When Al Gore proposed this in the 2000 election he caught a lot of criticism for it. It was a naive notion, it can’t work…something something something.
I am NOT arguing it is a good idea here. I am asking why it is a bad idea.
We have all paid into the SS system (near enough). Some many billions end up in that account and the US government decides there is money there they can spend. So they do. The government still guarantees all the payments and they did for some decades.
Fast forward to now. The government says there is no money there. SS is insolvent (or near enough) and needs to be nerfed in some fashion (too many ideas for that but bottom line recipients will receive less in some fashion).
So, why was the “lockbox” a bad idea? If I understood it right (which I might not) Gore was saying SS funds are in their own account and off limits to the government except to payout SS dividends.
The SS debt is only there because the government plundered our retirement funds and then tells us there is nothing there.
Maybe it sorta worked if you assume an ever growing population and economy where the young people pay for the old people. But I think we can all see that is not workable…sooner or later that will fail. And it is not rocket science. It should be abundantly obvious to a freshman econ student.
Maybe the SS money could be used to buy “safe” investments like T-bonds but that seems something that would not work long term either (just feels like I am loaning myself money and paying back the loan later at some profit…I am no finance guru but there has to be a problem with that but I’ll allow governments are different creatures than Joe Schmo).
Bottom line…why not a lockbox? Why not tell the government SS funds are for one thing only…paying SS recipients. Basically an enforced savings account for the population.
This exposes a fundamental flaw in our government (probably most governments). We also see it in business. Massage the numbers for a short term “gain” (scare quotes because it really is not a gain…just looks like it on paper). Kick the can down the road. Leave the reckoning to the future. And they will never fix it either. The crash is the only thing that stops it and you just hope you (general “you”) are not the one to have to deal with the massive fallout.
Kinda like deferring maintenance on a bridge. Not a problem till it collapses. Hope you are not the scapegoat who gets caught after 50 years of neglect even if you have been in the office responsible for maintenance for six months (and nevermind you had no budget for it…under the bus you go). And let’s be real…that guy/gal almost certainly would have kicked the can down the road too…he just lost at musical chairs.
When that social security money comes in, you either invest it, or you don’t. If you don’t invest it, then the money just sits there dead, not doing anyone any good, and isn’t nearly enough for anything. It’s like the guy who buried his one talent and then dug it up again.
But if you invest it, what do you invest it in? Any option other than treasury bills is horribly risky, and has tremendous opportunity for grift and corruption. Whatever government functionary is responsible for choosing the investments is going to just invest it in the company that they coincidentally happen to own, and of course $10,000 per share is a fair market price.
And so that leaves investing the social security fund in treasury bonds. Which is what we did.
If SocSec had not had the interest paid on the T-bills they bought, they’d have run out of money much sooner.
SocSec was designed as a Pay As You Go system, with taxes collected this year going to pay recipients this year. The “trust fund” was little more than a buffer account to smooth out variations. The fund started to swell only after the reforms in the early 1980s, which raised taxes to build up a very large buffer for when the baby boomers started to retire. As the last of that generation nears retirement, the buffer is running down, and pretty soon we’ll be back to a PAYGO system, except there won’t be enough receipts to pay all the benefits promised.
The root of the problem is demographics: people are living longer in retirement and not having enough kids (especially kids with good jobs paying lots of taxes).
As I remember it, the issue of the day was that Social Security was taking in more money than it needed to pay out. Those excess funds were not being invested in nice safe treasury bills, but being funneled off to fund other parts of the government, thereby allowing the Republicans to cut taxes. This was 2000: Democrats vividly remembered that Clinton won the presidency in 1992 after the economy collapsed under Bush I because of the Reagan tax cuts for the wealthy.
Gore’s lockbox metaphor was for a plan to “lock” those excess funds away from any other use than Social Security payouts. It wasn’t supposed to be “dead” money, but an investment toward future payoffs.
Bush countered with a plan to siphon off SS funds and allow people to put them into individual IRAs, which if never touched would grow faster than SS payouts. In reality, the odds were overwhelming that many people would touch them and have nothing left for retirement. But it sounded better than Gore’s clumsy metaphor.
Two things happened. Bush II won and immediately got a tax cut for the wealthy passed, just as the Democrats feared. And over time the excess money that SS brought in vanished as the population aged. Not to mention a third thing, the total waste of about $2 trillion dollars in Iraq, back when $2 trillion was real money, not Google’s fifth-place market cap. The debt skyrocketed and we’ve never returned to Clinton’s balanced budgets.
The disappearance of the excess funding was inevitable. A couple years might have been bought, though. Everything else that followed from his loss* would have been vastly different.
* I’m not going to beat this dead horse, but of course Gore won Florida and the presidency. Trump should spend some of his free moments on Truth excoriating that Supreme-Court-rigged outcome.
No, the real problem is that the rich aren’t paying their fair share into Social Security.
The cap on FICA taxes has not been changed to keep up with inflation (or life expectancy) and so most rich people cease paying their share into SS very early in the year. (Like Elon Musk – he hit the cap on SS taxes in the first hour of 2025.) If that FICA cap was increased to a reasonable level, and adjusted each year, SS would be solvent for years to come. To be fair, the maximum SS payout should also be raised at the same time.
The Social Security system has also been used for a couple of other programs, but overall they are minor in effect:
payments to orphans: limited until they reach adult age, and about offset what their parent would have eventually received. And besides, without this most of these kids would have ended up on some type of government assistance anyway.
SSI for disabled individuals. Good idea, because again, most of them need some kind of government assistance to survive, and the SS system is more efficient than most other programs. I see too many people seemingly content to lay around collecting this and do nothing for themselves, but I suppose that’s such a small percentage that it doesn’t matter.
But the major problem with Social Security is the rich not paying their fair share!
And yet other countries like Norway and Singapore manage to have Sovereign Wealth Funds that are widely admired and tend to bring in above market returns for their risk profile.
As I remember it, the issue of the day was that Social Security was taking in more money than it needed to pay out . Those excess funds were not being invested in nice safe treasury bills, but being funneled off to fund other parts of the government, thereby allowing the Republicans to cut taxes.
I don’t buy it. The excess contributions built up the trust fund’s t-bill collection so that when (like now) payroll taxes are less than SS payouts, SS redeems the t-bills and full payments continue. This business about the government “stealing” from the SS fund are lies spread by the GOP to make people distrust SS and therefore would miss it less when they kill it.
The problem was that those t-bills’ sales produced money flowing into the general fund that was spent each year. So taxes were lower than they should have been to cover the same general (non-SS) spending. That has continued to the present time.
With the effect that the whole country and economy has gotten used to a level of spending (and borrowing) that exceed the tax take by an amount that includes the annual SS surplus income.
Now as that surplus SS income stops, and begins to turn to deficit, ordinary taxation must rise by the corresponding amount, or other federal borrowing must rise by the corresponding amount, or any combo of the two.
But the big picture is the federal tax take or federal borrowing must increase now to pay off those T-bills the SS income surplus bought over the years. And due to the shape of the Boomer retirement curve, a pile of T-bills that flattered the general revenue picture over 40 years will now need to be fully paid off in more like 10.
With the crazy party in power, it’ll be hard to tease these effects out from the crazy.
A longer way of saying it reminds people that money is fungible: all the money that the US takes in goes into a large vat and is used undifferentiated for varying purposes. Intake includes both FICA money and treasuries (technical nitpick: t-bills are for 2 months to a year; t-notes for 2-0 years; and treasury bonds for 20-30 years). Whenever an excess over anticipated income from one source occurs, the government borrows the money from itself, which gets expressed as treasuries. Borrowing money as treasuries is basically how all deficits get paid. Excess SS funds do get used to buy them; the more they do the less the US has to borrow from other sources. The bottom line looks better.
Because all this money goes into the general fund it can be used for any purpose - unless specifically earmarked. Gore proposed that excess SS funds be earmarked. If that money was needed elsewhere it would have be taken from the general fund or increased borrowing. The excess would always be there in the form of treasuries and extend the payment structure. That’s a tricky concept since it comes down to accounting measures that are anathema for most.
The context for Gore’s plan, though, was Bush proposing to allow people to voluntarily divert part of their FICA to invest in private accounts. No matter how you slice it, this would reduce the amount of SS funds coming in and also the amount of payments needed. The free market would make up for the lack. Full disclosure: Democrats had also proposed something similar, but by 2000 they saw how unfeasible such trust in the public would be over time. Calling this “stealing” from the SS fund is standard political hyperbole, but effectively true. Bush found out how unworkable this plan was - it would benefit lots of people but not actual retirees and add massively to the deficit - when he kept trying to push it during his presidency and failing. Your statement is hardly coherent enough to dispute, so I’m giving a broader picture.
Bush was effectively lying to the public by telling people they could invest their money better than the government could do it for them. Social Security does not invest people’s money for their own use when they retire. FICA taxes pay current retirees, and some of it gets put into a trust fund that will pay for future retirees, but mostly not for current payees. Each generation pays for the retirement of previous generations. That’s how the system has always worked, and how it is intended to work.
If the system were changed the way Bush wanted, the money that payees invested for themselves would be diverted from current retirees, and from people near retirement. Bush never addressed this. In claiming that people could invest FICA taxes for their own personal retirement without affecting current retirees, he was double-counting the money.
Gore’s proposed lock box was an attempt to create a physical image that people could understand. His actual plan was to make it illegal for anyone to use the trust fund for anything other than its original intended purpose. The problem is that it sounded silly, as if there would be a giant safe in Washington, D.C. where the trust fund would be kept safe, like Scrooge McDuck’s vault.
The trust fund is invested in special U.S. Treasury bonds that, by law, can only be redeemed at maturity. This prevents them from being traded on the bond markets, which stabilizes their value. In effect, the Social Security system is loaning money at interest to other parts of the government. It may seem weird for one part of the government to loan money to another part, but it’s better than letting it sit there idle.
The first part is untrue. From 1972 to 2022, the cap went from $9000 to $147000, or 16.3x. Average monthly payments went from $162.35 to $1,825.14, or just an 11.2x increase.
And in 2025, the income cap increased by 4.4%, while the Cost Of Living Adjustment (COLA) was just 2.5%.
Increased life expectancy is a problem, but the income cap has outpaced the benefit payments. The cap is based on wages, which have also outpaced inflation.
While I won’t argue any of that, my stance is that there shouldn’t be a cap, or it should be drastically higher. The median household income between 1972 and 2022 grew much slower than the mean household income, so the rich are just getting richer compared to everyone else. I say this as someone who was above the cap while I was still working.
Something has to change, obviously. But if the cap is dramatically increased, it should be admitted that “We are altering the deal. Pray we don’t alter it further.” SS was never supposed to be progressive in the same way income taxes are. You paid into it, and got something resembling your wages out of it. The benefit and tax caps meant that for the rich, they effectively never paid into it but also got nothing out of it. The system is kept going by wage-earners and that’s also who get the benefits.
If that system is ended, there’s really not much reason not to just fold the whole thing into normal income taxes, which are progressive and unlimited. Maybe that’s what we need, but it is a very different philosophy.
Quadrupling the cap, say, would affect the 90-99th percentile earners. Well-off but not rich-rich. It wouldn’t affect Musk or Bezos.
Increasing the cap doesn’t make it progressive at all. Just somewhat less regressive. I also get that taking 6.2% (or 12.4% for the self-employed) of the salary of the super high earners won’t affect them much. But it will affect the amount of funds we have to work with. Maybe we should make it truly progressive after all.
Do they even get a salary? Almost all of their income is from investments which isn’t “earned income” and doesn’t pay into the system nor does it count for what you get back.
No, the system is mildly progressive already. Higher earners get less benefit than lower earners.
It might seem regressive relative to income tax because the percentage dwindles to 0 as you go far past the cap. But that’s not considering the benefit. Rich people get much more benefit from government services than the poor, because they have so much more stuff. Therefore they are getting a much higher return from the military, police, fire services, roads, environmental protection, etc. that protect said stuff. It’s all indirect things so it’s hard to quantify, but the benefit is there. Social Security though is strictly dollars in, dollars out. And the rich get strictly less dollars out than dollars in, no matter how high on the income ladder you go.
No FICA, AFAIK. Though as you say it doesn’t count for what they get back, either. There is the “Additional Medicare Tax” which applies even to investment income. But that’s for Medicare, not Social Security.
You can argue that the benefits (which aren’t received until decades after collection starts) are progressive, but collection is absolutely regressive.