Bernie Sanders calls White House allegations of Social Security fraud and waste 'a prelude not only to cutting benefits, but to privatizing.' How outsourced Social Security might work

DOGE aims to cut 12% of the Social Security Administration (SSA) workforce, reducing staff from 57,000 to 50,000. It’s also consolidating 10 regional offices down to four and closing 45 field offices across the country, according to Government Executive.

A leaked email from SSA’s acting commissioner Leland Dudek, published by The Bulwark, sparked fresh fears about privatization. The March 1 email to staff stated they need to “revitalize SSA operations by streamlining activities” and “outsource nonessential functions to industry experts.”

Why lawmakers are talking about privatizing Social Security

This wouldn’t be the first time politicians have attempted to privatize Social Security. Back in 2005, former president George W. Bush floated the idea of creating privatization accounts, in which workers could divert a third of their payroll taxes into a private account. It did not go over well.

What’s different this time? A false narrative that the current program is rife with waste and fraud.

Elon Musk, who spearheads the Department of Government Efficiency (DOGE), told Fox News that Social Security was “a mechanism by which the Democrats attract and retain illegal immigrants by essentially paying them to come here and then turning them into voters.”

In late February, Musk told podcaster Joe Rogan that Social Security is the “biggest Ponzi scheme of all time,” and accused the program of fraud and abuse.

President Donald Trump has reiterated Musk’s false assertion that millions of dead people are receiving Social Security checks.

Under the Biden administration, the SSA’s Office of the Inspector General conducted Social Security audits of payments from 2015 and 2022 and found that most improper payments were overpayments — not payments to dead Americans.

The office uncovered $72 billion in improper payments, but while that sounds like a lot, it’s less than 1% of the total benefits distributed over seven years.

“So why do you lie so much about Social Security? Why do you make it look like it’s a broken, dysfunctional system?” Sanders asked in the CNN interview. “The reason is to get people to lose faith in the system, and then you can give it over to Wall Street.”

Pros and cons of privatization

Social Security has been under the microscope for years, thanks to a long-term funding shortfall. If nothing is done, it will run short of funds by 2034, with only enough to pay beneficiaries 79% of their scheduled benefits.

The program is funded by employers and employees through payroll taxes (each paying 6.2% of the employee’s earnings, while self-employed workers pay the full amount).

But with fewer working-age Americans and a record number of baby boomers retiring, , those payroll taxes aren’t producing enough revenue to keep pace with demand.

There are a number of options for making up this shortfall, such as raising the retirement age, eliminating the taxable income cap or raising payroll tax rates.

A vast majority (85%) of Americans polled in a National Academy of Social Insurance survey (NASI) want their Social Security benefits to remain intact — even if it means raising taxes.

Advocates of privatization believe the private sector could do a better job managing the program. Privatization would involve diverting payroll tax contributions into self-directed private accounts.

Proponents say this would give workers more options and allow them to make better investment decisions. For example, they could increase their contributions so they could build up their retirement funds faster.