Kerry Thomas Opinion & Commentary

Ponzi’s Social Security Scam

by Kerry Thomas

May 11, 2005

A dead rose by any other name still stinks.

When Charles Ponzi sold his plan for getting rich to an unsuspecting public in 1920, the first people in his program did make money. But it was at the expense of those who were just getting into the plan, at the bottom. His program promised a big payoff, in exchange for a small investment to join the plan.

In other words, it was a pay-as-you-go plan. Now where have you heard that phrase lately?

Ponzi’s system was dependent on getting new investors to put their money into the program, in order to pay out the promised benefits to those who had joined earlier. As long as new investors put their money in, the promised benefits could be paid out on time.

This “scheme” was soon deemed illegal, and was outlawed by the United States government. Only the plan didn’t disappear. It was soon adopted by the very United States government that had outlawed the program in the private sector. The United States used Ponzi’s techniques to design a program that also promised a larger payoff for a small investment. And at first the government program was voluntary, just as Ponzi’s had been. Eventually, the government made their program mandatory for every citizen. But it was and is still a Ponzi scheme.

Today we call that scheme Social Security. It is a pay-as-you-go system, relying on getting new money into the program, in order to pay out the benefits that were promised to earlier investors. It is a pyramid scheme, plain and simple, a scheme that, if it were instituted in the private sector, would be deemed illegal. It’s private sector promoters would be charged and imprisoned.

We all know that the present Social Security system will run a deficit within a generation, as the baby boomers retire, and there are fewer private sector employees paying into the program. The promised benefits far exceed the projected revenues to pay for them.

So what do we do about this problem? Higher taxes and benefit cuts won’t solve the underlying problems inherent in a Ponzi scheme.

In case you’ve bought into the scare tactics of the Democrats, let me repeat what has been previously stated by those in political power. If you are age 55 or older, you will continue to receive the benefits promised you under Social Security. Your checks will continue to come to you every month.

But, if you are younger than 55, there are options proposed.

One option would allow you to remain in the current system, just as it is. A second option would allow you to set aside a small portion of the money you are now paying into the Social Security system, into a privately-held account in your name, which you could direct to be invested according to your direction. You could opt for a conservative investment portfolio, or diversify your investment account into more risky, but higher-yielding investments. These funds would pay out benefits to you according to how well your investments did over time.

One option that would take a generation or two to implement would continue to pay out the currently-promised benefits, but would eventually make the current system obsolete. It is the plan which no career politician dares even discuss in public. This plan would eliminate the Social Security system entirely, and rely upon private investments to ensure the retirement plans for everyone.

In other words, you would be responsible for your own retirement planning. But it calls for one thing that so many today fear: personal responsibility.

With an educational system that frowns on personal responsibility, and an almost ingrained “me-first” mentality in half the population, it will take at least two generations to educate the American People about the values and rewards of capitalism and responsibility. It will take the elimination of scores of government programs that were instituted in the last century to eliminate the need for personal responsibility. It will take strenuous mental conditioning to overcome the utopian dream of the socialist worker’s paradise promised by Marx and Engels and enshrined in the web of the American welfare safety nets.

It will take strength and courage and a belief in one’s own abilities to overcome adversity, achieve, and succeed in life. Are you up for the challenge?