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The "Social Security is a Ponzi Scheme" Hoax

By       Message John Sanchez Jr.     Permalink
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On January 29, Sheila Samples submitted a quicklink to an article entitled, "Ayn Rand Railed Against Government Benefits, But Grabbed Social Security and Medicare When She Needed Them". In that article was a reference to the objectivist and libertarian right's view of Social Security as a Ponzi scheme, which prompted me to post the following comment:

The "Social Security is a Ponzi scheme" hoax.

Libertarians and objectivists have long considered the Social Security system to be a Ponzi scheme. Lately the Wall Street right has been selling that bill of goods to the tea partiers who lack the intellectual sophistication to see through that proselytization to its self serving motives.

Social Security is, in fact, an insurance program, funded by its beneficiaries, that has never failed to pay a benefit to a qualified recipient in its seventy-five years of existence. Would that the systemically corrupt medical insurance industry could make that claim.

If Americans were to have an option to participate or not, as they chose, you would find that the libertarians and objectivists would elect not to participate in the premium payment, but would demand participation in the distribution of benefits when the need arose as entitled Americans. This is because their philosophy is not based as much on self-reliance as self-interest.

Social Security is no more a Ponzi scheme than any other insurance plan. The real Ponzi scheme can be found on Wall Street, where financial markets are governed by insiders to make sure that the investments of Main Streeters are harvested by Wall Streeters in their regularly manipulated market fluctuations and collapses.

Wall Street has cast their green eyed gaze on the 2.6 trillion dollar Social Security trust funds, and is slavering over the prospect of making them the next hyperprofitable rug to be pulled out from under the American People. We must not allow their fictions and fables to serve as the philosophical basis to justify that larceny.

There was an old "Archie" comic book that had a gag in it where Jughead approached Archie and said, "Hey, Arch, I've got a great money making idea, can you loan me five bucks?" Archie said, "Sure, how much do you stand to make?" Jughead replied, "Oh, about five bucks." That stands to this day as the best description of Wall Street philosophy that I've ever seen.

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June Genis, a member and sometimes candidate of the Libertarian Party posted the following reply to my comment:

Reply: SSI is a Ponzi scheme

It is true that so far SSI has managed to pay out the benefits it promises but it has done so by the only method which allows a ponzi scheme to function: broadening the base. As the so called trust fund began to prove insufficient to the amount needed, more and more people were forced to join the system. This is exactly the way any chain letter is able to pay out bigger and bigger benefits to those at the top of the chain.

But we are now out of base. We are drawing from the the trust fund (really, a worthless pile of government IOUs) to make current payouts and the base of potential payers is shrinking while the aging population is growing. When SSI was started the average human lifespan was less than 65 years; now it is almost 80. It was designed to protect a few people in their last few years. Today we look at it as a reward which will fund a long and enjoyable retirement.

At least Madoff didn't use force, only fraud to run his ponzi scheme. The government users both.

My reply to June Genis:

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While toeing your party line in an almost admirably stubborn way, you are wrong in nearly every claim you make.

Regarding the "broadening the base" canard, it is true enough of a real Ponzi scheme, but an absolutely false claim regarding Social Security. In the 1980's, with the reform of Social Security under the Reagan administration, the payroll tax was nearly doubled to allow baby boomers to provide for a substantial part of their own retirement as they also supported their grandparents' and parents' retirements. That is when the trust fund surplus started to swell. It is an arrangement that was well publicized and entered into with open eyes by the People of the United States, unlike a Ponzi scheme where the base is broadened surreptitiously.

That is when your Saint Ronald Reagan got legislation passed to allow him to help himself to the surplus while replacing the shortage with special Treasury notes in an effort to disguise the extent of the massive deficits that the profligately spending old reprobate was running up. This set a precedent for every president following him, and that is why the trust funds have those 2.6 trillion dollars in Treasury notes. That is what you falsely term "a worthless pile of I.O.U.'s" despite the fact that they, like all other government debt instruments, are backed by the full faith and credit of the United States of America.

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I am a lifelong resident of the Chicago suburbs, with a several year hiatus to serve in the Navy when my Vietnam era draft notice turned up. I had been told that guys with last names like mine were among the preferred cannon fodder in the Army, so (more...)

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