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Sunday, October 23, 2016

Will all my readers out there who think Rick Perry’s ruggedly handsome mug should be carved onto Mount Rushmore please stop sending me emails about Social Security as a Ponzi scheme? The astute governor from Texas, apparently one of the country’s leading experts on Social Security, has been running around comparing the federal retirement program to such a doomed investment plan.

I’ve addressed this issue many times before in this column. I don’t want to bore my regular readers with another long dissertation on this topic. But since Gov. Rushmore broached the subject, I’ll make three quick observations.

First: Social Security is not an investment scheme. It’s a social insurance program. (The word “social” in “Social Security” means something!)

In addition to providing workers with a basic and stable income in retirement, Social Security was established to achieve larger goals for our country as a whole. One of those goals was to raise the standard of living of lower-income workers in retirement. This is accomplished with a weighted benefit formula that gives those retirees a higher “replacement rate” — when comparing their average income with their Social Security retirement benefit — than their more well-to-do fellow taxpayers can expect.

Second: Many emailers wrote to tell me how Social Security started out with thousands of taxpayers for each Social Security beneficiary, how we now suddenly find ourselves at a three-to-one ratio, and how the entire scam will implode when we reach two to one. That’s a classic Ponzi-scheme scenario, they say.

Well, obviously, in the earliest days of the program (the early 1940s), workers far outnumbered Social Security beneficiaries — but the ratio was more like 40 to one, not “thousands” to one. But as more and more people quickly qualified for benefits, the taxpayer-to-beneficiary ratio rapidly dropped, and by about 1970, it had matured to the three-to-one ratio that has held strong for 40 years now.

As the baby boomers retire, we are indeed heading toward a two-to-one ratio. But with some modest adjustments to benefits and/or tax rates, the system can continue to operate quite well at such a worker-to-beneficiary ratio.

Finally, third: Ponzi schemes, by their very definition, have short life spans. Social Security has been around for 75 years now.

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Copyright 2011 The National Memo
  • goadsteven

    Thank you so much for this very enlightening information. And let me emphatically state that I am EXTREMELY opposed to Perry and all of the remaining republican presidential candidates,

  • dsram

    Our country is in such a sad state because of slick polititians, such as Perry, who have a way of talking stupid and making it sound realistic and because of those incapable of opening their eyes to reality who mindlessly believe their BS! Unfortunately, common sense isn’t common, especially in our government!

  • peteserb

    The national memo like all liberals prefers to use a different name for a subject. Liberal becomes “Progressive”.Socialism becomes “share the wealth” Wastefull government becomes “Stimulus” Etc, Etc. Never do the libs let a fact get in the way of their goals. The final goal is to turn America into a 3rd world socialist state. No matter what it’s called.

  • historyfan

    I thought the Repubs were the ones who put a “different name” on Social Security. Show me a poor, 3rd world, socialistic government. And I can show you the richest countries in the world (like Sweden, Finland) that may have some socialist aspects but are not socialist.
    Where are your facts?

  • urewoh

    Social Security is definitely not a “ponzie scheme”; nor is it exactly an individual “insurance” policy. It is a “Social” program that for 75 years has been helping to further the “common good” for the nation. It is a tax that all current workers pay to cover current monthly benefits to retirees. Thus, to meet the challenge of covering the increasing benefits being collected by the “baby boomer” generation retirees, there is a critical need to drastically cut the rate of unemployment. Priority must be given to insuring that all our young are educated and acquire the technical skills needed to be employed future workers. We also, as a society, need to reverse the rapid rate of incarceration, especially of African Americans, that removes them from being gainfully employed. Instead of paying taxes into the Social Security Fund and being positive contributors to society, they become costly burdens.

  • Travelstead

    Social Security is not a ponzie scheme. I was a social program to help people when they retire. We put our own money into this program. The government didn’t do anything except spend it starting with President Johnson on the Vietnam war and every president dipped their hands in it since. If it had not been touched there would be plenty of money in it as the Boomers retired. But no, the younger generation wants to blame the Boomers for what the presidents did. If the government put back what they took out it would be viable again. Why dont they?????? It was never to be touched.

  • Newfriend

    If you had followed Tom Margenau news letters, you would know that SS has always bought Gov bonds, which pay interest.(Beter long term investment and less risky).
    The bonds are then cashed in for $$ to pay for SS.
    Thanks Tom Margenau, I for one (of many) have learned and grown due to your news letters.

  • noreasterbybirth

    First, I think certain facts need to be made before everyone, including Mr. Margenau, jump to conclusions.
    Mr. Perry was very clear in his contention that SS was a Ponzi scheme for younger tax payers if the status quo remains. Those were his exact words. Mr. M, you agree with this in your column when you said that with the coming 2-1 payor to payee ratio that is coming, SS will need “some modest adjustments to benefits and/or tax rates” to operate “quite well”. So you are admitting in your own words that SS will need changes to benefits and tax rates to stay solvent. So you are admitting that the status quo will not suffice and that if it were to remain the same, the entitlement known as SS might be insolvent. So you agree completely with Mr. Perry on the future of SS if nothing is done. That’s my first point.
    Second you said by its very definition Ponzi schemes are short lived. Tell that to the people who were duped for decades by Bernie Madoff and probably still wouldn’t know they were involved in a Ponzi scheme if the economy didn’t tank in 2008. Now would I have called SS a Ponzi scheme? Probably not. But Rick Perry is trying to make a point that something needs to be done NOW about SS to save it for the future. He wanted his intentions to revamp it heard loud and clear, so he chose a controversial term and IT WORKED. You all cannot stop talking about the Ponzi scheme and it has opened dialogue no one has wanted to open on an entitlement thought to be sacred.
    Rick Perry is NOT talking about doing away with SS. Let me repeat: Rick Perry is NOT talking about doing away with SS. And even if he was……how do you think he would get that past either branch of Congress? Our president is not a dictator. Not last I checked and balanced.
    Listen to what the candidates say and make your comments, columns in a rational and non-polarizing way. We all deserve the truth and not the political slant of it.

  • Alinfun

    A Ponzi Scheme is for profit…Social Security isn’t but the government has been stealing from it…borrow..borrow…borrow…yea?????