Social Security is the government’s Ponzi scheme

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At bars, barber shops and at dinner tables all over America, everyone is asking if Social Security really is a Ponzi scheme? To the talking head on the tube who was doing his best to convince me it isn’t, you can thread all the needles you like, add intent, insert a million technicalities, and slice it and dice it up any way you care to in an attempt to prove or disprove anything.

But no matter how you split hairs in your presentation, when you take money from B to pay A, money from C to pay B, and money from D to pay C, it is still a Ponzi scheme, and is known by that name because that is precisely how Charles Ponzi did stole thousands of dollars in 1916.

The only real difference is in the wording. We use the words fraud, scam or swindle when this system is run by Bernie Madoff, Reed Slatkin or Gerald Payne. Never when it’s run by the government. The talking head tried to kosherize Social Security by calling it a “transfer scheme” (I was shocked that the word “scheme” was there, as it is as negative as “fraud” and “scam”).

There are many super-intelligent beings on this planet who will argue that Social Security is exactly like that.

From the Cato Institute: “Just like Ponzi’s plan, Social Security does not make any real investments — it just takes money from later “investors” or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi’s scheme.”

Please note: the Cato Institute uses the words “like Ponzi”, three times in that one paragraph.

From a New York Times op-ed written by John Makin, the Director Of Fiscal Policy Studies at the American Enterprise Institute, under the headline “Social Security: nothing but a ponzi scheme.”

If my editor, fine gentleman that he is, were to allot me the proper space I could show you 100 more reliable sources to prove Social Security is a Ponzi scheme. In fact, Social Security is not only a Ponzi scheme, it is the ultimate Ponzi scheme and would be illegal if it was not run by the government.

• • •

Mr. Raisman. I will sum up this week’s commentary to you in one word – Solyndra. Nothing more need be said.

• • •

We used to say, “When guns are outlawed, only outlaws will have guns.”

That’s been changed to, “When guns are outlawed, only outlaws and governments will have guns.”

• • •

We just returned from a couple of weeks out in the middle of the country. We drove through Missouri, Kansas, Iowa and Nebraska. That’s four more states my roommate crossed off her list. She says that before she leaves this earth, she wants to visit all 57 states. Fifty-Seven? Yes. Fifty-seven. If my president can say 57 states, so can she.

President Obama is terrific with the Teleprompter, but on his own, we heard about the 57 states, the 10,000 people who died in Kansas, the Naval Corpse Man, the Jews and janitors and a whole lot more. Recently he mentioned the Intercontinental Railroad. Do we really have a train going from New York to Paris? The left-wing media still pokes a lot of fun at Bush but remains rather quiet about Obama. I am spelling it out for you: P-O-T-A-T-O … E?

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Reader Feedback

Pappy G from Weeki Wachee, FL says:
Stan, may I offer you, and your readers a short trip inside the world of social security: And then to finish your trip, a ride out, that would of course be our proposal:
Oct. 10, 2011, 3:10 am
Neil Friedman from Sheepshead Bay says:
At bars, barber shops and at dinner tables all over America, everyone is asking if Social Security really is a Ponzi scheme?
Really Mr. Gershbein? Exactly how many bars, barber shops and dinner tables have you been at in the last month to make such a generalization?
Do you and your roomie return your checks every month?
You're just another one of those Fox News addict lemmings. Try coming upo with your own opinion once in a while instead of surfing the Internet for them.
FYI, Barack Obama - one mistake; George W. Bush-we're still counting!!!!
Oct. 10, 2011, 11:04 pm
Bill says:
Thanks Stan for having the courage to expose our national Ponzi scheme's true nature.

For a technical analysis of our grand Social Security and Medicare federal Ponzi operations, please reference the following webpage.
Oct. 11, 2011, 11:53 am
Carly EngageAmerica says:
Making Social Security sustainable would fix the dilemma and put an end to the argument of whether or not the program is a “Ponzi scheme.” Such things as raising the retirement age could help. This needs to be done because seniors spend an ever-increasing number of years in retirement, during which taxpayers finance a large fraction of their incomes and medical expenses. The growing length of retirement for men in part reflects a decline in the number of years spent working. Since 1900, male life expectancy at age 20 has risen by 14 years, yet working-life expectancy is currently lower than it was when Theodore Roosevelt was first elected president. At the start of the last century, a 20-year-old man could expect to live an additional 42 years, during which he could expect to work 38 years; the average period of retirement was thus relatively short. By 2004, life expectancy for a typical 20-year-old man had climbed to 56 years, yet his working-life expectancy was still 38 years (

Furthermore, if Social Security payouts were reduced by 3% or 5% for new beneficiaries, about 18% or 30% (respectively) of the funding shortfall would be eliminated. Also, bigger contributions should be required from workers and employers. Right now they pay 6.2% of earnings up to $106,800, or as much as $6,622 per year, into the Social Security system. If the contribution rate were increased to 7.3% of earnings, Social Security's projected deficit would be eliminated ( ).
Oct. 11, 2011, 2:28 pm
Bill says:
No such series of tweaks and peaks shall ever "fix" Social Security and Medicare. Why?

Due to fundamental and inviolate laws of Nature, SS-Ponzi and MC-Ponzi are completely vain attempts to create perpetual money machines. All such 'virtual machines' are impossible, in exactly the same way that mechanical perpetual motion machines are impossible.


Read More;
Oct. 12, 2011, 12:36 pm
B A Jones from B Heights says:
Anyone who compares Social Security to a Ponzi scheme is profoundly ignorant of both. In many cases this is not the ignorance which flows from lack of information: that could be cured. Rather, it is usually a militant crusading ignorance which ignores facts and logic and, worse, works to keep them out of the public discourse.

A Ponzi scheme, as most of the critics well know or should know, masquerades as an investment arrangement but actually pays out capital pretending it is interest/dividends. Capital is depleted, but that depletion is concealed from the “investors”. Sooner or later the facts come out and the scheme collapses.

Social Security is fundamentally and obviously different. It is intended to be an inter-generational transfer program. It is not supposed to, and does not purport to, build up large reserves. No facts are concealed. There is no claim that benefits are being pre-funded. It does not maintain individual savings accounts though it does, of course, maintain records of individual benefit entitlements which are based on formulae reflecting contribution history.

It is, in short, a transfer and not an accumulation program: today’s contributors pay the benefits of today’s retirees. Any assets which build up result from the fact that today’s contributions exceed current benefits. They are not pre-funding reserves analogous to those which are needed in a private pension plan or life insurance policy. As a transfer program, Social Security does not make any pretense of accumulating assets by individual, by group or by generation to pay the benefits of that individual, group or generation. Had it operated that way, it could never have paid benefits in the 1930s when it came into effect and when it was most needed. 30s retirees were paid from 30s contributions and the pattern has continued.

A private pension plan, by contrast, should build up substantial reserves, over time, to pre-fund benefits earned to date. If it terminates before reaching that funding level - usually but not always because the plan sponsor goes out of business - there will be benefit expectations which are not met. That level of reserve building is not necessary for Social Security because the government is not going out of business: more precisely, if it does we will all have far more pressing problems to worry about than Social Security so we can proceed on that assumption. Not only is such funding not necessary; it would be disastrous.

There is, to repeat, no need to build up reserves in anticipation of the collapse of the US government. Doing so would be a waste of time and effort anyway because the accumulated assets would likely become worthless when the collapse happened. All our SS-benefit entitlements, and any associated assets, would become about as valuable as claims against the Czarist government were in the thirties.

Finally, we should remember that if the critics had their way and benefits were pre-funded, the end result would be a vast pool of investment capital slopping around the markets under the overall control of government - not, I would have thought a prospect which would appeal to most right-wing critics of Social Security.

[This comment already appeared in the Economist]
Oct. 18, 2011, 10:53 am
ebonystone from out west says:
One problem of Social Security is its annual cost-of-living increase. No private pension plan has such a provision; when one retires, the initial monthly pension amont remains the same until death. It should be the same with SS. This might persuade some workers to keep working for a few more years to ensure a larger payment.
NB the same applies to federal civil-service pensions, which also have COLA provisions. Inflation has been pretty low for the last few years. But it wasn't that long ago that federal retirees (and SS recipients) could count on a nice annual increase. Many federal retirees, after 10 years of reitrement, were getting pensions larger than their salaries had ever been.
Ending COLA in these cases, and in all government "entitlements" would make a nice dent in future budget deficits.
Nov. 12, 2011, 10:42 am

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