Social Security is a Ponzi Scheme

September/15/2011 16:20PM
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I knew a man who ran a Ponzi scheme. It was small compared to Bernie Madoff. Only about $15,000,000. He took in many of his life-long friends. I had the pleasure of hearing his pitch, and rejected the opportunity to invest with him. When questioned by a nervous investor, he would put them on his life insurance policy as a beneficiary. But, insurance companies do notify people when they are put on, but not when they are taken off. He would put them on and take them off and put his wife back on. He shot himself when it crumbled. It crumbled when the new money stopped coming in slower than interest to investors could be paid back.

Social Security is different than this man’s Ponzi scheme. You could choose not to give Dan money but your can’t choose not to give the government money.

It is a well-known fact that those who are paying in today have almost no chance of getting 100% of the money back when they retire. That’s a Ponzi scheme. There would be enough there to handle those of us drawing Social Security and those paying in for the future except for one little problem. The government, like Dan, tapped the funds. Putting IOU’s in the fund from the Treasury.

Now the Treasury is broke. To pay the IOU’s the Treasury would have to borrow money or print money. We have over-borrowed and show little chance of being able to borrow more to pay these IOU’s. If we printed that much money the dollar would drop like a rock.

Those who attack Rick Perry on his position on Social Security just choose to put the problem on the back burner. Changes have to be made in Social Security to keep the house of cards from falling. One change would be to start paying the Social Security Trust back for the money stolen by the government. Cut expenses elsewhere and start putting the stolen money back in the pot. Invest the money in the pot. And, lower the expectations of the younger payers. If they know they will get less they know they must save and invest more for their retirement.

Calling Social Security a Ponzi scheme does not mean eliminating Social Security. It means facing the truth. It means addressing a problem, not ignoring a future mess.

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