Column: GOP and Musk unveil a threat to Social Security
You may have been tempted to believe Donald Trump when he swore, along with some of his Republican colleagues, to protect Social Security. If so, the joke may be on you.
That concern emerged Monday when Sen. Mike Lee (R-Utah) uncorked a tweet thread on X labeling Social Security “a classic bait and switch” and “an outdated, mismanaged system.”
Twenty-three minutes after Lee posted the first of his tweets, it was retweeted by Elon Musk, who has been vested by Trump with a portfolio to root out inefficiencies in the government. Musk led his retweet with the comment “interesting thread”; if that wasn’t an explicit endorsement, it matched his way of amplifying others’ tweets, tending to give them credibility within the Musk-iverse.
It will be my objective to phase out Social Security, to pull it out by the roots.
— Sen. Mike Lee (R-Utah)
Lee’s tweet thread, along with Musk’s apparent concurrence, serves as an outline of the arguments the GOP may use to undermine faith in Social Security, the better to soften it up for “reforms” that will translate into costs imposed on retirees, disabled workers and their dependents.
I recently reported on all the ways that Trump could quietly or secretly undermine his pledge to protect Social Security. Lee’s thread and Musk’s apparent endorsement are different — they amount to a frontal attack on the program.
Get the latest from Michael Hiltzik
Commentary on economics and more from a Pulitzer Prize winner.
You may occasionally receive promotional content from the Los Angeles Times.
While delving into Lee’s screed, we should keep in mind that he’s a leader of the cabal with the knives out for Social Security. As I’ve reported, during his first successful Senate campaign in 2010, he unapologetically declared, “It will be my objective to phase out Social Security, to pull it out by the roots.”
Lee said that was why he was running for the Senate, and added, “Medicare and Medicaid are of the same sort. They need to be pulled up.”
So here he is, right out of the box.
Lee’s attack has four basic components. One is to bemoan the fact that Social Security is funded mostly by a tax, which he asserts the government can use for any purpose — not necessarily to cover retirement and disability benefits.
Another is to point out that the program’s reserves aren’t stored in individual accounts with workers’ names on them, but collected in “a huge account called the ‘Social Security Trust Fund.’”
Trump tried to cut Social Security in the past, so why should you believe he won’t try again? Watch for these ‘gimmicks.’
A third is to claim that “the government routinely raids this fund. ... They take ‘your money’” and use it for whatever the current Congress deems ‘necessary.’”
And a fourth is to complain that the trust fund is mismanaged: “If you had put the same amount into literally ANYTHING else — a mutual fund, real estate, even a savings account — you’d be better off by the time you reached retirement age, even if the government kept some of it!” He states: “Your ‘investment’ in Social Security can give you a return lower than inflation.”
None of these is a new argument — they’ve been swirling around the conservative and Republican fever swamp like a miasma for decades. They’ve been consistently refuted and debunked. Lee can’t be unaware of that. Some of his arguments have a tiny nugget of truth at their center, but in his hands are twisted and manipulated out of recognition. Consequently, we can label his claims for what they are: Lies.
Let’s examine them one by one. (I asked Lee via a message at his office to justify his tweets , but haven’t heard back.)
Yes, Social Security is funded by taxes. So what? Lee’s salary as a senator is funded by taxes too. Does that make it illegitimate? It’s true that once a tax is collected Congress can decide to spend it however it wishes. But it’s also true that the payroll tax was enacted jointly with the provisions of the Social Security Act that designated the revenue for Social Security benefits.
As Supreme Court Justice Benjamin Cardozo observed in 1937, writing for the majority in a 7-2 opinion upholding the constitutionality of Social Security, it was clear that Congress intended the payroll tax to fund the benefits, for lawmakers “would have been unwilling to pass one without the other.”
It’s proper to note here that no one has ever proposed diverting Social Security revenues for any other purpose without recompense — except Republicans such as Lee. George W. Bush proposed converting Social Security into private accounts, which would have been tantamount to such a diversion — and a gift to Wall Street money managers eager to get their hands on the program’s trillions of dollars.
But Bush’s 2005 privatization plan was stillborn and he quickly abandoned it.
It’s also true that the program’s revenues aren’t stored in individual accounts but in the trust fund. That’s right and proper: Social Security is a shared benefit; no one can know in advance what any worker’s benefits will be. They’re pegged to career earnings, but low-income workers get higher benefits relative to wages than higher-income workers. They’re also related to a worker’s personal and family situation — spouses, dependents, health and so on.
Republicans want to cut Social Security benefits and protect the 1% from paying their share in taxes; Democrats know we can afford to raise benefits.
It also makes sense to invest the program’s revenues in a shared account, because large investments tend to perform better over time than those under the control of individuals, not least because that minimizes transaction costs.
That brings us to the notion that the government “routinely raids” the trust funds (there are two, actually — one to cover old-age benefits and the other to cover disability payments — but they’re generally treated as a single combined fund). The trust funds currently hold about $2.8 trillion in assets, all invested in U.S. Treasury securities.
Holding a T-bond, as anyone with the slightest knowledge of government fiscal policy is aware, means the bondholder has lent the money to the government, which can use it for any purpose Congress chooses and which must pay interest on the bond. Over the years, the government has used the money to build roads and other infrastructure and provide services. Using the borrowed money for these purposes allows the government to do so without raising income taxes, which would hit the wealthy harder than middle- or low-income Americans.
Lee should ask his well-heeled patrons if they’d prefer to pay higher taxes because the government couldn’t borrow from the Social Security reserves. Anyone have any doubts about how they’d answer? Me neither.
In any event, the financial transactions related to the buying and redemption of the program’s Treasury holdings are fully disclosed every year by the program trustees in their annual report.
What about Lee’s assertion that investing in “ANYTHING else — a mutual fund, real estate, even a savings account,” would make you “better off by the time you reached retirement age.” This statement is as solid a compendium of financial ignorance as one might wish, even coming from a U.S. senator.
To begin with, if Lee thinks the Social Security trust fund should be invested in something other than Treasurys, he can take that up with his colleagues on Capitol Hill. They’re the ones who have mandated, by law, that the trust fund can be invested only in Treasurys. Over the years, proposals to widen the portfolio have been raised and abandoned, for several reasons. Some were concerned about the potential conflicts of interest inherent in a government program investing in the stock market; others that the returns from market investments are too volatile.
The worst enemies of Social Security are would-be journalists who don’t do their homework before writing about it, and consequently get everything wrong.
Savings accounts? Is Lee kidding? The rate on savings accounts offered to the average customer of Bank of America, to choose a commercial bank at random, is 0.01% a year. As I write, a 10-year Treasury bond yields about 4.2% annually.
As for Lee’s assertion that “Social Security can give you a return lower than inflation,” the fact is that Social Security benefits are adjusted for inflation every year. They’re also lifetime benefits. Try to find an annuity plan that pays inflation-adjusted benefits for the life of the annuity holder and his or her spouse — for all but the richest people, it would be unaffordable or at least uneconomical.
Lee also reveals a fundamental misunderstanding about Social Security as a program. It’s not just a retirement program, but a combined retirement and insurance program.
Disabled workers — and their dependents — are entitled to benefits well beyond their contributions; the families of workers who die before retirement age receive benefits that include payments for children through age 17 — through age 18 if they’re in school. If those benefits were based on the balances in a worker’s individual account, then the families of those who have suffered untimely deaths could receive a pittance, running out while still needing help.
Lee concludes by urging his followers to “acknowledge the truth: Social Security as it now exists isn’t a retirement plan; it’s a tax plan with retirement benefits as an afterthought.” This is an outright falsehood. As it now exists, Social Security isn’t just a retirement plan, but a disability program. It’s funded by taxes, but to call retirement benefits “an afterthought” is so wrong it’s frightening.
What should we think about all this? Lee is a member of the Senate majority; his proposals could be a real threat to the program. The fact that they garnered an “attaboy” from Elon Musk should be their death knell. Let’s hope so.
Get the latest from Michael Hiltzik
Commentary on economics and more from a Pulitzer Prize winner.
You may occasionally receive promotional content from the Los Angeles Times.
