In a recent episode of his podcast, Scott Galloway — a business professor at New York University known for having controversial opinions — shared his thoughts on Social Security and its reformation, and what he had to say is somewhat shocking. It appears that if things played out according to Galloway’s thoughts, as much as 30% of retirees who no longer be eligible to receive Social Security benefits.
Of course, Galloway does not mean to indiscriminately reduce the number of beneficiaries by 30%, however, he does feel that the money is not being distributed evenly and as such, high-income retirees should not be able to qualify Social Security benefits.
Is Galloway’s critic of Social Security eligibility fair?
In a 2024 episode of his podcast, Galloway made a bold yet seemingly true claim that he feels “like almost every economic policy is nothing but a thinly veiled transfer of wealth from the young to the old.” He does make a fair enough point with this, particularly when considering the huge wealth disparities in the country, along with the fact that benefit money does indeed come from current workers.
By Galloway’s count, wealthier seniors make up between 10% and 30% of the total of Social Security beneficiaries. Galloway further asserted that, “Every year we effect a $1.2 trillion transfer from young people who are not doing as well as they have in past generations to the wealthiest generation in history.”
Whilst in theory, Galloway’s proposition does indeed seem logically sound, the actual implementation of it could result in undermining the whole system and the political logic behind it and as a result, administrative costs would be increased and perverse incentives could be created.
Additionally, it is also true that this idea of Galloway’s is by no means novel or unique, in fact, this notion is referred to as “means testing” because the government looks at the means of each household when determining benefits. Since the introduction of Social Security in 1935, means testing has been proposed in a variety of forms over the years, yet no large-scale implementation of it has ever taken effect.
The future of Social Security
Scott Galloway’s positioning has sparked great debate regarding the future and longevity of the Social Security system as a whole. This is particularly due to the fact that the Social Security Administration has been thrown into a state of chaos over the past few months. Not to mention the issue of declining funding wherein, if speculations prove to be true, the SSA will have to significantly reduce benefit amounts by 2033 if no legislative action is taken to fix the federal program.
Conversely, if means testing does come into full effect, the repercussions could turn out to be less than desirable, specifically with regards to the following factors:
- Social Security would no longer be universal – The program is incredibly popular with 79% viewing it as favorable due to its ability to cover everyone, according to a recent poll.
- Increased expenses to run the program – due to the ease through which a recipient’s benefit amount is calculated, Social Security’s administrative costs have been sitting below the 1% threshold since 1989.
- A creation of perverse incentives – as a result of the small amount of means testing that is currently in place, evidence would suggest that sometimes recipients will intentionally scale back on working so as to ensure they always remain below the thresholds.
From an economic perspective, payroll taxes or funding retirement benefits from the current workforce is not exactly the most ideal setup, and it is for this reason that Galloway’s standpoint is not entirely out of bounds. Despite this, its implementation would cause severe ripple effects to the system that could end up being to the detriment of the very people Galloway wants to help .