'The Beauty of Social Insurance Is that It Is Actuarially Unsound'

In 1967 in Newsweek of all places (back when it was still owned by the Washington Post and Tina Brown was just getting ready to celebrate her 14th birthday), Samuelson wrote:

The beauty of social insurance is that it is actuarially unsound. [italics in original] Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. And exceed his payments by more than ten times (or five times counting employer payments)!

How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired...

Social Security is squarely based on what has been called the eight wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived. And that is a fact, not a paradox.

“Most liberals had ended the 1960s rather ashamed of the beliefs they had held at the beginning of the decade,” Patrick Moynihan said in the-mid-seventies, and the idea that a 1930s-era program and the demographics that sustained it could be maintained, "for as far ahead as the eye cannot see," as Samuelson wrote in 1967, was at the core of those beliefs. (Which would run smack-dab into the '70s-era notion of "Zero Population Growth," so popular amongst the far left of the time, including John Holdren, President Obama's Dr. Strangelove-esque "Science Czar.")

Forty-four years later though, President Obama is presiding over yet another breakdown of the old liberal order. Or as Richard Miniter wrote recently, “Like it or not, Obama is not the new FDR, but the new Gorbachev: a man forced to preside over the demise of a political system he desperately wants to save.”

Related: "Romney Walks Right into Perry’s Social Security Trap," Bryan Preston writes at the Tatler, starting by asking, "Who wrote this?"

“Let’s look at what would happen if someone in the private sector did a similar thing. Suppose two grandparents created a trust fund, appointed a bank as trustee, and instructed the bank to invest the proceeds of the trust fund so as to provide for their grandchildren’s education. Suppose further that the bank used the proceeds for its own purposes, so that when the grandchildren turned eighteen, there was no money for them to go to college. What would happen to the bankers responsible for misusing the money? They would go to jail. But what has happened to the people responsible for the looming bankruptcy of Social Security? They keep returning to Congress every two years.”

"Answer: Mitt Romney, the same candidate who is now demagoguing Rick Perry’s position on Social Security."

Update: "Chris Matthews: Yup, Social Security is a Ponzi Scheme."

Thumbnail image courtesy of  R. Gino Santa Maria / Shutterstock