"We will always protect Social Security, Medicare!" says President Donald Trump.
That would be nice.
But when I look at these programs' balance sheets, I don't see how he's protected anything. Both Social Security and Medicare are on track to run out of money.
Politicians mostly ignore the problem. Worse, progressives like Sen. Bernie Sanders (I–Vt.) and Rep. Alexandria Ocasio-Cortez (D–N.Y.) say they want to expand Social Security benefits.
That's just irresponsible.
My new video points out what we've known for years: These programs are unsustainable.
The problem is that people like me live longer. We like getting monthly Social Security checks and medical care that appears free.
Since we vote more consistently than others, politicians don't want to make us mad by cutting our handouts.
My fellow geezers say, "Social Security is not a handout! I contributed to the 'trust fund' every year. I'm just getting back what I paid in!"
But that's not true. Today, most of us get back much more than we paid in.
In 1935, politicians created the handout, saying, even if you don't save for retirement, government will save for you.
But that was another political lie. They didn't create individual retirement accounts. They didn't save our Social Security payments. They spend every penny as it comes in.
It's why Social Security is like a Ponzi scheme.
Bernard Madoff went to jail because he used new investors' money to pay old investors. That's exactly what our government does.
Few Americans realize it.
"What happens to the money?" I ask people on the street.
"It's held in trust," said one woman.
It isn't.
When politicians started Social Security, there were enough young workers to tax to cover the cost of sending checks to old people.
But now, since we live longer, there aren't enough young workers to fund our payments.
Social Security's costs exceed its income by billions of dollars.
"There is a plan out there to save it, but it requires some tough choices," says the Cato Institute's Romina Boccia. "Commonsense tweaks we can make."
Those include raising the retirement age, capping checks to the affluent, and letting young people opt out of Social Security. Reforms like that require tradeoffs. But ignoring the problem doesn't make it disappear.
We need to act, says Boccia, because Social Security is like the Titanic—gradually heading for disaster.
"Make reforms now," she says, "we can avoid the iceberg. [But] if we wait until the iceberg is in front of our noses and try to turn the ship, we're going to run right into it."
Medicare will hit its iceberg in 2033; then benefits will automatically be reduced. Social Security will hit it the year before.
At that point, incoming taxes will cover only about 78 percent of promised retirement benefits.
Yet irresponsible Democrats say: Spend even more.
"Human wants and needs are unlimited," replies Boccia. "There's always another program that needs more funding."
Sanders says, pay for it by taxing the rich more.
"There isn't enough money even that the rich would have, to pay for the…unfunded liabilities," Boccia points out.
If only politicians had listened years ago, when Cato and the Heritage Foundation proposed letting workers put some of their Social Security money into personal retirement accounts. Instead of relying on future taxpayers, workers could accumulate real assets that grow over time.
Personal accounts give workers something Social Security doesn't: assets we own.
"Even a conservative portfolio of stocks and bonds that got you a 5 percent annual return would have made you many times more [than Social Security]," says Boccia.
Private accounts helped Chile rise from one of the poorest countries in Latin America to one of the richest. Yet leftists still object to capitalists getting a cut of the pie.
"We lack gratitude for what the free market provides," says Boccia.
We should adjust these programs now.
The longer politicians wait, the worse the choices become.
But today's politicians will probably be gone by then.
Our children get the bill.
COPYRIGHT 2026 BY JFS PRODUCTIONS INC.
The post Social Security Is Like a Ponzi Scheme. How Do We Fix It? appeared first on Reason Magazine.
Social Security is racing towards insolvency because the program pays out more in benefits to retirees than it collects in taxes from working Americans.
Handing out even more generous benefits will make that situation worse. Yet that is exactly what the trustees who run Social Security are planning to do: Retirees will get a 3.6 percent cost-of-living adjustment (COLA) next year. That increase is 0.8 percentage points higher than last year's, and it is 0.9 percentage points higher than what Social Security was expecting to pay.
The Social Security trustees are doing what the law requires during a time of high inflation. That's why Congress ought to intervene here.
It should cancel the COLA.
No, this isn't a demand that lawmakers stick it to America's retirees. It's an appeal for some fiscal common sense. There are three good reasons to cancel this year's COLA.
First: Handing out higher benefits to wealthy retirees simply doesn't make sense when Social Security is trending towards insolvency.
As the Committee for a Responsible Federal Budget notes, the announced COLA would be a $900 increase in benefits for the average retired household—but some retirees could receive as much as $3,600 more.
Paying generous benefits to wealthy households is the main reason Social Security is facing insolvency in the first place. A program originally intended to keep seniors from falling into poverty has become a huge wealth-transfer scheme that overwhelmingly benefits those who don't need the handouts. The COLA doubles down on this flaw.
Second: What about the workers who are paying for those lavish benefits? Wages have risen by 3 percent, on average, over the past year. Those pay increases have already been outpaced by inflation, which is up 3.7 percent in the past 12 months.
You'll often hear retirees talk about how they are living on a "fixed income," but the math simply doesn't bear this out. Social Security beneficiaries will get a COLA that is larger than the average pay increase for the workers who are funding the COLA. Retirees are protected from the impact of inflation while younger Americans must deal with inflation and finance that protection for the elderly. That's crazy.
Third: Cutting the COLA could kick-start a conversation about how to solve Social Security's looming insolvency. The Social Security trustees estimate that an across-the-board cut of about 22 percent will be necessary in 2032. Eliminating COLAs won't meaningfully change that arithmetic, but it would change the conversation—which has for too long been dominated by politicians promising seniors that nothing needs to change. That's wrong—and the sooner that becomes apparent, the better off the political system will be.
If eliminating the COLA is too radical a change, Congress should instead change how the trustees calculate the annual increase.
Currently, the COLA is based on one particular measure of inflation: the Consumer Price Index for Urban Wage Earners and Clerical Workers, otherwise known as CPI-W. This is a relatively narrow index that reflects the spending habits of only about one-third of all Americans, as Romina Boccia points out in her newletter, The Debt Dispatch.
Instead, Boccia suggests using the Chained Consumer Price Index for All Urban Consumers, or C-CPI-U, which covers about 93 percent of all Americans and is generally regarded as a better measure of the rising cost of living. Other parts of the federal government already use C-CPI-U to update such things as tax brackets.
If Congress simply changed how Social Security's COLA was calculated, it could close 12 percent of the program's long-term shortfall. And while some retirees would see smaller COLAs as a result, the result would more closely match those increases to inflation.
Social Security's COLA reflects many of the fundamental flaws with America's old-age entitlement program. Like Social Security as a whole, it is too generous to the rich, too costly to the taxpayers, and too unfair to younger, poorer workers.
The post 3 Reasons To Cancel This Year's 3.6% Social Security Boost appeared first on Reason Magazine.
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