Nick Begich, the Alaska Republican challenging Rep. Mary Peltola (D) in a critical House race, compared Social Security to a “Ponzi scheme” in an appearance on a conservative talk radio show last year.

In a lengthy interview on “The Michael Dukes Show” in July 2023, Dukes, the host, prompted Begich to speak about what the candidate described as Peltola’s promise not to “touch” Social Security funding.

Begich ― the founder of a software company who lent his last campaign, in 2022, $650,000 — noted that the massive benefits program has a funding gap that will cause an automatic 20% benefit reduction in 2035, absent congressional action. Begich claimed Peltola’s supposed aversion to plugging that hole is “crazy.”

He then criticized the government for investing the trust fund it uses to pay out benefits in U.S. Treasury bonds, which provide a lower return on investment than other assets.

If a young person sought professional advice on how to invest money, “they would not tell you to invest in the lowest-yielding security available,” Begich said.

Social Security’s trust fund is invested in Treasury bonds because they’re widely seen as very low-risk. But Begich has a different, unsubstantiated theory: that Social Security’s Treasury investments are a way for the government to buy its own debt.

“Because we run these huge deficits, we need someone to buy all the debt that we’re producing,” he concluded. “And guess what? That’s you, through your Social Security. That trust fund has been invested in government debt from the get-go, and it’s a Ponzi scheme, and it’s used to prop the system up.”

Peltola is one of five House Democrats in seats that former President Donald Trump carried in 2020. Her reelection is an essential part of Democrats’ strategy for retaking the House, which would require a net gain of just four seats.

Begich got a major boost in August when Alaska Lt. Gov. Nancy Dahlstrom, a MAGA Republican who risked splitting the conservative vote, dropped out of the race.

Alaska has a ranked-choice voting system, in which candidates are progressively eliminated until someone wins a majority of votes. This system appears to have benefited Peltola in her first contest with Begich in 2022, when former Alaska Gov. Sarah Palin, a polarizing right-wing populist, was also on the congressional ballot and also split the conservative vote.

Social Security is a very popular program, and Begich’s comments could aid Peltola’s efforts to run as the more centrist guardian of Alaskans’ interests.

Peltola has not said Social Security should not be “touched” or changed. She is merely opposed to benefit cuts, and has instead come out in favor of “scrapping the cap” — that is, eliminating the ceiling on earnings subject to Social Security payroll taxes — as a means to shore up the program’s finances.

It’s a view shared by many Democrats, who prefer increasing revenue to benefit cuts. These cuts, they say, like raising the retirement age, are unfair to workers who are either in physically demanding jobs or don’t live as long as the wealthy.

Citing her co-sponsorship of a bill eliminating income taxes on Social Security benefits, Peltola said in a statement that her “commitment to protecting and improving the program is clear.”

“It is imperative that we continue to elect leaders who understand and respect the critical role of Social Security in all of our communities,” she said.

Other Democrats were more explicit in their criticism of Begich’s remarks.

“Calling Social Security a Ponzi scheme should be disqualifying for a candidate for Congress. Social Security has been paying benefits for 85 years — on time and the full amount,” said Jim Kessler, the executive vice president for policy at Third Way, a centrist Democratic think tank. “And for all the hand-wringing about Social Security finances, whenever the program was periodically nearing insolvency, Congress always acted to make sure no one would miss a payment.”

Asked about his use of the term “Ponzi scheme,” Begich declined to defend the comment. He instead chose to repeat another myth: that the federal government has been raiding Social Security’s trust funds to finance other programs. (In fact, those funds are statutorily obligated to be used for paying out Social Security.)

“Too many of Alaska’s seniors are living payment to payment and faced with crushing inflation as a direct result of long-running deficit spending in Congress financed by the Federal Reserve printing money,” Begich said in a statement.

“When the federal government treats social security like a slush fund — taking money from the Trust Fund to pay for their ever-expanding wishlist — they betray the trust of tens of millions of Americans who rely on the ability of the fund to sustain them in later years.”

The term “Ponzi scheme” — named for a mass swindle perpetrated by Charles Ponzi in the 1920s — refers to a fraudulent setup where an investment manager pays out returns to existing customers using investments from new ones, rather than based on the value accrued by the actual investment. Also known as a “pyramid scheme,” the system invariably collapses when the swindler runs out of new customers and can no longer provide returns as promised.

Most of the time, when Republicans have called the program a “Ponzi scheme” — as Sen. Ron Johnson (Wis.), former Trump budget director Mick Mulvaney, and former Texas Gov. Rick Perry all have — they are referring to the program’s funding structure, which relies, in part, on current workers’ tax payments to fund retirees’ and disabled workers’ benefits.

Social Security is not — and could not be — a pyramid scheme because it is a pension program, not a private investment fund. Pension programs are often financed through current workers’ earnings, which does not pose the same risks, provided there is proper planning to ensure the amount of cash in the pension fund is adequate to pay out benefits into the future.

Begich’s characterization of Social Security’s Treasury bond investments as a mechanism for one part of the federal government to lend money to another part is different than other Republicans’ use of “Ponzi scheme.” But it’s no less untrue.

First, Social Security only has trust funds invested in Treasury bonds because it ran surpluses from 1983 through 2020, following a combination of benefit cuts and tax increases designed to extend the program’s solvency ahead of Baby Boomers’ retirement. In other words, those surpluses were invested in Treasury bonds long before U.S. deficits and debt grew to the size they are now.

Since 2021, Social Security has been spending down the surpluses it invested in the trust funds — one for the retirement program and one for the disability insurance program — to pay for scheduled benefits. That’s by design – a feature of the program’s planning for years when payroll tax revenues would not be adequate to cover benefits.

The combined trust funds are slated to run out in 2035, at which point incoming revenue from payroll taxes and taxes on benefits will only be adequate to cover 83% of scheduled benefits (though it varies from year to year). That funding gap must indeed be addressed, but it does not speak to an inherent flaw in the program.

What’s more, there is no evidence to back up Begich’s original claim that the United States would have a hard time financing its government debt without the investment of taxpayers through Social Security. Although some countries are diversifying, the dollar remains the reserve currency of choice for foreign governments and other institutional investors. The government of Japan, a U.S. ally, increased its investment in Treasuries such that it surpassed China as the U.S.′ largest foreign creditor in 2019.

The interest rates on short-, medium- and long-term Treasury bonds are currently all under 5%. As Begich notes, that’s a lower rate of return than some riskier investments, but it’s also an indication that demand for Treasuries, which are backed by the credit of the U.S. government, remains high.

Advocates concerned about Social Security’s financial stability are not necessarily averse to conversations about diversifying how Social Security’s money is invested. But they note that income inequality is a far more important contributor to Social Security’s funding gap.

Social Security has a taxable maximum of $168,600, meaning Americans whose paychecks exceed $168,600 aren’t taxed for Social Security beyond that point. Due to massive gains in earnings for the small percentage of workers whose pay passes that cap, only about 83% of wages are now taxed for Social Security, compared with 90% of wages in 1983, according to Social Security’s chief actuary.

“If you can solve [the funding gap] just by getting billionaires to pay the same rate as all of the rest of us, the solution is obvious, which is why Republicans are desperate to talk about anything other than the facts,” said Alex Lawson, executive director of Social Security Works, a progressive group that supports expanding Social Security.

Begich’s campaign was not forthcoming with his preferred reforms for Social Security. As a former fellow at the anti-tax group Club for Growth, it’s unlikely he would support raising taxes to help fund the program, however.

“We must shore up this fund and ensure that it is stewarded in a way that improves returns and assures our nation keeps its promises,” Begich said in his statement to HuffPost.