Think You Know Social Security? These Myths Say Otherwise

1. The Social Security Trust Fund. You may recall Al Gore was going to create a lockbox to keep the government from pilfering your contributions (ha ha). In reality Lyndon Johnson allowed Social Security Funds (i.e. your contributions) to be enjoined with normal government monies that could be used for the payment of general government obligations. (In other words NO LOCK BOX) My dad was told by FDR and other Democrats in the 1930's that he would have his own Social Security Account that could not be touched/used by the Federal Government. That sure as heck didn't happen !!! The You Tube link spends time explaining how when the government spends your Social Security funds on their priorities they print Bonds (i.e. IOU's) to pay you back. In other words a license to print money (and create inflation). Glad my Social Security funds were used for precious USAID Projects. :-(

2. Motivation for the creation of Social Security in the 1930's. The "Great Depression" was created by the Federal Reserve's fear of too much prosperity and growth in the 1920's (i.e. the Roaring 20's). Progressive/Keynesian/Communist economists in love with the discredited "Phillips Curve" threw a wet blanket on the economy to prevent inflation in early 1930 (i.e. too much consuming going on out there ... as Howell Hefflen would say). They did this by drastically reducing the number of dollars in circulation to prevent inflation. This all preceded the implementation of the Smoot-Hawley Tariffs in late 1930. The Smoot-Hawley Tariffs was the fig leaf FDR used to cover the Fed's and his mismanagement of the economy. By the way, the Great Depression introduced the greatest period of DEFLATION in history ... why, because FDR and the FED's policies destroyed businesses (no money) which caused drastic unemployment.

FDR was fearful of an up rising (revolution) of unemployed young men. He proposed Social Security as a way of getting older workers to retire to open up worker slots for young men getting FDR out of a jam. FYI ... that is why Jay Powell is playing with "FIRE" at the FED.

3. Joe Biden's "Social Security Fairness ACT" signed (by auto-pen ?) on January 5th 2025 ... Will cost the Social Security Trust Fund $200 $Billion over the next ten years ... will accelerate Social Security's bankruptcy by 1 to 2 years. The damage is already done. However, I will challenge the underlying "Social Security Fairness Act" philosophy. I was one of those poor saps who was forced to contribute to Social Security for 45 years. The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) were set up in 1983 by Congress in Public Law 98-21 in the name of the Social Security Administration. The WEP and GPO provisions were incorporated to treat all employees fairly. They have a table on the last page of the WEP document (Years of Substantial Earnings) that shows the AIME "replacement rate" for various time of service in the Social Security system. You need a minimum of 10 years to participate at all. The bone of contention is the "replacement rate" for people under 30 years of service. It is 90% for folks who have over 30 years of Social Security service. It is graduated between 20 and 30 years. Under 20 years it is 40%. All good Liberals believe in progressivity unless it applies to them. They want 90% for anything over 10 years. The reason for the original/1983 WEP adds progressivity to calculating the PIA level at full retirement ... is the poorer population.

A) Employees that participate in State sanctioned, or “non-covered”, pension programs do not pay federal payroll taxes (that is FICA taxes) if you participate in a “non-covered or exempt” pension program. Such employees do not pay the 6.2% FICA tax nor do their employer’s pay the requisite matching 6.2% FICA tax. 26 states have such pensions. Wish my wife and I had a 12.4 % raise every year for 20 years (if I had a non-covered gig)

B) Social Security, by the original design, will give low wage earners a higher percentage of their average lifetime wages, adjusted for inflation, at retirement. This is accomplished by inflation indexing and uses a mathematical curve with distinct bend points (the first in particular) to favor low wage earners over higher wage earners. The result is low wage earners get a higher “replacement rate” of their average lifetime wages than higher wage earners. (I didn't invent the system)

C)Per AMAC (Association of Mature American Citizens) there are 2.75 million “non-covered” or exempt pensioners that will benefit from the “Social Security Fairness Act”.

D)They take the top 35-years of earnings divided by 420. If you work for only 15 years after your “non-covered” gig you get 35 minus 15 or 20 zeros in your average. As a result, “non-covered” employees erroneously appear to be a low wage earners !!!

E)Eliminating WEP and GPO would affect approximately 2.75 million “non-covered” pensioners according to AMAC (Association of Mature American Citizens). There are approximately 66 million total Social Security recipients per AMAC most of which would pay the price in 2032 when the Trust Fund goes bust. Again, this would create a 200 Billion dollar shortfall for Social Security by 2033, thus, forcing the Social Security Trust Fund to go insolvent years early.

F)According to AMAC 2024 data, the average pension for “non-covered” or exempt pensioners is already 37% higher (before R 82) than pensioners getting only Social Security benefits alone.

G)This will be a major screw job when Social Security runs out of cash a 2 years early and Social Security “only” folks take a 23% “haircut”. “Non-covered” retirees will continue to get their exempt pension benefits as normal. Is that fair?

H)We can’t stand for politicians who continually try to “Game” the system. HR 82 should really be called the “Social Security Unfairness Act”.

Regards, Bill