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Internet Lies About Social Security
is a silly, dumb and totally misleading email about Social Security
that is floating around the online world — being passed around
from one uniformed email recipient to the next. Several readers have
sent it to me and asked me to comment.
It actually has been polluting cyberspace for years, and I’ve written past
columns debunking all the lies it contains. I thought it had finally run its
course. But it’s back, and it is just adding more muck to the dung heap
of Social Security misinformation that stinks up the online world. So I guess
it’s time for me to tackle the subject again.
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 children 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 money went, it’s available.
Social Security’s actuaries can account for every nickel ever collected
in Social Security taxes — from 1937 to present. You can go to www.socialsecurity.gov.
Under “Our Agency” on the homepage, click on “Actuarial Resources” and
then on “Trust Funds” and 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 2012 (the most recent data available).
Total income: $840.2 billion. 83.8 percent of that came from payroll taxes, 13
percent came from interest earned on trust fund assets, and 3.2 percent came
from taxation of Social Security benefits.
Total outgo: $840.2 billion. 92.2 percent of that went to pay monthly checks
to Social Security beneficiaries, 0.8 percent went to administrative expenses,
0.5 percent went to the Railroad Retirement Board to cover Social Security benefits
paid to RRB beneficiaries, and 6.5 percent remained as assets in the Social Security
The silly email then goes on to try to make the point that Social Security is
a bad deal for all Americans. Using some dubious 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.
You betcha! Every single 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 things were before Social Security came along. Everyone was living the good
life and they all 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 came along. After 80 years of Social Security, that
rate is well below 10 percent.)
Then the email trots out the time-worn 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
Finally, the viral email goes off on a big rant about Social Security being labeled
an “entitlement.” After offering a lot of misleading facts 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, folks. Don’t get so worked
up about it!
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