Social Security Solvency?

World's Richest Man Eats Social Security?

Photo by Jim Watson/ AFP via Getty Images

Elon Musk Declares War on Social Security which tells us where he and his partner Sen. Mike Lee (R-UT) are about to take us. That is an existential warning to everyone who has ever paid FICA taxes because Musk and Lee want to transfer its administration to Wall Street.

MikeLee’s entry on X declares that Social Security has been one of those “deceptive sales techniques” that the government has “used on the American People” and “gets far too little attention. Buckle up because this is a wild ride.”

How many Republican lies are in Rep. Lee’s declaration?

1. The government has pursued a course of “deceptive sales techniques” when deception and program destruction have been the Republican Party’s strategy since 1935.

2. That this 89-year ever-present nightmare from the Republican Party has gotten “far too little attention.” It is always at the top of the GOP's and beneficiaries' minds.

3. The Republican Party has used the word “entitlement” which is contractually true to destroy this government program to cover up their “entitlement” attitude based solely on an assumed superiority gained by luck and inheritance for today’s top 5%.

4. Every millionaire and billionaire in this country has been supported at some stage by government handouts known as subsidies and/or tax breaks. These are the most “entitled” people in today’s culture and economy who damn anything helpful to single mothers, the elderly, the disabled, the unemployed, the sick, the homeless, the destitute, and anyone else who needs help with that bootstrap thing the wealthy always get from the government.

   • Exxon Mobil still receives subsidies from state and federal governments

   • How Elon Musk Gets Money From the Federal Government and not just for Tesla

What everyone misses is that everyone gets something from the government through the tax, regardless of its source be it income tax – even on unemployment insurance – to sales tax to government “fees”, that fig leaf the Reagan administration invented to cover up the taxes they created to distract from the inevitable $1+ trillion debt he ran up with his tax cuts for the rich.

How is it that the most favored, the richest, the most powerful people who have bought an entire government are so resentful of the crumbs tossed to those who have the least and who are entirely powerless? If Musk is getting $20 billion from the government, what possible moral justification is there for his “war on Social Security?”

The knock on Social Security, based on the fact that it is an efficient,anti-poverty government administered program, is explained in the Social Security Administration’s (SSA) Trustees Report Summary showing that the Trust Fund lost 3.61% in 2023 as worker FICA taxes did not cover 100% of the yearly payouts.

Does it really need to be pointed out that private sector entities lose money all the time, go bankrupt, suffer from red tape and bureaucracy as well as show its disdain for accessible customer service? Do we really need to fight like children who snag what they can and look jealously at their siblings for what they got?

Politicians have been dealing with how to ensure the Fund’s solvency for decades between the “fiscal conservatives” who want the government out of social programs for the needy and the last of the FDR Democrats who want to continue aiding those in need. This is a grudge match by the uber class “small government” bellyachers who want to replace every conceivable program that helps the “little people” so they don’t have to spend an extra out-of-pocket $50 per year or contribute to those life-saving programs.

This is a fight about keeping Social Security out of the hands of those who intend to rob it blind by “privatizing” it and letting Wall Street plunder it for huge paychecks to their C-suites and their “investment advisors” who peddle stock and marketable bond advisories carrying a healthy fee that the poor, working poor, and middle class will never be able to afford.

Somehow that’s just not enough!

The SSA’s overhead costs are less than 1% per year and, after 89 years, it runs like clockwork. Wall Street will never settle for 1% of the pie. They’ll take 20% as their share. Furthermore, the SSA invests in non-market Treasuries bearing market level returns which are the safest investment. In contrast, Wall Street would be tempted at some point to include low rated publicly traded bonds and stocks.

Wall Street runs on two emotions: fear and greed which toggle on the micro level of minute by minute to the macro levels of month by month and year by year. That roller coaster is an inherent risk to anyone inconveniently retired at the time the markets crash. That illustrates the destruction of the security we want.

Keep these last three paragraphs in mind when contemplating sending Social Security as we know it to our ever hungry financial octopus.

Of course, Wall Street has probably already devised structures to tamp down excess risk depending on beneficiaries’ ages. They already use different structured portfolios that scale risk by clients’ ages but, again, beneficiaries will pay excessive fees for what would take investment houses less than a week to apply to Social Security beneficiaries.

Wall Street's risk appetite created the Great Depression and all the recessions including the massive, industry-wide 2007-2008 mortgage fraud crash they perpetrated on the U.S. and world economies. And it was taxpayers who paid for the cleanup while the surviving banks’ C-Suites gave themselves huge bonuses.

Since 2008, Wall Street has avoided the possibility of Progressive Democrats’ desire to reinstate the Glass-Steagal Act of 1933 which was repealed in 1999. That Act created a wall between retail banking and investment banking, keeping risk investment, i.e. the stock and bond markets, to investment banks. It beggars belief that Wall Street’s greed has only intensified as each market fall encourages them to look elsewhere to buy up passive income properties such as residential real estate which has contributed to greater poverty for what was once a thriving middle class.

Now we are on the precipice of Wall Street gaining the last mountain of free-range cash to gorge themselves and set up today’s and future elders for the roller coaster ride of boom and bust when they can least afford financial insecurity.

Social Security was intended to be the bedrock retirement program for the elderly to escape poverty. As late as the 1980s, reputable financial advisors’ sales pitches included a pyramid showing how to structure financial security. Buying a house was on the third level after schooling and employment. Social Security occupied the next level. Only after that came investment in mutual funds, stocks, bonds, etc. Those higher realms of risk were only to be funded by sufficient surplus income.

Social Security was set up in 1933 as a simple, no muss, no fuss government administered annuity that now theoretically collects 12.4% per worker in FICA taxes. That is to say 6.2% from the employee, 6.2% from the employer, and 12.4% from the self-employed. It used to be that those funds were both payouts to beneficiaries and the Trust Fund that now invests in non-marketable Treasury bonds producing a market rate of return on investment.

But there’s a tax cap on the earnings of the wealthy. For 2024, that cap was $168,600. All earnings above that are not taxed. For the likes of Elon Musk, Mark Zuckerberg, Jeff Bezos, and all the other obscenely wealthy, this means that they’ve paid their Social Security taxes within seconds on the first business day of the year. Multimillionaires may take a few days to pay their fair share.

But that’s only if they pay income taxes. Tax returns include line items for Social Security.

What is never covered in publications about the Social Security Trust Fund and this latest frontal attack is that it mimics what happened when employers and Wall Street devised different pension structures. Defined Benefit Plans that were popular in the 1970s are nearly gone now. Today, the Boston College Center for Retirement Research’s report titled Boomers Lament Disappearance of Pensions estimates that only 6% of corporations offer Defined Benefit Plans.

Since the 1990s, employers and Wall Street switched from Defined Benefits to Defined Contribution Plans. The Demise of the Defined-Benefit Plan and What Replaced It delineates the differences between the two. Both plans offered Wall Street 401k investments in securities. They differed in who funded and was responsible for investment decisions.

• Under Defined Benefit Plans, the employer was responsible for funding and investment decisions.

• Today’s Defined Contribution Plans require partial employer funding while the employee can contribute or not. What else is bad about them is that over 90% of our system’s investment advisors cannot meet or beat the S&P 500, even without the market crashes. So it begs the question: why do we expect novice employees to good investment decisions by picking a good plan that fits their current and future needs and what they’ll receive monthly upon retirement? The markets are so complex that choosing a particular plan is impossible for the newbie and there’s the question of whether to choose a lump sum annuity, close the 401k, and move the funds to an IRA upon retirement or what.

Assume that Wall Street already provides various risk level 401k plans on file for whenever Congress gives Social Security to Wall Street, there is no security for the beneficiaries at any age when the market experiences a recession or crash or depression. The resulting benefit distributions would be irregular during those times.

At the very least, the SSA and its actuaries take care of investment decisions and payouts based on the safest, non-marketable Treasury notes and bonds. Moreover, the Trust Fund was sequestered in 1983 by Reagan and thus is immune from demands to pay down the national debt.

Trump is slated to be inaugurated on January 20, 2025. This is an excellent time to reach out to all Senators and Representatives to disregard Musk’s declaration of war on Social Security.

With that in mind, check out a table of proposed solutions to address its long term solvency. Dr. Ed Weir, PhD, Former Marine, and Social Security Manager until he retired, has a YouTube channel at youtube.com/watch?v=oda…. In that edition, he shows the various proposals offered to shore up the Trust Fund’s viability. The table can be viewed at ssa.gov/OACT/solvency/p…

Dr. Weir shows 2 solutions that together ensure a 99% solution to the solvency issue. The first is on page 20 of 35, number C2.6 which deals with changing the ages for early and standard eligibility. The second is on page 24 of 35 pages which eliminates the tax cap. That is proposal E2.1.

What is enlightening is that C2.6 provides 26% of the solution while E2.1 relieves 73% of the problem and requires all employers and employees each pay 6.2% like the rest of us. Dr. Weir states that it would take any President about 10 minutes to select these two proposals and the issue would solved.

From experience, though, we know that “controversial” issues remain controversial for decades as talking points for campaigns.

But now we see a muscular frontal attack from Musk, the richest man in the world and thought to become the first trillionaire.

If you’ve ever paid FICA tax, get the word out. We must fight this or become the 5%’s slaves until we are free. They don’t see our labor as deserving “dignity.”

At heart is this: great wealth in few hands causes great scarcity for the vast majority of those not wealthy.

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