I've written about this before. Social Security is one big Ponzi scam.
In some ways, Social Security is worse than a Ponzi scam. With Bernard Madoff, I could have protected myself by refusing to invest or doing due diligence. With Social Security, I'm forced to participate via taxes. Also, State accounting is exempt from the rules that normally apply to the private sector. If the State does something, it's presumed to be a good idea.
This is a current issue, because Rick Perry criticized Social Security.
It seems that Rick Perry's character is "I'm saying politically incorrect things. Therefore, all people who believe these things are fools."
Rick Perry has picked a few "politically incorrect" statements.
- Social Security is a Ponzi Scam. (true)
- "Carbon dioxide causes global warming" is a scam. (true, but Rick Perry presents a weak criticism, which almost makes it seem like an edorsement)
- criticizing the Federal Reserve (again, it's a weak criticism)
- I doubt evolution. (gotta throw in something silly to make him look like a complete fool)
Getting back to the post title, Social Security is a Ponzi scam.
First, I'll address one irrelevant point, "Social Security is Unconstitutional". The Social Security tax is an income tax. It's as valid as everything else the IRS does. (I'm ignoring people who say that the income tax is invalid due to a legal technicality. Unfortunately, Federal judges and appeals court judges have consistently ruled that the income tax is 100% legal, as currently enforced. Even if they are wrong, they have a "justice" monopoly and their decision is final.)
Suppose that younger workers were given the choice to opt-out. They agree to not make any future claims, and in return they don't pay any more Social Security taxes (both employer and employee portion). The worker effectively pays the employer portion of Social Security tax. His salary is reduced by the amount of payroll tax the employer pays.
A pro-State troll says "You're being silly. Social Security would collapse in insolvency if younger workers could opt-out." Isn't that proof it's a Ponzi scam?
A pro-State troll says "Social Security isn't a Ponzi scam. It's pay-as-you-go." This is arguing definitions. Pay-as-you-go is a fancy word that means "Ponzi scam". Current Social Security taxes pay benefits to people who pay in previously. That's a Ponzi scam; current payments go to previous investors.
A pro-State troll points out "Government is not required to obey the same accounting rules as the private sector." Any private business that used the same methods as Social Security would be shut down for operating a fraud. Government does it and passes a law saying it's legal. That doesn't make it not-a-scam.
There's no way that current Social Security promises can be kept, unless there's massive inflation, tax hikes, or benefit cuts. It's a Ponzi scam.
Like all Ponzi scams, Social Security was initially profitable for the scamsters, until it collapses as the scam is exposed via insolvency. Until 2010, Social Security was a massive profit center for the State. Until 2010, Social Security taxes collected exceeded benefits paid. The surplus was not put into a "trust fund". That's an accounting fiction. That money was immediately spent. Because Social Security ran a taxation surplus, deficit spending could occur elsewhere without causing inflation.
Consider this analogy. "Bernard Madoff is running a Ponzi scam. Let's give him another $5B so he can keep his scam running." That's obviously silly. That's what all the "reform Social Security" proposals sound like.
With Bernard Madoff, his scam was stopped and leftover money was returned to investors. The Social Security scam should be stopped and the leftover money should be returned to taxpayers. There's nothing in the Social Security trust fund, just a stack of IOUs. The "leftover funds" is $0.
In many ways, Social Security is worse than any private-sector Ponzi scam. I didn't invest with Bernard Madoff. In the private sector, I can be clever and not be fooled by scamsters. Under threat of violence, I'm forced to participate in Social Security via taxes. Via State lawmaking magic pixie dust, Social Security is not-a-scam, because State lawmakers and comedians say so.
Social Security was sold to the public as an "insurance plan". To maintain that illusion, the Amish were given an exemption. Social Security is an income tax. The complicated "benefit formula" helps hide the fact that it's a tax. It makes it seem like you're paying taxes in exchange for some future benefit. Even for current retirees, they're getting a lousy return compared to most other investments. It's going to be even worse for younger workers.
Social Security is one big Ponzi scam. Anyone who says otherwise is either a fool or a liar. Current Social Security taxes pay benefits to previous "investors"/taxpayers. That's a Ponzi scam.