Posted BY: David Barulich

In his N.Y. Times op-ed (Feb. 28, 2023), columnist Paul Krugman admitted that Social Security is indeed not like a pension plan, but rather incorporates significant wealth transfers from higher- to lower-income participants.

The thing about Social Security is that from the beginning it was designed to encourage misconceptions.  It looks, on casual inspection, like a giant version of a private pension plan.  You pay into such a plan during your working years, contributing to a pension fund, and when you retire you receive payments from that fund in proportion to the amount you put in. …

I’m pretty sure that it was set up to look like an ordinary pension fund because that made it politically easier to sell. But in reality, Social Security has never been run like a private pension plan.

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He makes a further observation:

I get a lot of mail from people saying that we should simply eliminate the upper limit on the payroll tax. That would certainly raise a lot of money. But bear in mind that there’s no fundamental reason Social Security has to be financed with payroll taxes — we only do it that way because back in 1935, F.D.R.’s advisers thought it would be a good idea to dress Social Security up to look like a private pension fund.

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