According to the commentariat, Governor Rick Perry has stepped into a pile of electoral cow manure. Perry had the unrivaled gall to tell the truth about Social Security — that the program is, by design, a Ponzi scheme. As President Eloquent might say, the talking heads are “all wee-weed up.”
Personally, I’d like to give Rick Perry a medal for courage and a laurel wreath for leadership. He has signaled his intention to speak truth boldly in terms real people can understand.
Of course, Social Security is essentially a Ponzi scheme, fully dependent upon adequate numbers of new “investors” (workers) to pay off prior “investors” (retirees). But this week, Reason delineated three major Social Security facts that make it far worse than a Ponzi scheme, and audaciously added that Rick Perry was “soft-pedaling” his rhetoric on the subject. From Reason:
One, a Ponzi scheme collects money from new investors and uses it to pay previous investors — minus a fee. But Social Security collects money from new investors, uses some of it to pay previous investors, and spends the surplus on programs for politically favored groups — minus the cost of supporting a massive bureaucracy. Over the years, trillions of dollars have been spent on these groups and bureaucrats.
Two, participation in Ponzi schemes is voluntary. Not so with Social Security. The government automatically withholds payroll taxes and “invests” them for you.
Three: When a Ponzi scheme can’t con new investors in sufficient numbers to pay the previous investors, it collapses. But when Social Security runs low on investors — also called poor working stiffs — it raises taxes.
In fact, the Ponzi scheme/Social Security comparison was first made by the neo-Keynesian Nobel laureate Paul A. Samuelson. Writing in defense of Social Security in a 1967 Newsweek column, Samuelson opined:
A growing nation is the greatest Ponzi scheme ever devised. And that is a fact, not a paradox.
Unfortunately, Samuelson wrote this Social Security defense when America was just entering the huge baby-bust (1965 onward) that followed the post-war baby-boom (1946-1964). The rapidly declining birthrate was in 1967 still completely off the radar of the most astute demographers, which is probably why LBJ was able to sell the nation on the addition of Medicare to “the greatest Ponzi scheme ever devised.”
Samuelson’s generation simply could not conceive of a time — ever — when vast numbers of normal, human adults would willingly curtail their procreation drives in sufficient numbers to produce a bare-replacement birthrate. What Samuelson and his fellow Keynesians failed to account for was the scientific decoupling of sex and procreation, i.e., birth control and abortion. When Samuelson wrote his gleeful, pie-in-the-sky treatise, abortion was illegal in all 50 states and considered strictly against the Hippocratic Oath. Fifty million plus aborted babies wasn’t even on anyone’s possibility radar in 1967. The first birth control pill gained FDA approval a mere seven years prior, in 1960, and it wasn’t until 1965 that the Supreme Court struck down state statutes that made selling birth control devices/drugs illegal.
Throw into this mix the radical ’60s feminist movement, with its hyperbolic attack on traditional motherhood and the role of “non-working” wife, and what you get is a double-whammy to the nation’s birthrate. Hit from both the scientific order (birth control; abortion) and the new demands of women’s liberation, the Keynesian-anticipated wave of new Social Security “investors” was decimated preemptively.
Failure to clearly see the future is at least a somewhat mitigating factor in Samuelson’s over-the-top support for the Social Security Ponzi scheme.
But this is 2011, not 1967. The “greatest Ponzi scheme ever devised” hit a societal sexual revolution that has left Keynesians’ rose-colored glasses smeared with demographic raw eggs.
When Rick Perry has the gumption to responsibly point this out in public, we ought to be sending the guy thank you notes for clarity and leadership.