Opinion: Social Security is a promise worth keeping after 90 years

Social Security Faces Crossroads at 90: America's Greatest Promise or Looming Ponzi Scheme?

As Social Security marks its 90th anniversary this month, the nation's most popular government program stands at a critical juncture, with supporters calling it "a promise worth keeping" while critics increasingly label it the "biggest Ponzi scheme of all time."

The debate has intensified as new trustee reports reveal the program's financial challenges have worsened, with trust fund depletion now projected for 2033-2034—just eight years away—potentially triggering automatic benefit cuts of up to 23% for 70 million Americans.

The Financial Cliff Approaches

The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits. The program's combined trust funds, which also includes disability insurance, may run out in 2034, one year sooner than projected last year.

Recent tax changes under the "One Big Beautiful Bill Act" have accelerated the insolvency timeline, moving combined trust fund depletion from the third quarter of 2034 to the first quarter of 2034. This represents Social Security's 75-year solvency gap increased relative to last year's projections, from 3.50 percent of payroll to 3.82 percent of payroll.

The program faces cash deficits totaling $3.6 trillion over the next decade, the equivalent of 2.7 percent of taxable payroll or 0.9 percent of GDP, with an estimated $25 trillion shortfall over the next 75 years.

The Ponzi Scheme Debate Intensifies

The financial pressures have reignited accusations that Social Security operates like a Ponzi scheme. Billionaire businessman and White House adviser Elon Musk resurrected the comparison in February, telling podcaster Joe Rogan that "Social Security is the biggest Ponzi scheme of all time."

Critics argue the system mirrors Charles Ponzi's 1920 scam, where "returns are paid to earlier investors using the capital from newer investors, rather than legitimate profits." They point out that "a private citizen who set up such a financial chain letter would go to prison."

Nobel laureate Milton Friedman previously argued that "taxes paid by today's workers are used to pay today's retirees," with the system relying on "what supporters call 'a compact between the generations' and opponents call a Ponzi scheme."

However, fact-checkers and policy experts strongly dispute the Ponzi scheme comparison, noting crucial differences: Social Security is transparent, has multiple layers of oversight, doesn't promise unrealistic returns, and Congress can act to address the program's fiscal imbalance.

"Social Security is clear about why you pay, what happens to your money, and what you'll get out of it," explains the Urban Institute. "The pool of contributors will never run dry - if you work legally in the U.S. (with a few exceptions) you have to pay into Social Security."

The Timeline That Disproves the Ponzi Scheme Theory

Perhaps the most compelling evidence against the Ponzi scheme comparison lies in Social Security's implementation timeline, which fundamentally contradicts how fraudulent schemes operate.

The Social Security Act was signed into law on August 14, 1935. Taxes were collected for the first time in January 1937, and critically, the first one-time, lump-sum benefit payments were made that same month. Regular ongoing monthly benefits started in January 1940, with Ida May Fuller of Ludlow, Vermont, receiving the first monthly Social Security check (number 00-000-001) for $22.54 on January 31, 1940.

This means Social Security was paying benefits within two years of collecting its first taxes—a timeline that would be impossible for a Ponzi scheme, which requires extended periods of collecting money before any payouts to create the illusion of returns.

Ernest Ackerman received the very first Social Security payment of 17 cents in January 1937, the same month taxes were first collected. Fuller worked under Social Security for just under three years from spring 1937 to November 1939 and paid a total of $24.75 in Social Security taxes. During her retirement, she collected a total of $22,888.92 in benefits over 35 years until her death at age 100.

"The immediate payment of benefits from the very beginning proves Social Security was designed as genuine social insurance, not fraud," said policy experts. In a Ponzi scheme, early investors are lured by promises of extraordinary future returns—they don't receive anything of value initially except promises. Social Security delivered actual benefits almost immediately while operating under complete transparency about how much workers would pay, what benefits they could expect, and how the system would function.

Demographics Drive the Crisis

The fundamental challenge stems from demographic shifts that have transformed America since 1935. In 1960, there were more than five workers paying Social Security taxes per beneficiary, but that ratio has dropped to just three-to-one. The ratio of people ages 25 to 64 to people age 65 or older will be 2.8 to 1 in 2025, declining to 2.2 to 1 by 2055.

Today 12 percent of the total population is aged 65 or older, but by 2080, it will be 23 percent. At the same time, the working-age population is shrinking from 60 percent today to a projected 54 percent in 2080. The U.S. birth rate has dropped from 16.5 per 1,000 people in 1990 to 10.6 in 2024.

Current U.S. fertility rate stands at 1.63, well below the 2.1 replacement rate needed to maintain population stability. As Musk noted, "people are living way longer than expected, and there are fewer babies being born, so you have more people who are retired and that live for a long time and get retirement payments."

A Promise That Transformed America

Despite financial challenges, Social Security's defenders emphasize its historic success. In 2025, approximately 69 million Americans will receive roughly $1.6 trillion in benefits, including almost nine of out 10 Americans 65 and older, for whom Social Security constitutes 31 percent of their income.

The program's impact on poverty has been dramatic. Before Social Security, more than half of America's seniors lived in poverty. Today, thanks largely to Social Security, the poverty rate for older Americans is under 10%. Without it, research shows that nearly 22 million more Americans — including over 14 million seniors — would be living in poverty.

The program enjoys broad, bipartisan support, with a new AARP survey finding 95% of Republicans, 98% of Democrats, and 93% of Independent voters all believe Social Security is vital to the financial security of Americans.

"Social Security spends just 1% on administration. Ninety-nine percent of funds go directly to beneficiaries," making it remarkably efficient compared to private alternatives.

Reform Proposals Emerge

Policymakers across the political spectrum are proposing solutions, though they differ dramatically in approach.

The Brookings Institution released a bipartisan reform plan in February 2025 that would achieve 75-year solvency through equal combinations of tax increases and benefit reductions, including raising the taxable maximum ceiling, increasing taxation of high earners' benefits, and expanding legal immigration.

House Republicans have proposed raising the retirement age and restructuring benefits, with the Republican Study Committee's 2025 budget calling for reforms that would "affect no senior in or near retirement" but gradually phase in changes for future retirees.

President Biden's approach focuses on raising taxes on high earners, with his budget stating "No benefit cuts" and calling for the "highest-income Americans to pay their fair share."

A recent survey found 85% of Americans would rather raise taxes than cut benefits, according to polling by the National Academy of Social Insurance, AARP, the National Institute on Retirement Security and U.S. Chamber of Commerce.

The Stakes Are High

The Committee for a Responsible Federal Budget warns that "policymakers are running out of time to enact necessary fixes to head off trust fund insolvency. The longer they wait, the fewer policy options will be available, and the harder it will be to avoid abrupt changes."

The Center on Budget and Policy Priorities emphasizes that while Social Security faces "a significant, though manageable, funding shortfall," the challenge is solvable: "Policymakers can reallocate contributions or allow the funds to borrow from each other, and have done so when one of the funds is near depletion."

As the nation grapples with Social Security's future, the debate reflects deeper questions about America's social contract. Whether viewed as a sacred promise or a financial time bomb, the program's 90th anniversary serves as an urgent reminder that time is running out for compromise.

As Melinda Forstey of Serving Seniors writes, "A promise is only as strong as our willingness to keep it. Strengthening Social Security for the future will require responsible, bipartisan decisions to ensure the trust fund remains solvent for generations to come."

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Sources:

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42. Opinion: Social Security is a promise worth keeping after 90 years