No, Really… Social Security Is A Ponzi Scheme.

Posted by in Blog on August 30, 2011 8:49 am / 5 comments

Much is being made about a comment Rick Perry made regarding Social Security. He called it a Ponzi scheme. This, of course, gave the Left the vapors. That “dummy” Perry couldn’t possible know 1) what a Ponzi scheme is and 2) how Social Security wasn’t a Ponzi scheme. So, the bright lights of the Progressive movement set out to prove that Social Security wasn’t a Ponzi scheme.

By now you already know they’ve failed. Why? Because everyone who isn’t emotionally invested in sustaining the unsustainable cradle-to-grave nanny state knows that Social Security is a Ponzi scheme. The only major difference is that Social Security is a mandatory Ponzi scheme for anyone who works while private Ponzi schemes rely on gullible investors who voluntarily hand over their money. That’s about it, no matter how much Ezra Klein et. al. tell you otherwise.

Let’s look at the definition of a Ponzi scheme:

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

Okay. Now let’s change a few words in that definition.

Social Security is a government program that involves the payment of purported returns to existing beneficiaries (retirees) from funds contributed by taxpayers who pay Social Security payroll taxes.

Tada!

Of course, you can get into the minute details of where the money is actually coming from with Social Security and you can argue that the program is “transparent” therefore not “fraud”, but you’d be arguing against a simple fact: Structurally, Social Security is a Ponzi scheme.

It matters little that the government is running the Ponzi scheme. That just makes it legal. It also makes the situation worse. The government can do all sorts of things to keep the Ponzi scheme going and delay the inevitable collapse. This magnifies the size and scope of the inevitable collapse. The Maddoff’s of the world only hurt the people who voluntarily gave them money. The damage was contained. Social Security’s collapse will take the entire country down with it.

And let’s not forget how Medicare was tacked on to entitlement regime making the whole thing even bigger. Reform is needed now and the Left wants to play word games.

 
 

5 Comments

  1. misslexi says:
    August 30, 2011 at 12:16 pm

    Factual, succinct, AND sarcastic – WIN!

  2. Thoughts on Soulja Boy | politicsandmomanomics says:
    September 8, 2011 at 6:27 pm

    [...] last night, but you can read everything I have to say about that on my twitter feed (other than: the only way Soc. Sec. isn’t a Ponzi scheme is that it’s mandatory). Anyway, I was far more motivated to share my take on Soulja Boy [...]

  3. Larry Wright says:
    September 12, 2011 at 3:25 am

    Whether Social Security is a Ponzi Scheme or not is arguable for technical reasons, but everyone is ignoring the other thing Perry said which was that Social Security is a “Monstrous lie”.

    That is indisputable.

    The government, from day one of Social Security’s inception in 1936 has implied that Social Security is essentially a retirement plan that “pays you a monthly check from age 65 for the rest of your life.”

    “Hoo-ee, Myrtle! We’ll be on easy street livin’ the Life of Reilly!

    The government implied that you were putting away *your* money and you might even get back more than you paid in. (That’s called the hook in sting lingo.)

    Fact is, it’s not your money. *Your* money, collected from your paycheck last week (if you still have a job) will go out the door tomorrow to pay your neighbor’s grandpa’s Social Security check.

    The government said *your money* would earn a guaranteed 3% interest. That would make it one of the worst retirement plans ever conceived. Aside from that, it does *not* earn interest. Even worse, about a third of Americans die before they ever collect a penny. Where’s *your* money go then, to your heirs? Nope. The house, er, the government keeps it.

    The Federal government has proven beyond any doubt that it cannot manage money. So why do people continue to put their faith in a system that is rapidly going broke after millions of people have paid in over a Trillion dollars? Central government control over such a large fund is simply too tempting for human nature.

    Our Social Security system should provide individuals who are not tech savy with the means to save a portion of their working income and be able to retire in comfort when they have enough to retire on. (Remember, retirement is an income, not an age.)

    A privately owned investment account, much like an IRA seems to be the only sensible way to do it. With the same level of contribution, an investment in a S&P500 index mutual fund over a 40 year working life would make you a millionaire. Of course by then a million bucks will only buy a couple of bags of groceries and a tank of gas. But on the bright side, you’ll qualify for food stamps.

    The “Monstrous lie” must come to an end.

  4. Ves Jones says:
    September 15, 2011 at 9:16 am

    Doesn’t matter what you call Social Security. It is what it is and needs to be fixed. What Perry needs to do is explain HOW he would fix it, or does he plan to abolish it. In that case, what does he propose to replace it with? During the Monday night debate, he was all bluster and no substance, especially on this topic.

  5. Explaining Ponzi Schemes to Ezra Klein « agconservative says:
    September 30, 2011 at 2:57 am

    [...] From @Diggrbiii: http://www.therightsphere.com/2011/08/no-really-social-security-is-a-ponzi-scheme/ Share this:TwitterFacebookLike this:LikeBe the first to like this [...]

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