Put ‘Country Before Party’ and Admit Social Security Is a Ponzi Scheme
There are few issues where we need to put “country before party” more than Social Security, which is why Rick Perry’s comments about the program were a breath of fresh air.
Texas Gov. Rick Perry’s assertion this week that Social Security is a “Ponzi scheme” touched off a heated debate within the GOP whether voters would embrace such provocative language.
At Wednesday’s Republican debate, Mr. Perry, the governor of Texas, said it was a “monstrous lie” to tell young workers that the 74-year-old pension system would be there when they retire. He has written that Social Security is a “failure.”
Is Social Security a “Ponzi scheme?” Yes.
Like a Ponzi scheme, money that’s paid into the program isn’t invested; it’s spent and used to pay off people who’ve already gotten into the program. So, whether you’re talking about a run-of-the-mill Ponzi scheme or Social Security, some people do benefit from it.
Like a Ponzi scheme, Social Security pays off old investors in the scheme by bringing in new investors to pay the bills.
Like a Ponzi scheme, if enough new investors can’t be brought in, the whole program becomes untenable.
There are, of course, some differences. If someone, like Bernie Madoff, tried to put together an “investment” like Social Security in the private sector, he’d be arrested. Additionally, a con man can’t force you to participate in the con the way that that the government can. Nor can a con man risk plunging the whole country into bankruptcy with his irresponsibility.
The reason that isn’t so obvious that no one can deny it yet is that we’ve benefited from a Baby Boomer population bubble. We had so many new people pouring into the system that it didn’t matter that the numbers didn’t add up. However, now those Boomers are about to retire and we don’t have anyone to replace them. As Shika Dalmia has noted, “The (Social Security) worker-to-retiree ratio is expected to fall from 3-1 today to 2-1 in 2030 (down from 16-1 in 1950).”
That’s why we have a $100 trillion in unfunded Medicare and Social Security liabilities. Since we’ve already spent every dime we’ve collected for Social Security, the rich don’t have close to enough to make up that shortfall even if we confiscated all their wealth, and since we won’t be able to borrow that much money, something’s going to have to give.
The sooner we recognize that and make some changes, the less disruption there will be to the program. The danger to Social Security isn’t the people like Paul Ryan or Rick Perry who want to tweak it to try to make it viable long-term; it’s the demagogues who think there’s a political advantage to be gained by lying about attempts to reform the program. They think that if they scream, “They’re going to take your Social Security away” loud enough, then people will believe the lie and they’ll benefit at the ballot box. Maybe they’re even right about that. But if they get by with that lie for long enough, then one day, perhaps even within a decade, the Social Security checks may simply come to a stop because the government won’t even be able to borrow the money we need to make the payouts. The people like Rick Perry, who actually care what happens to Americans who rely on Social Security, understand that and they’re willing to take a political risk to do the right thing. More politicians from both parties should put country ahead of party and do the same thing.
This post originally appeared at The Huffington Post.
On June 21, Charles P. Blahous III and Robert D. Reischauer, Public Trustees of the Social Security and Medicare Boards
Although progressives like Willard “Mittens” Romney attack Rick Perry for referring to Social Security as a Ponzi scheme (as many