A Ponzi scheme by any other name …

by | Apr 5, 2010 | Blog, Capitol Review, Notes | 1 comment

Economic illiteracy has its advantages, especially for liberal agitators who seem disproportionately afflicted by it.

A few weeks ago, the whiny left erupted with feigned outrage when Republican U.S. Senate candidate Jane Norton noted the obvious — that Social Security has become “a Ponzi scheme.”

For anyone who understands economics and the fraudulent way the federal government constructed Social Security, Norton’s observation was a simple statement of fact.

But for the Dependency Party and its fellow travelers, speaking the truth is tantamount to heresy.

According to the Colorado Statesman, Dependency Party chairman Pat Waak “pounced on Norton’s comments.”  Said the quotable but clueless Waak:  “I’m not sure whether she knows what a Ponzi scheme is or not….”

According to the Securities and Exchange Commission: “A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.  Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.  In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.”

Social Security pays benefits to current retirees using money being contributed by current workers.  Because it’s a coercive program operated by government, it doesn’t bother to promise high returns because government simply intercepts money from workers’ paychecks without their permission.

Worse still, politicians in Washington have robbed the Social Security Trust Fund, filling it with IOUs so they can spend workers’ “contributions” on other government programs to help ingratiate themselves to voters.

Clearly, it’s Ms. Waak who is in over her head on this subject, but like so many on the left, knowledge isn’t a prerequisite for pontification, so she twaddles on:  “To take something like Social Security that people have paid into for years and years and are getting their Social Security benefits from, and to turn around and say it’s like a Ponzi scheme — I don’t get it.”

Obviously.

As of 2009, the Social Security trustees reported that the program has an unfunded liability of $17.5 trillion.  For those who practice Waakian economics, that’s how much the program owes to beneficiaries above and beyond what it expects to collect in taxes.

Yes, Americans have paid into Social Security for years and years, and for years and years, the Dependency Party — and, regrettably, too many cowardly Republicans — have been stealing that money to spend it elsewhere.  This year Social Security begins paying out more in benefits, on an annual basis, than it receives in contributions.  The future looks even worse.

Remember, the U.S. Supreme Court ruled that just because we have been forced to “contribute” our hard-earned money into Social Security, we have to right to receive anything in return.

If that’s not a Ponzi scheme, then nothing is.  If it were operated by
anyone other than Congress, its organizers would be jailed next to Bernie Madoff.

Hucksters on the left parrot Waak’s remarks.  A spokesman for Americans United for Change called Norton’s statement “shocking.”  (For those who invest their faith and future in the Nanny State, the truth is indeed shocking.)

That spokesman argued, “Social Security has operated successfully as the same pay-as-you-go-system it always has (been) since FDR signed it into law.”

If Social Security is “successful,” then Barack Obama is a fiscal conservative and Medicare (which has an unfunded deficit five times larger than Social Security) is an outright bonanza.

Thanks to irresponsible spending and unaffordable entitlements, our children, grandchildren and great-grandchildren are saddled with more than $100 trillion in debt.

Nobody I know would do such a thing to members of their own family, but using the coercive powers of government, self-serving politicians have transformed inter-generational theft into standard operating procedure.

I’m glad Jane Norton has the courage and integrity to speak honestly about government spending because that’s the only way we can ever return to fiscal stability and defeat the culture of dependency.

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