Democrats are pushing back after Elon Musk claimed that Social Security operates like a “Ponzi scheme” while advocating for cuts to federal bureaucracy. However, one expert tells Fox News Digital that Musk’s criticism is valid.
“Musk’s statement about Social Security being the world’s biggest Ponzi scheme does have validity,” said James Agresti, president of the nonprofit research institute Just Facts, in response to Musk’s claim, which received a “false” rating from Politifact.
“A Ponzi scheme operates by taking money from new investors to pay current investors—that’s the definition given by the SEC. Contrary to popular belief, that’s exactly how Social Security operates,” Agresti explained.
How Social Security Really Works
Agresti noted that Social Security does not work like a traditional retirement savings plan.
“It doesn’t take our money, save it, and then give it back to us when we retire, as many Americans believe,” he said.
Instead, Social Security immediately transfers money from working taxpayers to current beneficiaries.
“The vast bulk of Social Security taxes collected go out the door right away to pay those receiving benefits,” Agresti said.
Though a trust fund exists, Agresti pointed out that it only holds enough money to fund two years of operations.
“That’s not because the fund was ‘looted,’” he clarified. “It was designed to collect surpluses and earn interest. The problem isn’t mismanagement—it’s that Social Security operates like a Ponzi scheme.”
Concerns Over Fraud and Waste
Critics, including former President Donald Trump, have long argued that Social Security mismanagement allows improper payments to individuals who are deceased or fraudulently listed with extreme ages.
Agresti confirmed that there is reason for concern.
“What’s unclear is whether these individuals are actually receiving checks,” he said.
He pointed to a case from the Obama administration, where 80,000 deceased individuals were sent stimulus checks—70,000 of whom the Social Security Administration already knew were dead.
“I don’t know if they’ve fixed that issue since then, but the system is clearly struggling to keep up with accurate data, which creates opportunities for fraud,” Agresti added.
Democrats Accuse Musk of Targeting Seniors
Democrats argue that Musk and others advocating Social Security reforms are trying to take away benefits that senior citizens have rightfully earned.
Agresti dismissed that claim.
“There’s been a lot of misinformation about this,” he said.
For example, when DOGE suggested cutting 10,000 Social Security Administration workers, Democrats claimed it would weaken the program.
“But Social Security pays for administrative costs from the trust fund. Cutting those expenses actually strengthens the program financially,” Agresti explained.
According to Just Facts, Social Security’s administrative overhead costs $6.7 billion per year—enough to fund benefits for 300,000 retirees.
Will Social Security Survive?
Many experts warn that Social Security will become insolvent by 2035 if changes are not made.
Agresti highlighted the funding gap with a stark calculation:
“To fully fund Social Security like a real pension plan, every payroll tax-paying American would need to contribute an additional $272,000.”
He also pointed out how Social Security’s return on investment has deteriorated over time:
• Retirees in 1980 recovered their payroll taxes in just three years.
• Retirees in 2000 needed 17 years.
• Retirees in 2020 will need 22 years—assuming the program remains solvent.
“Without another tax increase on future generations, the program won’t have enough money to sustain itself,” Agresti concluded.
