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Kyle-Anne Shiver

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September 9, 2011 - 12:00 am

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.

Some might argue — and liberals do — that the Social Security trust fund, which stored on paper all of the surpluses of FICA taxes paid in by baby boomers, could now be used to pay them the retirement benefits that can’t be gotten from their offspring. Alas, the Social Security trust fund contains nothing but a pile of IOUs in the form of Treasury claims, which in order to pay in real money depend upon hugely increasing taxation on younger workers.

But don’t take my word for that. Please, don’t. Take this official confirmation from the Clinton administration’s Office of Management and Budget in 2000:

These [Trust Fund] balances are available to finance future benefit payments and other trust fund expenditures — but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, make it easier for the government to pay benefits.

Now, that’s the truth. And it was written by Clinton’s OMB director, Jack Lew, who also happens to be Obama’s OMB director.

But in February of this year, Jack Lew wrote in USA Today that the Social Security Trust Fund is solvent until the year 2037 — surely based upon those “bookkeeping” gimmick IOUs, which he forgot to mention this time.

Republicans in Congress are working diligently to produce a real plan to modify the Ponzi elements built into the Social Security system, while the Obama administration continues to lie through its bookkeeping-gimmick teeth. And the alternative-reality left gets mightily annoyed when fiscal realists go after the most sacrosanct pillar in the liberal cathedral.

Rick Perry ought to be considered a one-man Reformation truth-squad every time he utters the phrase “Ponzi scheme” to foaming-at-the-mouth liberal pontificators.

Charles Krauthammer is also a Social Security truth-teller. In March, he wrote of Lew’s duplicitous attempt to shore up Obama’s Social Security propaganda, spelling out the Reformation’s argument in demographic enlightenment format:

But demography is destiny. The ratio of workers to retirees is shrinking year by year. Instead of Social Security producing annual surpluses that reduce the federal deficit, it is now producing shortfalls that increase the federal deficit — $37 billion in 2010. It will only get worse as the baby boomers retire.

In 1950, the worker-to-retiree ratio for Social Security was 16-1. By 2010 that ratio had shrunk to 3-1. By 2030, it is projected to be 2-1. Only in a Keynesian la-la land like the one inhabited by President Obama could this spell anything but Ponzi-scheme apocalypse.

Choices have consequences. And the millions of Americans’ choices not to bear many children, coupled with irresponsible political choices to raid the Social Security trust fund, have rendered “the greatest Ponzi scheme ever devised” just one more bitter fruit in the diminishing Keynesian economist’s orchard.

And Don’t Miss a PJTV Exclusive: “Roger Simon Talks with Perry Adviser Dave Carney About the Governor’s Stance on Social Security”

Kyle-Anne Shiver is an independent citizen journalist. She is a frequent contributor to PJ Media and American Thinker. She blogs at www.commonsenseregained.com.
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