But It Is A Ponzi Scheme!


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…..

11 thoughts on “But It Is A Ponzi Scheme!

  1. Whatever you call it, it is STILL a Ponzi scheme. A Ponzi transfers payments by new members to existing members to give them profit – “profit”, tax payments transferred – what’s the bloody difference?

    Social Security has NOTHING to do with pensions and it should NEVER be confused or the lines between the two blurred! Social security is all about helping those who (hopefully temporarily) cannot help themselves. It has good marals at its heart, but it needs to be used and controlled sparingly and carefully – simply because of human nature and the damage it can also do along with the good.

    A PENSION on the other hand is an aid to retirement and the PROPER way IMO to organise it is as a type of insurance scheme where the payments made during a person’s working life are invested and those payments or contributions, together with any interest on the investment of them, adds up to a worthwhile fund at retirement. That is NOT what has been done! In the UK it’s even referred to as National INSURANCE and it’s anything but!

    1. I will agree with the assertion you made about SS and that is why I have tried to make all those calling it a scheme are wrong….when the Repubs finally give their way and privatize SS then we will have a type of Ponzi….

      1. More on this……too many of the conserv idiots try to paint the SS as a Ponzi….I just want people to understand what a Ponzi….too many think it is some government run deal that is all f*cked up….

      2. Yes I understand your point. Personally, I think it’s a Ponzi, I’ve always thought it’s a Ponzi and I probably always will – who runs it makes no difference at all in my opinion – government – private – they’re all a bunch of jerks with no serious grip to speak of on reality!

      3. No argument at all…….these pricks are ALL acting like spoiled kids that need a good thrashing to make them wake up…..

      4. Sadly, the thrashing, or even the odd smack, is not really allowed any more in the UK, which is why it’s now in part full of yobs and young hoodlums – PC crap!

      5. Yes, like I say, I understand your point of view and largely agree with it. I’m not saying that there shouldn’t be a state pension so that EVERY citizen should have at least a pension that affords them enough to get by on with some dignity in retirement.

        However, my argument is not with that aim and I most certainly deplore the way in which the major flaws in the current pension system are used as an excuse to try to have that pension reduced or otherwise degraded. MY argument is with the present set-up itself, which IS basically a Ponzi system and THAT I believe is the root of the problem…

        Look, Ponzi schemes depend on an ever increasing “customer/investor” base in order to fund the payment of “profits” for longer standing investors since there are few or no REAL profits being made – is that not so? Well, so it is with the pension schemes most, if not all, of our democracies operate. If there are less people paying into the scheme, or they are for whatever reason contributing less during any period (for more than a very short time) then the system is BOUND to hit problems or even fail and THAT is the situation we now have. The crash in 2008 didn’t cause the problem – just like the crash itself, it was GUARANTEED to happen sooner or later and because the contributors’ payments were not invested (albeit topped up by employers and higher tax payers – which is the ONLY part of this that even comes close to being conceivably SS), but rather today’s contributions that are being used to pay yesterday’s pensioners, they are now scratching round like a bunch of headless chickens in order to try to reduce the burden, when those pensions have already been saved for and should have been bought and paid for!

        No wonder people are pissed!

      6. All I can say is that SS was stable for many years until the government had to pay for wars and other programs that it could not afford and started raiding the SS fund to make it seem that all was okay and that they had a handle on things…..we could talk about tax cuts and breaks that have lead to some of the probs of today or we could talk about politicians not wanting to alienate any part of the electorate….instead they want to blame the fund for all its probs……makes good fodder for votes……

      7. Hmmm… hard for me to comprehend because the US is so different (still being in the middle ages and all) – 😈

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