Social Security plays a vital role in the financial well-being of our country's retired workforce. With the guaranteed monthly benefit check the program provides, the senior poverty rate currently resides at about 9%. But according to an analysis from the Center on Budget and Policy Priorities, the elderly poverty rate would push above 40% if the program didn't exist.

Thankfully, bankruptcy and insolvency of the Social Security program are things the American public doesn't have to worry about. Recurring revenue sources, such as the 12.4% payroll tax on earned income and the taxation of benefits, ensure that money will always be heading into the program for disbursement to eligible beneficiaries.

A person tightly holding a Social Security card between thumb and index finger.

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Social Security is in trouble, so who or what's to blame?

Then again, survival isn't the same thing as success.

Even though Social Security is in zero danger of disappearing, it's not exactly in the best shape. The 2018 Social Security Board of Trustees report suggested that the program would begin expending more than it collects in revenue very soon, with a forecast depletion date of its $2.9 trillion in asset reserves by 2034. In plainer English, the current payout schedule isn't sustainable for a long period of time, and if additional money isn't raised, or expenditure reductions enacted, an across-the-board benefits cut of up to 21% may be needed to sustain payouts through 2092. It's not exactly the best outlook when more than 60% of retired workers are reliant on their Social Security check for at least half of their income.

But rather than focus on solutions, people are too busy playing the blame game. Check any social media platform and you're bound to find the same two scapegoats for Social Security's issues over and over again: Congress and "illegals" (i.e., undocumented immigrants).

But guess what, folks? Congress and undocumented immigrants didn't steal your Social Security. Demographic changes and a subpar inflationary tether are the real cause of the program's problems.

Story continues

A man in a suit purposefully hiding a stack of hundred dollar bills behind his back and crossing his fingers.

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Congress hasn't stolen a dime from Social Security

There's perhaps no myth more pervasive than the idea that the federal government "stole" money from the Social Security program to fund wars, and that the federal government never paid the money back, thereby leaving the program in the financial predicament it finds itself in today. These folks proclaim that if Congress paid back the money it stole, with interest, everything would be hunky-dory.

Now, let's focus on the truth.

Congress has been borrowing (not stealing from) Social Security's asset reserves (i.e., the net cash surpluses that have been built up since its inception) for decades. The Social Security Administration is required by law to purchase special-issue government bonds, and to a lesser extent certificates of indebtedness, of various maturities. Congress uses this borrowed money to fund a variety of line items. This might include defense spending and wars, but it may also head toward healthcare, education, and social programs. Money borrowed from Social Security isn't earmarked for any particular line item of the federal budget, such as funding a war.

In return for borrowing money from Social Security, the federal government pays interest to the program each year. In 2017, Social Security collected $85.1 billion in interest income, with the program forecast to collect more than $800 billion in aggregate interest income between 2018 and 2027. In other words, the federal government is already paying interest into the program.

The most important realization here is that the program's $2.9 trillion in asset reserves isn't gone. It's simply being held in special-issue bonds as opposed to collecting dust in a locked vault and losing out to inflation as time passes by. If you go out and buy a bank CD with the cash in your savings account, you didn't lose your cash. You've simply shifted your cash to a new asset that still bears value. The same applies with Congress borrowing money from Social Security. Every cent that's been borrowed is accounted for, which means that Congress didn't steal your money.

Plus, if the federal government simply paid back what it borrowed, the program would no longer be collecting any interest, and the value of its asset reserves wouldn't have grown. It would actually be in worse shape.

A Social Security card atop a work visa.

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Undocumented workers aren't a drain on the traditional program

You know who else didn't steal your Social Security income? Undocumented workers.

The wholly incorrect thesis here is that undocumented persons are receiving benefits who never paid into the program, which is draining Social Security's resources and threatening the longevity of the program for those folks who have been paying in for decades.

Once again, time for a truth bomb.

To receive a traditional Social Security benefit (i.e., a retired worker benefit, survivor benefit, or disability benefit), you'll first have to earn 40 lifetime work credits. This means that you'll need to be an American citizen, or be a legal immigrant on the path to citizenship, in order to eventually receive a retired worker benefit. To spin this around, it means that undocumented workers who are incapable of receiving a Social Security number aren't going to receive a dime from the program.

This is where it's worth pointing out that asylum seekers and refugees are able to apply for, and potentially receive, a Supplemental Security income (SSI) benefit. However, an SSI benefit isn't the same as a traditional Social Security benefit, even if both programs are run by the Social Security Administration. Since SSI and traditional Social Security have different funding sources, it's still completely true that undocumented people have no access to a traditional Social Security benefit. Therefore, there's no way they can be a drain on the system.

What you might find interesting, though, is that undocumented workers are contributing about $13 billion a year into the Social Security program by using a friend's Social Security number or a fake Social Security number. Again, these undocumented workers are never going to get any money back from the program by doing this, but they're regularly supplying Social Security with a little over 1% of its annual revenue.

A visibly annoyed senior man looking into the distance.

Image source: Getty Images.

Want a scapegoat? Here you go...

Instead of incorrectly blaming Congress' borrowing and undocumented immigrants for Social Security's woes, here are a few things you can blame that have evidence to back them up.

For starters, increased longevity is a problem. Living longer is a great thing, because it means we get to spend more time with family and friends. But when the Social Security program was designed in the 1930s, it was believed that retired workers would receive a benefit payment for years, or perhaps a decade. Following decades of medical advancements and improved health education, the average 65-year-old is now living for about 20 more years. Social Security wasn't built around the idea of paying beneficiaries for two or more decades.

You can also blame Generation X and millennials for lower birth rates. On average, the trustees' report expects an average of two births per woman over her lifetime. But in 2017, birth rates hit a 40-year low of 1.76 births per woman. As birth rates drop, it becomes more difficult to maintain the worker-to-beneficiary ratio.

Blaming the rich works, too. Back in 1983, a little over $300 billion in earned income (i.e., wages or salary) escaped the payroll tax, which in 2019 has a maximum taxable earnings cap of $132,900. That means all earned income between $0.01 and $132,900 is subject to this 12.4% tax in 2019, while earned income above this amount for the well-to-do is exempt. As of 2016, though, four times as much earned income ($1.2 trillion) was being exempted from the payroll tax. Tack on the fact that investment income is also exempt, and it's easy to make the case that the rich are crippling the program to some degree.

And if you really want to blame Congress, you can do that, too. Instead of wrongly claiming that it stole from the program, blame Congress for failing to amend the program's inflationary tether, the Consumer Price index for Urban Wage Earners and Clerical Workers. The CPI-W does a poor job of tracking the inflation that seniors are contending with since it's an index focused predominantly on working-age urban and clerical workers. This results in insufficient cost-of-living adjustments and the precipitous loss of purchasing power for retired workers.

It's perfectly OK to point the finger for Social Security's mess, but you best get your facts straight before doing so.

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