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  • Is Social Security a Ponzi Scheme?

    While some of the press stories might make one think that Bernie Madoff ran Social Security, the reality is quite different.

    Although Social Security does bear a resemblance to a Ponzi scheme in that it has promised much more in benefits to younger Americans than it can possibly pay, these shortcomings can be fairly easily fixed if political leaders are willing to face up to the challenge. Ponzi schemes cannot be fixed, since they are criminal enterprises designed to fleece participants.

    However, rhetorical flourishes aside, the recent Social Security debate among Republican presidential candidates is a valuable reminder that the program faces serious problems and needs to be fixed. Since 2010, Social Security has been spending more in benefits than it receives from its payroll taxes and other revenue sources. The non-partisan Social Security Administration actuaries say that these deficits will never end. And in less than 25 years, there will be a 25 percent across-the-board benefit cut unless the program is fixed.

    Americans know these facts. A new CNN poll shows that fully 55 percent of Americans recognize that “Social Security’s problems are serious and can be fixed only with major changes to the current system.” However, these poll numbers have been the same since at least 1998, showing that unless there is real political leadership, nothing will happen.

    In 2005, President George W. Bush tried to fix Social Security, and in the late 1990s, President Bill Clinton talked about Social Security fixes, but both efforts came to nothing.

    We know what to do. Social Security can be fixed by increasing the retirement age to reflect increases in longevity that have already taken place, changing the benefit formula, and a few other simple things. A combination would enable younger Americans to enjoy the same type of retirement security that their parents and grandparents received. A more complete reform is included in The Heritage Foundation’s “Saving the American Dream” plan, which would guarantee that no American would ever retire into poverty.

    The important thing about this year’s Social Security debate is not whether it is a Ponzi scheme or not. The important thing is that after three years of mushy presidential rhetoric, potential political leaders are talking openly about Social Security’s problems and what is required to fix them. But that is only the first step. Talk must lead to action.

    Posted in Featured [slideshow_deploy]

    24 Responses to Is Social Security a Ponzi Scheme?

    1. West Texan says:

      David said " … is a valuable reminder that the program [SS] faces serious problems and needs to be fixed."

      I respectfully disagree. National SS and its connected programs need to be eliminated. This doesn't mean pulling the rug from under current and retirement age recipients. But the responsibility of public welfare rests with the individual states. If they choose to pool their numbers for maximum benefit, let them do so through compacts. But domestic programs like SS are not federal business. Please don't fall prey to big government social progressive propaganda.

    2. Mike Greggs says:

      I'm afraid that as long as these elected public servants are making a going concern and career of their service, that nothing will ever be done unless it benefits them, the one's supposedly sent to serve us.

    3. Donna says:

      Social Security works exactly like a Ponzi scheme: it takes money from current "contributors" and gives it to earlier "contributors". It was designed by FDR to take older Americans out of the workforce to make the unemployment figures (and FDR) look better. The first recipient, Ida May Fuller, paid a total of $22.54 into Social Security, and got paid $22,888.92. That is totally outrageous!
      At best, Social Security is welfare. At worst, it is the biggest financial fraud committed in the world and no one is going to jail for it. At least in the case with Bernie Madoff, his investors had a choice whether to participate — and the people he fleeced got some justice.

      • Citizen says:

        And FDR knew it was a Ponzi scheme. His Labor Secretary, leftist Frances Perkins who was pushing the program, later recalled FDR's comment "Ah, but this is the same old dole under another name. It is almost dishonest to build up an accumulated deficit for the Congress of the US to meet in 1980. We can't do that. We can't see the US short in 1980 any more than in 1935." Treasury Secretary Henry Morganthau also recognized it as such and disapproved of any Treasury financing for it then or in the future. See Amity Schlae's book The Forgotten Man-A new history of the great depression for more info.

      • just wondering says:

        do you have statistics on how many contributors die before or shortly after they reach retirement age and they nor their family members never receive $1 ?? The Ida May Fuller example is "1 rotten apple means all apples are rotten" example

    4. Bob Garrett says:

      You need to take into account the nearly 50,000,000
      Americans that murdered in their mothers wombs.

    5. Lloyd Scallan says:

      If Bernie Madoff would have "easily fixed" his Ponzi scheme, then perhaps it would not have been a Ponzi Scheme? So, if politicians "easily fixed" Social Securty, would it no longer be a Ponzi scheme? What is it now, before it's "fixed"? A bird by any other name is still a bird, isn't it?

    6. jweb says:

      Rick Perry is a ponzi scheme.

      Liberty 2012…that means Ron Paul.

      • jweb says:

        Still haven't done personal research on Perry everyone?…I can wait…but remember time is not your friend anymore.

    7. Wise Old Owl says:

      Why does no one say that another fix is to actually invest the money, instead of the government spending it? You can not honestly say it has been invested. You have your money taken by the government, the government writes an IOU to itself and spends your money. In the early days up until just a few years ago, there were enough workers that the fund ran a surplus after paying recipients. Had that money really been invested, it would probably be solvent. And to say SS works like insurance is wrong too. If an insurance company offered such an annuity, the officers would be thrown in jail.

    8. Wise Old Owl says:

      Why is it the SS recipients that have to suffer? You have government pensions where the employee gets 60% to 80% of pay at age 55 to 60. There is no way you can fund such a retirement unless the contributions are a major percentage of the employee's salary. If a government worker can get 60% of pay after 30 years of work while a SS recipient only gets 20% of pay after 45 years of work, the only way the government recipient can get that kind of pay is from taxes on the SS worker. If a SS recipient should expect to work longer for less in benefits after paying in enough to fully fund his benefits by age 67, than it is also time to make the government workers work till 67 and cut their pensions dramatically. Some jobs can't have older workers – a fireman for example. But the worker could do something else – better to have an overpaid receptionist than to have a retired worker at age 50 with a properly paid receptionist – you save the lower of the 2 salaries. Make one government worker work another 20 years to age 67 and cut the pension down to 30% of pay (still greater than SS), and you will save more money than making a 100 SS workers work an extra 2 years.

      • Chris says:

        You are in fact a wise old owl. I have never thought or heard of this idea before. I hope you have written your politial leaders from your state and voiced this idea. I am going to write mine and inform them of the idea. I hope you don't mind.

        • jweb says:

          and the labor unions? Who is our government working for? Wise old owl clearly shows by simple reasoning, that it is not us. Labor union take the collectivist approach, unlike the Bill of Right, which takes are individual approach. Life in non-linear; therefore, not everything is is right/left or us/them. There is strength in Union as John Jay wonderfully pointed out in the Federalist Papers. But Union needs to counter-balanced with individaul rights and responsibilities, thus the Bill of Rights. Why is it considered radical and nutty to be a strict Constitutionalist? George Washingto staed that to error once or twice is human, but error, when the ability not to is present, causes one to question the hands rather than the heart. Washington also stated that people will see it when they feel it. Believe you me, America will wake up to the full value of Liberty. Perhaps when they wake poor and homeless on the continent that their forefathers conquered. And who was Jefferson referencing…the banks. Who are our political "leaders" working for? Who ever pays the most.

    9. Mike, Wichita Falls says:

      Republicans, formerly W and recently Ryan and Perry, seriously talking about improving SS have always been clear that current recipients and those 55 years and older will be immune to any changes in the system, but Democrats immediately demagogue them. Who is it again that puts politics and party ahead of country? Republican leaders seek to preserve and build; Democrat leaders seek to destroy.

    10. Slick says:

      "Although Social Security does bear a resemblance to a Ponzi scheme in that it has promised much more in benefits to younger Americans than it can possibly pay, these shortcomings can be fairly easily fixed if political leaders are willing to face up to the challenge. Ponzi schemes cannot be fixed, since they are criminal enterprises designed to fleece participants."

      SOOOOOO, if no changes are made to take care of the shortcomings, then Social Security IS a Ponzi Scheme!!!! And with the progressives trying to stop ANY changes by scaring the old people to death, there won't be any changes soon. So, a Ponzi Scheme it is . . . . so WHO is going to jail?????

    11. Tex Heath says:

      I am glad someone is finally paying attention. SS IS a Ponzi scheme, initiated to foster socialism during a very vunerable time in our history(the great depression). But, we are stuck with it so lets try to make it viable. First, take social security(oxymoron) OFF BUDGET where it belongs. Next, set up provision to start paying back what was stolen from it by the incumbent driven thieves who have raided it. Time has changed the 47 to 1 ratio(contributors to reciepients) down to 2 1/2. Then allow it to invest and manage itself in order to survive past what is evidently a quick demise.

    12. Blueneck says:

      So basically anyone under 55 gets hosed. even though like me we have been paying in to the system since we were 16 years old at our first jobs. the social security "shortfall" can easily be fixed by any or combination of the following, raise the salary cap, increase the retirement age or roll back the Bush tax cuts. the Payroll tax cut is precisely the wrong thing to be doing if anyone is concerned about funding ss as well.

      Also had we Gore's much ridiculed lockbox preventing congress and the treasury from raiding the ss funds for things like wars and pork we wouldn't even be talking about this.

      • Bobbie says:

        somebody innocent has to be targeted to take the sacrifice from government incompetence. too much government control who lies, cheats and steals. Who's only plans are ruining the country and who refuse all other plans. who demand sacrifice and create the circumstance to make it happen. Who refuse any corrections and comply with no compromise. They're hypocrites. so why not hit where it's already bankrupting and cheat the most vulnerable? that lock box is open to anything domestic. the democratic, rino way…

    13. Hanna says:

      I started working full-time at 17 and am now 47. I will continue to work until 67. After 50 years of paying into SS and my employers paying into SS, there is no way that I will even see half of what has been paid into the system based on my earnings and an expected life after retirement of 15 years. So 55 and up is protected, doesn't make me happy! If changes are made they should be phased in, not stop and go measures.
      Taxpayers should not be funding retirement accounts for Government workers that are drastically different than what the private sector sees. We should all be in a similar boat so that actions taken would benefit most Americans in the same manner or hurt most Americans in the same manner.

    14. Blueneck says:

      My question to those that do not like SS. what do you plan to do when you retire? 401ks pretty much worthless, fewer and fewer companies offer defined benefit plans. tradition savings accounts do not yield any significant interest. I don't know about you but I know I don't want my in laws moving in with me when they can't afford to retire

      • Donna says:

        My husband and I plan to run a hobby store after my husband "retires" from his current job. We do not plan on taking SS, whether we qualify for it or not. It is welfare, it always was welfare and we don't plan on going on the public dole – ever! We've had some pretty rough spots and even then we didn't take welfare, and we don't plan on changing that after we reach "retirement age".
        IF we need support (financial or otherwise), our children will help us out or take us in. We taught them from an early age that family takes care of family. If either set of our parents need us to help them out or take them in, then we will. It won't be easy, but we will do it because family helps family. I'm sure most of us would do the same (perhaps reluctantly, but we would still do it).

    15. Donna says:

      Who's says everyone has to retire? A lot of people retire from their main career, but then launch into their preferred line of business during their older years. They can afford to since their mortgage is paid off, their children have moved out. One of our friends started a motorcycle store after retiring from his main job. We plan on starting a hobby store.
      Just sitting around doing nothing productive during our elder years is not only wasteful but also not healthy for the mind or body.
      As far as your in-laws, if they cannot afford to retire, then they shouldn't retire. If they have to retire because of health problems or forced retirement, then how selfish you are not to want to help them out. You'd better hope your children aren't reading your post!
      We taught our children from a very young age that family helps family, and IF we need to be supported by them when we are elderly, then they should help us. If either my parents or my husband's parents need us to take them in, then we will. It won't be easy, but we'll deal with it because they are family.

    16. Liz says:

      Donna, how do you define the term welfare? To equate the current SS-payments as welfare is insulting to the seniors who have paid–paid–their entire working life into this system, not because they chose to do so but because it was and still is required–social security recipients always were led to believe that they were contributing to their eventual retirement. Their employers were required–no choice–to contribute also as part of the individual employee's enumeration–this is not welfare. No where does it ever say that welfare requires its recipients to contribute a cent, which is exactly why it is a hand-out and–when permanent or automatic–undermines self-reliance and responsibility. Please, do not confuse the issue. It's already intentionally being misrepresented enough without adding to the misrepresentation. The reason SS is running low is due to former Congresses using its monies as a slush fund to finance various pet charities (recipients who never paid into the SS system)–and indeed those charities may be termed welfare. We had elected dishonest and devious men and women who used their positions to steal from the general (required!) SS monies in the name of charity, while they themselves had their own separate retirement fund, as all union government workers have to this day (paid for by us, now that is welfare!).

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