Nikki Haley is prophetic in her warning over Social Security’s pending bankruptcy
Opinion by Tiana Lowe Doescher, Washington Examiner, 11/17/23
Despite Nikki Haley‘s upward trend in the 2024 Republican primary polls and rave reviews of her most recent debate performance, the former South Carolina governor’s presidential campaign platform touting the need for fiscal responsibility is drawing predictable brickbats.
Consider this New York Times “fact check” on changes to Social Security espoused by Haley, who also was United States ambassador to the United Nations for nearly two years in then-President Donald Trump’s administration. At the Nov. 8 debate in Miami, Haley, along with former New Jersey Gov. Chris Christie, citing Social Security’s pending insolvency, called for eliminating the program’s benefits for wealthy retirees.
New York Times writer Jim Tankersley acknowledged the pending fiscal problems the social insurance program for seniors faces but then sought to counter Haley’s main point.
“Social Security’s main trust fund is projected to exhaust its reserves by 2033,” wrote Tankersley, who covers White House economic policy for the Gray Lady. “That means the program will not be able to continue to pay benefits in full unless Congress draws on other revenue sources. That is not the same as going bankrupt — the program would still be able to pay about three-quarters of scheduled benefits even without additional funding.”
By the most basic definition of the term, the New York Times is indeed wrong, and Social Security is, undeniably, going bankrupt. But more than this, the paper fails to, as left-leaning fact-checkers love to say, provide context here.
Unlike a corporation or a person, a government entity like Social Security does not file for bankruptcy in court to restructure or discharge its outstanding debts. Still, in 10 years, the entitlement program will become no less insolvent than any other company that would be filing for Chapter 7.
Should Congress ignore Haley’s calls to reform the program and instead choose the tact of Trump and evidently Florida Gov. Ron DeSantis, both 2024 GOP primary rivals, to avoid politically painful decisions in the short term? That approach would trigger in a decade an across-the-board 23% Social Security benefit cut, tantamount to $17,400 less in benefits for a typical newly retired dual-income couple.
DeSantis rejected Haley’s call to increase the retirement age for future Social Security recipients, citing a two-year decrease in life expectancy thanks to the COVID-19 pandemic and self-inflicted “deaths of despair” caused by substance abuse and suicide. But when Social Security was established in 1935, the retirement age was set at 65 years old. Average life expectancy in the U.S. is now, even after this minor post-coronavirus dip, more than 76 years old, up 23% from 1940. Even so, the full retirement age for those born after 1959 is just 67 years, merely one year more than it was 83 years ago.
The most obvious problem is the Ponzi scheme structure of Social Security itself. By design, today’s workers pay for today’s retirees. Workers cannot pull from “their” money because it is already promised to retired beneficiaries. In 1960, Social Security relied on five workers for every single beneficiary. For the next few decades, there were just three workers for every beneficiary. By 2010, there were fewer than three workers per recipient, and by the time the program is projected to become insolvent in 2033, we’ll rely on a mere 2.3 workers per beneficiary.
Further, the return on the investment of Social Security was always structured to diminish, especially in a culture with falling birth rates.
On Jan. 1, 1940, Ida May Fuller received the first-ever Social Security paycheck at the age of 65. She had paid $24.75, just shy of $450 in current dollars, into the system in the three years prior. In the subsequent 35 years that she remained alive, she received $22,888.92 in total. In 2019 dollars, that’s well into the six figures. Her return on investment for Social Security was 92,380.48%, or a 22% ROI annually.
The return on investment has plummeted, but in increasingly unequal measure. For most recipients today, their annual percentage return on investment has fallen to the single digits, and assuming the Trump and DeSantis camps win politically and stave off a 23% benefit cut in the next decade, millennials will face outright losses.
But select boomers will profit prior to Social Security going broke, as detailed in none other than the New York Times last month by economists C. Eugene Steuerle and Glenn Kramon.
“For a typical 65-year-old couple, at least one partner, on average, will likely make it to 90 or beyond. Yet even as life expectancy has risen since 1935, the minimum age to qualify for at least a portion of your Social Security benefits has fallen to 62,” the pair wrote in the Oct. 26 op-ed titled, “For the Good of the Country, Older Americans Should Work More and Take Less,” which runs counter to the narrative presented by the news outlet’s own fact-checker.
“Many people are now drawing from Social Security for as much as a third of their adult lives, if not more,” Steuerle and Kramon wrote. “If people took the same number of retirement years as the average person retiring in 1940, they would stop working at around 77. As such, Social Security is increasingly losing its purpose as old-age insurance, as benefits stretch well into what is becoming late middle age for many.”
Congress can ignore this crisis and “protect” Social Security from bankruptcy. But only reform will save a program racing toward insolvency. Just ask Nikki Haley.