Posted by Brad @ 8:43 am on August 18th 2011

Social Security: Still a Ponzi Scheme

Sully published one of my letters in regards to a blog conversation that began with these two quoted bloggers:

Zaid Jilani:

A Ponzi scheme is an economic arrangement where the money paid into the system by later entrants is paid right back out as benefits to earlier entrants. None of these social insurance programs that Perry mentioned fit this definition. They benefit those who pay into them with guaranteed benefits.

Daniel Indiviglio:

Wait — what? Social Security fits that precise definition.

Which garnered a big fat “heh” from me.

And readers have been going back and forth on the matter. And what amazes me are those readers who keep saying “No way – social security is solvent and already has a shit-ton of money in it.

Leading Sully to post two letters in response. The other one (which was better than mine, which was juts a rehash of this post), making a point I honestly didn’t know about:

Social Security is not guaranteed. Sorry to have to demolish a liberal shibboleth. Over 50 years ago, the U.S. Supreme Court ruled that workers have no legally binding contractual rights to their Social Security benefits, and that those benefits can be cut or even eliminated at any time, regardless of how much the worker has paid in to the system. See Flemming v. Nestor, 363 U.S. 603 (1960).

How can that possibly be, you may ask, if we’ve been paying into the system our whole working lives? In truth, Social Security contributions are not insurance premiums. They are simply taxes, like any other taxes, and the benefits are just a form of appropriated spending, no different than farm price supports, for example, that can be eliminated at any time. In other words, if Congress decides to abolish Social Security tomorrow, workers have no legal recourse whatsoever. […]

I dare say that a private insurance company that sold a retirement product while nurturing the belief that customer benefits were guaranteed, when in fact they were not, would be guilty of fraud. Why does it cease to be fraud when the government is doing it?

No Comments »

No comments yet.

RSS feed for comments on this post.

Leave a comment

You must be logged in to post a comment.