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We have A Social Security system Bernie Madoff would love
Daily Caller ^ | 08/30/2011 | By C.J. Ciaramella

Posted on 08/30/2011 8:45:13 AM PDT by SeekAndFind

There goes Rick Perry again, saying things that make liberals’ heads explode.

Speaking to a crowd in Iowa this weekend, the Texas governor and GOP presidential hopeful doubled down on statements he made in his book, Fed Up!, that Social Security is essentially a pyramid scheme.

“It is a Ponzi scheme for these young people,” Perry said. “The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie. It is a monstrous lie on this generation, and we can’t do that to them.”

The left reacted, predictably, with shock and outrage. Liberal blog Firedoglake called Perry’s rhetoric “wingnutty talk” and “crazy shit.”

So just how apt is the comparison between a Ponzi scheme and the popular entitlement program?

A Ponzi scheme is a fraudulent investment plan that pays returns to investors with their own money, rather than with actual profits. It lures investors with higher-than-usual payouts — money coming, of course, from new investors.

Since Ponzi schemes depend on perpetual growth and pay out more than they takes in, they’re ultimately doomed to failure. The only question is how much money a scammer can pilfer before the pyramid crashes down or the law sniffs the scheme out.

Exhibiting its distinctively strained logic, Daily Kos writes, “The only way Social Security could ever become anything like a Ponzi scheme is if we suddenly ended Social Security.”

Think Progress adds that entitlement programs like Social Security aren’t Ponzi schemes because they reward “those who pay into them with guaranteed benefits.”

Whether or not a Ponzi scheme and Social Security share much in common rests on whether one accepts the fundamental premise that Social Security’s benefits are guaranteed.

Jeff Berkowitz, a communications consultant and former research director at the Republican National Committee, said statements like Perry’s — accurate though they may be — rub Americans the wrong way because they call that guarantee into question.

“The reason it’s so controversial is because it’s so exactly true,” Berkowitz said. “The more you expose the uncertainty, the more people become concerned about the safety of their investment.”

Daniel Indiviglio, a journalist at The Atlantic and previously Forbes, writes that Social Security depends on steady growth to keep paying retirees — a steady growth which is not occurring.

“[T]he same could be said of a Ponzi scheme. It’s only when investor growth slows that a problem arises. Of course, this is exactly the problem that Social Security faces: population growth slowed, and now it’s running out of money.”

Slower population growth, plus an influx of retirees from the baby boomer generation, means fewer workers are paying for each current retiree.

“When FDR implemented Social Security, there were 16 workers for every one retiree,” Berkowitz said. “Now there’s less than three for every retiree, and it’s moving downward.”

Over the next 75 years, Social Security is on pace to owe $7.9 trillion more in benefits than it will receive in tax revenues, according to a 2010 Heritage Foundation report.

Berkowitz said the system needs to be reformed, “otherwise whoever is not at or near retirement isn’t going to get the full benefits they were promised.”

One crucial feature of a Ponzi scheme, at least from law-enforcement’s point of view, is that its creator intends to defraud investors. That can’t be said of Social Security. Still, Berkowitz said that only means the federal entitlement system is “a warm and fuzzy Ponzi scheme.”

Think Progress wonders aloud “if Perry will be able to get away with maligning these popular programs on the campaign trail.”

If history is any indication, the answer is probably yes.

Laissez-faire economists and politicians have been calling Social Security a sham since it was a glimmer in FDR’s eye. In 1936 GOP presidential candidate Alf Landon called the Social Security Trust Fund “a cruel hoax.”

And how’s this for “wingnutty?” In a 1999 New York Times article calling for the privatization of Social Security, the Nobel laureate economist Milton Friedman wrote that the “guaranteed” benefits of the entitlement program exist “solely on the expectation that future Congresses will honor promises made by earlier Congresses — what supporters call ‘a compact between the generations’ and opponents call a Ponzi scheme.”

TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Government
KEYWORDS: bernardmadoff; entitlement; madoff; perry; ponzi; ponzischeme; socialsecurity

1 posted on 08/30/2011 8:45:17 AM PDT by SeekAndFind
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To: SeekAndFind

Sure ignorance, social security is what it is, and you can never fix it if you cannot have an adult discussion about the topic. How is running around and screaming ponzi scheme adding to the discussion of what to do. All you do with this idiocy is give the rats ammo to say, they are going to take your social security. Grow up Perry this is as stupid as your comment about F22:

2 posted on 08/30/2011 9:02:11 AM PDT by org.whodat (What does the Republican party stand for////??? absolutely nothing.)
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To: org.whodat

RE: All you do with this idiocy is give the rats ammo to say, they are going to take your social security.

The rats ARE going to say what they will say REGARDLESS of what you stand for ( even when what you stand for is right ). We don’t have to give them ammo. They HAVE their AMMO and will always use it.

Better to be honest about it.

3 posted on 08/30/2011 11:41:42 AM PDT by SeekAndFind (u)
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To: SeekAndFind

SS is not capitalism, nor socialism; it is not a Ponzi scheme; it does not depend on investment or savings; it does not promise impossible returns; it does not accrue debt. It is an uniquely American solution born out of our historic tradition of neighbors helping neighbors. It is in the tradition of American homesteading and barn-building and great projects that made us a great nation. It is that everyone with a paycheck puts money into a pot; and everyone post-working life gets to draw money out of that pot. That’s it. In the future, yes, the money that goes into the pot will be about 80% of what people would like to take out, but big deal. Either increase the inflow, or reduce the outflow, or split the difference. That’s all you need to do, and that’s almost certainly what we will end up doing after all the fuss dies down.

The nearest analogy I can come up with is that it is like a group of people at your work getting together to buy lotto tickets. The more people who join in, the greater the odds of wining, but the smaller the personal take. Only in SS, it is everyone (who has a job) in the country joining in, the odds of wining are 100%, and the take is very modest.

I think the biggest valid complaint is that it is mandatory - but it is not! (No, I don’t mean that you don’t have to have a job if you don’t want to.) It is a program created by politicians elected by us. If you really want to end SS, you can end it like we ended prohibition. We have the constitutionally-provided ability to end SS if enough voters agree. In the meantime, it is no different than all the other laws we abide by. Yes, it is a limit on our freedom that we can’t walk naked down the street, can’t swear whole-heartedly in a public place, and have to have a license to drive a car, have to contribute to SS, and a host of other agreed upon things that we are stuck with until we the voters change it.

But it’s not a bad deal!!! It is not as good as investment with perfect hindsight, but it turns out to have been a lot better than buying stock in Enron or Lehman brothers! And it solves the problem of devastating retirement poverty that existed in 1935 so completely that we’ve forgotten all about that problem. Now that’s a successful program - one whose success has been so complete that we forget the reason for it.

4 posted on 08/31/2011 11:23:16 AM PDT by TruConservative
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To: TruConservative

The IDEA of Social Security I will agree is not a bad one.

I will disagree however that it is NOT a ponzi scheme.

If we truly had a trust fund, we would not be raiding it to spend on current expenses and putting in IOU’s instead.

What we really need to do is put in a REAL Social Security trust fund which is LOCKED and UNTOUCHED by politicians and purely accounted to the INDIVIDUAL paying into it.

We could make it solvent for instance by adopting a Chilean style Social Security system ( something they adopted over 20 years ago when they realized that it was on its way towards insolvency). That system was helped designed for them by AMERICAN ECONOMISTS BTW and is working well.

Alternatively , we could make Social security similar to the Federal Thrift Fund used by Federal Employees to fund their retirement instead of this current system we have where current retirees are dependent on current workers ( the ratio of which is SHRINKING by the years ).

But we don’t have it and HEREIN LIES THE PROBLEM.

5 posted on 08/31/2011 4:17:41 PM PDT by SeekAndFind (u)
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