Capitalism Builds Wealth

Capitalism gives people an opportunity to turn their work into something they own: a business, a home, an investment account, or savings they can leave to their children. That ownership matters. A government promise to send you a monthly check is different from an asset that belongs to you. There is no better example of why socialism doesn’t work in a free society than America’s first foray into socialism—Social Security.

Social Security’s approaching funding crisis makes that distinction especially clear. Millions of Americans have paid into the system throughout their working lives. They deserve an honest explanation of how it works, what it can afford, and what opportunities they have surrendered by putting their retirement largely in the hands of politicians.

A promise is not a personal account

Your Social Security earnings record is not an investment account. It does not contain a balance of stocks and bonds that you can withdraw, manage, or leave to your heirs. Payroll taxes support pooled trust funds that pay benefits under rules established by Congress.

The trust funds do hold investments. Their assets are special-issue U.S. Treasury securities that earn interest. The problem is not that no money is invested anywhere; it is that you do not own an individual share of those investments. Social Security’s explanation of the trust funds describes how taxes, securities, and benefit payments flow through the system.

Social Security transfers wealth between workers and beneficiaries, and its benefit formula also redistributes income across earnings levels. It is social insurance within a largely capitalist economy, rather than collective ownership of the entire economy. My objection is to its reliance on compulsory redistribution and political promises instead of personal ownership. A retiree receives a benefit but does not acquire a retirement asset that can grow into family wealth.

The funding shortfall is approaching

The 2026 Trustees’ report summary projects that the Old-Age and Survivors Insurance (OASI) trust fund will exhaust its reserves in the fourth quarter of 2032. Continuing income would then cover 78% of scheduled benefits, a shortfall equivalent to 22%, unless the law changes. This is the retirement and survivor fund; the Disability Insurance (DI) fund has a brighter outlook unless Congress merges the two funds to gain more time before OASI fund insolvency—about 2 more years before the combined fund becomes insolvent.

Reserve depletion would not mean all checks stop. It would mean the program cannot finance its full promises under current law. With the population aging, fewer workers relative to beneficiaries must support those payments. The same report shows that Social Security’s combined annual costs have exceeded total income, including interest, since 2021.

For people who built their retirement plans upon politicians’ promises, knowing that they will still receive a benefit offers little comfort. A substantial reduction would still mean difficult decisions about housing, food, transportation, and other expenses. Congress should have addressed the shortfall decades ago. Congress has known that the OASI trust fund would become insolvent in the 2030s since 1993. Current retirees could have had decades to adjust their retirement planning.

Previous repairs shifted costs onto workers and retirees

Social Security’s problems have been with us for decades longer. The Social Security Amendments of 1977 reduced the growth rate of benefits, gradually increased the payroll tax rates to 6.2%, made more of workers’ paychecks subject to payroll taxes, discouraged workers from early retirement, and reduced benefits for spouses and survivors who had separate pensions.

Just six years later, the 1983 Social Security amendments enrolled millions of new workers in Social Security, accelerated scheduled tax increases to 6.2% for both employees and employers, delayed a cost-of-living adjustment, gradually raised the full retirement age from 65 to 67, and made up to 50% of Social Security benefits taxable income. In 1993, Congress increased the maximum taxable portion to 85%. Social Security’s history of benefit taxation explains both changes.

Each of these congressional changes to Social Security either reduced benefits for retirees or increased payroll taxes for workers in an effort to keep Social Security solvent for 75 more years, but the long-term funding problem remains. Higher taxes, later full retirement, and taxation of benefits have not produced a permanent solution. Every delay makes the eventual choices harder for the people who depend on the program.

Medicare faces a similar warning

Social Security isn’t the only socialist program that is in trouble. The 2026 Medicare Trustees’ report projects that the Hospital Insurance trust fund, which supports Medicare Part A coverage for inpatient hospital care, skilled nursing care and hospice care, will exhaust its reserves in 2033. Subsequent income would cover approximately 89% of scheduled Part A expenditures. Congress has yet to act on a remedy for Medicare because the most direct proposals are also the most politically unpopular—raising the payroll tax, reducing benefits or a combination of both.

Despite Congress’ failure to remedy the current Medicare program, prominent Democrat members of Congress are proposing “Medicare for All”—which is $40 trillion worth of government-funded universal healthcare. Before politicians propose that Medicare should be available for everyone, they should explain how they intend to finance the obligations already on the books. Expanding a program does not repair the funding model that is failing to support it.

What ownership could have meant for me

I asked a different question: what if the Social Security taxes paid by my employers and me since I began working in 1981 had instead gone into a personal, tax-deferred account invested in an S&P 500 index fund?

In my retrospective calculation, that account would have reached approximately $4.9 million by age 65. If I hadn’t withdrawn funds from the account for retirement, the account would have had $37.5 million by my 95th birthday. Under the withdrawal assumptions I used, it could have provided income equal to approximately 7 times my Social Security benefit through age 95. Upon my earlier demise, any remaining account balance could have gone to my beneficiaries.

That estimate reflects my own earnings history and the investment assumptions in my calculation. It is not a promise that every worker would have achieved the same result. What it clearly illustrates is the phenomenal advantage of a capitalist approach based on personal ownership over a socialist approach based on the redistribution of wealth. With an investment account, the worker has an asset. Its growth can finance retirement, help a family through an emergency, or leave something for the next generation. Social Security may provide eligible family members with survivor benefits, but it does not leave behind a personal account balance for heirs.

Give workers a greater stake in prosperity

Capitalism allows ordinary people to participate in the growth of productive businesses. You do not have to own a factory to own a share of the economy. Saving and investing can turn part of a paycheck into capital that earns income and grows over time.

That opportunity should be available to more workers. Government should protect property rights, enforce honest contracts, and make it easier for people to work, save, start businesses, and invest. It should also honor existing commitments rather than using promises of future benefits as a substitute for sound financing.

The case for capitalism is the case for giving people a greater stake in what they build. A policy that expands ownership can help families become more independent and pass wealth to their children. A policy built around redistribution leaves more of their future dependent on the next political decision.