Posted on 09/12/2011 2:43:37 PM PDT by SeekAndFind
For too long, politicians have been afraid to speak honestly about entitlement reform — but the American people deserve the facts, Texas Gov. Rick Perry writes in an op-ed that appeared Monday in USA Today. Perry provides the cold, hard truth:
Social Security’s unfunded liability is calculated in the trillions of dollars. Last year, annual Social Security outlays exceeded annual revenues for the first time since 1983. The Congressional Budget Office projects that outlays will be roughly 5% greater than revenues over the next five years, worsening as more and more Baby Boomers retire.
By 2037, retirees will only get roughly 76 cents back for every dollar that is put into Social Security unless reforms are implemented. Imagine how long a traditional retirement or investment plan could survive if it projected investors would lose 24% of their money?
I am going to be honest with the American people. Our elected leaders must have the strength to speak frankly about entitlement reform if we are to right our nation’s financial course and get the USA working again.
The piece appeared opposite an editorial from the USA Today board. The view of the paper? “Social Security far from a Ponzi scheme.” The board writes:
Yes, Social Security has major funding problems. It pays out more in benefits than it takes in, and the gap will grow steadily worse as Baby Boomers retire. To that extent, Perry has a point. Congress, under both Republican and Democratic control, has been negligent in making necessary adjustments to bolster Social Security’s balance sheet for the long term. But the program’s problems are largely the result of people living longer, and therefore collecting more in benefits, rather than some inherent structural shortcoming or constitutional failing.
Social Security is most certainly not a Ponzi scheme, which is an undertaking designed to swindle people out of their money by using incoming revenue to produce bogus investment returns to attract more money (see Ponzi, Charles and Madoff, Bernard).
Ponzi schemes have two salient features. First, they are criminal enterprises, which Social Security is not. Second, they work only until people get wind of what is going on, at which point they inevitably collapse. Social Security’s finances are plainly visible for all to see. The imbalances emerging now are a surprise to no one, and modest adjustments in tax rates, benefit formulas and the retirement age can ensure the program’s viability for generations to come.
Perry is playing to fears among younger voters that Social Security won’t be around for them; polls have shown that more than 60% over those under 30 don’t expect to collect. But even if nothing is done, the program could still pay about three-quarters of promised benefits at mid-century.
The term “Ponzi scheme” attracts such attention because it does typically refer to a criminal enterprise. In that respect, the USA Today editorial board is right. Social Security is not illegal. But the board’s second point — that SS is not a Ponzi scheme because it hasn’t collapsed, because investors continue to invest — makes little to no sense. Social Security doesn’t have to attract investors with the soundness of its returns; the government mandates that every single worker invest in the program. If SS did have to attract investors, the program very well would collapse in true Ponzi-scheme fashion as soon as current workers found out they’d be lucky to receive as much in benefits as they invested in payroll taxes.
When Perry calls Social Security a Ponzi scheme, he’s referring to the structure of the program, which relies on new investors to ensure old investors receive a handsome return on their investment. Michael Tanner, senior fellow at the Cato Institute, explains in greater detail:
Social Security … forces people to invest in it through a mandatory payroll tax. A small portion of that money is used to buy special-issue Treasury bonds that the government will eventually have to repay, but the vast majority of the money you pay in Social Security taxes is not invested in anything. Instead, the money you pay into the system is used to pay benefits to those “early investors” who are retired today. When you retire, you will have to rely on the next generation of workers behind you to pay the taxes that will finance your benefits.
As with Ponzi’s scheme, this turns out to be a very good deal for those who got in early. The very first Social Security recipient, Ida Mae Fuller of Vermont, paid just $44 in Social Security taxes, but the long-lived Mrs. Fuller collected $20,993 in benefits. Such high returns were possible because there were many workers paying into the system and only a few retirees taking benefits out of it. In 1950, for instance, there were 16 workers supporting every retiree. Today, there are just over three. By around 2030, we will be down to just two.
As with Ponzi’s scheme, when the number of new contributors dries up, it will become impossible to continue to pay the promised benefits. Those early windfall returns are long gone. When today’s young workers retire, they will receive returns far below what private investments could provide. Many will be lucky to break even.
Eventually the pyramid crumbles.
So, sure, Social Security is not a Ponzi scheme insofar as the government is able to force investors to enroll, as well as to pay more when slowed population growth results in fewer investors — but, absent that, it is. Milton Friedman put it this way in a 1999 New York Times article: 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.” Charles Blahous, Ph.D., a member of the Board of Trustees of the Social Security Trust Fund, has also admitted the program is a Ponzi scheme:
As I’ve written before, Perry’s comments aren’t problematic because they’re false: They’re problematic because Social Security is a popular program, because “the people want their treats” and because other politicians are willing to continue to pander. But Perry’s rhetoric is also enormously helpful because it’s generating this conversation, just as he hoped.
P.S. TheStreet.com is presently polling readers as to whether they think SS is a Ponzi scheme, in case you want to participate.
Victory for Perry.
He makes an ‘outlandish’ point. He get jumped. He explains himself.
The lib media is left to sputter “he has a point, but ...”
USA Today: “Social Security is most certainly not a Ponzi scheme, which is an undertaking designed to swindle people out of their money”
So basically a system that Perry explains will only pay back 76% of what the next generation will pay in is NOT intended to swindle the next generation. Phew, we can all be so relieved that this generational swindling is UNINTENTIONAL.
“USA Today: “Social Security is most certainly not a Ponzi scheme, which is an undertaking designed to swindle people out of their money”
I completely agree here. Ponzi schemes are driven by voluntary greed, not the threat of financial ruin and jail time.
“Ponzi schemes have two salient features. First, they are criminal enterprises, which Social Security is not. Second, they work only until people get wind of what is going on, at which point they inevitably collapse. Social Security’s finances are plainly visible for all to see.”
First, “Ponzi schemes have two salient features. First, they are criminal enterprises, which Social Security is not.”
Horse manure! It is the worst kind of criminal enterprise - one that people are forced at the point of a gun (jail) to participate in.
Second:”Social Security’s finances are plainly visible for all to see.”
Double horse manure! People, like my Dad, always believed that they “paid into the system.” There were, and probably still are, Social Security documents that tell you your benefits are based on how many years you paid into the system. I HAVE NEVER SEEN A DOCUMENT FROM THEM THAT TELLS THE TRUTH. You don’t pay into anything. You don’t have “your money.” The money you pay in through one door goes straight out the other door.
And I don’t know what it is, but it is damm misleading and dishonest, and always has been!
That is a crock. I told our daughter to save and put all extra money she can afford into a personal Roth IRA. That is what I've done for many years.
HA! Critical Thinking 101 ------ F-
I blew three logic fuses just reading that pap.
All the people of my generation, Baby Boomers, who have paid SS TAXES since their first job have ALWAYS said, “It will be nice IF there is anything in SS by the time I retire, but I’m not counting on it.”
About time he decided to be honest. Badumpba(rim shot)
bkmk
“Victory for Perry.
He makes an ‘outlandish’ point. He get jumped. He explains himself.
The lib media is left to sputter “he has a point, but ...”
USA Today: “Social Security is most certainly not a Ponzi scheme, which is an undertaking designed to swindle people out of their money”
So basically a system that Perry explains will only pay back 76% of what the next generation will pay in is NOT intended to swindle the next generation. Phew, we can all be so relieved that this generational swindling is UNINTENTIONAL.”
Its laughable, just because the criminal Government in Washington D.C. is swindling us, somehow we are not being swindled by the unauthorized Socialist security program.
There are times when I think a foreign enemy would be doing us much more good then harm by nuking Washington D.C.
Here we have a lawless Federal Government stealing from everyone.
“A real ponzi scheme is not backed by the good faith and credit of the united states tax payer. Social security is what it is.”
In my judgement a Ponzi Scheme is a specific kind of economic model in which new inverters are made to support the pay out of old investors.
In the case of Social(socialist) Security it’s an unauthorized form of Generational thief.
Its bound to fail even as it is presently setup because one of the main reasons people uses to have kids was to provide for their future financal security. With that reason taken away, we are now not only precising over a dying western civilization. We are presiding over a collapsing Ponzi Scheme.
In any even whether you beleive congress can be trusted to honestly manage this “program” is somewhat academic because we have spend the last 70 years with the most “devoted” congresses we can muster and still they failed.
It is A lie! it structurally cannot work! It has been undermining our ENTIRE CIVILIZATION!
This FDR scam cannot survive unless it is is allowed to become an ever more abusive scam. Yes it is a tax scam, even FDR knew that it was really about bring in more money to his coffers in a political palatable way.
“All the people of my generation, Baby Boomers, who have paid SS TAXES since their first job have ALWAYS said, “It will be nice IF there is anything in SS by the time I retire, but I’m not counting on it.””
It would serve no good to anyone to give them nothing in exchange for believing promise they never really had any choice in the first place.
Again it was the so called “Greatest generation” imposed this lawless mandate upon us all, and not even all of them!
That generation got their pay off at the Baby-boomers expense. The question is when does the crime end? When do we stop stealing from each other and start caring for our family again?
When do Grandparents start helping to raise their grand children again as it has been tradition millennia of human history prior to FDR’s “new Deal”?
When do we return to a Civilization that has proven itself to work and sustain itself?
The West is dying! The west is dying in no small part because of what FDR did not only here in America but by treaty(namely UN mandates) across much of the rest of the western world.
You know everyone is “required” to have a socialist security system under the UN treaties? This was something intentionally pushed thou by Roosevelt.
No kidding, show me any politician that has not supported spending the money on things not intended. Is the fat ass in California still collecting money for his fake baby syndrome. Not to mention the trillions spent on illegals. Talking about it is not fixing it, first you need to stop the bleeding.
I don’t see how we can fix this sort of problem in Washington. We are too Divided, and that fact is not likely to ever change. The problem needs to be taken out of Washington and handed down to our States.
Some states will be just as divided as Washington, but some will solve the problem one way or the other. So eventually all the others(including the divided states) will have solutions known to work in other states upon which to make eventual resolution of the problem for them politically possible.
1. Honesty, especially in pointing out the serious nature of the fiscal problems we face. We are tired of the lies and untruths.
2. Standing up to the media. The election of Bam has shown how they are not to be trusted, let them have it right back in a “friendly and funny” way and the electorate will love you.
Perry may get this. Just like the Reagan “Morning in America” slogan, there is one for 2011 that people will buy into, Perry is halfway there.
Now, is he a big-government Republican? That just might be so.
schu
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