Business

Should social security be privatized?

WRITTEN BY
07/02/25
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Fact Box

  • Social Security was established in 1935 as part of President Franklin D. Roosevelt’s New Deal with the goal of providing a safety net and retirement for the elderly or disabled. 
  • Social Security is one of several American “entitlement programs”—government programs that provide financial benefits to individuals who meet certain eligibility criteria—and include Medicare and Medicaid, and unemployment among others.
  • In February 2024, about 67 million US residents collected Social Security benefits. Of Social Security beneficiaries, 85% are retired workers, dependents, and survivors; 13% are disabled workers and dependents; and 3% are “young survivors”—unmarried children of a deceased worker eligible for survivor benefits. 
  • By 2035, Social Security is expected to only able to pay out 80% of its funds to beneficiaries. To keep it solvent—able to pay—will likely require “raising taxes, cutting benefits or a combination of both.”
  • A December 2023 Gallup poll found that 50% of American retirees “expect the Social Security system to pay them a benefit when they retire, while 47% do not.”

Curtice (Yes)

Social Security is an example of the government attempting to do something—like securing its citizens’ retirement—yet doing it badly. While Social Security is a noble concept, since its establishment under FDR’s New Deal in 1935, it has never been on solid ground financially. 

While it may not technically be a Ponzi scheme—a fraudulent investment scam that pays returns to earlier investors using new investors' funds rather than generating legitimate profits—Social Security often resembles just that. In 1940, 42 workers were paying into Social Security for every retiree. By 1960, that number had been reduced to 5 to 1. Today, it is approximately 2.9 to 1 per retiree; by 2050, it is projected to be 2 to 1. No 'lockbox' or account has your Social Security contributions in it, as Al Gore once claimed. Instead, the money is deducted from your paycheck each time you pay for current retirees. 

Social Security is also the largest single line item in the federal budget and a significant component of the national debt. According to the Congressional Budget Office, the Social Security Trust Fund will run short of money by 2031. However, If a worker's contributions had been put into a personal account, in US Treasuries, for example, that worker would have substantially more money when it came time to withdraw. 

According to the Heritage Foundation, “the average worker receives significantly less from Social Security than he would have if he had conservatively invested his Social Security payroll taxes in the stock market.” Additionally, a private retirement account would be one that workers could leave to beneficiaries. Retirement was never something the federal government should have taken on, as Americans very soon will reap the repercussions of such poor policy and fiscal mismanagement. 


Rob (No)

Even amid concerns that Social Security is running out of money, privatizing this sector would be detrimental to both the government and the general public for several reasons. To begin with, while some argue that privatization saves the government money, one study shows that it actually doesn’t. 

Another study also suggests that the idea that the private sector is more efficient than the public sector is just a myth. Keeping Social Security in the hands of the government helps avoid unnecessary fees and expenses associated with privatization. These result from the firms’ administrative fees and profit margins, and they lower the amount available for allocation to beneficiaries. Conversely, the government doesn’t charge additional fees for these services, and most of the funds go to beneficiaries.

Private firms make money by investing in different stocks and equities. Given how volatile and unpredictable the stock market is, these investments could easily be wiped away. The reliance of private firms on investment returns means they have better returns than the government-run program. Still, it could also potentially jeopardize the financial security of pensioners and their dependents. The Social Security Trust, on the other hand, invests in the government and is not subject to market volatility. This ensures that retirees are guaranteed a source of income regardless of the market conditions. 

Lastly, privatization would also likely lead to increased corruption. The involvement of private firms with profit-driven motives opens the door to misappropriating and manipulating funds that should otherwise be allocated to benefit retirees.

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