Recently Republican presidential candidate Mitt Romney criticized fellow contender Rick Perry for labeling Social Security a Ponzi scheme. Romney extolled the virtues of the soon-to-be-bankrupt program and vowed to support its continuance unconditionally if elected.
A Ponzi scheme, so named after white-collar criminal Charles Ponzi, involves a huckster collecting money from numerous investors who are promised a high or reliable return on their investment, but in which payments are made by future investors lured in by similar promises of financial gain. The scheme is unsustainable, because dividends received are not actually invested, and are not equaled by the dividends promised to investors. Earlier investors fare better than later investors, who lose their money once the scheme collapses.
Social Security, signed into law by white-collar criminal Franklin Delano Roosevelt, involves the federal government collecting money from all working citizens, who are promised a reliable pension when they retire, but in which payments are made by subsequent generations dragged into the program. The system is unsustainable because, due to slowing population increases and politicians raiding the Social Security Trust Fund, most payroll taxes received are not actually invested and are not equaled by the payments promised to retirees. Earlier generations fare better than later generations, who will not receive benefits once the system collapses.
The history of Social Security’s establishment and implementation reveal that Governor Perry is wrong about the program’s being a Ponzi scheme. It is much worse. read more »