By Howard Rich || Texas Gov. Rick Perry made waves during a recent Republican presidential debate when he referred to Social Security – one of the entitlement programs responsible for our nation’s skyrocketing debt – as a “Ponzi scheme.”
“You cannot keep the status quo in place and call it anything other than a Ponzi scheme,” Perry said. “It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you’re paying into a program that’s going to be there. Anybody that’s for the status quo with Social Security today is involved with a monstrous lie to our kids, and it’s not right.”
Many in the Republican establishment – including several elected officials responsible for perpetuating this generational fraud – scolded Perry for his remarks. In fact, one former advisor to George W. Bush went so far as to call Perry’s views on the subject “toxic.”
In defending itself against Perry’s criticism, the Social Security Administration (SSA) released a statement acknowledging that the program “is and always has been either a ‘pay-as-you-go’ system or one that was partially advance-funded.”
Translation? New investors are required to pay off older investors – the very definition of a Ponzi scheme, or what the U.S. Securities and Exchange Commission would call “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”
Of course the SSA has a very literal defense against this analogy.
“The American Social Security system has been in continuous successful operation since 1935,” the agency’s release noted. “Charles Ponzi’s scheme lasted barely 200 days.”
Perhaps, but can a system that’s careening toward insolvency really be called “successful?” Also Bernie Madoff’s Ponzi scheme – which defrauded thousands of investors out of billions of dollars – went on for at least two decades before it was finally detected. Most importantly, Charles Ponzi didn’t have politicians and bureaucrats working with him who could compel higher taxes, the printing of new money or the accumulation of trillions of dollars in debt. If he did, his scheme might still be fleecing unsuspecting “investors” just like our government is doing.
According to Michael D. Tanner – a senior fellow at the Cato Institute – Social Security taxes have been raised at least 40 times since the program’s inception by a total of more than 800 percent (even after adjusting for inflation). Meanwhile, the ongoing decline in Social Security benefits is forcing millions of Americans to work longer than ever before. In fact, a new Ohio State study reveals that reductions in benefits are responsible for anywhere between 25 to 50 percent of the recent spike in delayed retirements.
“Most experts think it is inevitable that there will be further reductions in Social Security benefits to keep the program financially balanced,” the study’s author concluded. “Those changes may very well lead to even later retirements.”
Of course these “changes” will lead to later retirements – which further underscores Perry’s point. The only way to “fix” Social Security is to compel additional sacrifices from new workers while simultaneously reducing the benefits they are entitled to receive when they retire. It’s exactly what Ponzi and Madoff did – only the victims of this scam have no choice in the matter.
Social Security’s unfunded future liability is a scarcely-fathomable $20 trillion – and growing. Also expanding is the imbalance between those who are forced to pay into the scam and those who are taking money from it. In 1945, there were 42 workers per Social Security recipient. Today, there are only three — and that number is shrinking.
Rick Perry has correctly diagnosed Social Security as a Ponzi scheme. Now the only question is whether our political leaders will finally summon the courage to scrap this scam in favor of private accounts that will truly provide for the long-term welfare of our citizens.