The National Ponzi Scheme

It's worse than you think. [Link]

Rachel Maddow and her MSNBC guests are scandalized that Rick Perry stuck to his guns that Social Security is a Ponzi scheme during the presidential debate tonight. “This kind of rhetoric will hurt him in the general elections,” they reassured each other. They didn’t flat out say that Perry was wrong, but actually he is. Social Security is not a Ponzi scheme. It is much worse.

Here are three reasons why:

One, a Ponzi scheme collects money from new investors and uses it to pay  previous investors—minus a fee. But Social Security collects money from new investors, uses some of it to pay previous investors, and spends the surplus on programs for politically favored groups—minus the cost of supporting a massive bureaucracy. Over the years, trillions of dollars have been spent on these groups and bureaucrats.

Two, participation in Ponzi schemes is voluntary. Not so with Social Security. The government automatically withholds payroll taxes and “invests” them for you.

Three: When a Ponzi scheme can’t con new investors in sufficient numbers to pay the previous investors, it collapses. But when Social Security runs low on investors—also called poor working stiffs—it raises taxes.