Elon vs. Social Security: Evaluating the Allegations

(This post is the written supplement for the InFi podcast episode #77.)

In February Elon Musk spawned a nationwide conversation on Social Security, through several provocative tweets and an interview. Specifically, Elon released a table showing that the Social Security database has many millions of people more than 120 years old still identified as living, and he also argued it was a Ponzi scheme. Predictably, the floodgates opened with Elon’s critics denouncing him (and the MAGA base) as a bunch of know-nothing rubes who don’t understand data and who hate the elderly. In this post I’ll referee the argument to shed light on the actual condition of Social Security’s finances.

The COBOL Red Herring

Although in the grand scheme it isn’t important, nonetheless I would like to document for posterity a hilarious red herring that sidetracked many of the snobbish Elon critics for a good 24 hours: Specifically, many educated progressives had somehow convinced themselves that there were a cluster of people in the Social Security database who were exactly 150 years old, which (in their mind) indicated a coding issue rather than fraud. I’ll let the following screenshot of a nested Justin Wolfers tweet explain:

Before continuing, let me just make sure the reader understands what Wolfers & Co. thought they were demonstrating: Don Jr. originally tweeted out that Elon had told him there were people more than 150 years old listed as alive (and still collecting benefits) in the Social Security database. Now because there is a certain date standard that happens to begin in the year 1875 (when an international treaty was signed by various world papers, ensuring uniform measurements), somebody on Twitter named “Toshi” offered a bold hypothesis: Suppose there were a bunch of records in the Social Security database with a blank field for the DOB, in which case it might be read as a zero. Then if the default “zero point” on the timeline is in 1875, why, that would make the person 150 years old, because 2025 – 1875 = 150. Then Justin Wolfers was so sure that this must be what’s going on, that he doubled down on the hypothesis, and said you don’t even need to wade into COBOL code to see it: You just need to look at the distribution of the ages in the database. You won’t see anybody listed as being in their 130s or 140s, but instead you’ll see a spike at precisely 150 years old. Hence, this isn’t fraud, but is obviously a coding issue. Ha ha, DOGE fools!

There are just two problems with this neat demonstration: First, even on its own terms, it doesn’t work. The Treaty of the Metre was signed on May 20, 1875, and so if Toshi’s hypothesis were correct, there would be a bunch of 149 -year-olds in the database, not people who were 150.

Second and more damning, Elon soon followed up with the below tweet, showing that there were plenty of people still listed as alive at various age brackets:

So just to make sure we realize what happened: Look again at the original (nested) tweet from Wolfers. Don Jr. never said there were a bunch of people grouped precisely at 150 years old. No, the progressive critics of Elon just made that upbecause, if it were true, then the COBOL coding issue might explain it away as due to incomplete data.

But ironically, as Elon’s table shows, the actual data in the Social Security system look exactly like Wolfers said would be indicative of fraud. And yet, after Elon’s tweet, Wolfers didn’t suddenly announce a mea culpa. On the contrary, he joined a chorus of other DOGE critics who said, “This isn’t about benefit checks, this is just a database of Americans with Social Security numbers. We’ve known about this for a long time.”

The Office of Inspector General (OIG) Reports

To avoid confusion, let me definitively state: So far I have not seen any hard evidence that the Social Security system is paying out benefit checks to millions of people who are clearly dead. (For one thing, if you run the numbers, that would be a lot of money, which presumably hadn’t gone unnoticed this whole time.) But as even the OIG reports indicate, there is still rampant abuse of the antiquated Social Security database, which does list millions of people as currently living, even though their implied ages would be implausibly high.

Here's an interesting excerpt from the OIG 2023 report:

In Tax Years 2016 through 2020, employers and individuals reported approximately $8.5 billion in wages, tips, and self-employment income using 139,211 SSNs assigned to individuals age 100 or older. SSA transferred these earnings to the Earnings Suspense File primarily because personally identifiable information provided on wage reports did not match information in SSA enumeration records. One SSN appeared on 405 different suspended wage reports, and 210 additional SSNs appeared on at least 50 suspended wage reports SSA received during this 5-year period.

To unpack what this is saying: Over a five-year period, there was a single Social Security Number, pointing to an individual who was (ostensibly) more than 100 years old and still listed as alive in the system, where that number had been used in 405 different wage reports sent in by employers. There were another 210 different Social Security Numbers, each of which referred to someone ostensibly at least 100 years old, and each of which had been used on at least 50 different wage reports sent by employers to the SSA.

The OIG report went on to indicate that SSNs referring to dead people (but which aren’t flagged as “deceased” in the database) can also be used to fraudulently open bank accounts and to apply for other government benefits, besides Social Security. Thus, the fact that people have “known for more than a decade” about the problem Elon highlighted, hardly shows it is innocuous.

The Social Security Trustees Report

• The benefit payments have exceeded worker payroll contributions since 2010.
• The benefit payments have exceeded worker payroll contributions and the earnings on the so-called Trust Fund since 2021.
• The so-called Trust Fund will be depleted by 2033.
• Using a 75-year horizon, the present-discounted value of the unfunded liabilities—meaning how much more Social Security will owe it beneficiaries versus the new incoming payroll contributions from workers—is estimated at $22.6 trillion. 

In summary, even though Elon was a bit sensationalist in leading people to believe that there are currently millions of (clearly deceased) people still receiving Social Security benefit checks, the system is nonetheless rife with fraud and is woefully insolvent according to standard accounting principles. As the COBOL red herring demonstrated, the high-brow defenders of the system are bluffing.

Dr. Robert P. Murphy is the Chief Economist at infineo, bridging together Whole Life insurance policies and digital blockchain-based issuance.

Twitter: @infineogroup, @BobMurphyEcon

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