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Cake day: June 16th, 2023

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  • Just forget about the “trust fund” because as I mentioned, it’s not central to the way the SS system works. Social Security is simply a system whereby a large base of workers pays taxes to fund the (modest) retirement of a much smaller number of retirees. These are rough numbers, but: the average man starts work at age 21 and retires at age 65 (meaning he pays into the system for 44 years); the average male retiree then dies at age 76 (meaning he collects SS benefits for 11 years). So on average, four workers pay SS taxes to support one retiree. The average SS benefit is $1,583 per month, which means the average worker needs to pay just $396 per month in SS taxes for the system to remain solvent indefinitely. The median annual salary in the US is $59,384 (or $4949 per month) which means the SS tax rate only needs to be 8% (it’s currently 6.2% because the trust fund is being dipped into). Any shortfall could be easily made good by 1) raising the tax rate, and/or 2) raising the cap on taxable income.

    This is why the “Ponzi scheme SS” meme is bullshit. A Ponzi scheme provides fake returns to investors by returning part of the money invested by new suckers; as soon as you run out of new suckers, the scheme collapses. Social Security does not in any way rely on perpetually finding new suckers, it only relies on the demographic reality of human beings having a much longer working life than retired life.


  • No, what happened during the Reagan administration is that the government recognized that decades in the future, the predicted change in the age pyramid would mean more retirees and fewer workers to support them. So rather than slightly increasing SS taxes in the future to cover this, they started increasing SS taxes immediately and investing that overpayment in Treasury bonds (this is the origin of the Social Security “trust fund” which is routinely misrepresented as the entirely of the SS system). This SS trust fund money is primarily what allowed Reagan to run enormous deficits (“fiscal conservative” lol) without causing interest rates to spiral out of control.

    There is absolutely nothing about Social Security which is in any way like a Ponzi scheme. It is simply a pension plan applied to the whole country instead of just an individual company.