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Common Misconceptions about Social Security

Vol. 2, No. 1--Pre-Summit, January 2005

The facts found below come from research done by the National Committee to Preserve Social Security and Medicare and can be seen on their website (www.ncpssm.org). Alison Bonebrake of NCPSSM will be joining us at the Progressive Democratic Summit January 21-23 to participate in our panel on Social Security and Medicare.

1. Social Security will soon "go bankrupt." Talk about dramatic language! Left as it is, projections show Social Security will be paying full benefits through 2042, and 70% of benefits for many years following. If, however, what people mean is that "under the Bush privatization plan, Social Security will soon go bankrupt," then this isn't really a misconception. Privatization will dramatically reduce benefits by diverting payroll taxes.
2. Workers could get a better return by investing in the Stock Market. Sure, they could, but they could also potentially get a better return by using the money to buy lottery tickets--should we be arguing for that? With Social Security, eligible Americans are guaranteed income every month for the rest of their life. Remove this safety net and the retirement years will become fraught with uncertainty.
3. Social Security is unfair because tomorrow's workers will have to support the Baby Boomers' retirement. Actually, the Boomers have already paid ahead, leaving a surplus that will help carry Social Security through their demographic. What will really be unfair to younger workers is having to pay taxes to support the Boomers, plus investing in their own individual accounts and having to pay the transition costs of switching to privatization. Total privatization comes with a price tag of $9 trillion, and who do you think is going to pay for that?
4. Privatization gets rid of the inefficiency of big government. Actually, Social Security costs relatively little, and is very reliable. Does it make sense to replace a system that spends 1% on overhead with a system full of commissions and fees that, in other countries with privatized systems, can add up to a 15% overhead? That's 15 cents out of every dollar you've invested that you'll never see, and that's before market fluctuations are added into the equation. Of course, there are those who make their living this way, and they're hoping we'll bet on privatization. At least their retirement will be secure!
5. Most Americans, especially young workers, support privatization. Not true. While young workers fear that Social Security won't be around when they reach retirement, they are not against the system. Surveys show that 70-80% of young people approve of Social Security, while only 28% of all adults feel it should be privatized.

Learn more about Social Security myths.

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