Yes, Elon, Social Security Is a Ponzi Scheme. But Fix It. Don't Kill It. Doing So May Spell Personal Financial Suicide.

Elon, the Answer Is Simple. Pay Off Every Penny Owed and Set Up a Modern, Fully Funded System With No Role for Wall Street.

Social Security Needs to Be Fundamentally Fixed, Not Destroyed

Elon Musk, with President Trump’s permission, if not specific instruction, is in the process of dismantling Social Security. According to former Commissioner, Martin O’Malley’s, “Everything they’re doing is driving this agency to system collapse.” O’Malley is not given to exaggeration. His statement is a huge red flag.

Musk’s goal seems clear — gum up the System’s unbelievably complex and dilapidated works to the point that it will no longer pay benefits or correct benefits on time, if at all. His method? Fire or incentivize the immediate retirement of everyone with knowledge of how the 89 year-old machine, with its 20,000 plus pages of rules (no joke), is supposed to work — especially those who know how to fix it.

Social Security’s software code is written in a dead computer language — Cobol. Learning Cobol is feasible with time. But understanding miles of what is likely poorly documented, spaghetti code is something else. I know precisely how complex it is to program Social Security correctly. My 32 year-old personal financial planning software company’s tools, MaximizeMySocialSecurity.com and MaxiFiPlanner.com, share the same Social Security benefit-calculation code. It took us years — before we went to market — to properly code up the System’s myriad eligibility rules and benefit formulas. If you print out our code, which is written in a modernized and extremely fast version of another old software language — Fortran, we’re talking two reams of printer paper.

Who knows what Musk’s 20-year-olds are doing in their zeal to make America great again. Now that they have their hands on the Cobol code — the Washington Post just reported on their security breach —, they are free to erase large sections of it. They may also start deleting Social Security covered earnings records of political opponents or scrambled peoples’ records just for kicks. Yes, they may have read-only permission themselves. But this doesn’t prevent them from finding a remaining, disgruntled engineer with access to do their dirty work. Musk has already found a yes man to serve as Acting Commissioner.

The fact that Trump and Musk have so badly misunderstood why Social Security has records on people, who, if alive, would be 150 years old is testimony to their Social Security illiteracy. Suppose a corpse age 150 married at 80 and had a disabled child (Al Pacino just fathered a child at 83.). The child would now be 70 and collecting Disabled Adult Child (DAC) benefits. These benefits need to be recalculated every year to apply Social Security’s annual COLA — cost of living adjustment. Doing so requires having access to the corpse’s full covered earnings record on which the DAC is based.

This is the type of insider information that 7,000 Social Security exiting employees — surely the most knowledgable of the roughly 60,000 — are leaving with. Indeed, most are exiting with irretrievable personal Social Security computers on their persons — perched atop their shoulders.

Why in the world would Trump let Musk loose on Social Security? Social Security has 72 million beneficiaries. Why put their benefits at risk if doing will surely inflame over 40 percent of voters? Trump’s left brain should ask Trump’s right brain (or the reverse) this question and see if one of his brains can get a straight answer.

Why We Need Social Security — the Inconvenient Truth

Americans don’t save. We don’t save enough outside our retirement accounts. And we don’t save enough inside our retirement accounts. And when we realize we haven’t saved enough, we double down on risk, often paying a Wall Street advisor large sums to “beat the market.” Having secured our old age with a good-looking, fast-talking, super-smart money manager, we precede to retire far too early, take Social Security far too soon, and outlive our money far too often.

The story’s actually worse. Many/most of us don’t have the wherewithal to save — for good reason. A large chunk — 15.3 percent — of our pay doesn’t even reach our pockets to be saved, were we so inclined. Instead, these funds are wired to Uncle Sam by our employers as FICA contributions. Uncle Sam then wires the funds to Social Security beneficiaries or Medicare healthcare providers. Yes, the funds are first deposited in the System’s Trust Fund. But that’s just a fancy name for its checking account. The Trust Fund is trivially small and invests any funds not immediately dispersed in cash-like government securities.

This financial arrangement is called pay-as-you-go. It’s actually take-as-you-go, with each retired generation pocketing 15.3 percent of the wages of their children. They do so collectively so as not to have to look their children in the eye. And they get Uncle Sam to reassure their kids that they’ll get a return on their “investment,” namely the opportunity to expropriate their own children when they retire.

Social Security’s Ponzi Scheme

When Elon Musk pronounced Social Security a Ponzi Scheme, he actually got something right. The Wiki definition of a Ponzi Scheme is “a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.” I’d change “profits” to “would-be profits” since there is no real investment in a Ponzi scheme.

What Social Security has been doing for 89 years is fully disclosed, so the term “fraud” doesn’t apply. Nor does it “lure investors.” But just as Charles Ponzi’s “investors” relied, albeit unknowingly, on new chain-letter participants to pay old chain-letter participants, Social Security relies on new generations to pay old ones.

Roughly 20 percent of retirees are wholly dependent on Social Security. Another roughly 20 percent are highly dependent on Social Security. Again, this is due both to our shop-till-we-drop mentality as well as our being forced to participate in the System’s chain letter. Were labor force and real wage growth sufficiently high, Social Security could continue as is for years to come. That’s not the case.

Time to Radically Reform Social Security

Social Security is $63 trillion in the red, and will run massive cash-flow deficits inside a decade. Hence, we’re at the end of the line. But reneging on accrued obligations is a prescription for The Million Walkers March on Washington, in which a million elderly shuffle past the White House using walkers, singing Hit the Road, Jack.

Elon, when this happens, you’ll be thrown to the dogs — just another of Trump’s road kill. Call Rudy to understand the end game. Tesla will be a dirty word. X will be a dirty word. And SpaceX, which seems to be exploding on its own, plus your other government contracts will be terminated. You won’t even be given the chance to write an email explaining what you did of value last week before you’ll be sent one of your own fired for underperformance letters.

Elon, you’re looking at becoming the single greatest flameout in economic history. You will have taken your investor’s money and spent it on, what? Your ego. Can we call this a Ponzi Scheme? Why not. Language, as you’ve shown, is flexible.

Elon, Here’s How to Save Yourself

First, recall the 7,000 Social Security workers you’ve fired or are firing. Second, undo your miserable order to restore full clawbacks of Social Security overpayments to teachers and other state and local workers. Click this video (watch the 60 Minutes episode, which is second up in the clip) to see the horror stories you’ve just reinstated. Third, read this post, which details how to properly reform Social Security by adopting:

The Personal Security System

The Personal Security System (PSS) is a modern version of Social Security. It replaces our current outmoded and horrifically insolvent retirement-benefit system. Current retirees are unaffected. Workers receive their accrued retirement benefits, in full, and continue to pay the gradually declining FICA tax. Middle-aged and young workers lose the opportunity to accrue additional benefits, but these are benefits that the current system is clearly not able to pay. For younger and future workers, the PSS provides a modern, fully funded, highly progressive, marriage-neutral, non-sexist, personal account system, with significant compulsory contributions, collective investment of assets, a guaranteed minimum return, and an inflation-indexed investment payoff that continues till death, i.e., real annuities. The entire system can be run on a single laptop. And since investments are made in a global, market-weighted index, there is no role for Wall Street to mis-invest our money and charge fees for the privilege.

So, Elon. Call off your lackeys and do something intelligent. Destroying things is not your forte. Building things is. Build a modern Social Security system while protecting those dependent on the existing system.

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