer Financial Protection Bureau. Don’t be fooled. Republicans, like Johnson, do not care about your retirement security.
A Ponzi scheme is a fraudulent investment that pays early investors using money from new investors rather than actual investment income. Ponzi schemes collapse without continuous new money. The Social Security is a trust fund invested in U.S. Treasury bonds. Treasure bonds are the premier, safe investment in the world. Social Security has a $2.8 trillion surplus and has never missed any payments to beneficiaries. It is not a Ponzi scheme.
In Wisconsin Social Security generates $28.1 billion in economic impact. It lifts 307,000 people in Wisconsin out of poverty. Wisconsin has 825,000 people over 65 and 43% of them would be in poverty if they did not have Social Security. For 30% of these people Social Security is their only income. Social Security is a critical support for people and Wisconsin’s economy.
But reactionary conservatives don’t allow facts to interfere with their ideology, especially when there is money to be made. They claim Social Security is going bankrupt and must be cut to control the federal deficit. Both are untrue. They claim people can manage their own money better than the government. But both research and experience debunk this claim.
Social Security isn’t going bankrupt. It currently has a surplus invested in treasury bonds that earn interest. It does have problems with an aging population and fewer younger workers. But it can fully meet all obligations until 2021 when payments will begin to exceed income. Around 2033, the trust fund will run out of reserves. But even then, the revenue will be enough to pay three-quarters of the benefits. So Social Security needs some adjustments to avoid draining the surplus. Many experts say Social Securities actuarial problems can be easily fixed.
Social Security does not add to the federal deficit and cutting it can not help lower the deficit. Social Security has its own funding source in dedicated payroll taxes. It currently has a surplus. It isn’t allowed to spend money it doesn’t have in the trust fund. Plus money in the trust fund can not be used for other government expenditures. Social Security is the largest single expenditure in the federal budget but it is not the reason we have deficits.
Conservatives also believe individuals can manage their retirement savings better than government. But independent research and decades of experience with individual accounts (IRAs, 401ks, etc.) show the opposite. Most individuals get lower investment returns, pay higher management fees, and have dramatically less at retirement with individual accounts. Most people don’t have the knowledge or time to “manage” their accounts well. Market volatility, investment risk, and administrative fees eat up earnings. Many experts say we are facing a retirement crisis because the switch from pensions to individual retirement accounts have not worked well for the average person.
Rather than attacking Social Security we should be strengthening it. We should do the sensible things necessary to fix the program’s actuarial problems. Wisconsin voters should reject Senator Johnson’s scare tactics. We all should reject the conservative efforts to cut and privatize Social Security.