From the VOMITORIUM
I have heard many, especially those on the Right that are trying to make it like some kind of scam, call the Social Security system a Ponzi Scheme……..but the problem is….I do not think they know what a Ponzi Scheme is all about…….I mean NO disrespect but I heartily disagree with the assumption……politifacts.org has a great explanation….
The term originates with Charles Ponzi, a Boston swindler who conned investors out of millions in 1920 by promising returns of up to 100 percent in 90 days on investments in foreign postal coupons. After first-round investors harvested those profits, others flocked to Ponzi, unaware his “profits” consisted of money paid in by other investors.
In contrast, the administration says, Social Security is more like a “pay-as-you-go” system transferring payroll tax payments by American workers to American retirees.
Earlier this year, we quoted the Congressional Budget Office’s projection that this year Social Security would deliver more in benefit checks than it’s projected to gather in taxes. U.S. Rep. Michele Bachmann, R-Minnesota, that Social Security is out of money. In its latest annual report, issued in August, the Trustees of Social Security and Medicare trust funds confirms that tax income is running short of benefits paid. Regardless, the report says, benefit payments will not be exhausted until 2037 because until then the administration can cover the expected difference with investments made via the Social Security trust fund.
“First, in the case of Social Security, no one is being misled,” Zuckoff’s January 2009 article in Fortune magazine says. “…Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns.”
Second, he writes, “A Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted. That’s when the last people to participate are out of luck; the music stops and there’s nowhere to sit. It’s true that Social Security faces a huge burden — and a significant, long-term financing problem — in light of retiring Baby Boomers…But Social Security can be, and has been, tweaked and modified to reflect changes in the size of the taxpaying workforce and the number of beneficiaries. It would take great political will, but the government could change benefit formulas or take other steps, like increasing taxes, to keep the system from failing.”
Third, his article says, “Social Security is morally the polar opposite of a Ponzi scheme… At the height of the Great Depression, our society (see “Social”) resolved to create a safety net (see “Security”) in the form of a social insurance policy that would pay modest benefits to retirees, the disabled and the survivors of deceased workers.By design, that means a certain amount of wealth transfer, with richer workers subsidizing poorer ones.That might rankle, but it’s not fraud… None of this is to suggest that Social Security is a perfect system or that there aren’t sizeable problems facing the incoming administration and Congress. But it’s not a Ponzi scheme. And Ponzi himself, who died in a hospital charity ward with only enough money for his burial, would never have recognized it as his own.”
I apologize for the length of the explanation but I felt that it was necessary to clarify the issue once and for all….I realize that to some people Social Security is a thorn in their side…but to call it something it is not is being very unfair and dishonest…..