In any discussion of how to salvage Social Security, the fundamental flaw in the Social Security system must be addressed. Most pension fund fiduciaries are held to a prudent expert standard. The Social Security Trustees are not in the same position because Congress has largely removed their investment discretion.
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That lack of investment discretion creates an unsurmountable obstacle to the system — the sacred trust of Social Security stewardship. “Stewardship begins when we recognize that every promise entrusted to us belongs not only to the present, but also to the generations that follow.”
The crisis in Social security is unparalleled in our history. Nowhere have I seen solutions that refuse to acknowledge the loss of a sacred trust — a bedrock of our capitalist system that is so apparent in the defects in the structure of the Social Security system and the law that created it.
Public sector pensions are treated like a gold standard whose obligations can never be undermined. Nor should they be. Teacher pensions are funded currently, and shortfalls in funding, regardless of financial mismanagement of the assets, are made whole always by taxpayers. Yet that common understanding is not afforded to the sanctity of Social Security obligations — all because the trustees do not have investment discretion.
If you ask any ten Americans what Social Security is, you will probably receive ten different answers. Some will call it a retirement program. Others will describe it as a government benefit. Many will simply refer to it as an entitlement.
Behind that single word, “entitlement,” lies one of the most important questions in American public policy: What exactly have American workers entrusted to their government?
If we truly want to solve the Social Security fiasco, we have to acknowledge what the program is, who funded it, who mismanaged it, and how we pay for it. The answer matters because how we define Social Security ultimately shapes how we choose to protect it.
For more than ninety years, millions of Americans have accepted mandatory payroll deductions from every paycheck. Employers have contributed alongside them. Together, those contributions have supported a system designed to provide retirement, disability, and survivor benefits under federal law. Not one federal tax dollar has been used to fund Social Security. All payments into the fund have come from employees and employers.
Whether we describe Social Security as a benefit, an entitlement in the federal budget sense, or a social insurance program, one reality remains unchanged. It is built upon trust, and not simply financial trust. It is a public trust, which changes the conversation.
Every trust has three essential elements: Someone places something of value into the care of another, someone accepts responsibility for protecting it, and someone ultimately depends upon that promise being honored.
Social Security reflects each of those principles. Workers contribute throughout their careers. Employers match those payments dollar for dollar in almost every case. The federal government administers the trust funds and the program established by law. Retirees, widows, children, and disabled Americans depend upon that promise being fulfilled. The Social Security System is not merely an accounting system. It is one of the largest public trusts ever created.
Throughout history, America has repeatedly demonstrated its willingness to honor long-term commitments. Veterans trust that promises made during military service will be honored. Investors trust that markets will operate fairly. Citizens trust that laws will be applied consistently.
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Trust is the invisible asset that allows institutions to endure. Once confidence begins to erode, restoring it becomes far more difficult than preserving it. Stewardship is not simply protecting money, but protecting confidence.
Every trustee accepts two responsibilities. The first is to honor the promises already made, and the second is to preserve the trust for those who will depend upon it tomorrow. Neither responsibility can exist without the other.
If we honor today’s beneficiaries while ignoring tomorrow’s workers, we fail in our stewardship. If we protect future generations by breaking promises already made, we fail just as completely. Great stewardship requires both compassion and honesty.
The architects of Social Security in 1935 could not have anticipated many of the realities we face today. Americans live significantly longer than they did ninety years ago, and birth rates have declined. The ratio of workers supporting retirees has changed dramatically. The nation has experienced inflation, recessions, financial crises, and unprecedented monetary policies.
None of these developments reflects failure. Every trustee and all actuarial assumptions consider these potential outcomes.
Leadership is often measured not by predicting every future challenge, but by responding wisely when circumstances change. Every generation inherits problems its predecessors never imagined. Stewardship is demonstrated by confronting those realities honestly rather than pretending they do not exist.
That is one reason debates about Social Security often become so frustrating. Too often, we argue over political labels rather than first agreeing on first principles. If we begin with politics, we usually end with politics. Yet if we begin with stewardship, we often discover common ground.
Most Americans, regardless of party, believe that promises should be kept. Most Americans believe that workers who contributed throughout their lives deserve honesty about Social Security’s future. Most Americans also believe future generations deserve a system that remains financially sound.
Congress must acknowledge that by breaking the relationship between the trustee and investment discretion, Congress has accepted the responsibility to make the system whole. Instead, in the decades since Social Security was founded, Congress, the Federal Reserve, deficit spending, and deficit financing using Social Security funds were negligent at worst and deceptive at best.
Congress must acknowledge its role and cover the shortfalls in the Social Security funds. Quantitative easing alone cost the system over $2 trillion in lost earnings.
Only by acknowledging its culpability will Congress and future Executive Branches stop using Social Security trust funds as a re-election tool.
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