Stanley Kurtz has a detailed post on the distinguished history of comparisons between Social Security and a Ponzi scheme, dating back to an influential 1967 article by liberal Nobel Prize winning economist Paul Samuelson, and running through multiple other liberal commentators as well as scores of establishment-conservative think tank papers. Via the comments here, Alex Tabarrok at Marginal Revolution adds more, including Paul Krugman.
Over at RedState, Leon Wolf looks at Mitt Romney’s reliance on Democratic scare tactics, which is, of course, par for the course with Romney.
12 thoughts on “Today in Social Security Debates”
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Crank I noticed that your boy Pawlenty joined Romney’s team today. Still think he’s the bedrock of principle and conservative virtue?
I never said Pawlenty was Mr. Conservative (I believe the term was “Soggy Wonder Bread”). I just thought he seemed solid enough and was really the only acceptable candidate in the field. I admit I’m disappointed in him, but it won’t be the first or last time I’ve been disappointed in an endorsement.
I posted one of those Ponzi Scheme links in the comments to your post for a few days ago. I love seeing the mental gears move as people respond to charges that Social Security is a Ponzi Scheme by screeching that you’re insane and paranoid and some Jihadist Tea Partier with a gun to the head of America. But once you start asking them to explain what the actual tangible difference is between Social Security and a Ponzi Scheme…. they suddenly get a bit quiet. They really are incredibly similar.
The fact that Social Security has lasted this long has to do with the power of the government to COMPEL people to participate, not anything else. If we were free to exempt ourselves from Social Security, most of us would have by now, and people who had invested their life savings in Social Security would be destroyed, just like Madoff’s investors.
…I should add that I am much happier with Bobby Jindal, who is in every way the real deal.
Samuelson’s point really is the key: the Ponzi scheme financing structure of the program was entirely sustainable under the conditions of the 1930s-1960s. It ceased to be once population growth dropped off, for the same reasons why defined-benefit pension systems have ceased to be sustainable throughout the developed world, in both the public and private sectors, in recent decades.
“Samuelson’s point really is the key: the Ponzi scheme financing structure of the program was entirely sustainable under the conditions of the 1930s-1960s. It ceased to be once population growth dropped off, for the same reasons why defined-benefit pension systems have ceased to be sustainable throughout the developed world, in both the public and private sectors, in recent decades.”
Agreed. A problem that was also exacerbated by raiding of the SS funds when the program was in surplus.
The one legitimate objection to the “Ponzi scheme” label is the insinuation that SS is a criminal enterprise, especially in light of Madoff. SS is obviously nothing of that sort, and can just as easily be described alternatively as a pay-as-you-go system.
But when you have the likes of Bachmann stating in 2010 that SS is a “tremendous fraud” and that anyone running a business that way would be “thrown in jail,” the political message of “Ponzi scheme” is a bit stronger than a simple description of the program.
The point that a Ponzi Scheme implies “illegal” is meaningless since the government can legalize whatever they want. If the government decided tomorrow to raise revenue by selling heroine to addicts, they technically wouldn’t be “illegal drug dealers” since they had made their activity “legal”. But they’d be doing the same thing that illegal drug dealers do without having to worry about going to jail.
The basic structure of Social Security is the same basic structure as a Ponzi Scheme, and it’s no longer sustainable. Keeping things the same means that we’ll wake up 8 years from now and the government will have to tell 65 year olds that have been waiting their whole life that actually they’re going to have their future payments reduced by 20%. Reform now is the only way to save the system.
Jeff W,
Good point. See W’s “We don’t torture” schtick for proof that legalities/ illegalities can be manipulated.
But let’s get to the good stuff. Why do you think 8 years from now the government will have to tell 65 year olds that have been waiting their whole life that actually they’re going to have their future payments reduced by 20%? Keeping the fire-bugs away from your home will help it be there for you when you need it.
You know, there IS a $2.3 Trillion surplus in the SS Trust fund. To those who think US Government Notes are worthless (I’ve heard that absurdity before), allow me to offer 2 cents on the dollar for anyone looking to unload theirs. Still waiting for the first to take me up on that offer of 2 cents for something that is worthless.
There is no “trust fund”. The government can decide tomorrow to stop paying out Social Security ever again if they want to – the Supreme Court has already ruled in their favor on this. That was why when we had the debt ceiling debate a couple months ago, Obama threatened to stop SS checks if a debt deal wasn’t made.
Is the government going to stop paying SS checks tomorrow? Probably not. It would be a political nightmare. But there is no money sitting somewhere with Social Security’s name on it. Just government’s promise to probably pay out at some point in the future, which we know is no guarantee. If the government doesn’t reform SS then they will have to reduce benefits and/or raise the retirement age. Has to be one or the other. There simply isn’t enough money otherwise.
Yes!! Let’s bring back Bobby the Intern.
“The point that a Ponzi Scheme implies “illegal” is meaningless . . .”
No, it isn’t meaningless. Implying that SS is anywhere near as bad as a Madoff-style Ponzi scheme is pure hyperbole.
The fact that SS needs to be reformed doesn’t change that.
Jeff W.,
The government could stop funding the Defense Department tomorrow as well. So unless we reform the Defense Department, we might not have defense when we need it.
Here’s the trick, though. Don’t let the government walkout on their promise. How? We start by keeping those who want to kill SS away from the levers of power.
Secondly, since the SS Trust Fund was raided for general spending, and since it was done so to make it look like we had a balanced budget, and since tax breaks were given to the richest of the rich as a surplus, we get the money from the richest of the rich who deserved no such tax break.
Finally, we lift the cap on FiCA taxable income (with the surplus we gain, we may even be able to drop the FiCA tax rate by a half percentage point).
Now that non-problem has been solved, let’s talk about lowering MediCare/ MedicAid costs through single-payer or public option healthcare.
I trust this debate ends the charade that the Tea Party is separate, as opposed to simply a Growing Rightwingnut Republican Referendum (I happily think of them as GRRR)