Presidential advisor Elon Musk recently claimed on Joe Rogan’s podcast that Social Security is “the biggest Ponzi scheme of all time.” In fact, Social Security has been one of the most effective and enduring components of America’s social safety net. It has done more than almost anything else to alleviate the problem of poverty amongst the elderly. While the program has been far from perfect, Congress has continued to improve and strengthen its structure over time when reforms were warranted. The program has become a “third rail” in national politics because it is so central to the lives of families living in states both red and blue.
Until recently, President Donald Trump has known enough to stay away from this issue. He has avoided mentioning cuts to the program, most likely sensitive to the fact that doing so has very little appeal to most of the electorate, including with a lot of the voters who brought him into power.
Presidential advisor Elon Musk recently claimed on Joe Rogan’s podcast that Social Security is “the biggest Ponzi scheme of all time.” In fact, Social Security has been one of the most effective and enduring components of America’s social safety net. It has done more than almost anything else to alleviate the problem of poverty amongst the elderly. While the program has been far from perfect, Congress has continued to improve and strengthen its structure over time when reforms were warranted. The program has become a “third rail” in national politics because it is so central to the lives of families living in states both red and blue.
Until recently, President Donald Trump has known enough to stay away from this issue. He has avoided mentioning cuts to the program, most likely sensitive to the fact that doing so has very little appeal to most of the electorate, including with a lot of the voters who brought him into power.
But as with his drive to reshape the government workforce with a sledgehammer rather than a chisel, Musk might end up dragging the president into a political quagmire that will consume much of the administration’s energy. Threatening Social Security, which turns 90 this year, will do more than almost anything else to energize Democrats and deflate Republicans, who will perceive this to be a losing issue for their party.
President Franklin D. Roosevelt and the Democratic Congress created Social Security in 1935 at the height of the New Deal. The United States had yet not adopted the kind of federal social insurance programs for retirees that European nations had put into place decades earlier, like Germany (1889) and Denmark (1891). In 1934, the Committee on Economic Security, headed by Secretary of Labor Frances Perkins, proposed that Congress create a federal insurance program that would provide retirees with pensions financed through payroll taxes.
Crucially, the program would be universal, including all workers who whose jobs were covered rather than deciding who should receive benefits through a means test. The belief of the program’s founders was that within a nation historically ambivalent about federal programs, means tests stigmatized beneficiaries whereas universal benefits were not seen as handouts. Universal benefits also had the advantage of investing many different income classes in the continuation of the program, since everyone under the insurance umbrella would receive something down the line.
Additionally, Old-Age Insurance, as it was called, was seen as a more conservative alternative to flat monthly pensions, which some reformers were calling for, and which would be paid for by the federal government. As Roosevelt said: “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
The Social Security taxes were a key part of the legislation. First, the taxes offered a fiscally conservative method to pay for benefits that would not draw on general tax revenue. Congress would be forced to consider the long-term annual costs of the program to make certain that they did not have to raise taxes on workers. Initially, Congress also planned to accumulate a surplus of funds. Second, the payroll taxes would leave workers feeling invested in the program by giving them the sense that they were “paying into” a system and thus deserved benefits down the line. “With those taxes in there,” Roosevelt later said, “no damn politician can ever scrap my social security program.”
But it faced problems immediately.
Southern Democrats who controlled many major committees insisted that agricultural and domestic workers, two segments of the labor force with high levels of Black employment, were excluded. The South did not want them to be brought into a federal policy that easily could open the door to civil rights interventions. Women were also left out, as legislators envisioned a program for single wage-earning households, and at the time, those workers were assumed to be men. Finally, the notion of a surplus for the future was the most questionable part of the package since the money would not literally be saved in some kind of bank account for future use. In practice, the excess funds would be invested in government securities. (Collecting money that would not be used in the short term sit well at a time that workers were still struggling with the effects of the Great Depression.)
During its first five years in existence, the program was on politically shaky ground. While Congress did expand coverage in 1939 to include workers’ widows and dependents, political support for Old Age Insurance remained weak. A number of Republicans attacked Roosevelt’s measure. In 1936, Republican presidential candidate Alf Landon said the program was a “cruel hoax” that would create a massive bureaucracy; he believed there was “every probability that the cash they pay in will be used for current deficits and new extravagances.” Opponents in Congress tried to subvert the program by freezing payroll tax increases eight times, starting in 1939, and lobbying to finance benefits through general revenue, which would eliminate the politically valuable earmarked payroll taxes, and thus make Social Security subject to the vagaries of all other discretionary programs.
In 1950, with Democrat Harry Truman in the White House, his party saved the program. Congress increased Old Age Insurance, raised the taxes, and gradually expanded the kinds of jobs that were covered, starting with agricultural workers. Congress abandoned the idea of collecting a surplus so that benefits were paid for on a strict pay-as-you go basis. Today’s workers would pay for today’s retirees. In 1954, Republican President Dwight Eisenhower warned in a letter to his brother: “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history.” The Social Security card that bore the individual number of every citizen became a point of pride. Though the Social Security number was originally created so that the government could record worker’s earnings for the program, it came to become one of the most common forms of identification.
For the next few decades Social Security grew steadily. When Republican candidate Barry Goldwater proposed making the program voluntary—thus undercutting its universal structure—in 1964, he was pilloried by President Lyndon Johnson, who used Goldwater’s proposition as one more piece of evidence that he was a radical conservative. In 1965, Congress added health care benefits—Medicare, which was also constructed as a universal benefit—into Social Security. It was one of Johnson’s greatest legislative victories. In 1972, Republicans and Democrats vied to increase benefits as Americans were struggling with inflation born out of spending on Vietnam. The partisan competition was over how to expand, not over whether to do so. President Richard Nixon and congressional Republicans pushed to index benefits to inflation so that there would be automatic cost-of-living adjustments when prices rose. Seeking to retain discretionary control over benefits, House Ways and Means Chairman Rep. Wilbur Mills, a Democrat, preferred the old-fashioned method of having Congress vote to raise the numbers (which also ensured they would receive credit). The final Social Security Amendments included both proposals. Benefits rose by a whopping 20 percent and the legislation indexed the program.
Since 1972, there have been a number of occasions when Congress has incrementally increased taxes and adjusted benefits based on actuarial predictions made by the Social Security Administration or bipartisan commissions. For instance, the Social Security Amendments of 1983 increased payroll taxes and delayed a cost-of-living adjustment to make the program solvent into the near future.
Republican efforts to directly cut Social Security benefits have never been successful. The program is too popular. When Reagan initially tried to address a fiscal shortfall in 1981, his Office of Management and Budget director, David Stockman, proposed significantly reducing benefits for early retirees. House Democrats pounced, with Speaker Tip O’Neill warning that this was the first step to destroying the program. Reagan backed away, giving rise to the notion that the program had become a “third rail” in American politics. In 2005, fresh from his reelection victory against Sen. John Kerry, President George W. Bush proposed a major plan that would privatize the system by allowing workers to invest some of their payroll taxes into investment accounts, thereby taking a risk as to where the account would be upon their retirement. House Minority Leader Nancy Pelosi and Senate Minority Leader Harry Reid handed the president a whopping defeat.
In 2008, more than 50 million people were receiving Social Security benefits. In 2025, approximately 69 million Americans will receive roughly $1.6 trillion in benefits. That includes almost nine of out 10 Americans 65 and older, for whom Social Security constitutes 31 percent of their income. Furthermore, 39 percent of men who are 65 and older and 44 percent of women that age receive at least 50 percent of their income from Social Security. According to the National Institute on Retirement Security, a stunning 87 percent of Americans believe that Social Security should remain a budgetary priority. That figure includes 86 percent of Republicans.
It is not a shock as to why many Americans have a sense of pride, as the founders of the program had predicted, in having paid into this system and equally believe that they are deserving of their monthly benefits.
Given the track record of Trump 2.0 thus far, there is no reason to believe that Musk is not serious about putting Social Security in the administration’s crosshairs. Indeed, the biggest threat right now to the efficiency of Social Security is Musk’s so-called Department of Government Efficiency itself, as it drives a proposal to slash thousands of jobs from the Social Security Administration and has gained access to the payment system.
To be sure, the program must deal with the growing numbers of retirees and thinning population of workers. But Trump and Musk’s burn-down-the-house approach is dangerous to the elderly and a worse alternative to the kinds of incremental reforms (such as increasing the taxable maximum ceiling on wages and increasing payroll taxes) that have continued to correct imbalances in the program since the 1970s. For example, the Brookings Institution has put forward one comprehensive study that shows how solvency could be achieved while maintaining the integrity of the basic program.
Trump, who has kept him away from this battle until now, might find his partner Musk drawing him into something that even Trump can’t spin his way out of. At a time of growing job insecurity and rising prices, as well stagnant pension coverage, Roosevelt’s legacy is more important than ever before.
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