During the beginning of President Donald Trump’s second term, Trump confidant Elon Musk claimed that the Social Security Administration (SSA) was plagued by “immense waste” and “extreme levels of fraud.” He further alleged that more than 20 million Americans over age 100 receive Social Security checks.
Social Security is the federal Old-Age, Survivors, and Disability Insurance (OASDI) program that provides monthly benefits for retirement, disability, survivorship, and death to about 68 million Americans, including survivors and dependents.
I am no apologist for the SSA, but Musk’s claims are way overstated.
According to a 2024 report by the inspector general of the SSA, less than 1 percent of Social Security’s payments are improper, the result of accidental oversight or changes in benefit status. This is a much better record than we see at other federal agencies. Yet that is still about $9 billion a year in improper payments.
According to the Washington Post, the SSA found in February that 1,294 Americans over 100 were receiving Social Security benefits. It was then determined that 1,107 of those centenarians were alive and well and entitled to receive benefits, though that is still 202 dead people who had benefits issued in their name.
According to Retirement Living, over 68 million Americans receive Social Security benefits (including retirement, survivor, and disability insurance), with the monthly payment for retired workers averaging $1,920.
Musk has recently resumed his criticisms of the SSA. During an appearance on Joe Rogan’s podcast, “The Joe Rogan Experience,” Musk called Social Security “the biggest Ponzi scam of all time.” He explained his reasons why:
People pay into Social Security, and the money goes out of Social Security immediately, but the obligation for Social Security is your entire retirement career. So if you look at the future obligations of Social Security, it far exceeds the tax revenue.
There’s our present-day debt, but then there’s our future obligations. So when you look at the future obligations of Social Security, the actual national debt is like double what people think it is, because of the future obligations.
Basically, 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. So the future obligations, so however bad the financial situation is right now for the federal government, it will be much worse in the future.
Musk is right that money paid into Social Security goes out immediately. The federal government does not have a retirement account with every American retiree’s name on it in which Social Security taxes are deposited that will be paid out in the future. All Social Security taxes collected are immediately deposited in the federal treasury and spent by the government on all manner of government boondoggles. The funds are fungible. In 1960, there were 5.1 workers per Social Security recipient, and that ratio has dropped to under 3 today. Social Security has always been a pay-as-you-go system.
Musk is also correct regarding the future obligations of Social Security. Since 2010, the cost of Social Security has exceeded its income from payroll taxes and taxes on Social Security benefits. According to the 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,
OASDI cost exceeds total income in 2024 and in every year thereafter through 2098, and the level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2035.
OASDI cost has generally increased much more rapidly than taxable payroll since 2008 and is projected to continue to do so through about 2040. In this period, the retirement of the baby-boom generation is increasing the number of beneficiaries much faster than the increase in the number of covered workers, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages.
But Musk is wrong when he says that Social Security is a Ponzi scheme.
Charles Ponzi (1882–1949) was an Italian immigrant who instituted a postal reply-coupon investment scheme in Boston after World War I. He promised huge returns on investments, but all returns on investment were paid out of deposits from later investors. The scheme, of course, was unsustainable, for eventually new investors couldn’t be fleeced fast enough to continue making payments to existing investors.
Social Security is funded by a 12.4 percent payroll tax (split equally between employers and employees) on the first $176,100 of employee income. Self-employed persons pay the full 12.4 percent tax but receive both a reduction in their net earnings from self-employment and a tax deduction equal to 50 percent of the amount of the Social Security tax they paid.
Unlike a Ponzi scheme, the paying of Social Security taxes is not an investment and is not voluntary. Social Security is worse than a Ponzi scheme: it is government coercion. At least participants in a Ponzi scheme are free to get out once they discover they are being defrauded. Anyone in America who works a job must continue to pay into Social Security even if he is receiving Social Security. Employers who fail to withhold Social Security tax from their employees’ paychecks can face criminal charges.
What Musk fails to realize is that it is neither constitutional nor the proper role of government to have a retirement, disability, insurance, or investment program — or force anyone to have a private one.
The true nature of Social Security is that it is an intergenerational, income-transfer, wealth-redistribution welfare program that takes money from those who work and gives it to those who don’t. Musk is not the only one who doesn’t realize this. Millions of Americans falsely believe that retirees are entitled to Social Security benefits because they paid into the system their entire working lives. Yet even the federal courts have ruled that there is no right to receive Social Security benefits regardless of what anyone has paid into the system.
