No, social security is not a ponzi scheme
I鈥檇 like to impose a new fiscal measure. Whenever you say either 鈥�America is Greece!鈥� re our fiscal debt鈥攐r anything like that鈥攐r 鈥�Social Security is a Ponzi Scheme!鈥� you have to send $10 to the US Treasury.
Today鈥檚 bond markets have the yield on the 10-year Greek bond at 23.54 and on the US ten-year note at 1.95. So enough about that鈥K?
Social Security is pay-as-you-go. Ponzi鈥檚 scheme was not as it depended on continuous doubling the ratio of contributors to investors (read this wonderful by Social Security鈥檚 historian).
As the above link concludes:
鈥淭he first modern social insurance program began in Germany in 1889 and has been in continuous operation for more than 100 years. The American Social Security system has been in continuous successful operation since 1935. Charles Ponzi鈥檚 scheme lasted barely 200 days.鈥�
Now, let鈥檚 just think for another minute about this pay-as-you-go process.
For much of its long and successful history, today鈥檚 workers have financed the benefits of yesterday鈥檚 workforce. When demographic factors have led to a funding imbalance, as was recognized in the Reagan years (!!), adjustments had to be made to extend full solvency.
Such adjustments once again need to be made and they are not daunting. In fact, the costs of the highend Bush tax cuts are about analogous to the shortfall in Social Security over 75 years, as both are about 0.8% of GDP. And do not be misled by the insolvency arguments: full benefits can be paid through 2036, at which point trust fund is exhausted. But at that point, courtesy of pay-as-you-go, the program can still pay 75% of scheduled benefits.
Now, forgive me if I get a little bit spiritual: as I鈥檝e written , Social Security was designed to 鈥渃reate a strong link between the aged and the working-age population鈥搕oday鈥檚 workers create the capital, the technology, and the wealth that will support tomorrow鈥檚 generation. Embedded in its鈥ormulas is the notion that those of us who came before, whether they were teachers, accountants, homemakers, mail carriers, barbers, cashiers, or lawyers, have built up the productive capacity of our nation.
When the children of these workers come of age (along with new immigrants), they will earn their living from this infrastructure while also making their own contributions. As they do so, we will peel off some portion of their earnings to provide pensions for their forebears, just as those forebears did for their own predecessors鈥ocial Security is thus an elegant collaborative solution to a universal challenge.鈥�
Maybe some people don鈥檛 want to accept the fact that we鈥檙e all in this together, but鈥e are. So unless you want to be sending a crisp Alexander Hamilton into the Treasury, don鈥檛 be talkin鈥� any of this stuff anymore鈥apeesh!!??
