Rick Perry and Social Security: Ponzi Scheme

Notice that NBC, MSNBC, CNN and the rest of the media talked about Rick Perry's description of Social Seucirty as a "Ponzi scheme" only in terms of "extreme rhetoric", as if Perry were using an "F-bomb". What nobdoy did --including the unfair and unbalanced network, at least in the limited surfing time I devote to that network these days--was explain what a Ponzi schme IS, and why it is not accurate to describe Social Security as such a scheme. That is because the media people are both DISHONEST and uninterested in ataul information (receiving it or imparting it). In other words, the media cannot explaon what a Ponzi scheme is, and why Social Security is not such a cheme, because it is a FACT that Social Security is a Ponzi scheme. Waht the media is telling you is that Social Seucirty is so SACRED a cow that we cannot tell people the real facts, and that anyone who tries to do so is subject to (figurative) LYNCHING. Well, this blog does nto believe in eithe sacred cows or lynchings (although it does believe in the death penalty, otwithstanding the truly EVIL questio non the death penalty from NBC--a question so evil that this blog, unwilling to turn the other cheek, hereby makes this charge against people wo have undermined the death penalty in this country: How do you sleep at night, knowing that you have KILLED PEOPLE by setting mmurderers loose to kill again?).


What is a Ponzi scheme? It is actually fairly easy to explai, even if the dishoenst people of the media are unwilling to explain it (because it sounds so much like Social Seucrity). Say you have two meen, who we will call Peter and Paul What if you are Bernie Madoff? How can yoiu APPEAR to successfully invest money for Paul, without actually investing any money at all? What you do is convince Paul that you have a great scheme to invest money for him--guaranteed to be a good thing. You promise Paul that, at some pint, he will get his money pack, and more. You may say that this is a great retirment progam you have set up, where you are investing in your own retirement. However, what you, Bernie Madoff, actaully do is then convince Peter of the same thing (at a different time). Then you use the money you get from Peter to pay off Paul. And you do this with a lot of people in a never ending series of transactions, where you assume that there will always be--at leastlong enough for your purposes--enough "Peters" to pay off all of the "Pauls". In other words, when you "invest" in a Ponzi scheme, your money is NOT going toward an investment for YOU. It is being used to pay off the earlier people who paid in money. If you have enough "new" people contributing money, this can actually go on a very long time (as it did for Bernie Madoff, and has as been the case with Social Security).


Sure, Social Security is a Ponzi scheme, BY DEFINITION. The first thing you have to understand about Social Securtiy (not opinion, but the factual way it was set up) is thta the money that YOU contribute to Social Secrutity (by means of the payroll tax that Obama is trying to GUT, destroying the whole original concept of Social Security) goes to pay the CURRENT people whao are expecting benefits. That money does NOT go to set up an account to pay benefits for YOU. Your benefits, if they are to be paid at all, must be paid from NEW "taxes" (not really contributions, since they go in no account for you) from a NEW generatioin (or generations) of "Peters" (to pay the previous Puuls, as yo uwere a "Pter" to pay previous Pauls, but turn into a "Paul" when you need to get paid off from new generatoins of Peters).


Now Social Security is different from a true Ponzi scheme in one respect: The ORIGINAL retirees put NOTHING into the system (which actually explains why the system was set up the way it was). However, every generation after that DID pay into the system, and Rick Perry is right: For CURRENT young people, Social Secruity is obviously a Ponzi scheme.


As a young person paying into the system, you are NOT contributing to our own retirement. You get NO account. The government can even take away the PROMISE it gives lyou, sincee you are not contributing to get an vested" right" in a retirment system where an actual account is set up in your name. All you are doing is paying for present SENIOR CITIZESNS to get money "promised" to them when they were young. As stated, this is a Ponzi scheme, by definition. Now part of the reason Perry got so much criticism is that a "Ponzi scheme" is supposed to be a FRAUD, and the idea is that there is something wrong with Perry calling Social Security a "fraud". Problem: Social Secruity IS a fraud, in exactly the way that a fruadulent Ponzi scheme is a fraud. Peole--over the entire period that Social Security has been in existence--have been led to believe that they are "contributing to their own retirement". They have been led to believe that there is a "trust fund" in whic they have an interestr. That is FALSE. By any definition, that is a FRAUD. Note that does not necessarily mean that Social Security is a bad system, although it is, but it is a fact that Social Security has always been DECEPTIVELY SOLD, with NO ONE interested in explaining the real nature of the system.


Why do Ponzi schemes eventuallyl faill apart? They fall apart for the same reason that Bernie Madoff is now in jail. Eventually, it becomes impossible to "rob Peter to pay Paul". There are just not enough Peters, and ALL of the Pauls start demanding their money. So long as our work force has GROWN strongly, along with our population, the FDR concept of Socials Security as a self-sustaining system (which Obama is abandoning) could continue. But the "baby boom" after World War II, AND the decline in population growh and work force growth in the USA, has made it IMPOSSIBLE for their to be enough contributions ("taxes") from YOUNG people to indefinitely pay the CURRENT BENEFITS to the retiring older people. There are just not enough young people, and if they are TAXED ENOUGH it wil destroy their current lives (and the economy). That is what Rick Perry means when he both says that Social Security is a Ponzi scheme for the YOUNG, and that Social Security cannot possibly be there for current oung people unless something is DONE to handle the FACT that we are about to have more retirees.promised more benefits, than can be handled by the NEW people necessary to "fund" the Ponzi scheme.


This is a real issue, and Perry is actually raising it in the CORRECT way. We CAN keep the FDR idea of a seslf-fuding, self-sustaining system by REDUCING BENEFITS (and maybe by raising the Social Security tax--the exact OPPOSITE of the Obama "payroll tax holiday). As this bog has pointed out, Obama does NOT appear to want to "save" Social Security in its original FDR form. Obama, and the left, seem clearly to want to ABOLISH Social Security as we have known it, and to turn it into some sort of ordinary Big Government WELFARE wealth redistribution program. The third alternative is to RESTRUCTURE Social Security to try to "transition" to the sort of system which should have been set up to start with--which would NOT have been a Ponzi scheme. That is a system where people actually CONTRIBUTE to their OWN retirement, and their contributions go to set up an INDIVIDUAL ACCOUNT for each person that the person OWNS. Note that this is entirely separate from the issue of how this account is INVESTED. Right now Obama, the mainstream media and the rest of the left like to talk about the "danger" of "investing" Social Security money in the stock market. The problem is that, right now, you have NO MONEY going to an actual account that you own because of your Social Security "contributions". There is something wore than losing our Social Security money in the stock market: that is NEVER having any money beloning to you at all. The FIRSTR thing you have to do when considering these alternatives is be HONEST about the PNZI SCHEME NATURE of the present Social Security system. If we want to keep that kind of system, where young people are paying for benefits for CURRENT RETIREES rather than for their own retirement, then we need to CONSCIOUSLY make that choice. It may seem obvious to you, as it is to me (and as Perry said in his book) , that Social Security is set up WRONG. Problem (as with all Big Government programs): The transistion from the kid of Ponzi scheme program that we have to a real retirement slystem, where the money paid byoung people goes into their OWN retirement account, is almost impossible. Seill, the first step in this "debate" (that the mainstream media and leftist Democrats refuse to have) is to be HONEST aobut the problem, and the nature of the system we have.


Yep. I argued this SAME issue in 1968, when I was 21, instead of my present 64. And I took that same positoin at both ages--the basic position set forth above. The setting was an "hnors" social studies class at New Mexcio State University, where I was majoring in physicas. What I told the professor and the class then, and what I am telling you now, is that Social Security is SET UP as a FAILURE as both a retirement system (which it is NOT--being a Ponzi scheme) and as a WELFARE sytem (which FDR did not intend it to be, but which Obama wants to turn it into). Yes, Social Security is a failure aw a "welfare system" because it purports to be "self-financing" and a comprehensive "retirement system" for EVERYONE (even if acknowledged to not obviate the need for otehr retirement resources). What did my professor say? No, he did not deny---as it cannot be denied, as Rickj Perry's assertions cannot be denied--that I was right about Social Security not rally being defensible as either a retirement system or a welfare system. What my professor said was the sAME thing that NBC and the maintream media are asserting with regard to Rick Perry: "Senior citizens LIKE Social Security, and they DESERVE THEIR DIGN*ITY without you takign it away from them. So Social Security has welfare elements, and so it is not really a good retirement system. Is that any reason to make older people FEEL BAD about a program upon which they are relying".


Nope. I did not buy it then, and I do not buy it noow. First it is INSULTING to older peole (as I now am) . But it is even more INSULTING (or maybe "condemning" is the righ word) for those people who want to use a LIE to avoid facing the real issues here. If we are never gong to be able to tak about Social Security as it really is, then we are DOOMED as a country (a conclusion I am close to making--pessimist that I am). Medicare is now being "paid" mroe than 50% from GENERAL REVENUE. Meicare and Social Security combined have some 60 TRILLION in UNFUNDED liabilities. Copntrary to what both Obama and Bernanke say, no "minor" adjustments are going to do it. And even wtihout Social Security contributing to the debt, because the Ponzi scheme aspect has not come home to roost yet, we are DROWNING IN DEBT. We jsut cannot go on this way, and it is a TERRIBLE thing to attack anyone--like Rick Perry--who tries to tell you the TRUTH about the issues involved here. Thi main issue in Social Security IS that it has all of the elements of a Ponzi scheme, rather than a real retirement program. When the COUNTRY is at stake, I jsut refuse to worry about whether a few "olde people" (SCARED BY CNN AND MSNBC AND LEFTIST DEMOCRATS) "feel bad".


As I have said before, our main present problem is that we just refuse to exist in the REAL. Instead, we exist in a fantasy world of our own making. I don't even like Rick Perry ("my governor") that much. On this one, however, Rick Perry is willing to exist--at least partly--in the REAL. Hi scritics, on the other hand, are exising in so unreal a world that you can't even get to reality from there.


P.S. No proofreading or spell checking (bad eyesight).