Image Source: Pixabay
 

During the Great Depression FDR sold American on his Social Security plan, called FICA. Investopedia explains:

“What Is the Federal Insurance Contributions Act (FICA)?

The Federal Insurance Contributions Act (FICA), enacted in 1935, mandates that both U.S. wage earners and their employers contribute a portion of earnings to fund Social Security and Medicare. These contributions ensure that individuals receive financial and health benefits in their retirement years.

…. FICA represents a foundational element of the U.S. social safety net, maintaining stability and support for future generations.”

Social Security “Insurance contributions” (taxes) were touted as retirement insurance; workers and employers paid the taxes, theoretically earmarked to provide the safety net of a guaranteed pension.

FDR was wrong. “Damn politicians” make outrageous election promises. Keeping those promises is for future politicos – not their problem. While they may never scrap the program, the farce is the major hole in the “safety net!” It’s about to explode….

The Farce

An annuity with a private insurance company is a legally binding contract. The insurance company must honor the terms or risk being sued for breach of contract.

Social Security premiums and benefits are NOT contractually guaranteed.

In 1960 the Supreme Court (Flemming v. Nestor) ruled, “that no one has an accrued property right to benefits from Social Security.” Contributions are taxes with an indirect correlation to benefits. While an annuity is “your money,” social security is not – period!

The “damn politicians” can change Social Security at will. It’s unlikely they would attempt to scrap the program; however, it’s been modified many times and soon will be bankrupt.

The government quietly changed the name to an “Entitlement” program.

Social Security in nothing more than “damn politician’s” political promises that can, and will be broken.

Meanwhile….

Retirees Depend On Social Security

The Social Security Fact Sheet explains Social Security is a major source of retirement income for many.

“Among Social Security beneficiaries age 65 and older, 39% of men and 44% of women receive 50% or more of their income from Social Security.”

Cut their benefits and they will be terrified!

Trust Fund? Gimme a break!

Social Security premiums go into the trust fund and are used to pay benefits to eligible recipients. Were these funds invested with private insurance companies, they would be invested in real assets and actuarial tables would indicate the solvency of the program.

Pew Research reports:

“Social Security’s two trust funds together held nearly $2.7 trillion in special Treasury securities as of July 2025. Various military retirement funds held more than $2.2 trillion. And Medicare’s two trust funds held a combined $425.3 billion.”

For almost a century, the government collected premiums, paid out benefits and spent the difference; putting IOUs in the trust fund. If a private insurance company backed their obligations with their company bonds (promises to pay) they would all be in jail…. They should call the trust fund what it is, phony pieces of paper – political promises!

The Party Is Nearly Over

The Committee For A Responsible Federal Budget explains:

“Social Security is only eight years from insolvency. The Old-Age and Survivors Insurance (OASI) trust fund is projected to go insolvent in 2033. ….

At that point, retirees will face an automatic 23 percent benefit cut under the law. ….

Time is running out to fix Social Security. Policymakers are running out of time to enact necessary fixes to head off trust fund insolvency. ….

Social Security is barreling towards insolvency. If policymakers fail to act, they will effectively be supporting a 23 percent across-the-board benefit cut for all retirees in just eight years.”

The Peter G. Peterson Foundation illustrates the dynamics with an eye-opening conclusion:
 

It’s no secret – the Social Security Administration trustees publish an annual report and has been warning Congress for years:

“Based on our best estimates, this year’s reports show that:

• The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year’s report. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits.
• If the OASI Trust Fund and the DI Trust Fund projections were combined, the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2034, one year earlier than reported last year.”

The Social Security Administration has no choice: it can’t spend money it does not have!

The political farce continues….

The scheme is failing because current benefits exceed tax revenue – called negative cash flow. The government borrows the shortfall to make up the difference and “deducts” the amount from the trust fund balance. They have been doing this for 15 years. It’s already insolvent….

How can a trust fund full of government IOUs run out of money when it contains no money? 2033 is when the accumulated negative cash flow catches up with the total amount of IOUs.

For decades politicians of all parties have played a game of chicken, knowing they should raise premiums and modify benefits. Instead, gutless politicians don’t have the courage to do the right thing and fix the system. They prefer pandering for votes, screaming that their opposition party is going to take away your social security. All the “damn politicians” are guilty.

Benefits will be reduced dramatically and a lot of people will be affected.

Cynics sneer that the problem will be solved when Congress loses their pensions and are only covered by social security! I’d bet on tar and feathers….

When it finally blows, likely sooner than later, Congress will pass “emergency legislation.” The lobbyists will insure it is another boondoggle like the bank bailouts.

What Can We Do?

Expect cost of living reductions, benefit reductions (much larger cuts for top earners), retirement age raised and tax increases.

Remove the rose-colored glasses. When the reductions are triggered, it will affect Americans of all ages; both workers and retirees. Social Security as a safety net is a farce. Start planning now, if you prepare for the worst and it isn’t as bad as you thought, that’s a bonus!

Saving for retirement is OUR responsibility. Those who hope to have and/or continue to enjoy a reasonable retirement must accept that fact. Make necessary adjustments NOW.

Take full advantage of IRA and 401k programs. If you are not maximizing your contribution, build a plan to not only get you there, but also take advantage of the “catch up” provisions. Get serious about saving, sacrificing some “wants” today to pay for “needs” in the future.

Strive for “lifestyle certainty” – having enough money to pay the bills regardless of what happens, expected and unexpected. Big Brother is not going to help you.

Think before deciding to defer benefits. The government offers higher benefits for those who defer taking them when they are eligible.

Financial planners use a “social security optimizer” program. Beware! The programs are based on the system as it is today. Very soon these computer projections will be obsolete and many will wish they took the money when they had the chance.

Prepare for the perfect storm. When things finally blow, expect major financial and social shock waves throughout the world.

The world will no longer want to buy our debt – financing our political folly. The US Debt Clock projects to 2030, estimating our debt to top $43 trillion.
 

Social Security pales in comparison to the $308 trillion in “US Unfunded Liabilities,” (more promises) amounting to almost $1 million per citizen.
 

With continued pressure on the dollar, anticipate more inflation.

Angry taxpayers have paid into the fund for generations, and promised retirement benefits. Retirees need the income. If benefits are cut, a revolt is likely, pitting the working class against the welfare class.

Centuries ago, rulers learned to keep the population fighting among themselves; then they are less likely to unite to overthrow the king. It still works…. The current riots in Minnesota may be tame by comparison.

Continue adding gold/silver to your savings. We are beginning to see dramatic price escalation. There may be fluctuation, but the upward trend is likely to continue.

I anticipate some sort of “national emergency” as a guise to social security reform. Benefits will change and taxes will be raised. Sadly, the political class is so divided they prefer political name calling as opposed to working together to solve our nation’s problems – politico business as usual!

Do what it takes to fund as much of your retirement as possible so you don’t have to depend on Big Brother. You will be glad you did.
 

On The Lighter Side…

Jo and I finished emptying moving boxes. We still have much to do feathering our new nest, however, we love freeing up the space.

I have a public service announcement.

We packed boxes from Home Depot and Walmart. Our decision to buy was based on where we were when we needed more.

The Home Depot boxes are far superior. The mover piled boxes on top of each other and the Home Depot boxes worked very well. The Walmart boxes crushed on the sides. When I tried to lift them with the punch out handles, most of them quickly tore. Home Depot also sells extra heavy-duty boxes and they were even better. Knowing what I know now, I wouldn’t recommend the Walmart boxes. The smaller Home Depot boxes are reliable, don’t get too heavy and are easy to work with.

Super Bowl coming up signaling the end of the football season. Three days later the Cubs pitchers and catchers are scheduled to report to Spring Training. Soon the grass will green up and we will be enjoying summer baseball.

Meanwhile, our Tampa Bay Lightning hockey team is playing well, despite having several key players on the injury list. Last weekend they played an outdoor game in Raymond James Stadium in Tampa. Outdoor hockey in Florida? That’s quite an engineering feat!
 

Quote of the week…

I’m going to combine two quotes this week….

“The real Social Security crisis is that the government does not have the money to redeem its IOUs.”— Paul Craig Roberts

“Poverty is terror. Having your Social Security threatened is terror. Having your livelihood as an elderly person slowly disappearing with no replenishment is terror.” — Harry Belafonte
 

And Finally…

It’s fitting this week to share some political quotes from lifelong friend Tom G.

• Those who are too smart to engage in politics are punished by being governed by those who are dumber.— Plato, ancient Greek Philosopher
• Politicians are the same all over. They promise to build a bridge even where there is no river.— Nikita Khrushchev, Soviet Union politician
• Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel.— John Quinton, American actor/writer
• Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. — Oscar Ameringer, “the Mark Twain of American Socialism.”
• A politician is a fellow who will lay down your life for his — Texas Guinan. 19th century American businessman
• I have come to the conclusion that politics is too serious a matter to be left to the politicians. — Charles de Gaulle, French general & politician
• I have come to the conclusion that one useless man is a shame, two are lawyers and three or more are the government. — John Adams (1735 – 1826)
• Suppose you were an idiot. And suppose you were a member of Government. But then I repeat myself. — Mark Twain (1835 – 1910)
• I don’t make jokes. I just watch the Government and report the facts! — Will Rogers (1879 – 1935)
• I contend that for a nation to try and tax itself into prosperity, is like a man standing in a bucket and trying to lift himself up by the handle. — Winston Churchill (1874 – 1965)
• A Government which robs Peter to pay Paul, can always depend on the support of Paul! — Will Rogers (1879 – 1935)
• The problem we face today is because the people that work for a living are outnumbered by those who vote for a living. — George Bernard Shaw (1856 – 1950)
   

And my favorite:

• Politics is the only profession where you can lie, cheat, and steal and still be respected. — Mark Twain (1835 -1910)

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