On MSNBC’s Thursday broadcast of “Hardball,” host Chris Matthews committed the mortal sin — he nearly parroted the theory that mortified so many of the network’s hosts and guests throughout the day. Matthews called Social Security “a Ponzi scheme” the day after Republican Texas Gov. Rick Perry doubled down on his previous statements echoing that sentiment in the Republican debate (h/t Matt Lewis)The video:
Matthews first put forth what he thought Social Security was originally intended to be: “You pay for it while you work. When you retired and have no other form of income, this will help you out. In fact, a lot were impoverished in the old days without Social Security. It’s a great anti-poverty program. But then people started to live past 65. Even the great Franklin Roosevelt didn’t make it to 65. In those days, if you made it to 65, you were lucky. You got a few bucks on Social Security.” (RELATED: Has Chris Matthews lost his mind?)
Then he put forth what it has become: “Today, lots of people fortunately make it past 65,” he said. “They live into their 80s and 90s. They’re still getting checks. The system doesn’t work that way anymore. It’s not as healthy as it once was. So, how does a Republican deal with the fact it is a Ponzi scheme in the sense that the money that’s paid out every day is coming from people who have paid in that day. It’s not being made somewhere.”
Actually, I agree with this piece by Michael Graham: No, Social Security Is Not A Ponzi Scheme. It’s WORSE. The problem with one graphic:
Texas governor Rick Perry is being criticized for calling Social Security a "Ponzi scheme." Even Mitt Romney is reportedly preparing to attack him for holding such a radical view. But if anything, Perry was being too kind.Everyone might recall more recently Bernie Madoff who was sent to prison for the same thing but at a much larger scale into the billions.
The original Ponzi scheme was the brainchild of Charles Ponzi. Starting in 1916, the poor but enterprising Italian immigrant convinced people to allow him to invest their money. However, Ponzi never actually made any investments. He simply took the money he was given by later investors and gave it to his early investors, providing those early investors with a handsome profit. He then used these satisfied early investors as advertisements to get more investors. Unfortunately, in order to keep paying previous investors, Ponzi had to continue finding more and more new investors. Eventually, he couldn't expand the number of new investors fast enough, and the scheme collapsed. Ponzi was convicted of fraud and sent to prison.
Social Security, on the other hand, forces people to invest in it through a mandatory payroll tax.Laughably, that is one of the defenses from liberals that I have heard - it's not a Ponzi scheme because it's not voluntary and you can't leave the system. Really? Can we then call it a forced Ponzi scheme? Or a universal Ponzi scheme being that libs love that collectivist adjective?
A small portion of that money is used to buy special-issue Treasury bonds that the government will eventually have to repay, but the vast majority of the money you pay in Social Security taxes is not invested in anything. Instead, the money you pay into the system is used to pay benefits to those "early investors" who are retired today. When you retire, you will have to rely on the next generation of workers behind you to pay the taxes that will finance your benefits.Just like the Ponzi scheme. Except it's being run by the US government, which makes it OK or something.
As with Ponzi's scheme, this turns out to be a very good deal for those who got in early. The very first Social Security recipient, Ida Mae Fuller of Vermont, paid just $44 in Social Security taxes, but the long-lived Mrs. Fuller collected $20,993 in benefits. Such high returns were possible because there were many workers paying into the system and only a few retirees taking benefits out of it. In 1950, for instance, there were 16 workers supporting every retiree. Today, there are just over three. By around 2030, we will be down to just two.So that's the social security = Ponzi scheme in a nutshell, but here's where it gets worse:
As with Ponzi's scheme, when the number of new contributors dries up, it will become impossible to continue to pay the promised benefits. Those early windfall returns are long gone. When today's young workers retire, they will receive returns far below what private investments could provide. Many will be lucky to break even.
Eventually the pyramid crumbles.
Of course, Social Security and Ponzi schemes are not perfectly analogous. Ponzi, after all, had to rely on what people were willing to voluntarily invest with him. Once he couldn't convince enough new investors to join his scheme, it collapsed. Social Security, on the other hand, can rely on the power of the government to tax. As the shrinking number of workers paying into the system makes it harder to continue to sustain benefits, the government can just force young people to pay even more into the system.The one thing that I would point out is that the tax is not split between the employer and employee. The employee pay the 6.2% and the employer pays the 6.2% by paying the employee a wage that is 6.2% below what they would be earning if said employer didn't have to pay into the system. The employee indeed pays it in full. More:
In fact, Social Security taxes have been raised some 40 times since the program began. The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase.
In addition, at least until the final collapse of his scheme, Ponzi was more or less obligated to pay his early investors what he promised them. With Social Security, on the other hand, Congress is always able to change or cut those benefits in order to keep the scheme going.More from Pajamas Media, Outside the Beltway, Power Line, Reason Hit & Run and Freedom's Lighthouse
Social Security is facing more than $20 trillion in unfunded future liabilities. Raising taxes and cutting benefits enough to keep the program limping along will obviously mean an ever-worsening deal for younger workers. They will be forced to pay more and get less.
UPDATE: Another Matthews vid on YouTube:
UPDATE #2: Put ‘Country Before Party’ and Admit Social Security Is a Ponzi Scheme. Kind of like asking people to admit the sky is blue, and yet liberals still seem incapable of doing so.
UPDATE #3: Remember when liberals used to call Social Security a Ponzi scheme?
In a U.S. News & World Report cover story excerpting The Birth Dearth, Wattenberg sums up his argument by saying: “In short, Social Security is a Ponzi game, a pyramid scheme, a chain letter.” In a December 1995 column, Wattenberg makes the point again, calling both Social Security and Medicare “chain letter games.” Implicitly echoing Samuelson, Wattenberg adds, “There’s nothing inherently wrong with a Ponzi game. Life itself is such a game.” The problem, Wattenberg continues, is that the success of the Ponzi game called life hinges on higher birth rates than we’ve been able to produce…Heh.
In January of 1996, just a few months after Shapiro’s article appeared, Pulitzer Prize–winning Washington Post columnist William Raspberry published a piece on Social Security titled, “Numbers That Won’t Go Away.” Although he’s no conservative, Raspberry argues that “[Social Security] is, in important ways, like a massive Ponzi scheme in which early participants are paid off with money put up by later ones.” Raspberry then asks if Social Security will collapse, “as Ponzi schemes inevitably do.” The piece makes it clear that Raspberry fears just such a collapse. He ends his column by asking: “Why aren’t the White House and congressional negotiators talking about these things?”
A bit later that year, in May of 1996, liberal columnist Jonathan Alter published a piece in Newsweek suggesting that former Democratic Colorado governor and erstwhile Clinton supporter Richard Lamm might run for president as the candidate of Ross Perot’s Reform party. Cynics might suspect that Alter’s glowing treatment of Lamm was motivated by an interest in damaging Republicans by puffing up a third-party bid. In any case, Alter lauds Lamm for his “straight talk” on Social Security. Lamm is praised as a “truthteller” by Alter for being willing to say, among other things, that Social Security is a “well-meaning Ponzi scheme.” Today, of course, the very liberal Alter is a sympathetic biographer of Obama and one of the president’s most supportive media cheerleaders.
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