Charles Ponzi

As Charles succinctly puts it in Things That Matter, “I’m open to empirical evidence.” That is, he is not just worth listening to, but willing to listen. That is why I have spoken up over the years on some of the rare occasions when I’ve disagreed with him – e.g., on the Bush Islamic democracy project (a big part of the enterprise that Charles refers to as “Democratic Globalism”) and, specifically, on the State Department-authored constitution for post-Saddam Iraq (establishing Islam as the state religion and installing sharia as fundamental law – Charles approved, I was a naysayer).

As noted above, Charles told Jon Stewart that Social Security was one of “the great achievements of liberalism,” and – along with its Great Society descendants, Medicare and Medicaid – was among the “achievements of the New Deal.” Ron takes umbrage at my suggestion that Charles, while ingratiating himself to Stewart’s progressive audience, might conceivably have been more generous in describing welfare state programs than he would have been in speaking or writing for his customary, largely conservative audience – i.e., that the latent admiration he has for these progressive nostrums more naturally emerged in a progressive setting.

Am I wrong? It wouldn’t be the first time … but let’s have another peek at Things That Matter. In the main, it is a collection of memorable Krauthammer columns and essays from the last three decades. It turns out there is one on Social Security.

Know what it’s called? If you guessed “Of Course It’s a Ponzi Scheme,” you win the prize.

Writing for his broadly conservative audience in 2011, Dr. K said Social Security is essentially indistinguishable from Charles Ponzi’s classic scam. Now, the Ponzi scheme may be a “great achievement” … but only if we are talking about the annals of fraud.

Dr. K’s column explains that the Social Security program deludes Americans into believing they are making “investments” that will generate dividends. In reality, it is a “pay-as-you-go” scheme in which government spends the money as it comes in, with early entrants getting paid by the “investments” of later entrants. As Charles puts it, “Pay-as-you-go is the definition of a Ponzi scheme.” Ultimately in the latter, he writes, “Word gets around that there are no profits, just money transferred from new to old. The merry-go-round stops, the scheme collapses and the remaining investors lose everything.”