Political ads claiming that Republican U.S. House candidate Nick Begich labeled Social Security a “Ponzi scheme” use a quote taken out of context, according to a July 2023 recording.
Social Security’s trust fund, used to pay benefits, invests in U.S. government treasury bonds, a low-risk form of investment.
Begich criticized that funding approach, saying it amounts to the government buying its own debt.
“Because we run these huge deficits, we need someone to buy all the debt that we’re producing,” he concluded. “And guess what? That’s you, through your Social Security. That trust fund has been invested in government debt from the get-go, and it’s a Ponzi scheme, and it’s used to prop the system up.”
Begich’s criticism was with the way Social Security is funded, not the benefits the program pays.
He went on to say that the funding mechanism wasn’t a problem when there were many workers for each retiree receiving benefits, but now that the nation’s population has aged and the ratio of workers to beneficiaries has dropped, “you’re going to have a real problem, and you can’t keep borrowing at this rate.”
In last week’s Debate for the State against incumbent Democratic Rep. Mary Peltola, Begich said he doesn’t oppose Social Security.
“I am a 100% full supporter of Social Security, despite what you may have seen on ads and on TV,” he said. “I 100% support ensuring that we meet the commitments that have been made. My comments in the past have been taken out of context, and what I have actually said is the federal government has taken the Social Security Trust Fund and they have spent it on current operating expenditures. That’s a savings account for our seniors, and being reappropriated for deficit spending. That’s wrong.”
A Ponzi scheme is a type of fraud in which the people who run the scheme tell customers they will invest their money. The fraudsters instead pocket the money, and pay the customers by soliciting money from new customers. These schemes collapse when the fraud is discovered.
The 85-year-old Social Security Trust Fund differs in multiple ways from these schemes. Among these differences:
- It is not marketed as a way for investors to profit, but instead is designed to provide financial security;
- fund trustees transparently report the fund’s finances;
- Social Security administrators do not pocket money from the trust fund; and
- borrowing primarily occurred when the program brought in more revenue than it paid in benefits, which is no longer the case.
The share of the federal debt held by the fund is shrinking. The trust fund is forecast to be depleted in 2035. At that time, Social Security revenue is forecast to be equal to 83% of scheduled benefits, if there are no changes to the program.
