Monday, November 12, 2007

The Ponzi Scheme Known as Social Security

This is Charles Ponzi and he is the inspiration for Social Security.

A hat tip needs to go to Michelle Malkin for pointing out this story. It seems that Barack Obama has made enemies with the nutroots recently. His crime is pointing out that social security has some problems. Social Security is the third rail for the base of the Democratic Party and much like someone's ugly wife, criticizing it brings an emotional response. He got hit by most of the usual suspects

All of which makes it just incredible that Barack Obama would make obeisance to fashionable but misguided Social Security crisis-mongering a centerpiece of his campaign. It’s a bad omen; it suggests that he is still, despite all that has happened, desperately seeking approval from Beltway insiders.


Barack Obama, please realize that you are assisting the right’s efforts to get rid of Social Security. Their strategy is to make the public think that the program is in trouble and then sweep in with their “solution.” …IS your heart in the right place? Social Security is not in trouble. Stop saying it is.

Now, the right blogosphere is having fun with this little political civil war however they should also remember their own threats against most of the candidates for the Rep nomination because they dared not toe the company line on things like abortion, campaign finance reform, immigration, etc. We all have our third rails and Democrats have among them Social Security.

I don't much care about this little battle. I frankly believe that Obama is better off taking them on. He has nothing to lose at this point anyway and the nutroots turn off as many people as they turn on. I am glad he said what he said and frankly showed political courage that I wish more politicians would show.

That said, I am much more interested in the problems facing Social Security and their solutions. I pay about seven percent of each check to social security and I don't believe that I will get anything when I retire.

A Ponzi scheme works as such. I came to you and promise that if you give me $100 today I will give you say $200 in the future. The way I get your $200 is from other suckers that are made the same promise. This works until I find no more suckers.

Now, the way Social Security works is that today's workers pay for today's retirees under the promise that once they retire, that day's workers will pay for them. That is no different than any other Ponzi Scheme only two things: 1) the government doesn't even hide that it is a Ponzi Scheme and 2) since the government is doing it instead of being illegal it is Social Security.

Frankly, the politicians can raise the age limit or the limit on income or any other limit, and it won't change the fundamentals behind it. If one group is used to fund the investment of another group, that PYRAMID scheme will fail once you have an imbalance in the investors. Say for instance, one month my ponzi scheme had a huge number of new investors and the next month I slowed down. I wouldn't be able to fund the new investors from the first month. That is what is happening now. It wasn't a month but years of baby boomers being born, and now there aren't enough workers to fund their retirement.

Anyone that knows anything about Ponzi Schemes knows that at some point there will be suckers holding the bag. It maybe the baby boomers if we don't figure it out, or it might be my generation or maybe even the generation after us. It matters not. The system is flawed. Social Security is among the worst ideas our government has created. It is a state sponsored legal Ponzi Scheme. That is what we should focus on. Everything else is trivial.

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