On the theory that the best defense is a good offense, Rick Perry has been insisting to anyone who will listen that Social Security is a Ponzi scheme. Probably hundreds of people have already explained why it isn’t, but I think it’s important to be clear about why Rick Perry thinks it is—or, rather, why his political advisers think he can get away with it.
A Ponzi scheme, classically, is one where you promise high returns to investors but you have no way of actually generating those returns; instead, you plan to pay off old investors by getting new money from new investors. Social Security is obviously not a Ponzi scheme for at least two basic reasons. First, there’s no fraud involved: all of Social Security’s finances are right out in the open for anyone who cares to look, in the annual report of the trustees of the Social Security trust funds. Second, a Ponzi scheme by construction cannot go on forever; no matter how long you can keep it going, at some point you will run out of potential new investors and the whole thing will collapse. I’m sure there are other obvious differences, but that’s enough for now.
So why do people ever think it’s a Ponzi scheme? It’s the combination of two factors, each of which is relatively innocuous on its own.
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2 comments:
those two facts PROVE SS is a ponzi. just because it isnt a secret doesnt mean its legal! however, lets throw in another small detail...ponzi schemes are VOLUNTARY. SS? not so much.
SS is not technically a Ponzi scheme, but the system is broke because our Govt. "borrowed" the money and can't pay it back. So, for a lack of a better term, it is a Ponzi scheme. Someone rigged a system to defraud other people of their money...
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