Social Security Is a Fantasy and Ponzi Scheme; How to Fix It

Entitled Americans don’t get it.


Jean M. Twenge is a professor of psychology at San Diego State University and author of Generation Me. 

America today is subsisting on fantasy. Facebook allows us to think we actually have 500 friends, grade inflation has convinced young people they are smarter than they actually are, and we have a hollow economy based on debt and false promises. The giant Ponzi scheme of Social Security is one of the most egregious examples of our delusional optimism.

The fantasy of Social Security is seductive. We imagine there is an actual trust fund somewhere that takes in money and manages it responsibly. When we retire, we are "entitled" to that money. Reality is not so attractive: Social Security is just a promise by Congress to take money from younger people and give it to older people. Congress even takes extra from young people and, rather than managing it responsibly, lends it to itself. Even Enron wouldn't come up with a scheme like this.

Those who argue against means testing often say that it's unfair for people to pay into the system and not get their money back. But if nothing is changed, current estimates suggest Social Security will go bankrupt by 2017, perhaps even earlier. This is generational warfare. If means testing and other adjustments to Social Security are not implemented, no one in younger generations—rich or poor—will get any of his or her money back.

Working Americans born after 1970, including those struggling to put a roof over their children's heads, are subsidizing the retirement of rich baby boomers and may never see a penny of that money in their own retirement. The current system is a reverse Robin Hood, stealing from the poor (and middle-class) young to give to the rich old. The income cap, which does not subtract Social Security tax from earnings over $106,800, makes the system even more regressive.

It's simply not realistic to expect to get all of "your" money back through Social Security, nor should you expect to if you are wealthy. This is well understood for other taxes. For example, those with means pay more income tax but do not necessarily receive more serv­ices from the government. Of course, they don't need the services as much as those with fewer means do. And this is how Social Security should work as well: It should go to the people who need it.

The details of how this is done are important—we don't want to punish those who were responsible enough to save—but there should be some dialing down of benefits for the truly well-off.

As my coauthor W. Keith Campbell and I document in The Narcissism Epi-demic, the prevailing attitude in this country has become "Me first." Believing that you deserve a Social Security check, even if you don't need it, is a sterling example of entitlement. Of course, today's senior citizens did not create this system. The blame instead lies with the politicians who got re-elected by selling the fantasy of endless Social Security. Now that the system is on the edge of failure, however, we all have to face hard truths. Enduring societies are built on a simple principle: The group is stronger than the sum of its parts, and we help those in need. Instead, many now believe that it's every man for himself, and screw the other guy (or, in this case, screw the next generation). This narcissistic attitude is corroding the building blocks of our society.

Millions of people have made life choices based on the fantasy of Social Security. We can't just throw these sen­ior citizens into the streets. We can, however, start being responsible now. Means testing is a good first step, as is raising the age for receiving benefits. Another option is setting up an actual, independently managed Social Security pension fund so that those who are now children can have access to it in retirement. People in their 20s and 30s (like me) are pretty much out of luck.

Of course, Social Security is only one part of a government that is $12 trillion in debt. Unless things change radically, we are expecting our children and grandchildren to pay for our current lifestyle. That's not just narcissistic—it's criminal.