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Is Social Security a Ponzi Scheme?

Posted by: Michael Mandel on December 28

(This is the first in a series on technology and the crisis)

In the aftermath of the Madoff implosion, quite a few people have pointed out the parallels between a Ponzi scheme and Social Security. Arnold Kling, whom I respect, has written:

I’ve been thinking that Madoff is a perfect analogy for the public sector. The government gives people money, which it expects to obtain by taking the money from people in the future. Even the Center on Budget Policy and Priorities, not known as a right-wing organization, sees the U.S. fiscal stance as unsustainable (pointer from Ezra Klein via Tyler Cowen)—in other words, a Ponzi scheme.

Other people have gone farther. Paul Mulshine of the New Jersey Star Ledger wrote a column entitled “The Ponzi scheme that Baby Boomers are waiting to cash in on.” And Jim Cramer has called Social Security the biggest Ponzi scheme in history.

Superficially, these critics have a point, and there is a parallel between Social Security and a Ponzi scheme. But on a fundamental level, they are very wrong, and it’s worth explaining why.

First, the parallel. Social Security taxes current workers to pay Social Security benefits for current retirees. In other words, the new entrants into the Social Security system, the young workers, pay off the previous entrants, the older workers. And despite the fact you have a Social Security “account”, there is no necessary link between what you paid into the system in taxes, and what you receive.

That’s very similar to the structure of a Ponzi scheme, where new investors pay off the original investors. As long as enough new ‘victims’ are brought into the scheme, it keeps growing and growing. But when the new investors runs out, the Ponzi collapses. Analogously, the slowdown in population growth puts pressure on Social Security finances.

But there is one enormous difference between Social Security and a Ponzi scheme: Technological change. Over the past century, new technologies have enabled the output of the country to grow much faster than its population. To be more precise, the U.S. population has more than tripled since the early 1900s, while the U.S. economic output has gone up by more than 20 times.

This long track record of technology-powered growth has enabled the enormous rise in living standards in the U.S. and other developed countries. In fact, this increase in productivity—output per worker—is the key fact which gives us our way of life today.

Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix. A fairly minor cut in benefits, combined with a relatively small increase in taxes, will bring the system back into balance again. (the latest Social Security report projects a 75-year deficit of $4.3 trillion. That sounds like a lot of money, but over 75 years it’s roughly $60 billion a year…not chicken feed, but not overwhelming).

But here’s the rub. Ultimately our ability to make good on the “Ponzi-like” nature of Social Security depends on the continued march of technological progress—and in particular, innovation which boosts output and living standards. If we leave the younger generation a good legacy—a sound scientific and technological base, combined with an innovative and flexible economy and an educated workforce—then Social Security is not a Ponzi scheme. The economy grows, and there’s more than enough resources for everyone.

But if instead we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need. If the technological progress slows, then Social Security does turn out to be Ponzi-like—with unfortunate consequences for everyone.

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Reader Comments


December 28, 2008 06:16 PM

"Social Security is Ponzi"-- what a load of load of social Darwinist claptrap, yet another excuse for an extreme form of skepticism that denies any good can or should be generally distributed amongst the people. Social Security takes in more than it pays out. Yep. What it doesn't pay out it invests in the most rock solid investment in the universe--US treasury bonds. The fact that "government" has done such a lousy job of managing our national budget is a problem of government, not of Social Security, which seems to be operating in a fiscally prudent manner with an unusually long time frame. "Government" will have to pay a debt it freely incurred in the open market. Finally, the rules only need tweaking, not major revision, for Social Security to be independently viable into the next century. This is not politics or ideology, it's just math.


December 28, 2008 06:46 PM

Almost any public sector financial woe can be fixed if you raise taxes enough. We used to have ZERO taxes in this country. Now, on average, we pay over a 1/3 of our gross income to federal, state, and local governments while real value of our dollar continues to decline. We're getting robbed on both fronts. The fact is that SS is a ponzi scheme. Read the House Ways and Means Committee's Green Book.

" When the government issues a security to one of its own accounts, it hasn't purchased anything or established a claim against some other person or entity. It is simply creating an IOU from one of its accounts to another. Hence, building up Federal securities in Federal trust funds--like those of Social Security--is not a means in and of itself for the government to accumulate assets. It certainly establishes claims against the government for the Social Security program, but the program is part of the government. Those claims are not resources the government may use to pay future Social Security benefits. The key point is that the trust funds themselves do not hold resources to pay benefits. Rather, they provide authority for the Treasury Department to use whatever money it has on hand to pay them."

It should be shut down.

Bernie Good Madoff

December 28, 2008 08:00 PM

Social Security per se is NOT a ponzi scheme! But national taxation IS. So people receiving something from taxation is Ponzi beneficiary. Taxpayers are Ponzi suckers.


December 28, 2008 08:18 PM

Money sucks.


December 28, 2008 08:18 PM

Well duhh. I've known that for 40 years!


December 28, 2008 08:21 PM

Yeah, if a guy named "Vinnie" holds a gun to your head and demands your wallet, it's called extortion. If the government does it, it's called taxes.

It's time to shut down more than the SS system. It's time to shut it all down. Crime, is crime, regardless of who is doing it.


December 28, 2008 08:25 PM

The Iraq war, national defense or any government funded project is similarly a Ponzi scheme. The evil doers are those who do not want to contribute their fair share of taxes but want to reap the benefits of national defense, roads, etc.


December 28, 2008 08:25 PM

Come on...Social Security is not a Ponzi long as the Govt. can run enough money printers to cover the load.. who thought the govt. can loan 2Trillion dollors to all these financial institutions and where does the money came from ?? when the social securiy starts to runs..thats where the shortfall is going to come out..chill out big guys.. everything will be ok..

Jon Monday

December 28, 2008 08:26 PM

I have spoken with a past member of the board of trustees of Social Security, and he says that simply taking the cap off will completely solve the shortfall. In other words, people making over about $100,000 per year would continue to pay into SS.

No cuts are necessary. No Ponzi scheme comparison is appropriate.


December 28, 2008 08:26 PM

social security is a gov't welfare program for impoverished seniors who have no income due to old age (health problems) and cannot work.

social security doesn't have a big investment fund. if it did have an investment fund as it's a waste of capital to own t-bills for long term investment. all money paid out is financed by taxes or people paying into social security program( welfare program).


December 28, 2008 08:27 PM

"We used to have ZERO taxes in this country."

Not only is this a statement absolutely false with respect to US history, it's actually wrong relative to the history of every society ever.


December 28, 2008 08:28 PM

Technological growth isn't really a difference between the Ponzi scheme and social security. The argument Mandel has used is like saying "Yeah but Madoff is really good at it. And he just got some really good computers to manage his scheme."

It's still a Ponzi scheme, now vulnerable to lags in technological development.

Anyway, I still agree that the social security system is not the same, or is not perfectly parallel to, a Ponzi scheme. Unlike in the Ponzi scheme, social security involved public agreement and social contracts... people know the risks they are taking but agree to provide this public good to past generations.


December 28, 2008 08:32 PM

Congress has been stealing Social Security Funds for years!!!

Robert Laughing

December 28, 2008 08:35 PM

As the corrupt and morally bankrupt vermin in Congress try and figure more ways to scheme, more money for themselves. and reward the Wall Street, Pig Oil and Detroit filth that feed their campaign coffers, remember that Reagan began the PAINLESS way to insure re-election...feed the Greatest Generation FAR FAR MORE than thy ever contributed into Soc Security. The geriatrics VOTE, the young and dumb don' PAY to Play! Congress has more ways to enrich themselves, then TAX meager Soc Security income. Every year, more and more people, PAY more, get less, and PAY MORE in Soc Security INCOME TAXES. Never before, have sooo many, given sooo much, to get sooo little in return...then, have that trinket taxed to death, so Congress can reward the cretins who buy them. TWO more election cycles: we got rid of many filthy republicans, now we must target Frank, Pelosi, Reid, Dodd, Feinstein, Boxer and at least 50 more! If you don't grasp the severity of their wrong doing, stop your whining.


December 28, 2008 08:36 PM

American Capitalism is a Ponzi scheme.
Technology-powered growth is powered by ever increasing consumption of Energy. This can not be sustained for more than few more decades.

Bill Dekle

December 28, 2008 08:36 PM

Of course, Social Security is a Ponzi scheme. The difference is that a normal Ponzi scheme is not also trying to set up a socialist state, which Social Security did. And in fact, the U.S. is now a socialist state, even though it's moved in so slowly and mis-educated our population so much that most don't realize it.


December 28, 2008 08:36 PM

More rightwing claptrap from the Corporatist Wallstreet crowd of thieves that rob America daily!


December 28, 2008 08:38 PM

Social Security would work if the government stop paying people who don't invest in the system; namely spouses who never worked but get their husbands SS when he or she dies. And let us not forget about the kids of these very same people who benefit I believe until they are 18 (not sure of the age).

Then of course there is the trick by the government of raising the age when you qualify for full benefit; the bet being that you will die before you ever get there or if you do you won't live long after that. Finally there are the people (and undocumented types) who pay into the system and die before they ever reach the early retirement age of 62. The real problem from my perspective is outlined in my first paragraph and ditto the remarks of Oldduke.


December 28, 2008 08:38 PM

"Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years,"

But, aren't assumptions such as these, equivalent to the same assumptions that caused the housing bubble and it's associated aftermath? Assumptions turn investing into gambling and that's not a risk that a retiree can afford to make. Couple this with the US Government's willingness to take out loans against SS and "reapply" those funds elsewhere, never to be repaid, and you have a Ponzi scheme, pure and simple. Not socialist crap or other such rhetoric. Cold, hard fact.


December 28, 2008 08:42 PM

Wrong, Michael Mandel!

Technological progress is not the main difference. The main difference is the US government's gun to our heads to make us participate. You see, when Bernie Madoff's investors wanted out, all they had to do was pick up the phone, and attempt to cash out.

When US Social Security's future looks insolvent, and the politicians can do nothing, nobody can cash out. Nobody can elect not to keep investing.

If Madoff had those kinds of rules in place, then he could have operated for centuries before the game was up. That's why Congress was scared to death about letting Bush privatize a little bit of SS - it would have meant the imminent collapse of the system.


December 28, 2008 08:42 PM

What happened to the trillions of dollars, I heard on the news years ago that was so called borrowed by goverment,


December 28, 2008 08:43 PM

SS is a minor part of age entitlements. Add in Medicare and there is no easy fix, as the article implies.


December 28, 2008 08:45 PM

Quit whining.

Taxes are the dues we pay for civilization.

The Dude

December 28, 2008 08:46 PM

Totally Ponzi - SS dollars are part of the 'General Fund' and is also subject to earmarks. Most people don't even realize this.


December 28, 2008 08:47 PM

Arnold King was another part of the problem ,trying to kill the US Government from within!These Cato A-holes wanted our SS money in the Stock Market,idiots!

Tom Holladay

December 28, 2008 08:49 PM

A ponzi scheme Social Security is not. In a ponzi scheme your money is at risk because the perp can't cover a run on the bank. You can put money in but you may never get any of it out unless you are first in line. Social Security is an annuity. You pay in and you usually get much more than you put in if you live long enough because there is somebody behind you not yet of retirement age working his ass off so yo can collect. Once you have paid in, your principle is captive until you retire and start collecting at a fixed rate. You never see the lump sum again. Somebody like your mother or grandmother already collected that. Madoff might not have been caught if his clients had not needed to withdraw funds in the face of the current crisis. By offering high returns he would have continued to collect more deposits to offset normal withdrawals. He was probably left uncovered by a client need to withdraw cash and take profits. The first out reaped the high paper returns plus principle while those who waited lost it all. It appears that several of our leading investment banks were also ponzi schemes that would have been caught short if the government had not been there for them. Their deposits and returns were paper ones based on bubble real estate. We have learned that, so far, we can trust Wall Street even less than we can trust government. Wall Street stuck its hands in our pockets and gambled with our money. Heads should roll. They are lucky the people have not rioted over this. But it is not over yet.


December 28, 2008 08:49 PM


t golstch

December 28, 2008 08:50 PM

yes, social security is a ponsi scheme, so the ethical magots comprising corporate america can abdicate any social responsibility and just keep on collecting the money they steal from this country. why pay any taxes at all? Just throw the sick and poor into the street so you can get that 5th lexus.

Ponzi victim

December 28, 2008 08:50 PM

It seems to me that extorsion is legal and can be verified here -

Keyser Soze

December 28, 2008 08:51 PM

Wow, I had almost given up all hope in the the people of this country, till this guy just got a clue and realized what's been going on in this country since we instituted a 1/3 socialism policy... Now, just take the next step, and join the Libertarian party!

Jimmy Ray Joe Bob

December 28, 2008 08:51 PM

What if we made SS voluntary? Those who want it, pay into it. If you don't want it, then you can opt out and provide for your own retirement? That will never happen because when was the last time any politician gave any money up? Christ will come again before that happens. SS has become an emotionally issue, devoid of any logic or reason and hence we are all doomed to pay higher taxes.


December 28, 2008 08:54 PM

35 year social security solution


December 28, 2008 08:55 PM

"But there is one enormous difference between Social Security and a Ponzi scheme: Technological change."

So....this guy...technological change. Is he the one that pays back all the iou's the government wrote to itself? Probably not. That leaves the tax payers to pay the social security tax and the hidden tax that pays off these iou's. Who do we send to jail for this scam exactly?

Paul Mason

December 28, 2008 08:58 PM

There are only two ways out of this predicament:

a. Cut SS benefits and entitlements.



December 28, 2008 08:58 PM

This same technological progress the author lauds also has led to drastically increased life spans requiring greatly enlarged expenditures for senior social security and medical coverage. Social Security is not sustainable.

The productivity of my hand should be taken from me and "should be generally distributed amongst the people?" Only if I chose to do so, else it's forced servitute to The State.
I'm all for helping people in need, I contribute quite a bit to it, and far more effectively than I've seen any government program do so. To see a portion of my productivity wasted on unsustanable and ineffective programs, where I could have done more with it, is disheartening and frustraiting. There's no social darwinism there.


December 28, 2008 08:59 PM

We should continue to tax, tax, tax the hell out of each and every person that works hard and tries to earn a decent living in this country. Then give that money away to the folks that wanna splurge on those flat screens and used Escalades. Take it from those who work for it and give it to the bums. I like that approach, it's simple.


December 28, 2008 09:00 PM

"Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix. A fairly minor cut in benefits, combined with a relatively small increase in taxes, will bring the system back into balance again. (the latest Social Security report projects a 75-year deficit of $4.3 trillion. That sounds like a lot of money, but over 75 years it’s roughly $60 billion a year…not chicken feed, but not overwhelming)."


Amazing, isn't it, how the author solved a major economical problem in the U.S. with one simple paragraph, and a complete disregard to macroeconomics.

Paul Mason

December 28, 2008 09:01 PM

There are only two ways out of this predicament:

a. Cut SS benefits and entitlements.


b. Print money to pay for these benefits and entitlements, which means hyperinflation, with prices rising 100% per annum or much more.

The lesser evil is (a).



December 28, 2008 09:01 PM


Let me guess, you are getting SS benefits, and much more than you paid in. Me, I will get nothing, and you should thank me for paying in what you did not, yet you are living of of.


December 28, 2008 09:01 PM

I hate to say it, Wayne, but you probably just ended up on an FBI watch list... it doesn't make any difference that your assessment is fundamentally correct - I'm sure your opinion (which I tend to agree with) is considered dangerously un-American by some. (I'm pretty sure the feds already have my name - as an old friend once said, "It's not whether or not you are paranoid - it's are you paranoid enough?")


December 28, 2008 09:02 PM

The numbers stated in this article are incorrect. The chair of the Federal Reserve Bank of Dallas, Richard Fisher, explains that Medicare and Social Security have combined unfunded obligations of over $90 trillion. This requires every citizen (including infants and the elderly) to contribute $330,000 per year. Another alternative would be to divert 97% of the economy to these programs.

Both of these solutions would need to occur in perpetuity in order to maintain these programs in their current form. As such, these programs are unsustainable and will never be able to provide the quality of care (Medicare) and financial support (Social Security) people are planning to receive from them. Tremendous cutbacks will need to be made. The scheme is already collapsing, but there are fun ways to hide the real numbers. More information is available at the Dallas Fed site:

"Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix." -- Ah, the myth of infinite growth!

Mark Schreiber

December 28, 2008 09:03 PM

Mr. Mandel states there's one enormous difference, but there's a more profound difference. A Ponzi scheme is a fraud.


December 28, 2008 09:03 PM

"It's time to shut it all down.."

Uh huh. When Vinnie does put a gun to your head, do you want the police to help you get your wallet back? Do you like roads? These people who don't want to pay into the system still want to take advantage of the system. If you don't like it, go like up in the mountains or move to some other country.

Artemus Ward

December 28, 2008 09:06 PM

Social Security's finances are open for pundits, analysts, or anybody else to review and draw conclusions from. If SS is insolvent, we'll see it coming in time to do something about it, and if we don't, we'll only have ourselves to blame. In contrast, Madoff sent nonsensical statements to his clients and stonewalled any questions. His clients had no idea their money was going down a rathole. The difference is transparency.


December 28, 2008 09:06 PM

I believe there is a major problem with the numbers cited in this article. The population has tripled, I'll buy that. However, our productivity has grown 20x? Maybe when referenced to 1900's dollars, but remember, a dollar today is worth approximately 42x less, so a 20x productivity gain is actually a 2x loss when compared against the same value. Now I doubt the 2x loss is the right number, but it's doubtful it's 20x positive.

The first reply has a serious problem too. "What it doesn't pay out it invests in the most rock solid investment in the universe--US treasury bonds." 20, 30, 50 years ago that was true. However, today the government is printing money so fast they won't admit the rate. As soon as any country decides to call their holding of US debt due, our dollars are doomed. Then this rock solid investment is worth only as much as the electrons it's traded with.


December 28, 2008 09:06 PM

""Social Security is Ponzi"-- what a load of load of social Darwinist claptrap..."
hmmm...How old are you? If you are in your late 50s, you might be right. If you are younger than that, you are missing the point. The government's "obligation" is the same as insurance and annuity companies - consider current and future obligations via actuarial methods. By all knowledgable mathmatical standards, Social Security is operating as a pnzi scheme.
The "technolgy effect" referenced is Greenspan blah, blah from the 90's to explain away what the Fed didn't understand, or didn't want to understand - that the congress had unleashed the biggest source of speculative capital in history in the form of high risk mortgages and home equity loans to super-charge the economy. We now know what a massive miscalculation that was. Let's not pay "see no evil, hear no evil" with Social Security.


December 28, 2008 09:07 PM

Ifthe ouput per worker or population growth slows for the next 70 years, we will have much bigger problems than social security failing.


December 28, 2008 09:08 PM

What happened to the trillions of dollars borrow by goverment from S. S. years ago, it was on news??

mike ryan

December 28, 2008 09:10 PM

I know - this isn't anything new...Social Security has long been known to be the best representation of a true Ponzi scheme. Thanks to Prof. Ken Gauss at Providence College, I learned this a long time ago ('92). It's the best Ponzi scheme, because it reinvests in T-bills, interest-free. What a great concept.


December 28, 2008 09:10 PM

Of course SS is a ponzi scheme. It is as plain as day it is.
Just remember just because the gov. can do it does not mean you can. The gov. HATES competition when it comes to stealing your money.
They just stole trillions using fear tactics, played the media like the morons they are, all to cover their own corrupt tracks. Worked like a charm. The very perpetrators become the self appointed saviors.

TERM LIMITS , we need to throw about 2/3's of the bums out!
Americans (imo) are too far gone to begin to understand how they are being screwed over by the political class.
They just continue to vote the same corrupt criminals back into office time after time.
It IS disgusting how uneducated, voting wise, the general public is .
Political campaigns are nothing more than a Lier's banquet.


December 28, 2008 09:10 PM

BusinessWeek's Chief Economist wrote this article?


To whom should I submit my resume?

Chief Economist


December 28, 2008 09:11 PM

The Government as run by the GOP is broken. Maybe you have noticed that not just the poor are getting poorer. If run properly (like the current Social Security Program), however, Government programs can & do help the average American citizen. Stop bailing out Wall Street & start providing SS & health care to American workers & their families.


December 28, 2008 09:11 PM

They're not really congruent examples. A true Ponzi operator has no actual assets; the US Government has extensive assets beyond the direct revenue of the Social Security system. While there may be deficits for 75 years or so, that will have followed 90 years of surpluses which bought considerable assets - roads, bridges, parks, buildings, etc.


December 28, 2008 09:12 PM

Just as the entire banking and financial sector is exposed for the Ponzi scheme it always was, it's time to stoke up the propaganda about Social Security - which has been operating at a vast surplus for 75 years, and (through purchase of T-bills) finances the discretionary federal budget. A few minor tweaks will keep it going another 75 years.

You want Ponzi schemes? The discretionary budget is a lot like a Ponzi scheme. Wall Street is a Ponzi scheme. The idea of eternal growth in the housing market, mortgage-backed securities and credit default swaps were Ponzi schemes and worse, and bankrupted this country and its people. The Pentagon budget is not a Ponzi scheme, it's just flat-out plunder. The government is primarily an income redistribution vehicle, from the poor to the rich. Where are the columns about that? I guess if it's benefitting the vast majority of the people who actually work to pay into a government pension plan, it has to be very, very bad.

Nick Bustamante

December 28, 2008 09:14 PM

How did the Goldricks mortgage contract get changed with new terms when it was resold into a package where they could not get it modified? They did not agree to any of that and had no knowledge that their mortage loan was even securitized and resold...What the banks did is criminal and they all should be held liable...Now they are been rewared with Baiul money from tax payers..Furthermore I believe our US Government is totally corrupt in how they collect taxes and how they waste and use our tax dollars...Starting with the US Treasury using SS funds just like it was a general fund and the FED printing money by the truckload to devalue the funds that we contributed years ago..It buys us pennuts with its constant loss of buying power..The whole system Sucks..On top of what the Internal Revenue wants from those who are even we pay so much in local and state taxes as well as on many consumption items that most people can not exisit on what is left...It is plain robbery by our Government at all levels...It is time to have a major Tax Revolution in our country and get rid of a corrupt tax system which supports the rich ..lazy and crooks...


December 28, 2008 09:15 PM

The biggest problem with SS is the Trust Fund wasn't invested appropriately. The Trust fund is excess contributions collect specifically to support the Boomers retirement. If we spend it down the fund will be depleted around the time the oldest boomer turns 100 (2046). The projection is SS could only pay about 75% of promised benefit at that point. The bubble is past and it's 40 years out. Given that we can barely forecast the next quarter, it doesn't seem logical to begin worrying about 40 years out. Understand, it's really political. We're going to hear a lot of talk about "fixes" when revenues drops below expenses in the next few years. If we're never going to use the Trust Fund, we should immediately reduce the payroll tax and make it a pay-as-you-go program. Good timing, it would be a good stimulus since the income tax is already.


December 28, 2008 09:16 PM

Social Security is simply deficit spending. Deficit spending is a part of capitalism and is how everyone funds current development.

We borrow against the future all the time and no one calls it a ponzi scheme. The fact that people classify SS as one says more about the bias of the person making the claim than it does about the nature of Social Security.

I mean, really. You'd have to be stupid, ignorant, or deliberately deceitful to classify it in this fashion.


December 28, 2008 09:16 PM

Social security is nothing more than a legalized Ponzi Scam. Bad laws have bad outcomes. Any one who believes that technology is going to save the day on this one is only deceiving themselves. The real difference between Madoff and SS is that an entire generation will sustain such massive losses that the Madoff fraud will look like pocket change. It is very unlikely that my generation will benefit from the SS fraud and I am certainly not counting on SS for my retirement. How quickly some forget that our all knowing administration claimed that our economy particularly our real estate and financial sectors were in great shape up until the day they crashed. As previously mentioned bad laws have bad outcomes. The Federal Reserve Act is a bad law. Many subsequent monetary laws are bad laws. Social Security is the product of bad legislation and just like Madoff everything seem fine maybe even fantastic until the day it crashes.


December 28, 2008 09:17 PM

It should be the respnsibility of each worker to save for his own retirement, if he cannot do that he should go asking money from relatives and friends.

Unforunately if you work and save for 30 years, your money stays the same and prices go up, it's called inflation and it doesn't have to happen.



December 28, 2008 09:17 PM

The SS system will not be able to afford to pay all of the current white people working in our lifetime when they are able to collect it. With illegal labor being 'all the rage' with any company that can get away with it and jobs going over seas, we're done. Technology helping the US stay ahead of the problem? Technology is helping jobs leave the US at lightening speed. The scheme will collapse in our lifetime and my accounting teachers told me this all several years ago to look else where for your money cause it will not be there for you even though you're paying into it....

nick Cook

December 28, 2008 09:17 PM

a good code of ethics which should now be realized; i don't steal music, i do steal from the government.

if it is someone's living, don't touch it. if it is the government's, take it back.

when it comes to the end, the heros are the one that acted first.


December 28, 2008 09:21 PM

I fail to see why our investments in homes suv's and tvs has anything to do with the future output of our society.


December 28, 2008 09:21 PM

People who invest in ponzi have the money to risk and are looking for the return. If it sounds to good to be true, then it is. Social security is different, people are forced to invest and not allowed to withdraw at all until far in the future. In our present economic times it is obvious the treasury can print all the money it wants so I see no fear in SS, I just hope the dollar winds up worth more than the peso in the coming years.

Steven Vasquez

December 28, 2008 09:22 PM

Social Security is a Ponzi scheme and unsustainable for many reasons. First off, Congress has been looting upwards of $150 billion a year from Social Security and Medicare to pay for its out of control deficit spending. This has caused a $53.3 trillion deficit in unfunded liabilities that our children and grandchildren will be paying as indentured servants for the rest of their lives. This is over $430,000 per household, like a mortgage, but with no house to back it up. Second, while technology has improved productivity for some sectors, America has lost its manufacturing surplus, and its output has lost significantly that our GDP will continue to go down, not up. Third, the biggest Ponzi scheme is the Federal Reserve, where as a private cartel of international banks (its a private corporation, not part of the government) it prints money out of thin air and charges taxpayers interest for it, even though the Constitution says only Congress can coin money (interest free). In addition, by printing fiat money, it causes the worse tax of all, inflation, which steals from the poor and middle class, and gives it to the bankers (the same ones that own the Federal Reserve). This is why twenty years ago a single income was enough to sustain a family, and today two incomes is barely enough. Those with fixed incomes like social security and the poor are worse hit. Raising taxes and lowering benefits will just increase poverty in America (currently 1 in 8 and growing quickly). The real solution is to follow the Constitution, abolish the Federal Reserve (central bank) as Andrew Jackson, Thomas Jefferson, JFK, and George Washington insisted, and restore sound money. By not charging Americans interest for the creation of money, we no longer require an income tax (which is also unConstitutional), and limit the government's ability to steal from the middle and working class, balance the budget, and live responsibly within its means.


December 28, 2008 09:25 PM

Social security would be a Ponzi scheme if the ground level investors were getting RICH while the newer entries into it were being promised the same riches, but without any means of getting it. It's a terrible analogy to compare the two simply because no one actually exploits it. Congressmen aren't buying mansions with social security investments - the system pays out to old people who helped protect even older folks. It's not a "get rich" scam; it's there to stop old people from falling through the cracks. Sheesh.


December 28, 2008 09:26 PM

The economic stimulus crap reid, peloski and peeO are pushing is the biggest Ponzi scheme. At least with Social Security millions have and are receiving retirement benefits.


December 28, 2008 09:26 PM

Enough nonsense about the US being a socialist state. In a socialist state, the government owns industry. Here, industry owns the government. If what you errant idealogues mean is a WELFARE state, you're quite right, Those who contribute nothing (the wealthy) receive a public dole (low taxes). That's Reagan/Bush welfare, and that's what we have.


December 28, 2008 09:30 PM

Mr. Mandel, please go back to basics. If retirees get good support that support will always come from current workers. Start there. (Same for bad support.)

You're surely correct: small trimmings (compounding over time, of course) in benefits and small increases in FICA taxes can keep the current system solvent and stable.

Plus you might point out that the Ponzi scheme isn't the only kind of scheme. I'm no expert but I can name bubble schemes, pyramid schemes, and more. The central part of all of them is that they are based on deception. Blogs are inherently "loose ships" but you're running a very loose ship here...


December 28, 2008 09:35 PM

FDR and the legislative branch enacted SS as a stopgap for orpans and widows. Actuarial calculations do not support current trends (able bodied with 30+ years of retirement).
This another Federal Reserve scheme. The US is a vile and corrupt government, unparaleled in modern history.

Mike Mandel

December 28, 2008 09:38 PM


It's much easier for future workers to support the retirement of current workers if real pay is rising over time. And that requires higher productivity, which in turn requires technological progress, sustained over time.

Steven Vasquez

December 28, 2008 09:46 PM

The 4th reason that SS is a Ponzi scheme is that in the next 20 year 78 million baby boomers will enter retirement age, increasing beneficiaries by 100% while those entering the work force will only increase by 17%. There will not be enough to sustain this without destroying the economy with more taxes (most Americans already work over 7 months to pay all Federal, State, County, Property taxes, Sales Taxes, Tolls, Gas Taxes, etc before they start earning income to sustain their families) or to limit benefits (Seniors are already not getting enough to sustain themselves). In short, since Congress has stolen from these "Trust Funds" the same way Enron stole from pension plans, the government and its social programs are the most mass criminal schemes ever.


December 28, 2008 09:53 PM

Everyone seems so smart when I read these comments. Yet, no one ever does anything about it.


December 28, 2008 09:53 PM

The problem with Social Security is that people are living longer and using benefits much longer than there are funds to pay for. This year Social Security will have a nearly 6% cost-of-living increase.

L. Lystad

December 28, 2008 09:55 PM

Read the book "The Coming Generational Storm" by Scott Burns (a well-known financial writer)--it explains exactly what is going on with Social Security and other entitlement programs (Medicare, Medicaid), and outlines a sensible solution. SS is not exactly a Ponzi scheme, but it does take in money it can't possibly pay back.


December 28, 2008 09:58 PM

This is by far the best explanation of the difference between the two that I have seen.

Ponzi victim

December 28, 2008 10:03 PM

It seems to me that extorsion is legal and can be verified here -


December 28, 2008 10:05 PM

If Social Security was the only challenge I would agree with this article, but it's not. With our debt at over $10 Trillion dollars and rising, the fact that many of our states are or will be declaring a state of financial emergency because they can't pay their bills, many of our largest companies in this country declaring bankruptcy, all of the assumptions on how the U.S. pays its debt obligations and keeps its commitment to Social Security beneficiaries can be thrown out the window.

We are going into a deflationary period and wages will be deflated as well. Social Security benefits are paid from worker's salaries. With general world wide deflation, the only way we get out of this mess is by telling debt holders we are only going to pay you 20 cents on the dollar. Of course that puts us back in a credit crunch because no one will want to lend anyone any money.

Ponzi victim

December 28, 2008 10:05 PM

It seems to me that extorsion is legal and can be verified here -


December 28, 2008 10:11 PM

Yes, Social Security has many of the most important features of a Ponzi scheme, and I am glad that some people were taught this by their professors in economics. But did these professors also point out that the Stock Market is a much more pernicious form of Ponzi scheme? Initial purchase orders and other new issues serve the important purpose of providing capital for corporations. But otherwise, the stock market does not create any new wealth, it just takes money away from some people and gives it to others.

Every so often, the stock market crashes. It is characteristic of Ponzi schemes to crash. But the Social Security system, which depends on required regular contributions from participants, has so far never crashed, although from time to time the tax rate has increased somewhat, and undoubtedly will do so even more so in the future.

Medicare is a different matter, because Medicare and private insurance systems have allowed the public to be horrendously overcharged for medical care. The required reform of Medicare will have more to do with reforming the whole health care system than with the financing.


December 28, 2008 10:21 PM

I agree that SSI is a ponzi scheme. Because the current retirees are getting paid from the taxes that the current workers pay. However, the difference between the usual ponzi scheme or the SSI is that ponzi scheme will collapse sooner or later and the very end of the investors will lose all the momey, whereas SSI is supposed to guarantee payment after a certain age from the gov't.
It maybe as hard as many people would believe. US is heading into socialism. SSI is a socialistic idea. Universal medical insurance is a socialistic idea and unemployed benefit is also a socialistic idea. If we are living in a capitalistic country, those benefit will not exist. Living in socialism society isn't a bad idea as long as the gov't encourages expansion of private businesses, institutionalize certain businesses that are vital to the nation to the very minimum, and take care of those who are in need and help those get back to their feet and rejoin the work force. Pure capitalism isn't good. it engender too much greed at the expense of other people. This is why we are in this pathetic economic state right now. Greed has been running rampantly for so long in the financial industry, with blessing of the gov't who encourages self-regulation. Now every single person is paying for it. Maybe gov't fails to realize that with the idea of potentially earning billions of dollars in profit, everyone will get very emotional and fail to distinguish what is right and wrong.


December 28, 2008 10:22 PM

I once read a book, "The Truth in Money Book"
The author, Theodore R. Thoren, surmises that the problem is really within the Federal Reserve Banking System. He claims, in my weak attempt to paraphrase, is that the Fed. creates money, with interest due, but never creates the interest portion. Thus, creating a mathematically impossible situation. A situation in which it would have to collect back more money than it has created. Thus, creating inevitable inflation, crashes, etc.
What he describes is so much like a pyramid scheme.
Does anyone in this group have any thoughts on this?
I mean if the whole financial system is a pyramid scheme, then focusing on things such as SS, Taxes, etc. to try to discover shy the economy is crashing, is like examining the cocktail glasses on an airliner, to try to discovery why it is crashing. Unless of course someone has poisoned the pilot.


December 28, 2008 10:23 PM

I once read a book, "The Truth in Money Book"
The author, Theodore R. Thoren, surmises that the problem is really within the Federal Reserve Banking System. He claims, in my weak attempt to paraphrase, is that the Fed. creates money, with interest due, but never creates the interest portion. Thus, creating a mathematically impossible situation. A situation in which it would have to collect back more money than it has created. Thus, creating inevitable inflation, crashes, etc.
What he describes is so much like a pyramid scheme.
Does anyone in this group have any thoughts on this?
I mean if the whole financial system is a pyramid scheme, then focusing on things such as SS, Taxes, etc. to try to discover shy the economy is crashing, is like examining the cocktail glasses on an airliner, to try to discovery why it is crashing. Unless of course someone has poisoned the pilot.

David E. Connolly, Jr.

December 28, 2008 10:39 PM

After reading all of the comments posted thus far, it seems clear to me that most people realize that our government, at all levels, is stealing from us to enrich the political class, and their friends. But these thieves are in control of the police, the army, and many armed agencies and bureaus that they will sick on us if we even hint of rebellion. This is history repeating itself- as soon as a society allows itself to be taxed, it's all over. Those controlling the tax revenues will invariably become so powerful they can control the people they tax, and extort more and more concessions from them. If our taxes had been used honestly thus far, everyone who desired to be retrained for a 21st century job would have been able to- instead we are the joke of the world- a once great nation now mired in mediocrity and corruption, and run by bottom-dwellers with degrees in manipulating the laws for their benefit.


December 28, 2008 10:41 PM

Social Security isn't a Ponzi scheme. People aren't forced into Ponzi schemes.

Steven Vasquez

December 28, 2008 10:42 PM


Social Security is heading towards failure by 2041. Medicare (and hence, the Federal Government) will fail and be bankrupt in 2019. The government with a $53.3 trillion+ debt will not be able to cover this. Printing more money out of thin air will just make it worse, causing inflation and poverty to grow out of control (think Argentina, Zimbabwe, 1920's Germany, etc). The US already have the fundementals of a banana republic. Its education (K-12) is dead last of all developed nation since the creation of the Dept of Education in the 70s, Its standard of living is falling like a rock, it also has the highest poverty of any developed country. The government is a house of cards on a shallow beach with a hurricane coming soon. There are less gold reserves in the US than Thailand (US used to be #1). There is very little left holding the dollar up, and it will crash soon. Eliminate the Federal Reserve, bring back Constitutional sound money, and stop corporate welfare and government subsidized monopolies.

John Bailo

December 28, 2008 10:49 PM

Social Security is a reverse Ponzi scheme. Workers are coerced into giving up valuable dollars early, then paid off in inflated, less valuable dollars with an income that allows them to live a life of penury.

Younger people, use up those dollars in the form of taxes.

Imagine if all the money paid into Social Security were invested back in the 1980s into stocks. Even with todays market, "Baby Boomers" (a prejudicial term which should not be used) would all be millionaires.

Nice Try, MM

December 28, 2008 10:59 PM

MMMMM, that kool-aid tastes real good!!!


December 28, 2008 11:02 PM

the article would have value if you presented facts and simple math.


December 28, 2008 11:02 PM


Just because the fear-hope is that we are going socialist does not mean that we will accept the governments decree to do so. It is high noon for true patriots to step up and have a tax revolt.

chris tolnick

December 28, 2008 11:08 PM

"Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix"

you are a fucking moron.


December 28, 2008 11:09 PM

Technology has increased output, yes, and this will continue, even in a weak economy.

BUT, technology can also hasten the exhaustion of Social Security. How?

Because technology is INCREASING life expectancies!!! In both direct and indirect ways, technology is making people live longer.

Therefore, the SS retirement ages MUST be indexed to life expectancy. This MUST be done. It is absurd not to do this.


December 28, 2008 11:09 PM

If we eliminate the Social Security tax shelter that the rich receive, there would be no problem. But Social Security (let's not abbreviate it ss, we all know what kind of connotation you're trying to invoke)taxes fall disproportionately on the lower income sections of society, the rich ARE NOT paying their fair share.


December 28, 2008 11:10 PM

Adam wrote: "We used to have ZERO taxes in this country. Now, on average, we pay over a 1/3 of our gross income to federal, state, and local governments while real value of our dollar continues to decline."

There has NEVER been a time in US history when we paid zero taxes. Before we became independent, we paid taxes to England! Remember the Boston Tea Party? That was to protest the taxation imposed by the Brits. And the war with the Brits fought somewhere around 1776? We fought for independence from a country that taxed us without any representation.

Without taxes, we'd have no military, no police force, no roads, bridges, and highways, no public school system, etc., etc. Taxes are in place to provide for common necessities that would be difficult, if not impossible, to obtain individually. I'm not saying that I like taxes, or that all of the tax that we pay is necessary. There's far too much waste and inefficiency in government. But I do know two things. The United States has always had taxes and taxes are a necessary evil.


December 28, 2008 11:18 PM

Of course it's a Ponzi scheme. That has been known since its inception. And it's absurd to say that technology is what distinguishes Social Security from a Ponzi scheme. Population growth and technological innovation are merely what has enabled the Ponzi scheme to persist this long. Those factors don't change the fundamental nature of the program.


December 28, 2008 11:18 PM

One glaring problem with something I read: You will NEVER get congress to reduce social security benefits, the baby boomers will not have it. Honestly, I want to see a poll done that asks baby boomers "If cutting benefits would mean saving social security and saving the government money, would you be okay with it?" You'd be surprised at the results i'm sure...

I want to see congress pass a bill promising me and my generation our money back from social security if it collapses, as I have little faith that it'll be around in 45 years.


December 28, 2008 11:18 PM

Eliminating the cap on SS will do nothing until 2017. Congress spends every extra dollar of the SS surplus. If we give them more, they'll just spend more. If a private corporation spent the proceeds of a defined benefit pension plan like Congress spends the SS surplus, the directors and officers would be in jail, and rightly so. We need to demand accountability with what we do pay in taxes before we allow them to tax anyone more.


December 28, 2008 11:27 PM

"Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production (...)"

Some people should at least read the definition before misusing a term within their usual litany...

Bob Snyder

December 28, 2008 11:28 PM

I'm tired of all the people who keep claiming the economy, the US, this, that, and anything else they can think of is a ponzi scheme. Just because something is unsustainable, does NOT mean its a ponzi scheme. A ponzi scheme is characterized by abnormally large returns, aka a quick buck. A ponzi scheme is a business or investment group, etc that relies on current investment to pay off previous investors without any real business model or investments. Please stop sensationalizing this crap, it's getting ridiculous.


December 28, 2008 11:31 PM

Bernie Good Madoff. You are an idiot. Seriously. I hope you accidentally walk across a road in my city without looking both ways (on roads built with taxpayer money) - and I accidentally hit you. Then, you can take your sorry butt to a hospital and hope there exists some type of relief to pay for your rehab. Or, hopefully not.


December 28, 2008 11:39 PM

Oh, let's just raise the taxes a bit.

No, let's just take the cap off.

We'll fix it by making the age to collect higher.

Technology will pave the way.

We've been hearing this junk for years as the solution to everything. When are people going to get the point. Democrats and Republicans are the same thing. Nobody is looking out for the citizens, just how to cash in on the Trillions we are printing.

How about this to fix social security, have the Fed print up and extra trillion and put it in their bank account. That should cover it.


December 28, 2008 11:40 PM

As originally written, social security paid for itself till the leftwing congressman changed all that to rob those funds to pay the national debt they ran up with their largess.


December 28, 2008 11:41 PM

how about we stop spending hundreds of billions of dollars on our world domination plans? then maybe we can pay for healthcare and SS.


December 28, 2008 11:46 PM

What I do not understand is why the government has instituted such social insurances. SS would be great if the population was constant, and that the gains on the piggybank of the SS program were equal or greater to the interest rate. However both of these are not true, congress has continually borrowed money to fund overspent programs, which fail provide returns equal to an equivalent interest rate. In addition the baby boomer generation failed to have enough children to sustain the program, so this creates an unfair burden on the generations to follow.


December 28, 2008 11:47 PM

So after reading this article...perhaps the author doesn't understand what a ponzi scheme actually is.


December 28, 2008 11:47 PM

I really can't find out what you are trying to prove here? That we shouldn't have ever had social security because it is a ponzi scheme. Doesn't the fact that it has worked for millions of older Americans who had no other source of income after working for companies for many years when they should have. Is is bad because they are people, or should they have invested into a private ponzi scheme that isn't guaranteed? Why shouldn't people be able to put money into a fund that will take care of them when they are old and without income? Most people in this country aren't rich nor do they make a decent enough income to invest much privately. Besides that I believe we have just witnessed the results of small, private investors who invest into the markets. The risk is too high for a person who hardly makes enough to pay their bills and is within months of being homeless in many cases to invest in the stock market. It was a hell of a shill game though where it appeared that people didn't need higher wages, just investment in the market to subsidize their income. We have seen where that has went. I have been hearing this reverse logic for far too long. When the government has a successful program then greedy people don't need to try to loot it for their own profit. Let it be, if it needs tweaked a little because there is an increase or decrease in some variable such as population or income I am sure that Congress will be able to handle that as years pass by. The other solution would be to pay people 50 bucks an hour so that they could save their own money and not have to be dependent on the government when they retire. After all, this country exists for the people, not the other way around.


December 28, 2008 11:47 PM

OK.... lots of talk...but

Why cannot we just "design" a plan to fix the existing system... maybe even more than one...publish them... then get the experts to give us the advantages and disadvantages of each plan...then have a national conversation about each plan...then tell our politicians which one we want... Why to the special interests control the conversation... If we can get that done... then we can work on the plan for Medicare... which is BIGGER problem... and we should not be voting ourselves more entitlements or "free money".... or "stimulus" packages until we get those two things fixed...
Come on people we are smarter than this.


December 28, 2008 11:47 PM

Social Security is a involuntary Ponzi scheme, and don't expect another 70 years of technological progress to save it from eventually collapsing.

Bernie Madoff is smart enough to know that he can not expect another 70 years of bull market to bail him out. I am suprised that Michael Mandell is counting on 70 years technological progress to keep Social Security going.

The Truth

December 28, 2008 11:48 PM

= Watch Peter Petersons IOUSA - Oscar short list for best documentary 2008.


December 28, 2008 11:50 PM

Social Security is not a Ponzi scheme and the author knows it. Even the question is a bunch of rightwing claptrap. Social Security has been an income transfer program from its inception, and it will never work in any other way. Here is another income transfer program for you, stock ownership. Both of these programs require intervention by the state. Why is one "socialist" or "a ponzi scheme" and the other "just honest capitalism"? No reason at all except that owners of stocks don't like to think that they are beneficiaries of state social welfare programs.


December 28, 2008 11:52 PM

The fascinating thing about this article is that it defines whether or not SS is a Ponzi scheme not by its structure, but by whether or not it's sustainable! A Ponzi scheme is still a Ponzi scheme if payouts to current beneficiaries require continued addition of new contributors, whether or not the new contributors can be bilked indefinitely.

But I do agree with the two commentators who observed that SS is un-Ponzi-like because (a) everyone is forced in and (b) no one can cash out on demand. So it's Ponzi, plus force. Lovely.

your face

December 28, 2008 11:54 PM

Thank you Doug, Nicholas, and DS. How freely people toss around all these words, like "socialism" and "Ponzi scheme."

Social security is not particularly functional nor sustainable, but neither does it fit the definition of a Ponzi scheme, as several posters (and the article) substantiate.

The "socialist" policies of the US government only seem leftist when viewed from the extreme right.

Tom K

December 28, 2008 11:55 PM

Mr. Mandel,

Your analysis is unsatisfactory. It makes facile assumptions and is rife with distorting simplifications.

First, your assumption about the "continued march of technological progress," and thus improved output per worker, seems awfully facile. I haven't gotten into any of the empirical data, but I'm not willing to make a multi-trillion dollar bet that technological progress will continue on a linear path for 70 years. Perhaps I'm being too skeptical in this digital age, but I need something more robust than an off-hand assumption. (Recall the off-hand assumptions about real estate markets before summer 2008).

Second (and more importantly, I think), you overlook fundamental aspects of the US economy that render moot a large part of your argument. Since the 1970's, almost all gains in household income have gone to the top 20% of income-earning households; and as of the 2006 census, the top 20% all earned more than $92k. The point is that almost all income (productivity) gains taxable under FICA *aren't* actually taxable under FICA! Don't get me wrong -- I don't advocate lifting the $100k income cap. But much of the gains to which you point won't add a dime to the social security coffers.

I'd also like to hear more from you about healthcare. It's has a large and growing share of US economic output, and technology plays a major role in that. But it's a double-edged sword for your argument, since it also means disproportionately rising medical costs, especially for retirees.

I recognize that I'm probably guilty of the same faults of which I accuse you. I'm certain I've oversimplified things and overlooked important analyses. But no matter how you cut it, the truth is, Social Security is in big trouble. Early investors are getting a guaranteed, handsome payout, and as a young professional I'm left holding an empty bag. The system is unsustainable unless my FICA taxes are raised and my benefits are lowered.

It's not a fraud, but it does look an awful lot like a Ponzi scheme.


December 28, 2008 11:56 PM

How about you knuckleheads get off your butts and actually do something about it instead of sitting in front of your computers and ranting. Myself, I enjoy reading these comments and making my own because I don't have any hobbies. This is my hobby. PLEASE keep entertaining me. Do any of you have jobs? I can ask that because I don't. However, I have enough set aside that I can surf around and make comments when I see people spouting (pouting) off.


December 28, 2008 11:57 PM

you said, "We used to have ZERO taxes in this country."

I have lived in a 3rd world country that had no income tax, no sales tax, no real estate tax. It was "supported" by custom duties, just like the USA of the time when we had ZERO taxes.

Countries like that - and like the USA of those halcyon, tax-free days - have corrupt police whose only real income is shakedowns and extortion, rarely have a free public fire department (those that do exist are poorly trained, badly equipped and they usually have worn out, poorly functioning equipment donated by USA fire companies that are upgrading) no free public libraries, few public schools and those they have are terrible, no street maintenance, no sewers, bad water and hardly anything that works. There is no system of protecting workers from abuse. There is no unemployment system, no retirement system and no pension system.

Those situations are not for lack of resources. I know of at least one such country that exports gold and other precious metals, has one of the most fertile agricultural regions in the world, has a booming tourism industry that serves many millions of visitors per year. But the resources belong to oligarchies that pay no taxes on land or production. Only tourists pay taxes on goods and services.

As a result of the import duties, new autos cost 2 and 3 times USA or country of origin sticker price - or the alternative is black-market autos stolen to-order off the streets of USA and other affluent countries and sold via hundreds of millions of untaxed transaction.

With the exception of situations like the oil-rich tribal or family-owned "nations" like Saudi Arabia or Bahrain or Kuwait, etc., show me a society with ZERO taxes and you will be showing me a dead one. And who would envy the coddled life in any of those oil-rich countries, from Venezuela to Africa, where the price for womb to tomb affluence is the loss of liberty, the loss of religious freedom, the insults to the equal rights of women and the loss of the simple right to object?

An orderly and equitable tax system is the hallmark of a sound and just society. Taxes are the ultimate Pay to Play, and in a good sense.


December 28, 2008 11:58 PM

If social Security is so tenious why has congress been allowed to rob it for years. Should we not be looking for ways to solidify the process. Or do members of congress who did not have a lot of respect for Social Security feel intitled to help themselves to the fund.

Mike Mandel

December 29, 2008 12:00 AM

Tom K:

You note "I'm not willing to make a multi-trillion dollar bet that technological progress will continue on a linear path for 70 years."

Quite understandable. And I'm going to address that issue in a coming post. Stay tuned.


December 29, 2008 12:01 AM

The last part of the article states that if "we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need." I was wondering if Mr. Mandel (the author) could explain how spending my after-tax money afects what the government takes out of my before-tax wages, and how this is depriving the next generation of "a good legacy—a sound scientific and technological base, combined with an innovative and flexible economy and an educated workforce"?


December 29, 2008 12:11 AM



December 29, 2008 12:13 AM

To: WhatTheHeck - Well put!


December 29, 2008 12:13 AM

Mark Schreiber says "Mr. Mandel states there's one enormous difference, but there's a more profound difference. A Ponzi scheme is a fraud."

Are you saying that SS is real, and that when I retire I will get everything the government has been promising?


December 29, 2008 12:21 AM

So SS is not a ponzi scheme because all we have to do is cut entitlements(returns) and increase the cap(new investors). The only difference is SS can force new investors to continue to pay into the ponzi, private schemes eventually run out of new money. The only way to get rid of this problem is to allow employees private accounts in their own individual trust fund. Congress then can't raid the ss fund for their pork and earmarks.


December 29, 2008 12:22 AM

Bob 11:28
"A ponzi scheme is a business or investment group, etc that relies on current investment to pay off previous investors without any real business model or investments. "

The abnormally high returns are just the bait to get greed to overcome caution. The essence is that the newcomers are harvested to pay the first "investors".
SocSec sure looks like a Ponzi Scheme when viewed simply from the new pays old perspective. Oh yea; and when not as many newcomers can play the earlier ones don't get paid.

I was thinking that the big Ponzi Scheme was not really SocSec; seems like the Treasuries they were forced to invest in are an even better fit for the definition. The current US balance of accounts is not a "real" business model. Until the US is forced by the IMF to sell its hard asset in order to complete debt renegotiation, it will not have actually "produced" anything, other than paper Dollars and Treasuries.

The US Dollar may be the ultimate Ponzi Scheme...


December 29, 2008 12:24 AM

SS was expanded decades ago to also provide benefits to the "disabled". My wife tutors teenagers who have been thrown out of High School for smoking too often in the boys' room and calling their teachers some very unflattering names. These teens are then classified as "LDS": Learning Disabled Students. In addition to one on one tutoring, the parents of these kids receive a monthly check from SS in the area of $500 to "care for" their "disabled" child! Check your paystub and estimate how many Americans' ENTIRE monthly SS deductions go to pay for this scam. It's real and it's disgusting.


December 29, 2008 12:32 AM

Social Security in itself was a good idea and worked just fine for years.
The problems started to arise when the government decided that Social Security retirement funds belonged to the government instead of the working people who invested in it and they began to "borrow" money from the Social Security system to pay for other things. None of which has ever been paid back.
What we are now left with is without a doubt a Ponzi system. People pay in to support the system for those that are taking out of it now and have no guaranty from the government that their investment will be there for them when they need it.

Mike Reardon

December 29, 2008 12:34 AM

I’ve seen a public relations campaign all supporting the idea of an “orderly bankruptcy”. The idea is simple - a competitive corporation (GM Chrysler) can not have any legacy costs that hinder its activities. No lasting contract obligations.

Removing labors contract legacy costs - is a standard, but with this (GM Chrysler), forget also the investor who already lost stock valuation as we got down to bankruptcy. The Courts supports restructure of the debt to suppliers and dealers, just restructure or let it fail and another Corporation will reform and replace it without the carrying contract obligations.

But business commentators are going a step passed that, saying if a corporation is distressed even the bondholders have to let go of infringing liabilities.

No need looking into any area consequences the thing needed is only a “orderly bankruptcy” that returns the corporation to world competition. Business is shedding as much social skin as it can right now. Its not going to support and past obligation.

The next public relations campaign after this will come when the banks have to repay the TARP loans and pay Tax at the same time. Get ready for a larger campaign directed away from any social responsibility. Get ready to have any SSI be a major target.

The Obama Administration wants to have social responsibility done by the government, its a great idea. It also the reality that can’t be avoided.


December 29, 2008 12:35 AM

If you pay into the Public Employees Retirement System (PERS) you DO NOT, I repeat DO NOT pay SS. The amount you pay into PERS is almost identical to what you would pay into SS but instead you pay it into PERS. BUT!, when you have done your 30 years on the job you are guarenteed almost 70% of highest annual pay. AND!, if you stay longer it can be as high as 100% of your highest annual pay. I know people who have retired at 52 with 30 years in and are getting a nice fat check each month for the rest of their lives and have never paid into SS. This is the program that all federal and some state workers pay into while the rest of us pay into a losing scheme called SS. You see these people everyday on your way to work. You know, it's that old guy or gal you see out there jogging every morning.

By the way, PERS has been investing in the stock market for years and even the recent crash has not kept them from making checks out to former government employees each month. Imagine if your highest annual pay is $70,000 when you retire you would get about $49,000 a year for the rest of your life. Thats a lot of money if you retire when your only 52.

I am afraid SS is a ponzi scheme. A bad one at that; it's a ponzi scheme that keeps lending money out to a high risk borrower, our government.


December 29, 2008 12:38 AM

Any increases in the American worker's productivity will likely be offset by the shrinking ratio of workers:retirees, especially as life expectancies improve and the population stabilizes.

Increasing taxes will only encourage the government to further mismanage our money (if revenues increase at all), and as with all social programs the demand for benefits will increase, not decrease so it's wishful thinking that we can cut back on the payouts. We'll probably see this time bomb explode in Europe first, so we should have some warning before it all goes to heck.

In any case, Americans need to rethink the government's role in our lives, especially when politicians steal our money with the excuse that they know how to spend our money better than we do. They don't. Americans may not be prudent savers, but our government's profligate spending makes us all look like misers.

I have a novel idea: how about letting the American people be responsible for their own finances instead of being forced by the government to participate in the Social Security Ponzi scheme?


December 29, 2008 12:41 AM

The trust fund surplus was raided like the bag of found money on "Dumb and Dumber," with idiots leaving worthless IOUs every time they took out cash. Now there is not a Social Security surplus, but a deficit. That's beyond inconvenient. How do we rob a deficit? We can't. All we can do that makes sense is default. The alternative is unthinkable.

It doesn't really matter how we refuse to fund Social Security during deficit, let's just think of something and send it to marketing for a little polishing and sanding. Socialism is always good, as is moral turpitude. Actuarial tables are excellent. Ponzi scheme is inspired. Let's rock and roll.


December 29, 2008 12:41 AM

wow, a lot of angry people, a few differing opinions, current and looming economic porblems, and the spector of hyperinflation, and a rising charismatic leader. This whole situation seems so familar.....


December 29, 2008 12:46 AM

Unick - good idea - let people invest on their own, where would they invest? Stocks? Hedge Funds? Banks? It seems we're running out of trustworthy investments - mattresses are looking better and better - as long as you put precious metals there and not dollars.

RonT - it seems your wife is getting paid to educate these 'disabled' kids. That is a problem with the educational system. Kick these kids to the street.


December 29, 2008 12:56 AM

All I have to say is:


Joe Cushing

December 29, 2008 01:03 AM

I didn't know this many people read this blog. 120 comments so far. I don't see the difference between SS and a ponzi scheme. A ponzi scheme is still a ponzi scheme when it is growing and working. Just because we have a way to continue to grow SS, does not mean it isn't s a ponzi scheme and that it isn't vulnerable to collapse in the same way.

Also, while we have increase productivity by 20 times, we have also increased the number of years people live beyond retirement by 20 times.


December 29, 2008 01:14 AM

Ok. Got it. Increases in Technological causes Increases in productivity causes Increases in Living Standard causes Increase in Taxable income causes Increases in Payments into Security "In-"Security. I think there is a few missing elements to this analysis. First, what impact does life expectancy have on the Security Outlays essentially in the future? For the most part, retirement age has not changed since Social "In-"Security was setup. Then, very few people made it to retirement, but now life expectancy is approaching 80 years old, which basically equates to 2 years of work equals 1 year of retirement. Further, when Social "In-"Security was setup, for every "1" retiree, 30+ workers paid into Social "In-"Security, and by 2030 or so, that number will be 2 workers paying into Social "In-"Security for each retiree. Second, we have had two great expansions, Medi-"S"Care and prescriptions drugs. What about these programs that further shrinks a worker's take home pay? Further, let's think about this, consider this liberals, this is the greatest transfer of wealth from those who create it to those who don't and what's more those who are receiving the wealth have the most of it, retirees since the have had a lifetime to build it. So, let me get this straight, I should joyful pay more in taxes to support my parents while I am trying to provide for my family, swell, just swell. The only way Social Security works is if a retiree pays his own way, ie personal retirement accounts. And, this stupid program will only pay an annual rate of return 2.5% at best, great. I am soooo hosed in this stupid program. I might be better off investing in Madoff then Social "In-"Security:).


December 29, 2008 01:16 AM

Two things.

1. The first person to live to a healthy 150 years old is alive right now. It's happening so get on board, aging is going to be cured and a lot of you will be here to see it and benefit from it.

2. Taking is wrong. We didn't have an income tax or social security in this country for a lot longer than we have and people got along just fine.

Now we have 40% of our income go out in taxes and other direct govt. theft. Whatever the govt. decides you're allowed to keep from your earnings is then devalued by the printing press fiat monetary system we have in the USA.

If you're willing to let the govt take your money than you're a slave. No if ands or buts, you accept your owners mercy and generosity that they let you keep some of your earnings (such a good little serf you are).


December 29, 2008 01:17 AM

it seems the american voters are getting less smarter than they were before,this world or USA is in a world of trouble and the us govt is using social security money and medicare money so lookout below when the crash comes.


December 29, 2008 01:38 AM

LOL, you "tax nobody" suckers are in for the most rude awakening imaginable in a few months. You babies have absolutely no idea of what a hard time is, and you are going to learn.

Hey, I've got this really great idea for you guys, line up and take an oath that you'll NEVER EVER take any public money whatsoever, not education money or Medicare or Medicaid or Social Security or unemployment or any other direct government aid of any form, not even loans or ASCS or VA or FHA loans or subsidised loans or grants or work for any company that accepts same.

I'd really love to see you chowderheads put up or shut up. OFC, I suspect most of you are like a tax resister I used to know, he'd file to get the unearned tax payment because he made about 15K a year "living his dream". Ha ha ha ha ha. And a lot of that was from sales of his pamplets on "how to avoid taxes by making no money". So easy a baby can do it, LOL.

Government as a PONZI scheme, LOL, that might qualify as the single most stupid statement I've ever read on the web - and no, you didn't say that directly but you twits certainly implied it in a major and obvious way.

And Social Security is INSURANCE, not anything else, and I defy anyone to find a better funded or more sound insurance program in any part of the private sector. Or do periodic govt bailouts of the private sector insurance companies "not count" against them as being "sound"? LOL.


December 29, 2008 01:46 AM

I thought financial journalists were just gutless people who dared not tell us the truth of our economy. The author of this article goes even further.


December 29, 2008 02:12 AM

"Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years"
I think that is an extremely bold assumption to make. Conditions in this century are vastly different than the ones which fueled America's productivity in the last century. With companies like India and China writing the growth story for the world and the american economy in tatters, this assumption breaches the territory of assumption and enters the territory of baseless assumption. Even if you ignore the today's scenario of the world, 70 years is too long a time period to make any assumptions for any country at any point of time.


December 29, 2008 02:18 AM

Wow. The author of the article is arguing that the defining characteristic of a Ponzi scheme is its inability to make future payments; and since he believes Social Security will be able to make future payments, it is therefore not a Ponzi scheme.

I'm sorry, the author is deluded. The defining characteristic of a Ponzi scheme is that early investors are paid off with funds raised from later ones.

The Social Security program is not "Ponzi-like", it *is* Ponzi.


December 29, 2008 02:57 AM

Madoff's only sin is that his name isn't Madoff Bank. Otherwise that entity would be bailed out. After all banks were doing similar things!


December 29, 2008 03:09 AM

Madoff Bank would've probably got bailed out. Most major banks were doing the same thing, with a different name. Its amazing that none of the journalists reporting about financial corporations ever mentioned it.

Joe Daniels

December 29, 2008 03:44 AM

The grand pyramid scheme is coming to a grinding halt. Finally. Madoff should have been a bank, to have got bailed out. China is selling Yuan bonds, and trading with asian partners in Yuan. Think what this means for the US Dollar in the long term. The US can't print as many dollars any more. This means brakes for Wall Street too.


December 29, 2008 03:46 AM

If Matthew is correct and our SS deficient is $4.3 trillion dollars over the next 75 years it is still less than the Bush debt that he ran up during his 8 year watch. The conservatives seem to be the ones that are screaming the loudest yet they elected Bush so it should be them that have to share in his squandering of our countries treasure. Had it not been for his incompetence or the people he put into positions that required competence we could have solved the SS dilemma.

So it seems to me that these people should just shut up and go sit in the corner with the dunce cap on and write “ I should not vote for a moron that knows nothing about government, economics, management, or anything that is required to run a government” 10,000 times on the blackboard. If you do not like the way SS functions then you need to think before you mark your ballot because it does matter who is President. He has to deal with everybody’s problems, not just yours.

Now as far as fixing the countries financial problems, we need to make those that use our public airwaves to sell their BS, be it talk radio or the printed word or TV take responsibility for what they say. When they lie to incite discontent to build their audience they should be prosecuted for liable. It is not ok to spread lies and both sides of any political opinion should be required and what they claim substantiated with some form of creditable evidence.

The NY Times led us into Iraq with Judith Millers lies supplied by Dick Cheney, just like the TV talking heads are driving us deeper into a financial crisis with their 24/7 coverage attempting to scare the hell out of every person on the planet. Yes we have problems but there are solutions to them if we use reason and logic and not hysteria and lies dealing with them.

Steve Orr

December 29, 2008 06:36 AM

Raise the age of eligibility to say 75. Most of these problems then go away.

People in their 60s are productive and if they stay in the workforce they contribute more, invest more...


December 29, 2008 06:38 AM

Smoke and mirrors baby, buy properties and hold on.


December 29, 2008 07:56 AM

Dude your warped. It's a ponzi scheme. The first person to receive a check was the year 1937- a woman in Indiana. She never paid a nickle into the system but drew checks for years afterwords.

Allan Schwarb

December 29, 2008 08:10 AM

Why is Social Security a Ponzi scheme only if there is no "continued march of technological progress"? What does technological progress or conspicuous consumption (as the author concludes) matter? A Ponzi scheme is a Ponzi scheme, no matter how large.


December 29, 2008 08:18 AM

Nice to see lots of smart and widely varying comments. It would be nice to know each commenters age and occupation so we know who are the ignorant and who know more than the others.


December 29, 2008 08:26 AM

Everybody in this article is wrong:
All of the Social security money is in federal government I.O.U. Therefore, social security is the middle men like that French guy that committed suicide
and the federal government is Madoff.


December 29, 2008 09:38 AM

It seems to me that the fact that for the foreseeable future Social Security may be able to pay for itself does not make it any less of a Ponzi scheme- eventually it will collapse from its internal dynamics. A scam is a scam regardless of how long it takes to uncover it!


December 29, 2008 10:20 AM

The article serves as great support for the ss system, but leaves out one important detail that changes the whole picture.
Social security was designed at a time when the US was a growing economic power, and the industrialization of the country due to WW2 and the post-war era added to that.That enabled the system to work.
For the past 20 years, the idea of a global economy has served to shatter the premises of such a system. Encouraging other nations to compete successfully with our system will lead to an inevitable downturn of the economic productivity of any single country as globalism proceeds. The system cannot support a rising standard of living for 5 billion people.
Capitalism cannot thrive without colonialsm!

Mmmmm, TARP is good eatin'

December 29, 2008 10:27 AM

Why didn't Madoff convert his company to a bank holding company, then he could get some government TARP?


December 29, 2008 10:32 AM

Let me join the other inmates...
Its scary to see some of the responses here. Distill it down the basic statement is somewhere around "the government hates us and is only out to screw us. Any of you ever live in a country where this actually was the case? "God bless America" and "This is the greatest country in the world" are probably statements you would also make loudly if asked, so please, let me ask for just a little bit of perspective and a little bit of wisdom?
SS is not by itself a bad scheme or a bad idea. It relieves the obligation of caring for the elderly by their family in a country where independence and individualism are virtues and where people rarely live in the village they grew up in surrounded by families who have been there for generations as is the case in some countries.
SS is not dead, nor is it a scheme of any kind. It is suffering a unique blow due to the baby boomer generation and that is hardly something that you, I or our government should even think of regulating.
Deal with it.
And to those of you who don't think we should pay any taxes; where is the first place you plan to go if you end up in an accident tomorrow (regardless of your insurace status). A county hospital perchance? Built in part with your taxes? How convenient...

Peter Christiansen

December 29, 2008 11:06 AM

Kevin Phillips in BAD MONEY, and many others, have documented how in 1990, as part of their campaign to destroy Social Security and force everyone to “invest” (give) money to Wall Streeters, Alan Greenspan, with the approval of the first Bush administration replaced the measurement of inflation that determines Social Security COLAs with a bogus measurement that deliberately understates inflation. This actually served two purposes. It made it appear that Greenspan was doing a great job managing inflation when in fact he was doing a terrible ob, and, it gradually reduced the purchasing power of Social Security recipients to in some cases, virtual starvation levels.
Since 1983 the Bureau of Labor Statistics has maintain an experimental consumer price index for seniors (CPI-E) that tracks seniors expenses more closely than the formula currently used to calculate the COLAs. Today’s COLA is calculated based on the habits of young, urban professionals. It doesn’t take into account the rising health care, insurance, and energy costs America’s seniors are currently struggling with,"
According to this (CPI-E) seniors have lost as much as 40% of their buying power since 2000. This of course was accompanied by a fear campaign that suggested that Social Security was insolvent and unsafe and that the only safe and secure way for Americans to plan for retirement was to hand over to Wall Streeters like Madoff ,on a regular basis, a large percentage of their money. Of course today we know which was the Ponzi scheme. Many who have seen their private 401K accounts dissolve before their eyes are now reduced out their retirement on Social Security. Fortunately Social Security is not only fully solvent for years to come.
Actually if people who make more than $250,000 a year had to contribute their fair share into Social Security, it would be able to restore the huge cuts in benefits that Greenspan and the Republicans covertly introduced, and still be fully solvent for the next 50 years, or longer! This would not only enable American to retire with dignity, as Canadians and Europeans already do, but would of course immediately inject tens of billions of dollars of consumer spending into the economy which our economy t needs soon it is to avoid deflation. Unlike the bank give away program which cost middle and low income Americans more than the wealthy, and only benefited bank executives, requiring everyone to pay their fair share of the Social Security tax would only affect the wealthy who can most easily afford to pay, while benefiting middle and low income Americans who have seen their private retirement accounts disappear, and it is guaranteed to provide a huge, immediate stimulus to the economy.


December 29, 2008 11:10 AM

Social Security, from its very inception, was and is a fraud! Whether Roosevelt knew or understood this is debatable. At the time SS was begun, retirement age was set at 65, while the average American lived to be only 63. That is to say, most people would be expected to die before they qualified to draw SS. Then, of course, Congress began to sweeten the deal (in a less-than-subtle effort to be elected/re-elected). Some interesting and thoughtful posts on this thread have been enumerated on this site. If you people think Social Security is in bad shape, please do not examine the viability of Medicare. It will scare the hell out of you! Personally, I am thinking of moving to Australia or somewhere.


December 29, 2008 11:14 AM

A Ponzi scheme is not defined by its long term success, or its ability to be maintained, but simply by its structure. Structurally, pyramid schemes and social security are identical.

What makes social security actually worse than a Ponzi scheme is that you can be denied social security by a central authority figure which perpetuates the system. In most Ponzi schemes, payments back to me are in some way "earmarked," either explicitly or implicitly, so I know I will receive a portion of the contributions from future victims. If I don't get paid, it's because the scheme has run its course and there are no new victims to feed its growth.

Secondly, I can receive social security without having paid my share into it. I at least need to buy into a Ponzi scheme (unless I'm at the top of the pyramid) to make money off it. Under social security, this clearly isn't the case.

Notice how none of these have anything to do with technology. That's because technology does not change the structure of either of these schemes.

It doesn't matter if you are conservative or liberal, if our country is in debt or has a surplus. Social security is a Ponzi scheme, simple as that. You can call me ignorant, but that's all time you could be spending telling my WHY I am WRONG.


December 29, 2008 11:36 AM

This is a useless article because it gives no details or facts whatsoever.

Social Security's solvency is not positively affected by technological advancement. In fact, one could argue that technology has made the problem worse...

On the outflow side of the social security ledger - technology has caused SS recipients to live longer; which causes the amount of money paid out to dramatically increase.

One the inflow side, the money following into the system is based on the number of workers and their annual income. As productivity increases, that means that the amount of goods and services produced increases but the number of workers and/or their salaries remain constant. This too has a negative affect on the solvency of the system.


December 29, 2008 12:09 PM

Technically, the author is correct. Because the government 'always' has more money, (worthless paper bills) it can 'always' pay us back with them if it needs too---they'll just be worthless bills. Let's all be glad Maddoff didn't have his own printing press! Finally, let's get one thing straight---US 'progress' is a direct result of dehinging the dollar from gold, which of course allowed the government to 'print' our wealth at will. So for the past 30 years the government has been running money expansion rates of about 10 percent a year which directly correlates to stock prices increasing by roughly 10 percent a year for the past 30 years. Every president since that time has, of course, altered the definition of inflation which has led to our 'low' inflation rate of 5 percent this year. The US's supposed 'wealth effect' is nothing more than inflation and the will of other nations to carry our debt load (ala holding and using US dollars!). Our prosperity (over the past 30 years) is as 'real' as the prosperity we experienced in house prices. The evil that is government monetization is that no one ever really knows the value/true cost of anything. But that's how swindles work, after all!


December 29, 2008 12:17 PM

Hear hear to taking the cap off! Forget cap gains taxes etc-- why should my SS taxes as part of income be higher than yours simply because I make less than the cap and you make more?

It's just another example of the little guy being held down-- how to break out of low income brackets when your SS taxes and sales taxes consipire to keep you from accumulating excess capital to invest?

I think it was Scott Adams who pointed out, "Beware financial advice from the rich, they don't want company."

Chuck Gaffney

December 29, 2008 12:20 PM

For years I've been saying that SS is a Ponzi scheme, if not the biggest of them all. Since I'm a Gen Y'er, I'm completely screwed for social security. Since I saw any of my job income would never come to me, I started my own company since its the only way for me to really a much early age mind you.

Chuck Gaffney

December 29, 2008 12:26 PM

oh, and lets not forget that the whole corporate model; go to school, waste money in college for a non secure job, then climb the overcrowded ladder to "success" is a load of bull. The definition of a Pyramid scam (Ponzi scheme) is when the people at the top make more money off those at the bottom with no way for those at the bottom to equally reach the top. Just have that in mind when you join all the other "sheeple" at rush hour to please the boss.


December 29, 2008 12:38 PM

Ponzi was a brilliant con man who thought well under pressure but the true inventor of the pyramid scheme was 150% Miller. Ponzi just used the international coupons to give Miller's idea something tangible.


December 29, 2008 12:47 PM

First off, I hope you don't get social security when you are 62 years old. you fuc.king piece of shit to write this article. You calim this to be a Ponzi scheme??? We pay taxes in the beginning you fool and we deserve to ge that back you fu.cking idiot. How can it be a ponzi scheme. They should shut this business week down like they were supposed to. Michael Mandel is the biggest fu.cing jerk off to write this article!!! Fired this motherfu.cker and see where he gets assistance??? Unemployment? Is that a ponzi scheme too? hope you have no job when you are 62 yrs old and then you'll see if social security is a ponzi scheme. ponzi scheme when you are 62.

Andrew Biggs

December 29, 2008 12:49 PM

Mandel says: "Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix. A fairly minor cut in benefits, combined with a relatively small increase in taxes, will bring the system back into balance again."

But Social Security financing is relatively insensitive to changes in technology and productivity, which work through wage growth, because future benefits are indexed to wages. While higher wage growth does help a bit, real wage growth would need to be more than double the rate over the past 40 years to reach 75-year solvency. Lacking faster wage growth, you'd need an immediate and permanent tax increase from 12.4% to around 14.1% (a 14% increase) or equivalent benefit cut. If we wait, it gets bigger.

Mandel also says, "the latest Social Security report projects a 75-year deficit of $4.3 trillion. That sounds like a lot of money, but over 75 years it’s roughly $60 billion a year…not chicken feed, but not overwhelming."

Actually, it's not $60 billion per year, but $60 billion plus interest. By the 75th year, the annual extra cash needed would be (assuming a 3% real interest rate) $60b x (1.03)^75, which equals $550 billion. Ouch.


December 29, 2008 12:53 PM

See, the government hates competition. S.S. is a ponzi scheme, but Madoff was growing but couldn't take the heat.The gov actually prosecuting someone of the same crime it's doing! Not surprised. That's why we need the FairTax Act and we need it NOW!


December 29, 2008 01:04 PM

I blame Bush.


December 29, 2008 01:29 PM

David, the reason that technological advancement is relevant is that with increased productivity, fewer current workers can support more former workers. And as several commenters have pointed out, SS only requires a few minor tweaks to be solvent well into the future, based on current assumptions of population and income growth. And to you anti-tax bozos out there: EVERY society has taxes, and always has. Taxation is not theft. Remember the cry of "No taxation without representation"? As long as the tax laws are passed by your elected representatives, you have had your say, and the resulting taxes are not only legal but an accurate expression of the popular will.


December 29, 2008 01:47 PM

Social Security is worse than Ponzi. In Ponzi you lose your money and you start over. In SS you and your children lose your freedom. It is part of a huge government debt that is being forced on the the back of taxpayers. If you don't pay, you go to jail. It's that simple.


December 29, 2008 01:47 PM

SS is nothing more than another corrupt government program. Originally an Insurance plan (FICA), it was meant to work like any other insurance program. Some win, some lose. Overall, it should provide a benefit to those with claims. The only problem is our politicians saw it as a cash cow. It has consistently brought in more revenue than needed, year after year since day one in 1935. Now for the 3rd time that equation is threatened and once again, they'll make adjustments to continue the excess collections.


December 29, 2008 01:55 PM

Fundamentally, the question is does it promise more than it can deliver? The answer is no, and not just for technology's sake. Benefits and taxes are subject to adjustment to keep the system solvent and conservative assumptions are used in planning. Is the system solvent? We cannot say. It may not be solvent using the assumptions it has used over the years, but these have been unbelievably conservative and have almost always been wrong on their projections. The expected duration of the trust fund has been extended 13 years over the last 10 years. At that rate it will never run out. We simply cannot tell 30 years in advance whether it is solvent or not. Only time can do that.

Mike O

December 29, 2008 02:27 PM

A couple trillion dollars of the "Social Security Trust" are held in US bonds. Due to annual budget deficits these bonds are paid by issuing more bonds. So what happens if foreign governments stop buying bonds realizing they're "investments" just go to paying themselves? It seems like the world's stupidest IOU system.


December 29, 2008 02:43 PM

It is a Ponzi scheme!!! Duh!! The future generations will be crushed by the debt. This is the classic politician scam. Put a program in place, and be retired when it blows up.

The X and Y generations are the SLAVE GENERATIONS


December 29, 2008 02:45 PM

It is a Ponzi scheme!!! Duh!! The future generations will be crushed by the debt. This is the classic politician scam. Put a program in place, and be retired when it blows up.

The X and Y generations are the SLAVE GENERATIONS


December 29, 2008 02:51 PM

Where are these Social Security Trust Funds? Why look into your children's and grandchildren's faces. They are the trust fund.

I have seen plenty of people saying thank god they did not invest the SS money in stocks and bonds - they would have lost 40%. Invested in the government the returns are much more reliable - 100% loss.

Since current retirees put money into the system at a much lower rates and will take out much more than they put in, there is a huge inter-generational transfer of wealth going on to the tune of hundreds of thousands of dollars. We will get a higher retirement age and more FICA taxes. In inflation adjusted dollars the younger you are the more you will be screwed.

Don't forget that part of the SS shell game is the "employer contribution" which is in reality is considered as of your benefit package if you work for a company. When you own a business the reality is more apparent - you pay twice the amount you thought.

As an excercise take out your SS payment history and put the data into Excel and see how much you would have owned if you invested this money in a paltry 4% CD instead. Instead you can hope to receive a fraction of your "investment" in the form of a government stipend in the distant future. If you live long enough to get it and the money is worth anything by then.


December 29, 2008 02:56 PM

While the morality of Social Security is debatable, the opportunity cost is not. Social Security does not take advantage of compound interest.

Social Security would cost less and provide more benefits if it were managed more like a pension fund than a welfare program. The fund has a long investment horizon, and can thus afford to take more risk in order to get higher returns. By investing in things liks stocks and corporate bonds we could pay less into the system and get more out, especially if we redistribute on the back end instead of the front end.

An even better system would be managed like a 401(k) fund, like personalized accounts. This would allow savers to rebalance their portfolio to be appropriate to their age. There are 401(k) plans out there that do this automatically and invest in a diverse array of funds, so even the most financially illiterate investor would be well diversified and properly balanced.

The added benefit would be increased capital to fuel economic (and technological) growth. More capital means lower interest rates, which means more investment and productivity growth. If we redistribute on the back-end we can still achieve the system's socialist goals without sacrificing sustainability or economic growth.

J. Gamez

December 29, 2008 03:00 PM

what would happen if Ford and GM failed?
I keep reading that they are responsible for Millions of jobs. if that is true than the money supposed to go into S. S. would be greatly affected.
would it make sense to read the signs on the wall and have a sales tax increase to shore up S. S.?

Chuck Gaffney

December 29, 2008 03:07 PM

@Vernon, or should I say "Vermin" Who in your dream world is getting SS at 62? It would have to be someone at age 55 or older at this point. From your language and pointless rage, you seem to be a mere kid, if I'm wrong, that's even sadder for you. I'm 25 years old and I'll either have to wait till I'm about 80 year old to collect about $800/month of 2074 dollars or not get it at all since every generation since the Baby Boomers has been smaller and smaller. The current working generations, Gen X, Gen Y and Z have nothing for us making SS an obvious Ponzi scheme. The mantra of "go to school, spend money in college for a good job to then retire" is very very dead. It just doesn't work and those of you who followed it like mindless sheep are just commanding a sinking ship.

Bill F

December 29, 2008 03:41 PM

Technological progress is a two edged sword. I agree it has increased our standard of living so far. What about the future case where robots, computers, automation take the place of most workers. This would make the average American worthless. Who are you going to tax now to pay for SS; a robot? Maybe that's the problem with the current SS system. We are not taxing the robots and computers that are currently displacing workers.


December 29, 2008 04:03 PM

Who will bail out the U.S. Government=taxpayer?


December 29, 2008 04:18 PM

In summation then, paying into social security is investment in America's technological progress. If we remove that technological progress, it becomes a Ponzi scheme. And that is the same with any other investment. Say you bought stock in Enron when they were doing good business. That was an investment. When they started moving debt and toxic assets into shell corporations Enron became a Ponzi scheme.

Titus P

December 29, 2008 04:19 PM



December 29, 2008 05:07 PM

"But if instead we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need."

Investing in homes sure didn't payoff and you know what happens when you invest in stocks! There is no money left to "invest" in flat-screen televisions or SUVs even.

The core of the problem is not social security, medicare or foreign oil. It is the prevailing culture of rewarding crooks like Wall Street brokerage firms and banks, leaving evil doers unpunished such as Dick Cheney and punishing those who cannot defend themselves, like the taxpayers.


December 29, 2008 05:07 PM

The short answer is yes. See this from months ago:


December 29, 2008 05:30 PM

Anon said
December 28, 2008 08:27 PM
"We used to have ZERO taxes in this country."

Not only is this a statement absolutely false with respect to US history, it's actually wrong relative to the history of every society ever.

While, that statement is false, I believe the author meant to say "We used to have ZERO income taxes in this country." That is a true statement. The federal government used to be funded by excise taxes, tariffs and other such indirect taxes. Income taxes were introduced to America by the Revenue Act of 1861 to fund the Civil War, and things didn't really get rolling until the 16th Amendment was passed in 1913. So income taxes as we know it are really less than 100 years old. Hmmm, the size, scope, power, and authority of the federal government has really grown by leaps and bounds during that same time period. Who would have thought that if the government gave itself power to steal your income it would use your money to grow its power and take away your rights and sovereignty?


December 29, 2008 05:33 PM

At the time of the American Revolution, 19 people had to work in farming in order to feed 20. Today one person has to work on a farm to feed 20.


December 29, 2008 05:35 PM

$4.3 trillion in present value terms - this does not equate to $60B a year... This is what we owe today... and next year, we will add 3% to the $4.3T due to inflation...

SS = Madoff on Steroids...


December 29, 2008 06:28 PM

Scial security is a Ponzi scheme no matter how you look at it. These analyst or so called economist, you can not believe, these are the people who did not see the sub prime mortgage, CDO or CSO scheme, did not see the oil price fraud. Best way to deal with Social security, cut the benefit by 25%, increase the eligibility age by 3 years, and also offer a lump sum payment up front to those who have at least 1 million in asset. Encourage people to move to health care city, medical tourism, this will also help our Medicare and haelth system and encorage immigration of young educated people.


December 29, 2008 06:51 PM

Maybe I'm too young to understand why soooo many are complaining about ss but I work in banking. I talk to seniors on a regular basis who have saved for years but unfortunately in the market and their 401k's are now down to nothing. They did everything right but the market failed and thank goodness now they are at least getting some sort of supplemental income from the gov. SS is just like any other insurance...everyone puts in their premium. Some people get into accidents but others will pay insurance and never need it paid out. Its life!


December 29, 2008 07:10 PM

Watch the movie "I.O.U.S.A" then the light bulb goes on and you realize we are being duped by the ruling elites in Washington DC. Social Security is a legalized Ponzi scheme. What gets a regular Joe indicted is used by government to get re-elected.


December 29, 2008 07:18 PM

You have it correct- if you get the invest yourself then you would draw much more than Uncle Sam is promising. Not only that but if you happened to die, which all of us will, your heirs would get what was left over.

Bill Bixby

December 29, 2008 07:21 PM

And how is the banking system any different from a Ponzi scheme when banks lend more than their deposit base? If everyone withdrew their deposits from a bank at once--a proverbial run on the bank--what would happen to the bank? Not so different from Madoff if it weren't for FDIC insurance. What's more, the so-called economic boom caused by productivity was of little benefit to the rank and file workers who experienced virtually no wage growth after adjusting for inflation in the 1990s. This "productivity miracle" Mandel speaks of is a sham and is actually causing unemployment as workers lose their jobs to machines. It is also destroying the environment as GDP is viewed by economists like Mandel as the alpha and omega of economic success. All of that excess production in GDP is laying waste to the planet so that a few piddling profits can trickle down to the masses from the "productivity miracle."

Web Smith

December 29, 2008 07:23 PM

The government took money that was earned and paid into social security and spent it on things that they were not supposed to be doing. If the money had been saved, like it was supposed to, and invested in things like municipal bonds, the social security cup would runneth over and our infrastructure would not be falling apart. Our retired people and our elderly would be enjoying much better lives instead of struggling with income that doesn't get them by. Instead, they chose to spend it, give it away, and keep it on the books as a future liability. Now they want to claim innocence and tell us that it's broken. The automakers did the same thing with the pension funds because they had to give them away in the form of dividends in order for the CEOs to keep their jobs. This is government theft on behalf of special interests.


December 29, 2008 07:37 PM

Fascinating array of comments, like when the good teacher chooses an interesting essay that touches on controversial ideas and then asks for student reactions -- some will reveal their personal preconceptions, and a few will address the whole and may bring insight or new information. It always makes for lively discussion.

I am particularly struck by Tom K's point that due to most recent wage gains being confined to upper incomes, "almost all income (productivity) gains taxable under FICA *aren't* actually taxable under FICA". I've suspected that this is exactly what led to that last Social Security fix coming undone, but have not been able to find quite enough data to do the numbers myself. Bill Richardson (Commerce secretary nominee), who has a better chance of getting the data than I do, made a statement that assigned the deficiency specifically to the failure of this one assumption -- the assumed wage increases of participants who make less than the cap.

I gather that the importance to Mr. Mandel of technological advance is to provide that missing kick to the incomes of those who contribute the highest wage percentage to Social Security. If it is not also accompanied by social innovation that allows more workers to participate in productivity advances, then I agree with those who thank it will not save Social Security. I also happen to agree with those who think it is a perfectly reasonable insurance/safety net that need not be burdened by private enterprise profit motives and desire to transfer risk to the individual.

It is a mean spirit that would deny this protection to the least capable. If those who are capable were actually providing the trickle down or the raising of all boats that they imply will result by letting them out of the most meager obligations to the common good, then perhaps I could be pursuaded otherwise, but I see no evidence that they are doing it.


December 29, 2008 07:44 PM

Ok, SS is not a Ponzi Scheme. There is no connection. This is just the right wing media trying to prove that TAXES are evil. If you honestly think so your caught up in their game. SS helps generations who should not have to work any longer. Sadly the writer forgot the most important detail of why SS is not a Ponzi scheme. That is Ponzi is a type of CON GAME! SS is not a trick or a lie. SS was never suppose to be mismanaged like this. It is sad that it was but that doesn't mean you give up. Congress has become corrupt because of corporations funding special interests, and much more. Time to ousts congress and start anew.


December 29, 2008 08:41 PM

YES---Social Security is a ponzi scheme and it's over due for a cleaning...


December 29, 2008 08:55 PM

If you want an example of a publicly funded retirement program that is a Ponzi scheme, Social Security obviously does not qualify. Howevr a perfect example of a publicly funded retirement program that is a Ponzi scheme would be the California Safety Retirement program that is the major cause of the growing deficit there. California allows police, fire and prison guards to retire at 55 years of age, at 90% of their salary. Sine police officers, fire fighters and prison guards in California average $150,000 and up, in salary and benefits ( and only work 62% of what would be a ful-time job in the private sector)this means there will very soon be more retired police, fire and prison guards in California than are actually working, and this number will rise each year which means California tax payers will be faced with having to fund not only the highest paid police officers, fire fighters and prison guards in the world, more and more of whom will be retired and probably living in other states where they won't have to pay California taxes.


December 29, 2008 09:24 PM

For those who shout love it or leave it at the mere mention of disagreeing with government policy, let me preface -- I'm planning in 2010 to leave it.

I'm disgusted with the complete stupidity of people who don't realize that the payroll tax impoverishes the person who makes all their money through labor versus the person who gains through capital. And beyond furious that people are truly dumb enough to not have figured out that Congress has used the so-called Trust Fund to further transfer wealth from labor to our corporate overlords, leaving nothing more valuable than a blown out hankie. If Social Security was truly a program to help the impoverished senior, then why not issue the Treasury Bonds directly to the seniors instead of practicing this department-to-department financial legerdemain??? Because then the IOUs would have to be paid off.

I'm sick of our war machine. I'm sick to death of pointless cultural revanchism in the form of Proposition 8 in CA. But more importantly, I'm sick of being robbed to pay for the kleptocracy. That includes you, OldDuke. Pay your own way, man. I have to ...

So long to you all in 2010. Enjoy the crumbled husk of this decayed giant and enjoy paying your own bills without my money.


December 29, 2008 09:32 PM

I don't quite understand the reasoning. If today for example we have 10 workers for every one retiree, then each worker has to pay 10% (for simplicity's sake) towards that one retiree. If in the future we have 2 workers for every one retiree, then each worker has to pay 50% of his salary towards that retiree. That is not a small tax hike. I don't understand what I am missing here except maybe that SS is indexed for inflation while future worker earnings will outpace inflation. If that is the case then it is not a free lunch because the future SS recepients are locked into today's standard of living and prevented from enjoying the productivity growth.


December 29, 2008 09:54 PM

per your comment today


December 29, 2008 10:38 PM

I have to chuckle at all the people who try to spread rumors about social security's failure. It isn't even a remote possibility.


December 29, 2008 10:46 PM

It's definitely a Ponzi scheme. We'll see it in about 30-40 years from now. The government uses the SS money to fund other non-SS related projects as well as to pay out SS incomes for current retirees. This will create a shortfall in the funding overtime until it become a "SS financial tsunami". I'm for SS; however, it needs to be fixed now by our naive politicians until it's too late. Don't wait 'til things start to hit the fan because at that time no one will be able to bail us out at all.


December 29, 2008 10:49 PM

"And to those of you who don't think we should pay any taxes; where is the first place you plan to go if you end up in an accident tomorrow (regardless of your insurace status). A county hospital perchance? Built in part with your taxes? How convenient..."

Actually, hell no - there is no freaking way I'm going to a hospital in the US if I get in an accident - have you seen the medical bills?!?!?

Oh, and so much for American 'insurance' programs - $1500 limit/yr, when just the Ambulance ride costs in excess of $3,000-$4,000 - where have you been?

Simple facts....and the fact is that, regardless of whether social security falls into the category of a 'Ponzi Scheme,' it's still a load of BS because people are forced to pay in, and thanks to inflation and population fluctuation (not to mention Congress 'borrowing' money), MOST get less out of it that they put in. In a way, it's a forced reverse-Ponzi scheme, I guess.

The biggest, and cruelest, difference is that the generation coming into this world right now doesn't have a way to unsubscribe from it.

Heck, we can unsubscribe from crappy mailing lists, we can unsubscribe from spam phone calls (for the most part), but we can't unsubscribe from a shitty program run by a bunch of criminals that set up cartels to do the work for them that they don't want to admit to doing themselves.

Like a forced magazine-subscription, I guess....except that we're almost at the point of 'going Mayan' and walking away from the low ROI.


December 29, 2008 11:02 PM

I think you are all redundant.
Doesn't anyone have any new ideas?
I've heard every argument on this page so far, and they're all old, tried and over with.
Someone please come up with something new, that is relevant to this new economic situation.
This is not 1929, this is not 1999, this is, (essentially) 2009.
We have not even begun to see the full impact of this financial situation. Not even close. We have to pull together here to survive.
This is not, do I get to keep my McMansion, or my Hummer, this, do I get to eat?
Oh, my God, this is gonna be hard.


December 29, 2008 11:02 PM

I think you are all redundant.
Doesn't anyone have any new ideas?
I've heard every argument on this page so far, and they're all old, tried and over with.
Someone please come up with something new, that is relevant to this new economic situation.
This is not 1929, this is not 1999, this is, (essentially) 2009.
We have not even begun to see the full impact of this financial situation. Not even close. We have to pull together here to survive.
This is not, do I get to keep my McMansion, or my Hummer, this, do I get to eat?
Oh, my God, this is gonna be hard.


December 29, 2008 11:49 PM

To Oldduke and other like minded fools,

Yes, my socialist friend, Social Security is a Ponzi scheme.

Let us review the basic con. You take money from one group of people by promising them extraordinary returns. You keep the promise to this first group my making the same promise to a second larger group. Then when the second group comes asking you pay them by making the same promise to a yet larger third group. As long as you can keep this up no problem. But you can't. We call this a pyramid scheme because you progressivelly need more victims to keep it going. The key here is that no new wealth is created just a promise is being made to different sets of people. The fact that the government is doing it, or that the population is assumed to be growing (not guaranteed by the way) or that the current generation is always going to be richer (again not guaranteed) does not alter the ethics of what is happening.

Ponzi schemes favor the bold as Madoff has just shown us. It was the boldness and the grandness of the con that allowed him to get away with it. I am sure when the whole Social Security system comes undone people like our author will be wondering what happened.

If I wasn't being forced to participate I would be laughing my butt off at the stoupidity of the comments posted here.

At the end of the day Tocqueville was right, we get exactly the government we deserve.


December 29, 2008 11:58 PM

Last time I checked people got taxed on earnings not productivity. Real wages for the majority of earners have remained stagnant for at least 30 years even as real productivity measured in the form of Real GDP increased.

If you don't believe me check it out:,0,2715648.column

Now for some schooling for ASSumptions.

1. People investing in the tech bubble ASSumed stock prices would always go up.

2. People ASSumed house prices would always go up.

3. The authors of SS ASSumed population levels would always increase.

4. Madoff ASSumed he could find more people to pay in.

5. Now the author ASSumes that productivity will only increase in the next 70 years.

Please raise your hand if you see a pattern here.


December 30, 2008 12:44 AM

Social Security IS a Ponzi Scheme. Further, the fact that US worker productivity has gone up 20 times while population has tripled since 1900 is irrelevant! What that means is that a worker today is 7 times as productive as a worker in 1900. But back then, 97% of the pop. lived on the farm. Today, its 2%. Plus, when SS was created, the avg. life expectancy of a white male was 68. Today, its 80something. Back then they worked 40 years, retired and got benefits for 3 years and croaked. A newborn in 2009 is expected to live to age 100! That's 35 years of benefits after 40 years on contributions. What needs to happen is that Social Security should be converted into Term Life Insurance with paid-up additions. That way, every person gets some vale for what they paid into it and it NEVER goes broke and it can be willed, tax-free to heirs.


December 30, 2008 06:14 AM

Social Security is a redistribution of wealth from the workers to the wealthy

They use social security for welfare foodstamps etc

They have us workers pay to help build competition against us by foreigners

Welfare recipients spend all that money

Investors get richer


December 30, 2008 06:17 AM

Social Security retirement is not welfare because the recipients paid into it

Using SS for welfare seems wrong while they let in foreigners to keep wages low and tax American workers to support a welfare class that just gives our money to the investors through groceries and rents


December 30, 2008 09:49 AM

Generational Insensitivity
Driven by an ever evolving sea of political emotions, individual differences become very pronounced. Eventually our differences define tolerance levels, and when violated we tend to push back, and when enough people push back, things change. The question is where is our collective tolerance level? One tolerance level we’ve developed over the past 25 years reveals where we are as a nation, and where we’ve regressed to as a people. Anyone who rises above the political firestorm of the day would agree that we’ve become a generationally insensitive society. The one issue that clearly demonstrates this insensitivity is social security, and the accompanying “I’m entitled” mentality. Saving social security has rendered an entire generation incapable of defining their tolerance level, while another generation endures financial hardships to meet their collective needs. Social security has become the monetary weapon of choice; senior citizens have become the political hot button of choice, and millions of working Americans have become the unwitting financial victims of choice.
Twenty five years ago, congress passed legislation that took social security from a pay as you go tax structure, to a pay in advance taxing scheme. One generation of workers were called upon to begin paying more in social security taxes than was needed to fund another generation of retirees. Maximum social security taxes increased over 300% in one ten year period, and average working lifetime social security tax contributions went from 5.15% of gross paychecks in 1980, to the current tax rate of 12.4%. Politicians said paying more in social security taxes would fund a rock solid saving and investment plan that would be available for the now retiring 78 million baby boomers; they said social security was fixed for the next 75 years. Reality suggests nothing could be further from the truth. Politicians implemented their own scheme, and have spent every last excess (operative word) social security tax dollar on something other than intended.
Each week, millions of average working Americans pay billions in excess (operative word) social security taxes into the social security trust fund. Politicians violate the peoples trust by issuing a special obligation bond, or IOU to replace and transfer the excess social security tax money to the general revenue fund. In effect each excess dollar paid in social security taxes, becomes a new dollar of social security IOU debt. In 2007 alone, 190.4 billion dollars of new social security IOU debt was created, and total IOU social security debt now approaches 2.4 trillion dollars. This tax scheme is financially devastating to the very workers senior citizens rely on for funding their social security checks, yet it’s tolerated, and even encouraged, as a vigil of silence surrounds this issue. Why the silence; Is it because of political persuasions, is it due to lack of subject matter knowledge, is it fear of losing a retirement check, is it fear of looking like a conservative, or acting like a liberal, is there a disconnect between the retirement world, and the working world, or simply put, are we just generationally insensitive?
Continued tolerance means a green light for politicians and their cronies, who continue to spend billions of social security tax dollars on something other than intended; they have no intention of quitting. If changes aren’t made soon, the seniors who find it difficult to raise their voices in objection today, will be raising their voices in protest tomorrow, as reduced benefits will be necessary to offset the funding void left by this taxing scheme. As a starting point current retirees (I’m one) could begin by lowering the “I’m entitled” banner, and raising the “enough already” flag. Regardless of your political persuasions, and irrespective of what mile marker you are at in life, I hope you will take this as intended, and join me in raising your voice, and bringing an end to this era of tolerance, and generational insensitivity. PUSH BACK, the future of our children and grandchildren and by extension America is at stake. You may join us in raising your voice at

Mike Mandel

December 30, 2008 10:50 AM

Randy writes:

4. Madoff ASSumed he could find more people to pay in.

5. Now the author ASSumes that productivity will only increase in the next 70 years.

Please raise your hand if you see a pattern here.

Well, productivity has risen for the past 200 years because of technological progress and capital accumulation--if it stops now, we are going to be in really bad shape.


December 30, 2008 12:51 PM

Whatever you want to call it, the government has not handled our money responsibly.

If my wife gave me money to save for our kids college and I went and spent it and just left my kids some IOUs - that would be downright irresponsible.

Social Security is the same concept. Whatever you call it - it's structurally broken.


December 30, 2008 02:18 PM

Why didn't my comment get posted? Whoever is editing and filtering messages, please contact me immediately with the reason. My comment was just as relevant as any other comment here. I am very angry with BusinessWeek.

Mike Mandel

December 30, 2008 02:41 PM

To theLeahAK:

I approved pretty much every comment, and I don't remember yours. Go ahead and post it again, and if it's a problem I'll let you know directly.

Mike Mandel

December 30, 2008 03:10 PM

To theLeahAK:

Oops...I found your earlier's approved now.


December 30, 2008 03:11 PM

Of course it is a Ponzi Scheme. The author's argument that it isn't one must be a joke. Basically, he is saying that so long as the government never gets caught it is doing nothing wrong. The same can be said of all Ponzi schemes: as long as they work, no one gets hurt. The problem is that they ALWAYS fail and so will SS.

Joe B.

December 30, 2008 05:28 PM

The SS Ponzi Scheme is no different then the government borrowing to pay debt.

Buster Hymen

December 30, 2008 07:17 PM

I CANNOT believe the limited faculties most folks have here (at least the first 50 or so I read before I had to purge).

Of course it's a Ponzi scheme, of course the people who say "don't worry about it," don't have a clue. Of COURSE the people recommending cutting this or raising that are not referring to THEIR taxes or benefits.

It might not have been a Ponzi scheme if there were ANY assets left from ANY of the money collected (at an excess rate in anticipation of the now-pending generational issues), but just like that classic Christmas movie starring Jimmy Stewart, "It's a Really Crappy Life, and the Gov't is Going to Screw You", "The money isn't HERE in the bank (lock-box) it's in Senator Kennedy's bridge, and Speaker Pelosi's BART,no, you've got it all wrong...".

And right after the author came-up with "technology" saving us idea, a gorilla flew out his butt.

You WILL find the income cap removed, you WILL find that you "make too much to qualify" for the "benefits" that you thought would be your's one day.
For you chipper folks saying just to raise payroll taxes or remove the cap...well, I guess you're not anywhere's near that cap then are you? But you're at risk too, when you discover your now-former employer had to let you go due to too heavy a cost to him by way of payroll taxes. Careful what you wish for.

Most of you could have best served this forum by repeatedly typing "bleet". The words you instead typed say the same thing, and it would have been less taxing for you.


December 30, 2008 07:22 PM

Limits To it!...circa a book modeling the consequences of a rapidly growing world population and finite resource supplies, commissioned by the Club of Rome.
The curse of getting old is watching every generation make the same mistakes.


December 30, 2008 08:07 PM

Our leaders should have called social security a TAX which it is and with this TAX they give money to people who are a certain number of years old. The money that has been paid into the social security system has been spent either by giving the money to people who are a certain number of years old or it has been spent helping the standing politicians get themselves relected so that they can and could spend more of the social security TAX collected. There is no money pot with your social security payments in it. There is no money. As long as the social security system remains an active govenment program, the government will continue to collect TAX to pay people who are a certain number of years old until the day comes that the TAXPAYERS say no more and vote the bumbs out.


December 30, 2008 08:19 PM

I wonder why some of thr BW submit comments sites go through a screening process and then if approved are put at the very bottom of the comment list while other BW submit comments sites post ones comments right away and they put the latest comment right at the top of the list? Kind of sounds like one department does not know what another department is doing. Good way to run an unsuccessful business.

SSA Benefits Authorizer

December 30, 2008 08:47 PM

I'm a Benefits Authorizer for SSA and this article is lacking serious concrete facts and evidence.. aka, it's full of cR8pp!

Gary Pierce

December 30, 2008 10:13 PM

Clearly this article is rock solid with its reliance on brilliant theorists such as Jim Cramer ('Bears Sterns: buy it; Lehman Bros: buy it') to support its general positions. Perhaps only citations from Joe the Plumber and the deranged guy under the bridge are needed to really send this home.

Madoff, I mean Mandel, spend a little time with the unemployed, the ill and the homeless before you spout crap like this. Oh who am I kidding, I'm sure youre ensconsed in a golden pillow unavailable to most Americans (and certainly unavailable to the vast majority of the world's people. Likely you really couldnt give a rats ass about those less fortunately than you.



December 30, 2008 10:20 PM

There is nothing you can do about it. Our government loves SS funds and keep taking money from our saving.


December 31, 2008 12:09 AM

SS can be considered a ponzi scheme for all the reasons blogged here, but only on one condition - that our contributions are considered an investment.

That was never the intent of the program, and I for one consider SS as a social insurance program. What does this mean to me in my mind?
1. my contributions, and my employers, are premiums. Its not an investment I'm intending on getting a personal return for. The return, if any, is in a decent society to see my grandchildren and their grandchildren grow up in.
2. I understand that everyone has to play for this to be viable going forward. You can't "opt out" or privitize part of it - the math doesn't work.
3. I hope to never be in a position to need to make a claim on this insurance, but I know its a possibility for me and a certainty for many.

Fine, so everything's ok if its insurance instead of an investment scheme? No, I'm not that silly. For one, this IOU crap has got to stop because any insurance plan has to have real assets to pay out. I'll be using my vote to get it done and I invite you to do the same.

And for the yucky medicine I'll have to swallow to make it all happen? My income has exceeded the FICA cap the last two years and hopefully will continue to do so, but I'd be willing to see the cap go. I'm also willing to have SS "benefits" means tested, so that if I don't need it when I'm old then I won't be eligible to make a claim. I'd even pay a bit higher taxes to get this program, and others like medicare, on firm(er) ground.

Yes, I'm lucky enough to be able to afford it, and yes, I work hard for my money. For the anarchists out there, let me save you the trouble. I'm a goverment loving leftwing wacko socialist- there, happy now? Doesn't bother me a bit. Regards

Big Ern

December 31, 2008 12:52 AM

The Congress and Senate are not apart of our SS system...thus they do NOT touch that money,in any way shape or form..They have their OWN SS system....DUH! We are Ponzi-ed!!! They screw with us, and keep them selves safe...REALLY!! check it out.

John Lubeck

December 31, 2008 01:02 AM

Reader Adam makes a point about taxes: "We used to have ZERO taxes in this country. Now, on average, we pay over a 1/3 of our gross income to federal, state, and local governments while real value of our dollar continues to decline. We're getting robbed on both fronts."

Adam, you drive to work on roads that were constructed by your taxes, you eat food and receive medicines that have protections paid for by your taxes, your kids go to schools free of charge because they are paid by your taxes. The list goes on and on and on.

If you don't want these benefits then please, feel free to move. Leave America. Your Reaganesque depiction that "Government is the problem" is 100% unadulterated clap-trap. You are the problem.

Due Diligence

December 31, 2008 01:45 AM

Who is this 1st guy who thinks the gov't takes in more money than it spends?

Ever heard of the deficit?


December 31, 2008 03:55 AM

Social Security is a legalized Ponzi scheme as pointed by Kurt and BJS. The difference is that one can opt out a Ponzi scheme, but we cannot.

Bob Clarebrough

December 31, 2008 06:38 AM

As a Brit I know something of state welfare schemes and how they can destroy even more than they help. Here's the thing: money sucked in from the economy and then doled out as pensions and other benefits can only be achieved by the government employing vast numbers of people to handle the administration. This is a criminal drain on the taxpayers above and beyond what they have stolen from them to support this Ponzi scheme. I am about to qualify for the state pension here in the ruins of Britain. I have a company pension already which is taxed and my state pension will be taxed as well. On top of that I am paying an eyewatering amount in property taxes. But if I could live tax-free I would not need the state pension nor would the government have to employ a zillion unproductive workers to rob me and pass the cash on. The headline cost of state welfare schemes is nothing compared with the administrative costs of running them. Madoff was far more efficient!

Jens Bryndum

December 31, 2008 07:03 AM

In addition to productivity tools we must also leave future generations the natural resources needed as input to the economy.....


December 31, 2008 09:08 AM

Folks, while all these responses are very well thought out and I do agree with those of you who believe Social Security is a Ponzi Scheme, so lets be honest with ourselves. We are significantly overtaxed and there is no end in sight to our rising taxes. Obama is going to raise taxes across the board and has fooled many Americans into thinking they are getting tax cuts by openly advertising "tax credits." Social Security, in my opinion, doesn't exist. There is no pot with a bunch of social security $ and the government cannot prove you otherwise - A Ponzi Scheme is 100% on the dot. However, there is no point in complaining because some things will never change. Each year, this country becomes more and more socialist.

Buster Hymen

December 31, 2008 09:38 AM

John Lubeck SAID...
If you don't want these benefits then please, feel free to move. Leave America. Your Reaganesque depiction that "Government is the problem" is 100% unadulterated clap-trap. You are the problem.

Trouble is, now you are taxed when you DO leave the country. Assets over 250K I think are treated as if you SOLD them when you took them with you. That's nice, so they weren't really your toys, the gov't was only sharing them with you.

Get used to hearing it. Property rights shall continue to be whittled away further. And if I recall, there was something about that mentioned in that paper thing I read about in grade-school, whatever that was.

So sure, I'll leave the country, and pay for you to continue to use your stinking road. See how far you can drive on it.

Go to the back of the class!


December 31, 2008 09:49 AM

I have noticed that the people who complain the most about high taxes are the same ones who complain that the roads are falling apart, the schools are in bad shape etc. All this costs money. We pay the highest medical insurance rates in the world and yet by most measurable categories of quality health care we lag the rest of the industrialized nations.
We could go back to a time when we had no taxes, dirt roads, third world health care, high infant mortality, a life expectancy of 40, seniors living in poverty and no unemployment safety net...... but do we want to?


December 31, 2008 09:53 AM

Is SS a ponzi: Following is a direct quote from Florida's 5th congressional district congressperson, Ginny Brown-Waite.

"For too long, Congress has gambled with Social Security and its surplus Lawmakers have engaged in an accounting shell game to pay other debts with taxpayers hard earned retirement dollars. This practice is irresponsible and should be stopped immediately.

There is a proposal in the works to put SS on a 35 year glide path to extinction; can be seen at


December 31, 2008 09:53 AM

The author has only proven that Social Security is, in fact, a Ponzi scheme. Ponzi schemes collapse when incoming funds can't cover the outflow. Doesn't matter if that is due to lack of new investors, market collapse as in the Madoff case or lack of technological progress. By predicating his entire article on the march of technological change as the driver for the inflows he demonstrates how Social Security could collapse, Ponzi-like. When, not if, technological advancement slides to a halt or an extended pause, down Social Security will come. It's the biggest Ponzi scheme ever devised.


December 31, 2008 10:13 AM

It's hard to believe that some people here claim that America is a socialist state and thing that's the worst thing to happen to this country. While on the surface it may seem like a socialist country, the US is still home to the wildest, least-regulated, very raw and primitive form of capitalism. The one thing that is very true is that the rich have created a socialist system for themselves that lives and prospers within a very cruel capitalistic system that the rest of us get to "enjoy".
Can anyone imagine how this country would look like if there was no social security? It is already like an abandoned zoo where animals are out of the cages and left to take care of themselves. Aren't we The People reaping what the Wall Street sow? What's good in it? Should I tell my father and mother, who lost 60% of their 401K in 2 days that all of this is actually their fault? I hoped some people would see through. But I guess I'm just a shallow socialist who doesn't see his own benefit in rich becoming richer while the poor are getting poorer. Call me as you wish, but I'm damn proud for what I believe in and wouldn't change it for anything in this world!


December 31, 2008 10:28 AM

Social Security is an official Ponzi scheme backed up by the state and with police powers of enforcement. Lyndon Johnson and JFK skimmed off the surplus produced by the baby boomers by unlocking the trust fund lock box and cementing the financial failure of the system and the country when the baby boomer bills come due. The only way to patch the gaping hole will be forfeiture of benefits for the rich and the middle class and seizure of 401k moneys and IRAs, again from the rich and the middle class. If you think that is is crazy, then go back and look at the size of the unfunded liabilities for SS, Medicare, and the Obama promises unfolding in health care.


December 31, 2008 10:48 AM

I agree with you Brian...and I might add that the one "difference" the author claimed, was the technological difference...but he gives the flwed example that the economy will continue to grow for the next 70 yrs...hogwash! We are about to experience a total collapse of our economy, and at that point, Obama will be in place to offer "the solution" which is socialism, thus completing the total destruction of our country as we have known it.

jay CA

December 31, 2008 10:53 AM

For all you anti-tax nutters out there: By international standards, the USA is undertaxed, not overtaxed. It's one of the lowest-tax countries (lowest share of GDP taken in taxes) of any industrialized nation. See
This is why the USA has crumbling schools, desperate poverty, and 40 million people with no health insurance. Look around the world at nations whose governments spend a share of GDP lower than about 40% to 60% (all levels of gov combined), and what you find are wrecked, rotten countries with badly educated populations, thieving public officials (without taxes to pay their salaries, they use extortion instead), piss-poor infrastructure and services, minimal middle classes, vast and ubiquitous poverty, and far fewer millionaires per thousand of population than you'll find in high-tax countries. Why? Because it takes massive public investment in schools, roads, bridges, hospitals, regulators, courts, police, sanitation, etc. etc. etc. in order to create the environment in which entrepreneurial wealth-creation is even possible for many people. In low-tax countries, only oligarchs and robber barons are rich. Taxation actually is necessary for private wealth to accumulate. It's the common investment in infrastructure you require to make your career possible. So stop complaining and start understanding basic macro-economics, right-wing anti-tax nutters. And learn to take pride in paying taxes.


December 31, 2008 10:59 AM

So what? You give money and you get paid later. The only factor is depreciation and inflation. But something is better than nothing.


December 31, 2008 11:01 AM

S.S. may or may not be a ponzi scheme, but is certainly is a wealth transference scheme. It transfers wealth from the most productive members of society to the least productive and wealthiest members of society. In addition, the tax is regressive since wages above 102,000 are not taxed. Given current demographics, the system is unsustainable.

Two mathematically easy, but politically difficult changes could make the system solvent: remove the cap on wages, and eliminate the cost of living increase on benefits.


December 31, 2008 11:52 AM

Jay CA, we need to test the hypothesis in California first, not all at once nationally. Let them feel the true cost of the nutty ideas and not deferred with state deficits or intergenerational shifts or federal bailout. Then you would see the populations of NV and neighboring states double in short order. Also, go look at the corp. tax rate for Ireland and you will see why that gateway country did so well in the "miracle" recovery from basket case economy to international model. Hint: It was not the education system that is often used to distract the viewer from the facts.

The Comicpro

December 31, 2008 12:02 PM

Never knew so many people had all the answers for SS in one place. I am awe struck at the geniuses we have in this country!


December 31, 2008 12:30 PM

This debate over the nature of a Ponzi scheme is intriguing because it actually dances around what any economic system really does.

Certainly it is easy to use some loose definitions and play logic/emotion games and clearly both elements of thinking are seen in this long series of comments. But unfortunately each time a person begins to get near the core idea they crumble into some kind of biased tirade and do a mental meltdown. Many who tried to find a significant difference between SS and Ponzi focused on the relative successful advances of technology as a way to suggest that SS was of longer viability. Only one commentator mentioned a concept of mutual intent and understanding. Their point was that unlike the alleged Madoff Ponzi, SS was an agreed upon arrangement. Technical advances are not guaranteed! Is such a guarantee part of the Ponzi definition? I don't think so. If not then the "technology" arguments are invalid? Laws are supposed to deal with predictable entities, not principles of chance! Reality may differ from theory.

Taken in its most loose definition, every economic enterprise could be seen as a Ponzi scheme! But in reality I notice there are far more people on the planet since the money burgers in the likes of old-time Florence, Italy, and the more recent Dutch and Swiss bankers took up the standard. Something worked. The huge question is "What?"

Aside from the fact that pyramid schemes (such as the Ponzi method) are frowned upon, there seems to be a deeper element that needs to be illuminated. If we take Friedman's economic theory that even national economies can be stabilized by global insurances and that those insurances can reach through social structures all the way to each individual how is that different from SS in principle.

In the sense of this targeted article any insurance company is as much a Ponzi scheme as was Madoff's alleged scheme. Their only saving grace is that there is a publicly understood agreement that income is supposed to cover claims (and overhead). What else is new?

If we say that money is a representation of some service value rendered between people, that adds a quality of "work" and "value added" to this bro-ha-ha of where the money goes in its cycles from hand to hand, organization to organization. Some economic theories have relied on the idea that expansion of an economic base can expand forever. Tears are shed when that base contracts. But economic theories need to be able to encompass both expansion and contraction not merely as risks, hoping for better days, but rather more of a philosophical view of up-turns and down-turns. Sustainability is then a question of where we stand between the extremes of a Zimbabwe like economy and an economy perhaps exemplified by some place where no one gets his hands dirty from personal work of any kind.

So of what use is it to vilify individuals if we are all just going to play "poor little me and pooh on you."? If we, on average, live within our means then we should have no problem. If that average is skewed between rich and poor too much then we can expect to see cycles that are excessive, to correct the instabilities so encountered. On the other hand some people are more equal than others. I suppose there will always be a certain tendency to compare where I am compared to where you are. I am somewhat impressed with one article entitled "While American spends, China saves." Neither nation is free of woes, and the title is only a title of what may be a fairy tale.


December 31, 2008 12:54 PM

I belive what the author says, Technology can sustain the Social Security system. I read the comment about the increase in life expectency, which also increases the consumption of the common population (increased population), hence more productivity needed. It is a closed loop just like rain, i hope you dont call nature a POnzi scheme.


December 31, 2008 12:58 PM

The best fix for America is to
1. secure the borders
2.deport the foreigners
3.Restrict exports (that's right)
4.Nationalize banking and insurance to not for profits
5. educate young American adults in the medical fields expeditiously
6. lower welfare benefits incrementally
7.Raise Social Security Retirement benefits substantially
8.Dismantle the IRS
9.Circulatethe money
10. fema camps for corporate leaders, bankers and wallstreeters who object ;-)

Mike Reardon

December 31, 2008 01:08 PM

Just change the formula to reflect what it is, a simple life support check. Transfer what is not the central point to other services and get universal health care into place to remove co-payments and major drug costs.

The formula is a mental impediment to finding the answer, Consumers get a life check for work over their life time and the rest is pretend on how it gets done. Its a gift to you for your citizenship and your votes.

Its easy to fix, just rethink what it really accomplishes and find a new formula that still supports retired workers and continues government payments into the market place.

The recipients of Social Security spend every dime. Over the month the money is transferred into the market place. Its not discretionary income for most people, it already has its assigned place before the month starts.

The fact is it has more economic impact as retail and rental income after it is out of the hands of the first holder. Any increase to a Social Security recipient is an increase to the economy. The bank will get more return on your money than you do for the month, and you pay for an account in the bank.


December 31, 2008 01:09 PM

All government is a Ponzi scheme. The Banking system and Wall Street are Ponzi schemes. The Income tax is a scheme to directly rob you of your labor. Let that sink in and be converted from a believer in big centralized government to a political atheist. Start to believe in personal self government and your need for big centralized government will no longer be important.

A rational person can see that it all has to collapse. After the revolution we will see if enough people have sufficient abilities to construct a new system of honest money and government. People typically have to be spanked pretty bad before they come to their senses. Seems to me that we are going through the beginning of that process right now. Next year we will see more civil unrest. 2010 we will see tax revolts. Both property taxes and income taxes will be severely cut or abolished. By 2015 we will see riots and demands to abolish the federal government and the Federal Reserve. The Union may not servive as we know it. The dollar will be destroyed and we will have to go back to a system of real money not the slugs and toilet paper we use every day. The Madoff Scandal is just noise to keep you from seeing that your whole life is threatened by the pollution on the Potomac in Washington. We need a revolution again.



December 31, 2008 01:11 PM

Globalization is just the new word for colonialism

Let in foreigners, give them tons of credit to buy foreign made goods causing excessive trade deficit which transfers wealth

When the merchant's bankers cash out of our bonds our money will be devalued and foreign made goods will go up in price

I thought we needed foreign labor to keep labor costs down because "Americans are lazy and expect too much pay"

After we're devalued then labor will be cheaper in USA

If it was just class warfare or the european merchant's bankers that caused an artificial shortage of money and offshored our jobs,, they should have just told us the truth

JFK was putting us back on a Constitutional silver backed money

Silver backed money would CIRCULATE,, DESTROYING DEBT!!!

Debt based money is temporary and disappears,, bankrupting America's families

They bankrupt us intentionally

It's amazing our govt borrows every penny instead of issuing it themselves

I guess we wouldn't even need the national indenture then


Bob Dole

December 31, 2008 01:27 PM

No one is going to over throw the government in the US. The average American has it so well off that doing so would be counter productive. Our government takes our money and uses it to beat down other countries to make our lives easier. The first step in a revolution is a majority of very unhappy people. I can't say there are that many people that are that unhappy.

Enzo de'Selvaggi

December 31, 2008 01:47 PM

Comicpro, it doesn't take a genius to know this is a failed system of failed ideas -- FROM THE START.

Politicians are elected to office for one of two reasons or both:
To steal money from one American, and give it to another American, or
To confer a privilege on one American, while making sure another American does not have that same privilege.

Social Security is a theft we've made promises on, so let's look at Walter Williams' plan:

age 45+, honour promise made via SSI
age 44 and under: release from Social Security scheme altogether.

What they will save on their own in the next 20 years will be equivalent to what they would have gotten in SSI.

It's smart, it's fair, and it elevates us from yet another Socialst tentacle of bondage.

Happy new year!

Bob American

December 31, 2008 01:50 PM

As usual, Mandel is either clueless or delusional. In this case, he's both. Politicians of both parties are simply bribing voters with bailouts/handouts and ignoring the Medicare/SS timebomb, with will explode around 2030, when most of them will be dead (or, at least, out of office). What is particularly cruel and hypocritical about this is the fact that today's politicians often justify big spending programs as "for the children." The cruelest joke of all will be when this time bomb explodes on today's children!!

Mike Mandel

December 31, 2008 02:38 PM

Bob American writes:

As usual, Mandel is either clueless or delusional

Do I get a choice?


December 31, 2008 02:47 PM

The people who come here illegally and the politicians are the ones who have bankrupt our system. Did you know that Federal Employees under the FERS plan pay into three funds, TSP, FERS and SS. In 1985 Congress helped themselves to a pay cut for this group by their OFSET game. They literally take money from each of the retirement plans when the Federal employee retires. The first of these retirees are just now realizing how Congress has diverted their money. The State and Private industry employees will never feel this same pinch because they will receive their full SS payment. They will NOT be penalized like the Federal Employees under the FERS plan.

All of the free medicare/medicade we give to those who are either illegal or who were just too lazy to work have put a burden on everyone. NO Work, NO EAT should be our policy. The Job Corps was set up for that purpose, but now we have entitlement welfare. Yes, everyone needs a helping hand up but not out.


December 31, 2008 04:10 PM

I can't imagine reducing SS benefits.
They don't pay for a whole lot of anything for most recipients, but it helps people to get by even if it is a meager existence..Interesting that the answers lead to converting SS to a stable or is it sustainable level of funding? How about the rest of the picture? Since i am not a policy maker, I will add this maddening thought. All political systems (and perhaps by extension economic ones) contain the seeds of change...that is...the seeds of their own destruction...This change is for what is perceived as an improvement, or to fit a newly defined landscape of political and economic reality. I will probably be still writing, running a coffee hut, and whatever else to my dying day because I am not so sure that SS will be there for me later in life. Perhaps in an even uglier world the disabled, infirm and aged will be euthanized because our political and economic system cannot afford them the dignity of a little living and health care. All of this stuff is owing to an ill conceived notion of the value of money. Money comes into value when it comes into use, when it produces something, more specifically when it produces a benefit for that which it was intended. It's hard to value cyberspace, except through revolving levels of technology. The rest of this outfit called the US and other developed countries have been busy exporting the hands on level of production to increasingly cheaper labor pools of production. Well you can't compete with wages that are based on propping up extreme poverty based needs. With that no jobs means no money for anything!!!!And preachers of abandoning social responsibilities will
bark even louder their ideas that the
current system will be saved and is worth? saving in that fashion. Hmmm?
We need a major rethink of everything.

Bob American

December 31, 2008 04:16 PM

Mr. Mandel,
To quote myself, "As usual, Mandel is either clueless or delusional. In this case, he's both." So, I guess you don't get a choice. Sorry.


December 31, 2008 07:58 PM

oldduke- "US T Bonds are the most rock solid investment in the universe"

Bwahahahahahahahah!! Bwahahahahaha.

US T Bonds are the biggest BUBBLE in the HISTORY of the universe, thats quite a difference from the most solid investment. I hope youre putting all your money where your mouth is...Im shorting T bonds


January 1, 2009 01:34 AM

If it requires endless Technology increases to NOT be a PONZI scheme... then it fact it IS a PONXI scheme only this time the "taking" is from the value of the dollar, by Fiat crreation of the Federal Reserve Bank, so even if you get
$5000.00 per month in SS retirement, IF
it costs you $500. for a Big Mac & Fries,
you can only eat at McD's 10 times a months and people forget, it was intended to be a "suppliment" not an entire "RETIREMENT" fund. Worse many claim benefits NOT earned and some NOT
deserved. IF we don't SLASH the Defense and WELFARE spending by 80%, you will be paying $15.oo for a Big Mac
soon, and $50. for it in 10 years but they have alreadly planned to switch to the Amero [for Mex-Can-USA ] currency and the dumb Senate we have is clueless, not been consulted and pretty much doesn't care, because they do NOT represent the PEOPLE, they represent the FED RES. Bank & corp. same as the House of Traitors.


January 1, 2009 04:06 AM

Social security is sustainable if we have a population growth of highly productive people. This can be done by better education and the immigration of the best and the brightest.
Immigration of low skilled workers is a big detriment because they are likely to provide less tax revenue, lower the per capita productivity, be a more drain on the social programs.
If 1 million low-skilled illegal immigrants are replaced with highly skilled best and the brightest from the world, they will lead to more innovation and productivity gains and provide a far greater tax revenue. Yes, the native born will have to compete with them but they are likely to generate a lot more jobs for the native born than the low-skilled immigrants from the south of the border.

Tony C

January 1, 2009 05:54 AM

2 things will fix Social Security,

Pedro Moreira

January 1, 2009 06:49 AM

Yes, the Social Security is a ponzi scheme, because the "new money" is used to pay who "invested" before. True, technology development might aid the manager of the ponzi scheme to fullfill its obligations towards the participants and, as such, at the end of the day, technology may actually help the manager to perform as if it had properly invested the funds supplied by the participants in the scheme. But this does not transform the ponzi scheme into an investment fund; it simply allows the deceiver to go on deceiving without being caught.


January 1, 2009 09:26 AM

Some politicians already have a solution to the SSN situation. As it was written in the article. The Ponzi Scheme needs more participants to keep it running.
e.g. Illegal Immigration Workers

norman ravitch

January 1, 2009 11:34 AM

Yes, social security is a Ponzi scheme, but that doesn't mean you can get rid of it.

Spofford White

January 1, 2009 12:23 PM

Social Security is a Ponzi scheme. How am I 100% sure? It just gave my mother a "raise". How could that be possible in a real pension? JrHagler is correct, they are counting on the illegal aliens to float it. They better not, because my Mexican illegal friends already have figured out how to get an ITIN (individual taxpayer identification number), file their taxes, and get huge REFUNDS from Uncle Sam. I bet the people at this magazine have not even heard of an ITIN, just like no one knew illegals bought houses with loans from WaMu (later defaulted)


January 1, 2009 12:59 PM

Not sure what is more scary, the fact that this is something being "discovered" or that it still has defenders.

Social security has always been a ponzi scheme and when it finally collapses, many of us will be saying I told you so.


January 1, 2009 07:27 PM

I don't get how you could argue that it's not a Ponzi's disturbing. We are forcing young workers who pay more and more to get educated and have massive loans, pay more and more for healthcare and daycare to foot the bill for 62 year olds plus with pensions they will never see to go to Fl for the winter?! It's disgusting.

As bad as SS is, you want to see trouble...SS is ABSOLUTELY NOTHING in comparison to Medicare. How would you like to be a...let's say 35 year old electrician paying $2500/mo for decent healthcare for your family AND for Medicare (and SS for that matter) that you will in all likelihood never see. There will be revolt and it will be sooner rather than later, at least in my estimation.


January 1, 2009 10:24 PM

Thank goodness I live in Australia, we have our problems but we pay our own way for retirement with mandatory Superannuation funds, what you put in you get back, none of this paying for someone else who may not deserve it.
Those who have none get a basic pension not the inflated ammounts received from your Social Security
Not to mention our Medicare is much healthier than yours (but really any countries health care system is better than the American one).
We are also currently looking at a tax system which means low income earners get tax a little while hight income earners get taxed alot.
We wouldn't dream of capping taxes.

As always the rest of the world looks on and shakes it head at the silly Americans who can't see the train wreck coming that is clear as a bull horn to the rest of us.

Suck it up, there are solutions but you are just unwilling to pay the price to institute them.

P.S. thanks for the financial crisis, but we have managed to come out on top due to a harshly regulated banking system, in fact we may not go into recession at all, Australia has a few leasons the rest of the world should pay attention to.

Joe Blt ow

January 1, 2009 11:17 PM

Social security is a social welfare program that helps the elderly. While you can argue that tax dollars from current workers pays for retirees, this is not a Ponzi scheme that fraudulently rips off investors. A better system would be like a mandatory 401K scheme that funds future retirement benefits.
I think the solution is simple which is to means test social security benefits so only the truly needy received benefits, the rest of the retirees must rely on wealth they accumulated over a lifetime rather than taxpayers funds.


January 1, 2009 11:32 PM

Social Security is an unfunded liability on the books of the federal government. There are no funds in an account somewhere that are segregated for payment of social security benefits. An even bigger unfunded liability is medicare and medicaid. I suggest everyone take a look at and take his "crash course" if you are interested about how large our outstanding obligations (debt and unfunded liabilities) really are.

Josh Ooi

January 2, 2009 01:08 AM

Social security is an unfair tax paid by all working people that is not part of the government. Any government/state employee can opt not to pay into social security and have their own pension scheme. So these government official that does not pay into social security dictates when we could enjoy our benefits. IS THAT FAIR???? Why don't they put all their pension funds into social security and then dictates when all of us can draw our funds. Tomorrow they could decide that we can draw our SS at age 75 and who can say no to that? They never will because it can be forseen that SS will be bankrupt by then.


January 2, 2009 01:51 AM

> Quit whining.
> Taxes are the dues we pay for civilization.

Said when taxes were less than 10% of what they are today.

>There are only two ways out of this predicament:
>a. Cut SS benefits and entitlements.

b. print money until it's worthless,
pay SS benefits with worthless money.

Dr. Crane

January 2, 2009 04:18 AM

Social Security most definitely is a Ponzi scheme. The assertion that it may be sustainable for decades does not refute that. Two men rob a bank. The first guy is caught the next day. The second guy is caught a year later. When did the second guy become a criminal, when he robbed the bank or a year later when he got caught? Likewise, a Ponzi scheme doesn't become a Ponzi scheme when it collapses.


January 2, 2009 07:05 AM

Politicians are parasites. They add no value , merely take from citizens, redistribute to their contributors(bribes) and return the paltry balance to citizens and even non-citizens in the form of items they can sell as socially good. Once in a while , they deliver something good but that is really in spite of the politicians not because of them.


January 2, 2009 07:33 AM

The comments here illustrate why we will NEVER be rid of SS, or even taxes. There are enough people willing to pay a lot of taxes for these programs and actually see value in them that our system will never allow us to 86 it. And yes, I believe it is a Ponzi scheme. Good intentions don't change that fact. Taking money from people to fund returning money to others is just that.
So how to fix it should be the focus. How about eliminating all expenditures from the system that are not retirement related. SSI and other "needs based programs" that have nothing to do with actually being OLD AND UNABLE to work should either have a designated program or be eliminated. Maybe limiting more of how much SS can go to spouses of recipients after death. Make sure there is "need" before funding children. Push back the age of eligibility by a year. Then take caps off contribution so everybody pays more. Don't limit it to the "rich" because they are going to be less likely to need the funds. EVERYBODY should pay. Sadly, we will likely have to eliminate pay-outs to people who did the responsible thing and saved for retirement.
As we do these things, I think those of us who think the system should be S-canned have earned the right to B-slap those that think we should keep the system.
On the other hand, maybe THEY should have to pay more and take less. We that want it gone can just collect from them and not pay. I like that. Good solution.


January 2, 2009 07:54 AM

Definitely a scam.
And wait until the bill for the "health care" scam arrives. Or until they take your house 'cause you have medical problems from the mandated "health care".

Tom Maher

January 2, 2009 11:03 AM

Thirty-five years ago, I described social security to my father as a Ponzi scheme. His reaction was one of not just disbelief but as an insult to him and his generation. A young man during the depression, he saw social security as the social contract it his between generations. He did his duty and now it was time for my generation to do theirs.

He was right. I still believe that describing it as a Ponzi scheme is a simple way to explain the cash flow. But there is one big difference, the social security system is transparent. We all understand how it works. A Ponzi scheme is not. It's real workings are hidden from its investors.


January 2, 2009 11:42 AM

Yes, it's like a Ponzi scheme. So? This is like calling attention to the fact that goverments can run lotteries and individuals can't.


January 2, 2009 12:02 PM

Scheme, scam, call it whatever you want to. The entire program is riddled with problems. Taxing Peter to pay for Paul's fathers retirement is a great idea if you are Paul's father. But to all the Peters out there this program is a complete sham. By now I am sure you have figured out that I am one of the multitude of American youths who are continually paying into a program that they will never see any benefit from. I personally am scheduled to turn 62 the exact year Social Security is slated to expire. If you are wondering if I get a warm and fuzzy feeling by contributing to past generations retirement while still trying to save enough for my own. Not unless those warm and fuzzy feelings are anger and disgust. Taking care of older generations should be a personal or family responsibility, not a burden on society.


January 2, 2009 02:44 PM

This article is a load of rubbish. How can you justify if something is criminal based on whether it uses or doesn't use technology? That is the most flawed thinking I've seen in a long time.

I can speculate anything if I choose to. But if I speculate that technological growth will continue to increase output that my scam is no longer a scam? What the heck!!!!

This argument falls flat on its face and therefore Social (in)Security in a ponzi scheme or pyramid scam or whatever you want to call it.

Just wait until loads of people are unemployed or wait until everything is outsourced or wait until the technology doesn't come through and you will become abundantly aware of how much it is a scam when millions of investors start demanding their investments back and there isn't the money to cover it.

So, yeah, the government will print more money to cover it. But this in turn devalues the currency, thus you are still robbing the investors because they are not getting value on their return.

I would like to see a fund do this and be given the right to counterfeit money when it needed to create extra cash. Because that is exactly what the Government does. Heck, let me print money when I need to pay my bills or buy something. I don't have a gold standard either so I should be fully qualified.

And yes, those who say there should be zero federal income taxes are correct. There should be zero federal income taxes. Because as it stands the Federal Income Tax system is nothing less than extortion by Government and turns American workers into salves financing a massive worldwide empire in which they have no say. Kind of like the mafia taking money from shopkeepers and businesses to finance the mafia empire. But we are expected to dislike the mafia and obey the government. Heck, I'm no fan of the mafia or any other crime syndicate but I'm really not a fan of the largest crime syndicate in the nation; the being the U.S. Government. Furthermore, then they also get to make the laws. So they get to make the money, decide how and when you get it, control interest rates, force it back out of your hands from you labor not theirs, and create, pass and enforce the laws to continue this communist/fascist Nazi regime.

Any other crime syndicate could only dream of having that much power and control.

Geez, wake up Americans before you end up asleep permanently.


January 2, 2009 03:26 PM

This is what happens when you get out of the Gold Standard in exchange for fiat money, letting the fascist government "take care of you" from craddle to grave, allowing the illegal IRS to steal our hard-earned money and "Federal" Reserve to print phony money with impunity!!!

Both the Republicans and the Demoncrats will simply not fix any of these problems!!! It's high time for another big Revolution in America before it's too late!!!

Also, please be obedient to JESUS so we will get out of this mess. Amen.


January 2, 2009 09:46 PM

I find the last point in this article to be extremely anti-capitalist (socialist).

"But if instead we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need. "

No one should be able to tell me how I should spend my earnings. If we continue to focus on "the good of everyone" soon the economy will be focused on "the good of no one" or to be more correct "the good of those who wield governmental power".

Keep your taxes off of my back and let me build a company. Tax me to death and I will stop working and many, many people will lose their jobs.


January 2, 2009 10:00 PM

I don't really agree with this article. How can the difference between a scam and a legitimate government function be 'continuing technology.' It is what it is, and if it needs to rely on future technologies to keep growing it's nest egg, it's not a reliable, legitimate system in the first place.


January 3, 2009 07:29 AM

The writer answering the question appears dishonest. He/she is more straight forward when he makes the parallel. But, brings in "national growth/productivity" when he makes the contrast! Productivity and growth occurs in a separate part of the budget. Does that increase flow into Social Security automatically?

"4.3 trillion in 75 60 billion per year" - Is this supposed to imply that the government is putting away $60 billion a year from this year to shore up for the deficit 75 years from now?

Finxed Income

January 3, 2009 07:32 AM

To the author of this post, Michael Mandel:

Is the 20 times increase in productivity you claim since 1900 in inflation adjusted dollars? This is important since our wonderful Federal Reserve has debased the value of the dollar over 90% since it was founded in 1913.

Michael, don't be blinded by technology.

civil westman

January 3, 2009 11:22 AM

I suspect that former Enron execs, now guests of the feds, made similar optimistic, forward-looking calculations of income. If this is the standard of fiscal prudence and due diligence to which we hold our elected officials, we deserve what we get; going back to basics, here is what we get:

Money is supposed to be the stored value of work I have done (not the root of all evil), so that I may exchange the value of my work to fulfill my needs and desires when it suits me, rather than having to immediately exchange my work for goods or services.

Now, it takes $7.20 today to purchase what one dollar I contributed in 1960 would have purchased (this is inflation). So, for the dollar's worth of buying power I contributed in 1960, I receive $0.13 in return in 2009. Then, since I have made the obvious mistake of saving for my own retirement, 85% of my SSI will be taxed as ordinary income at my marginal rate, further reducing the return of the 12.5% of my lifetime earnings which has been under the government stewardship praised by so many.

I can only conclude that the public schools - funded in part with "borrowed" Social Security dollars - have succeeded so wildly in their purpose that they have produced a populace so dumb that it clamors for jail for Enron execs, yet elects officials who do precisely the same thing, only on a far larger scale. The only difference is that Enron lacked the police power (ultimately jails, guns and bayonets) to steal the value of years of individuals' work - which is to steal a significant portion of their lives. That, gentle reader, is nothing but serfdom.


January 3, 2009 11:48 AM

SS a Ponzi Scheme? HAHAhAHA what a no-brainer.


January 3, 2009 01:59 PM

Social Security used to be a fund solely for the purpose for retirement and taking care of the aging population...that was all! In the 1970's the government changed the Social Security Fund to the "General Fund". All the money that was in it suddenly became accessible to every social program the government choose to fund with government putting in IOU's that were never repaid. It paid for disability, college educations, name it! Our government decides what benefits you will get for Social Security, a formula which can be changed at any time. Currently it is calculated by averaging the last 35 years you worked, allowing for inflation, but only up until the age of 60.....whether you work to 70 or not. And yes, you still pay into Social Security. If you work to age 70, these last 10 years don't count toward what you will receive in benefits. Your age at retirement is figured into the formula, but not your wages after age 60. A good majority of folks die before they collect a dime. If you are married, your wife, no matter what she contributed only gets approximately half of what she would get if she were single. Where do our present legislatures get their golden retirement fund?? (full salary and full insurance benefits until they die and then it goes to their surviving spouses).....why from the "General Fund", of course!!! And everyone wonders why Social Security is broke. It sure as heck isn't from some old lady that collected in 1930. My grandmother in the 1980's was getting a whooping $380.00 a month. Ponzi Scheme? NO. Downright misuse of funds and corruption. Yes!!


January 3, 2009 02:24 PM

Does anyone remember the consent of the governed? We are photographed at traffic lights, told we have no expectation of privacy in our phone conversations, stopped without reasonable cause to see if we are driving drunk, given ridiculous & insulting "stimulus checks" (isn't that what one gives a prostitute?) and told that this is the way our government ("OUR"..?) will take care of us. Our government is not there to take care of us and the sooner people get to their mirrors for that kind of help the sooner America will begin moving back toward its onetime status as the leader of the "free" world.

Right now it resembles more closely the lumbering, slumbering, slobering, politically and culturally sychophontic oaf on its way to a fall.

Voltaire was onto something "....Ecrasez l'enfame" )and start over. Start by digging out and replacing the foundation (career politicians) and setting a more durable and cleaner base (term limits).

Deconsolidate the ownership of media, so that there might actually be competition there once more. Read and insist on Newspapers - there is something about the way the mind processes written word that is more critical and less pablum-like the sound and sight bytes of tv and web "News"

I could (and have already done so) go on.

Oh yeah one more thing get angry, get really livid with the low lifes that are "running" our country. Forget about the money and security you think you've lost. If that's your main concern, you are an immense part of the problem, and a short-sighted boob to boot.

The issue of term limits is the issue on which the quality of our freedom and our legacy will turn. To maintain a system that allows (such a being as) a career politician to exist is to place ENTITLEMENT ITSELF as Cornerstone, Keystone and Cupola for our House of America. Rotten at the base and rotten at the roof.

Let's get rid of them.


January 3, 2009 03:53 PM

I really want to be a democrat! I could win any election too.

Here's my platform:

Let's send every family in America that isn't "rich" a check from the U.S. government for $500,000 right now.

It accomplishes all the goals that most democratic politicians have in mind!

1. Screw the evil rich
2. Help the poor
3. Stimulate spending
4. Destroy the value of the U.S. dollar (that's what bail-outs are doing right?)
5. Ensure re-election
6. Repeat


January 3, 2009 05:10 PM

Carl....december 28th

Man, you are right on!!! Can't agree with you more!!!

"It maybe as hard as many people would believe. US is heading into socialism. SSI is a socialistic idea. Universal medical insurance is a socialistic idea and unemployed benefit is also a socialistic idea. If we are living in a capitalistic country, those benefit will not exist. Living in socialism society isn't a bad idea as long as the gov't encourages expansion of private businesses, institutionalize certain businesses that are vital to the nation to the very minimum, and take care of those who are in need and help those get back to their feet and rejoin the work force. Pure capitalism isn't good. it engender too much greed at the expense of other people. This is why we are in this pathetic economic state right now. Greed has been running rampantly for so long in the financial industry, with blessing of the gov't who encourages self-regulation. Now every single person is paying for it. Maybe gov't fails to realize that with the idea of potentially earning billions of dollars in profit, everyone will get very emotional and fail to distinguish what is right and wrong."

Bill Bivens

January 3, 2009 06:01 PM

There are more crypto-anarchists out there than imagined. They may call themselves Libertarians, but they are really anarchists at heart. The one aspect of their philosophy worth considering is that if we had to support the miltary with bake sales we probably would not have invaded Iraq. Kidding aside, government represents a social compact that is intended to maintain essential ingrediants for widespread commerce and trade that can benefit everyone. Unfortunately, the failures to maintain necessary transparency in financial markets betrays that purpose.


January 3, 2009 07:20 PM

What this country needs is to get rid of Republican s.c.u.m. asap before they continue destroying everything from industry to finance while lining the pockets of the military-industrial block.


January 3, 2009 09:29 PM

It is a scheme no matter what anyone says. A person who is expecting to be compensated from future generations does not have his head on right. We have the feel good-ers and the deserve-ers coming up in the workforce. What do you think they will do for you?

luiz rudge

January 4, 2009 08:29 AM

What, in all the hells of earth, is NOT a Ponzi Scheme?
Company's stocks? When it go broke, you loose all your money. That's Ponzi.
Marriage? You invest for years, and it does not work. You loose time - and, quite often, lots of money. That's Ponzi.
Dakar Rally? Your amazing car goes the wrong direction, and you're lost in Atacama desert.That's Ponzi.
Social Security? When you reach the one-pays-one retirement costs, that will be Ponzi.


January 4, 2009 01:26 PM

Nancy is right. Social Security has operated with a surplus for many years. If that mony would have been saved/invested rather than placed in the general fund and spent I suspect that we would not have the social security problems that we are facing. It wasnt hard to see the baby boomer generation coming and that helped to build the surplus that should be there now when it is needed. It's time to out the blame where it belongs and that is with our leaders who are unable or unwilling to look at the future impacts of their decisions. It seems to me that the people who are 5-10 years from retirement cant win. Younger people want older folks out of the workforce so that they can advance theor own careers but at the same time say that we cant afford social security so you need to keep working. It's sad.


January 4, 2009 02:19 PM

yes - nothing more needs to be said


January 4, 2009 02:21 PM

Social Security is *by* *definition* a Ponzi scheme. I love how everyone wishes to cover this up with statements like "its not if they raise taxes" or "its only a small ponzi scheme" or "productivity will cover the shortfall" and all the other nonsense put forth to justify it. I can make the same arguments for the criminal Madoff. If only he could have forced existing investors to put in more money. If only he could have paid out less to current investors. If only he could have found more patsies to keep the funding going. If only he could print his own money. Come on folks. Engage your wee little brains and see reality for what it is. SS is a PONZI SCHEME. And it is immoral. Like it or not.


January 4, 2009 07:09 PM

Well it is like a Ponzi scheme in that new entrants are paying for benefits for the ones ahead of them. Until now as the population has grown this has been a wonderful thing. With several children each paying for there collective parents beneficaries have been able to receive much more than they put in for their parents. The problem is that now we are heading towards equilibrium with the number of children entering the system approaching parity with their parents. Now it will take much more from the each of the dwindling number of children than before to keep their parents out of poverty. Unless you assume there will be a time when the population of children stops entering the system, then that is not going to have the total collapse of a Ponzi scheme. The biggest problem is that the payroll taxes were increased to accumulate a surplus for the retiring boomers, but there really is no social security surplus since all that supposed surplus was used to finance the Regan-Bush tax cuts for the rich. The reason we didn't have all that inflation that government budget deficits engenders, is that so much of those deficts were covered by the boomer "contributions" to their future retirement. Since they weren't out spending that money the balance between money supply and goods and services stayed matched enough to avoid inflation of consumer goods (just inflation of stock prices and housing prices which aren't factored into the CPI, but that is another story). So the problem comes when the boomer go for that social security money, the "surplus" collected in payroll taxes (which of course affect the rich less than the poor since payroll taxes are a "flat tax" until you pass the income level on which you don't have to pay any more payroll tax) exists only in the form of government IOU's. Now unless we have a repeat of the great depression the only way out of the mess of all the imaginary value contained in inflated housing and stock prices can be maintained without vanishing into deflation, will be to inflate the currency. So retirement for boomers just won't happen. If you think you're 401K took a hit with the return of the stock market to normal values, just wait til you see the Dow stuck in neutral as inflation ramps up, and watch the boomers all trying to unload their inflated stocks in order to buy something that really exists -- like food. Guy's this stuff is all monopoly money that's lost any connection with real goods and services. Much more fun to come soon I think.

Dale Netherton

January 4, 2009 09:04 PM

What a bunch of rationalization. A ponzi scheme may work for a while and Social Security may work for a while but in essence it relies on the kind of deception all fraud relies on. The called for lowering of benefits and the increase in contributions at the government's whim is exactly why it fits the ponzi scheme logo. As income dwindles and taxes go up and priorities by the government shift the SS will become an expense beyond the nations ability to pay. Don't forget inflation and the "Core index" invented to avoid higher entitlement payments. Congress has made Madoff look like a piker.


January 4, 2009 11:01 PM

We only have to assume that our output per person will rise exponentially for the rest of history and then social security is not a ponzi scheme. Thanks for clearing that up for me. That's completely different than people in bubbles like the land bubble that assumed land would keep going up forever.

You people are amazing.

January 5, 2009 01:21 AM

You've been led around by the nose so much you think that up is down.

You blame liberals and lazy people, completely failing to realize that YOU are the lazy people, and that YOUR OWN ELDERLY and YOUR OWN KIDS have to deal with the repercussions of the assumptions you make.

Seriously guys, have you ever considered the real life possibility of every person always fending for themselves? Every adult dies at the point when they're physically unable to find & kill their own food? infants are expected to hunt for their own welfare as soon as they're able to walk..

That's not a civilization.. that's not even anarchy.

The simple truth is that you don't contribute as much to society as you think you do, and the people who you call lazy aren't that much more lazy than you are.. And that calling them lazy and telling them to get a job does nothing to rectify the real problems that person has in actually GETTING a job.

And no, you can't just say "do it or you'll starve" while simultaneously decrying other authorities *evil* as soon as they tell YOU to do something you don't want to.

Bob Clarebrough

January 5, 2009 06:51 AM

I'm sure you're right, Bones, that Oz has some lessons that we really should learn. We wait breathlessly for the first Australian aborigine to be elected Prime Minister. We are also trying to learn from you're determination to retain the Queen as head of state instead of becoming a proper republic. But then you would be learning from Americans , wouldn't you. That would never do!!!!!!!

M. Anthony

January 5, 2009 11:58 AM

Social Security either is or is not a Ponzi scheme quite apart from the externalities of technological innovation and population growth. I contend that it is such a scheme for the very simple reason that you initially offer. Whether or not the scheme keeps on keepin' on doesn't make it something other than what it inherently is. A scheme isn't any less of a scheme just because it is an indefinitely effacacious one. Further, your assumption of continued technological growth is a flawed one based on no better logic than the type that assumes that 'past performance predicts future results' e.g. relating to financial investment vehicles. To assume technological growth is to take it for granted- a dangerous path.

Comforting me somewhat and showing that you don't take such growth completely for granted, you say, "But if instead we—the current generation—invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need." This, however, is misguided enough to return me to my previous state of unease.

I might ask you just how you define the growth of the economy if not, at least in large part, through consumer spending on the latter items you mention? Purchases of such items that you seem so quick to dismiss as bourgeois luxuries - along with home ownership - are part and parcel of economic growth.

I would beg you to clarify your point.

The entities that invest in "technological 'seed corn'" are typically not the average consumer. These investors in technology are the producers of such technology, who are in turn funded either by downstream users - other companies and/or the eventual consumer - or through some kind of government funding. To my knowledge, the American public has never had to decide between investing in a television OR the technology used to create it. They are one in the same.

An evocative discussion, but one that you've managed to take some very wrongheaded positions on.


January 5, 2009 12:45 PM

What a load of crap from this author?.....................................

Technological change - is cited as the reason being different between ponzi scheme and social security and on top of this a little of this(A fairly minor cut in benefits) and a little of that( relatively small increase in taxes)...................................

Aren't these fixes to the ponzi scheme so it doesn't fail??

Richard Starr

January 5, 2009 12:46 PM

Social security has always been a scam of sorts. It was a feel good program based on the "help the elderly" concept. It was always intended to take in more money than it put out. Originally people lived, on average, to collect less than 2 years worth or payments. The "excess" money was used for other "worthy" causes. The first problem came about in that the money was "invested" in treasury bonds that paid a below market rate. Which is to say even lower than a regular bond paid. Really its just a book keeping process. This is a problem because it means the money was used by the politicos to pay off the people they needed to please. The next problem comes from the fact people are living longer and are often taking more out than they put in, even adjusted for interest and inflation. So you either need to cut payments by dropping what they pay out or they need to delay payments so that the number of payments made are reduced. Otherwise, the whole system collapses much in the way the sub-prime market has.

Matt S.

January 5, 2009 12:57 PM

It used to be the people in our country were the strength, now they are our weakness. We have a great country with low quality citizens. Untermenchen, as I call them. Socialism is not acceptable. Poor people suck and should be permanently impoverished. Social security is a ponzi scheme.


January 5, 2009 04:35 PM

Ponzi scheme offer a favorable return on investment (usually a LARGE return).

Social Security does NOT guarantee that. It guarantees a small return REGARDLESS OF HOW LONG YOU LIVE.

My father dies at 69 after taking SS for one year. He got SCREWED, but none of the family is bitter. If he'd lived to 90, we could have insured he wouldn't be homeless. That's the deal we signed on for. Dignity.

Social security now provides for my mother who has been collecting for 11 years. Odds are my father has NOT gotten a good return on his investment yet, but the odds are he will and even if he doesn't it will only be because my mother died and didn't need it. Someone else WILL.

Ponzi schemes promise the impossible. Social Security promises very little but is likely to succeed in its modest goals forever.


January 5, 2009 05:32 PM

ATTN: Businessweek Blog manager - I made an error in my previous post (submitted around 2:20ish), and I would appreciate it if you posted this comment instead. Thank you!

Social security disability insurance is a federally backed insurance program for people who are too old, too young or too disabled to earn their own keep. Can we call these people Untermenschen? I suppose, as long as we include the sick, the widowed and the orphaned. Privatizing social security (that is, turning it into a public retirement fund) would make it a purer Ponzi scheme, as it would exclude people like Trig Palin, disabled Iraqi vets and single mothers. This goes to show that SSDI is more of a Christ scheme than a Ponzi scheme.

Mike Caton

January 5, 2009 06:59 PM

I like that the article's main argument is that "it's not a Ponzi scheme because of technological growth". Wrong. A Ponzi scheme is still exactly that, regardless of whether it falls apart in the next iteration or not.

Is there hope for the GOP in the 21st century? Yes:


January 5, 2009 08:46 PM

It is the technological breakthroughs of the previous generation that makes it possible for the current generation to be productive. Part of that productivity goes into the current generation paying their "debt" to the previous generation.

The previous generation has also paid the social security tax throughout their working lives. Ideally, this should be enough to pay for the benefits. Then there are some who are not even lucky enough to live to collect. Therefore, social security can also be looked upon as a mechanism for sharing risk, i.e. an insurance scheme.

If the social security has materialized into a Ponzi scheme, it may only be because of mismanagement by the government. The government is a very poor manager of our savings, our taxes and even the fiscal and monetary systems.

We must demand accountability and efficiency from the government because they are the primary cause of all the problems of the nation.


January 5, 2009 08:48 PM

It is the technological breakthroughs of the previous generation that makes it possible for the current generation to be productive. Part of that productivity goes into the current generation paying their "debt" to the previous generation.

The previous generation has also paid the social security tax throughout their working lives. Ideally, this should be enough to pay for the benefits. Then there are some who are not even lucky enough to live to collect. Therefore, social security can also be looked upon as a mechanism for sharing risk, i.e. an insurance scheme.

If the social security has materialized into a Ponzi scheme, it may only be because of mismanagement by the government. The government is a very poor manager of our savings, our taxes and even the fiscal and monetary systems.

We must demand accountability and efficiency from the government because they are the primary cause of all the problems of the nation.


January 5, 2009 09:15 PM

I wrote about social security being a ponzi scheme back on December 18, 2008 right after the Madoff case.

I still think social security is a ponzi scheme despite technology and the increased output per worker. Anyway...details are at:


January 5, 2009 09:34 PM

You people are all complete lunatics.

The big difference between social security and a ponzi scheme is that in a ponzi scheme, there is a person siphoning off the actual money to his own pocket.

Let me repeat this so that it becomes clear to the Ayn Randians among you--a ponzi scheme is run for the profit of the schemer.

Whatever you think about social security (libertarian blah blah, taxes are thievery blah blah), it's being run for the good of the people collecting the benefits.


January 5, 2009 09:44 PM

Please stay down under.....the air must have robbed your brain. Go to the doctor tomorrow....oh...Imean ask to go to the doctor tomorrow and maybe they will let you see the doctor sometime in July 2010.


January 6, 2009 12:38 AM

profit as a motivator is fundamentally flawed. the social security idea was a fine idea for its time, but we know better now, and we see the finite nature of our ecology and thus understand that our money structures cannot be founded on ideas like an infinitely large market, or an infinite supply of raw materials, which our modern financial systems are based on.

the need for social security is a side effect of not providing unlimited health care. the first step to understanding our limited resources is humanizing our priorities so that the first use of all resources goes to basic health and well being of all people. we cannot in good conscience dole out 100x what the avg. person lives on for year to a CEO every month while other people die in the street of starvation and neglect and call our system ethical. it's one or the other. we cannot tout our first success as the 'best nation in the world' and then also maintain these failed power structures.

once we provide for the health needs of all citizens there will be no need for pyramid schemes to provide for the health care of any generation of elderly or any generation with the foresight to plan for when they are elderly. it is an embarrassment to our country that this flawed system (social security) ever had to be put into place, because if as medicine evolved it had always been made available to all citizens, this would never have been an issue.

this will also greatly improve the money wasted on litigation yearly as a result of medicine being inundated with people motivated by gain rather than altruistic care take; this is another side effect of requiring medicine to function as a business, rather than a service. when medicine is given proper respect in society, no one would ever ask a physician of any kind to deny treatment to anyone for any reason, especially not lack of funds. when people who are motivated by the opportunity to heal, rather than the opportunity to make big bucks, are the only ones invited to practice medicine then there will be fewer mistakes in medicine and thus fewer law suits.


January 6, 2009 12:42 AM

Does the Lottery qualify as a Ponzi scheme? This does benefit the schemer (ie. government)


January 6, 2009 08:51 AM

Of course SS IS a Ponzi scheme! This article even proves it!! Just substitute "Technology" by "Stock market Growth" and you get the same argument.

Fact is that a falling birth rate in the West combined with slowed innovation and less productivity equal a death sentence.


January 8, 2009 02:52 AM

You write: "Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix."

Oops! Bad assumption.

You can't maintain technological progress without cheap energy, and that's on its way out.

We're at the end of cheap energy (esp. peak oil). That and the decline of other resources have already doomed your assumption. The perpetual-growth economy is itself the ponzi scheme.

Cool Aid non-drinker

January 8, 2009 08:27 AM

For all who for political reasons have swallowed the line that Social Security is on sound footing please think carefully about what you are saying. I think if you just look at the rates that we're paying into SS you'll see that it has been ramping up at an ever increasing rate. (This is one of the hallmarks of a Ponzi scheme BTW!)

I'll paraphrase from

'37-49 1%
'50-60 1.5 to 3% rate was increased almost every other year
'61-70 3% to 4.2%
'71-80 4.2 to 5.08 hmm looks like the rate slowed down, but remember inflation was heating up!
'81-90 5.35 to 6.2%
'91-00 7.65
'01-06 7.65

Interestingly, after 1991 the Federal Government and SS administration seems to have realized that if they continued to increase the rate of SS they'd likely have a revolt on their hands so instead at that point they started digging ever deeper by increasing the top rate at an ever increasing pace

Here're the top rates from

37-65 3000 - $4800
66-70 6600 to $7800
71-80 7800 to $25900 Wow what happened (inflation!)
81-90 29700 to $51300
91-99 57600 to $72600
00-06 76200 to $94200
'07 97500
'08 102000
'09 106800

So there we have it, almost like clockwork SS has been increased ever 2 years. Also remember that employers must match their employees payment into the fund. Sounds like a good reason to start laying off some of those expensive employees doesn't it.


January 8, 2009 03:22 PM

Globalization is a ponzi scheme. Leveraging low cost structures in 3rd world countries and outsourcing livable wage jobs from developed nations and then selling into the current buying power in developed nations. When the developed nation is unable to maintain buying power...all collapse. The domestic economies of the exporting nations cannot sustain themselves because they lack the buying power due to low wages to buy what they produce


January 8, 2009 03:58 PM


January 8, 2009 06:37 PM

i'm thinking you are being incredibly sarcastic, which if so, is hugely funny
if not, then hugely sad, I'm betting on the former


January 8, 2009 11:33 PM

California is a ponzi scheme. The state bets on incoming property taxes for budgets and issues bonds based on this as well. Now the scheme is breaking and California is breaking.

And trying making a buck in the state. You will be taxed to death. I know because I've worked for two companies recently taxed right out of existence in California. Even the bosses are unemployed now. Try being a landlord in California. Your tenant will sit in your house for month upon month upon month while the you work your way through the court system trying to save your business...slowly going broke. Then the tenant will demolish your property as well and you'll get diddly.
Try being a worker in California. You'll get diddly pay and really high taxes. Try being a home owner and see how much taxes are placed on your home every year. Try being anything in California other than a bum or an illegal and you will get nowhere fast.


January 10, 2009 04:11 PM

Fast Forward Janrary 2009, Obama eyes CUTS to Social Security & Medicare.
Social Security & Medicare pays taxes and is NOT the problem.
SSI & SSP(inCalifornia) IS the PROBLEM & the PONZI!!!
Here are some facts about SSI--->>>>>>
SSP is included in California along with SSI to give an Individual $907 of Tax Free Cash each month & $1,560 for a couple collecting SSI & SSP.
When 'Head of Household' is ON SSI SSP the ENTIRE family gets an SSI SSP check.
That's right! The Entire family.
SSI SSP is paid to any Foreign person that NEVER WORKED A DAY IN THEIR LIFE HERE at age 65.
SSI SSP Never Has Had to Work a Single Day In Their Life.
The FASTEST Growing Catagory of SSI/SSP collecters is 'MENTAL OTHER', i.e., Depression, Anxiety, Agoraphobia, get the picture.
SSI/SSP has a 3 page check the box form mailed out to SSI/SSP's to fill out 'themselves' and return free EVERY 10 YEARS.
SSI/SSP Never has any kind of Re-Determination of the Severity of their 'Blue Book' Medical or MENTAL Condition except for THAT 3 page stupid little form.
NOBODY EVER checks up to see if what the SSI/SSP person checked on the boxes EVERY 10 YEARS ONLY, to see if it is valid.
Once you are qualified for SSI/SSP you can expect to get your check every single month FOR THE REST OF YOUR LIFE.
Now this is Important for those of you who THINK SSI's/SSP's are POOR.
A half to quarter million home in Los Angeles if A-OK to collect a lifetime of SSI & SSP checks!
SSI/SSP get 95% of their Property Taxes given BACK to them in a reimbursment check in October each year!
SSI/SSP get's no-copay no-premium MediCal, MediCaid, Medicare Part 'D', FREE MED's All the Time, Free Doctor Visits, Free Hospital, Free Convelescent Hospitals, Free Assisted Living, Free Commodity Vouchers, Un-Limited Food Bank Assistance, Meals on Wheels, IHSS in home supportive services (this is ABUSED to the MAX).
Many of the IHSS's are Morbidly Obese and ON SSI/SSP because they Sat and ATE themselves into morbid obesity, yet they get a Relative in their residence that's also on SSI/SSP to say they cook for that SSI/SSP and that add's another $300 check a month on top of $907 each in that residence each month, TAX FREE.
SSI/SSP get's free Braces on their kids teeth, SSI/SSP get's free Vision and Eyeglasses or Contacts.
SSI/SSP get's free Dental!
If you look on the 1st of the Month while you are shopping, look at ALL those Handicapped Placards on License Plates & Hangers on their Rear View Mirrors, REALLY LOOK AT THOSE PEOPLE, they are the PROBLEM, not Social Security & Medicare.
Most if not all of these people are on SSI/SSP because they have 'play acted' to get on checks.
I know. I did the US Census 2000 in my tiny mountain community in Far-Nor Cal and only 16 people out of 256 had EVER WORKED A SINGLE DAY IN THEIR LIVES.
They ALL Inherited their Properties, $450,000 and up in value, many of over 25 acres of land.
Yet, they KNOW how to shister the system to lie and get on SSI/SSP for LIFE, without paying a penny of taxes.
YES a Meth Head Can and DOES collect SSI/SSP because they are a Meth Head.
YES a Alcoholic CAN and DOES collect SSI/SSP because they are an Alcoholic.
Drive past ANY Dive Bar in the Nation, look at the Handicapped Placards parked there, they are on SSI/SSP spending YOUR TAX DOLLARS sitting and getting drunk EVERY DAY in those Bars.
That's right, SSI/SSP is the PROBLEM.
Yet, Nobody EVER discusses these leaches.
IT's NOT for poor, disabled poor people ONLY, They Can & Do MOST OF THEM OWN A PAID FOR REAL ESTATE AND YOU DON"T.
So, the next time you watch a Morbidly Obese family Waddle into the Stores on the 1st of the Month, LOOK AT THEM, they are on SSI/SSP, totally able to sit on their computers and chat, they WHY CAN't they require them to do Data Entry on their computers?
Because they just keep paying SSI/SSP's for 10, 20, 30, 40 years!
This is What needs to be EYEBalled by Obingo, NOT Social Security & Medicare.
SSI & SSP are the hugest Ripp Off in the Natioin.
Oh, The Illegals are waiting to ALL get on SSI/SSP when they become legal!
Their entire families WILL all get a check them, and free Medical, Dental/Vision too!
Section 8 is allowed with HR-3221 & HR-1851 to BUY A HOME ON SSI/SSP now. Read these Bills-> Pelosi's 1st Stimulus when to massive amounts of money to SSI & SSP, MediCal, MediCaid, SECTION 8 Housing Choice Vouchers for HOMEOWNERSHIP...Also Read HR-1851, Maxine Waters massive got money for SSI/SSP & Section 8, EBT Dignity Food Stamp Debit (Cash-Back) Food Stamp Cards!
WAKE UP YOU TAXPAYERS, you pay for those 1st of the Month people to get High, over eat, live in paid for homes, BUT THEY DON'T PAY A PENNY OF TAXES!

Know the Difference between SSI & Social Security

January 10, 2009 04:34 PM

Don't THINK for a second that SSI-Supplemental Security Income IS the SAME as Social Security.
SSI-Supplemental Security Income is TAX FREE WELFARE.
It's for people that did not work enough if at all in their lives.
It is ONLY qualified at the Social Security Office buildings.
It is EASY to qualify for SSI.
in California SSI & SSP pays a couple, say from China, newly here, age 65, $1,560 in cash in 2 checks per month.
One SSI from the Federal and one SSP from the State of California.
An Individual get's $907 in California.
The ENTIRE family is covered by SSI SSP if the head is on SSI SSP.
They ALL get 2 checks EACH per month, TAX FREE.
They all get free Medical, Dental, Vision, EMS, Hospital, Dr's Office Visits, MEDICINES, ALL FREE, ALL TAX FREE.
What MOST Americans don't understand is SSI/SSP is growing in 3rd place as the largest, swelling, ballooning 'Entitlement' FREE, never worked a day in your life, CAN own a home of ANY value, ANY size whatsoever, CAN be an Alcoholic or Meth/Tweeker and qualify for SSI/SSP.
There are households that get 1 inch or larger thick Federal & State checks each month, tax free.
The SSI is paid from the 'General Fund' and in NOT Social Security.
YOU MUST have worked to qualify for SSDI, it also pays taxes. You should and most likely worked for Social Security and paid FICA too, especiall the Boomers.
However, REMEMBER SSI/SSP pays No Taxes, never had to pay FICA, never had to to anything but, sit and eat to get morbidly obese to qualify for SSI/SSP at $907 a tax free 2 checks in California a month, guarenteed.
Never ever hear anyone distinguishing between the Tax Payer Checks of Social Security & SSDI (Social Security Disability Income/Insurance)
These are the two WELFARE checks, that never require work or paying taxes:
SSI-Supplemental Security Income & State Supplemental Program.
OK. It's SSI & SSP that's the proble.
Go here->
click-> People on SSI
Look at California that gives out 2 checks of cash per month--> Deep Dark Purple at the Stateline.
That's because people flock to California for the 2 check system they never paid for or pay taxes on.
SSI & SSP, here in lies the problem.


January 10, 2009 10:15 PM

It used to be a Ponzi scheme now it’s better described as extortion. Next time you get your annual Social Security statements in the mail, take the time to read it. On the front page is a signed letter from the Social Security Commissioner which says, and I quote “with out changes, by 2041 the Social Security Trust Fund will be exhausted”
in the year 2041 I turn 65, that means my government is forcing me to pay money into a scheme that they admit will go bankrupt right about the time I am eligible to receive it. If I refused to pay they would send me to jail, how is that not extortion?


January 12, 2009 03:00 PM

It is totally irrational to compare social security to a ponzi scheme. It has helped our parents and grandparents live when they have become elderly. Most people make back what they put in back and we owe it to those people to continue contributing.
If your looking for a retirement plan ponzi scheme, look at the 401k system. The 401k system encourages relatively inexperienced people to put money into the stock market. This pushes up the price of stocks so that when speculators sell they make a larger profit. That is the ponzi scheme you should be chasing after.


January 18, 2009 02:02 PM

Capitalism is a fraud. until the day the dollar dies all will be free, health, housing, education, food, no crime, everything will be owned by the people and not by private people.


January 20, 2009 04:04 AM

Yes, Social Security has many of the most important features of a Ponzi scheme, and I am glad that some people were taught this by their professors in economics. But did these professors also point out that the Stock Market is a much more pernicious form of Ponzi scheme? Initial purchase orders and other new issues serve the important purpose of providing capital for corporations. But otherwise, the stock market does not create any new wealth, it just takes money away from some people and gives it to others.

Every so often, the stock market crashes. It is characteristic of Ponzi schemes to crash. But the Social Security system, which depends on required regular contributions from participants, has so far never crashed, although from time to time the tax rate has increased somewhat, and undoubtedly will do so even more so in the future.

Medicare is a different matter, because Medicare and private insurance systems have allowed the public to be horrendously overcharged for medical care. The required reform of Medicare will have more to do with reforming the whole health care system than with the financing.


January 22, 2009 03:39 PM

The fact is that over 50% of our annual national budget is being spent on 12% of the population. This is a very serious generational inequity issue that has been the bane of my existence since I went to work for the social security administration in the 70’s. I saw the wage records…I saw the payouts and I was stunned! My grandfather paid in less than $300 in his entire life…he was a farmer…but when it came time to collect, his first monthly payments exceeded his entire lifetime contribution! Then he went on to collect for over 20 years.

And the AARP (who’s very cushy existence is based on lies to their members about their ‘entitlements’) has created a false belief that all elderly are poor. Do some research…the elderly hold the largest portion of the wealth in this country. Yes there are poor elderly…but they are a very small percentage of the elderly population.

Want to see poor elderly?…wait till my generation retires into this bankrupt ponzi scheme. We’ve been devastated by the stock market crash….the housing crash…and now the social security crash. I'm very afraid for our futures. But we have to do something now before it's too late.

Look out kids…we’ll moving in with you!


January 27, 2009 11:06 PM

When I realized that Social Security was a Ponzi scheme, I googled it, and discovered this article and all these posts. Lo for the last three hours have read them all. Conclusion, it was not my original idea. Solution, save money. Since I have no job this will be hard. I plan to grow my own food if needed, and get a cow. Maybe sell some milk or cheese. Think small and repetetive.

I am now 50 and do not have one iota of faith in our western medical system. It is a scam and a fraud. In fact, I refuse to see doctors at all. So I will not need medicare. After learning what I learned tonight I also will not pay into social security because it is a fraud. It is a slush fund, and has been since it started generating a surplus.

My father is on social security, and since he was also a teamster, he has another pension plan, pity if he had to live off of his $944 social security check. Currently a "decent" nursing home costs $3,500 a month.

The currently dillema is.... Americans spend too much money. That is how we have been conditioned. By the media, and the communities we live in. We are also fat. WE eat out too much, and eventually the only jobs will be fast food and convenience stores. (hopefully with this economy, half of these will go out of business, and you may be able to rent one to live in! I always wanted a drive-up window!)

The other reason we are in this mess is that we have no contingency plan. I think of this economic meltdown as a darwinnian opportunity to level the playing field. A chance for the greedy meanies of corporate america to get shaken down. A chance for the rotten apples to be culled from the harvest, with only the strong shiny ones remaining. Start by asking yourself which YOU are.

Raise your children to survive. Start a family hobby on a small scale where you can make something, anything. Think small. Perfect it, and then sell one. This is seedcorn. Just like anything it will grow, and save the money you make for retirement. Being poor is a state of mind. Watch little house on the prairie. It takes very little money to live... If you mow your own yard, cut your own hair, make your own clothes, build your own house, and generate your own power, and uhhhh grow your own food.

It takes a lot of money to live the way television tells us to live. Stop watching commercials, they cause Attention Deficit Hyperactivity Disorder. Ever wonder why there hasn't been an invention to filter out commercials from cable television? (Remember when the selling point of cable was "Commercial Free Television"?)

Think about it.

It is what you don't know that can hurt you.

But I digress.....

The above comments not only verify that Social Security is a Ponzi scheme, but virtually make it unethical to contribute to it. Make the government bail itself out. Get a job where you get paid cash, and barter everything else. Grow pot, do whatever you want to do, but just quit playing the dumb game of not seeing what is happening in our government, and in our daily lives.

There is so much wrong, the only fix really is to stop the merry-go-round, and wait till the dizzyness subsides. Take a deep breath, and find out what your life really means.

I doubt there will be anything but absolute chaos till all the morons and thieves cancel each other out. And we can then see if capitalism was really a success or not.

I do not fear the government, I do not fear the police,
I do not fear the economy,
I do not fear the future.

I fear lies and and corruption.

They are evil.


February 14, 2009 12:12 AM

It is true that up until this point social security has always taken in more than it has had to pay out. That is simply demographics. The Baby Boomers provided a huge period of time where there were many more workers than retired people. Unfortunately what they didn't do was have lots of children to make sure that when they started to retire there would still be more workers than retirees.

The day is coming very soon where there will be more people drawing on Social Security than paying into it.

Ponzi schemes always work great as long as there are more people depositing money than withdrawing it. Then they fail, and fail spectacularly.


March 13, 2009 10:55 AM the arguement is that if our economy grows and we tax more and cut more benifits then we can sustain social security. Well that seems a little hypothetical in our current economy. Instead look to David Walker the comptroller general for the US who lays out projections if we continue like we are, which is more likely. I am 28 and for me Social Security will be a ponzi scheme..because i wont ever see a cent of what i paid in. So, Michael Mandel, your saying SS isnt a ponzi scheme so long as we pay more money in the future to fund its losses...i belive thats what defines a ponzi scheme.

Ron Maxwell

March 16, 2009 01:45 PM

First, let me say that I draw Social Security for a disability, caused by nerve damage from a cancer operation. SSI,SSD,SS whatever, I don't know which. Its $1800 something a month. While collecting data to substantiate the claim, it was determined I had paid in over $1,100,000 in FICA taxes. I moved my family all over the country, Puerto Rico even, to be able to work. I took a job in Argentina, and had to be away from them for over a year. I made alot, but moving costs alot. Our nest egg was small, since gone. My age is 66. I would have to live another 63 years to draw out just the money I paid in. Did this money make any interest? Where does it all go when I die?
There has to be alot wrong with the system, but should last my life time. I've told my son not to get into the system, if he can help it, and that I don't think the United States, as we know it now will end in his life time.

Opinions, are like you know what, everyone has one. Mine is ethnics. When people came here they were supposed to "melt" in our society. WHAT HAPPENED THERE. When the Government started printing the Voting ballot in other languages, I knew I didn't want to be here anymore, but couldn't leave as long as my parents were alive, and when they passed, it was too late.
This is enough, not all I'd like to say though.

Syn Holliday

March 28, 2009 07:29 AM

Am I missing something, or is this a ridiculous article? Correct me if I'm wrong here: The author of the article is explaining that Social Security is not a Ponzi scheme because there are factors that can keep this Ponzi scheme working? Don't ALL Ponzi schemes depend on certain factors in order to continue successfully, and are they not still Ponzi schemes even if the factors are favorable?

Hey Ron Maxwell

March 28, 2009 09:00 PM

At $1,800 you MUST be on SSDI which pays taxes. This means you were WORKING and paying into FICA for a long time and became DISABLED while you were GAINFULLY EMPLOYED. You deserve your money! Sounds like you worked a long, long time and paid and paid.
All the Posts I read on here, STILL don't get it. They STILL are Looking at Social Security as the MAIN TROUBLEMAKER!
It's SSI & SSP that's the PROBLEM. Any AGE anyone claiming to be say, "Depressed" can collect SSI & SSP at $907 a month per Individual and $1,569 per couple, ALL WITHOUT EVER WORKING, ALL TAX FREE!
Along with the SSI & SSP check that is NOW All-In-One Federal Treasury Check, comes on the 1st of the Month just like a workers Retirement Social Security check comes, from the Federal Treasury.
MOST Retired Workers get LESS than an SSI/SSP Recipient that NEVER HAD TO HAVE WORKED A SINGLE DAY IN THEIR to collect for the Rest of their life. And, when the 'Head of Household' collects SSI/SSP, the ENTIRE family collects THEIR SSI/SSP checks as well.
When the ILLEGAL ALIENS, become LEGALIZED as Obama wishes them to be, and HE WILL LEGALIZE ALL OF THEM, you could have at a MINIMUM 20 Million New SSI/SSP Non-Tax Paying, Never Worked a Single Day In Their ENTIRE life, RECIPIENTS!
Since, SSI/SSP DRAIN the 'General Fund' of the Federal & State Governments, and pay ZERO taxes, there's NO WAY the 'Entitlement' Programs can last.
Not, adding in ONE year another 20 Million MORE onto Welfare for Mother's and Children & SSI & SSP.
People are getting kicked OUT of the jobs in California left and right, teachers, police, hospital workers, county social workers, fire, you name it, they are losing their jobs.
They are losing their jobs for 1-REASON, to pay for California's generous, and HIGHEST payout of Social 'Entitlement' Programs!
The IN Migration Into California is STAGGERING, and they are ALL SSI & SSP Recipients coming IN to collect the Double-Double-Check-Check. California pays out the MOST for SSI/SSP. They also recieve the MOST in Additional 'PERK' extras like Free-HUD Section 8 Housing Choice Vouchers, the HIGHEST in EBT-Dignity Food Stamp Debit CASH CARDS, Heat & Cool Assistance, You name it, California Dool's OUT the Tax Payers money to the Recipients!
Here in lies the California PROBLEM, and OUT goes the Working Families by the dozens.
About 1-Year after the Legalization or 'Shamnesty' happens, California will CRASH with the MONETARY pressure of all the New Citizens Applying, Qualifying and collecting nice fat checks for being "Depressed" from being an Addict, or Eating themselves INTO Morbid Obesity. People just don't get it still, that Social Security is NOT the problem, it's all the Fraud, Misuse and Waste of Tax Payers dollars on very, very Lazy Phonies.
MOST of the SSI/SSP's are FRAUDs. They just never wanted to have to work.
Just like Teenagers, some of them Don't want to get up in the morning and finish High School, these SSI/SSP people are THOSE teenagers grown up.
Every Tax Payer needs to WAKE UP and realize that the WORST Social 'Entitlement' are the CAUSE of the ENTIRE National Debt.
Allowing ITIN's to buy houses during the Mortgage Boom, then losing those houses to foreclosure because the Male/Father lost their CONSTRUCTION Job due to the END of the boom period, caused the 'Mortgage Meltdown'.
I know I am Hispanic, and I grew up in the CENTER of Los Angeles all my life until I turned old enough to move myself way, way, up into far-far Northern Cali. Now, it's the SAME thing Up Here as Down There!
So, I'm moving AGAIN, further up into the PNW. Into the Rural Region of another State and the nearest town very small. I've already saved enough money for a PV System, A Water Harvesting System, and a nice Generator. I'm going to Add these Off-The-Grid Items to a Tiny/Small House Kit I have already bought and am going to PUT UP the house myself with some help from friends and my brother.
Obama is SWELLING and BLOATING the Social 'Entitlement' Programs BUT NOT SOCIAL SECURITY and MediCARE and when the 'Shamnesty' Adds way too many New Recipients to the Non-Tax Paying 'Entitlements' of CalWORKS/AFDC, TANF, IHSS, SSI, SSP, it will break the back of the Monetary System, and NOBODY WILL GET ANY MORE CHECKS!
So, all anyone can do is Save & Prepare for NO MORE 'ENTITLEMENT' Checks of Any Kind Whatsoever!
If you are able to have a job, you will be the only one's getting any money and be a Target.
Anyone that uses Banks for Direct Deposit, Savings, Thrift Savings, Bonds, Mutuals, CD's, you name it, Obama will Take it. BECAUSE he's going to NATIONALIZE Everything and TAKE all the money and give it to himself, his Pals and his "people" that live off SSI & SSP, until the very last drop.
Then, there won't be any more money, except in the ground and in Obama and Pals pockets.
So, don't USE DIRECT DEPOSIT or he's going to take ALL your money!
NONE of his CRAP is going to work!
He does NOT want it to, READ THIS:
and this one:
and this last one:
You will understand EVERYTHING after reading these 3-Tiny's
The best thing you can do is GET AWAY FROM THE CITIES.
Go Back to the Land, go off the Grid, off the UTILITIES, cause Obama is going to make Utilities go up so high the only people affording the Utilities are going to be the one's that get Government and State Subsidized Help to Get the Utilities. Nobody else but the stupid Liberal Celebrities and Politicians will be able to afford the Utilities.
Obama's goal is to get EVERYONE to the point of want to BEG and GROVEL to become a Servent/Slave of HIS Government.
He's a Combo of Hitler and Stalin, but NOT exactly like them. He's also a bit like Mugabe and will probably run this Nation more like the Soviet Union WAS or Zimbabwai(sp?)
Obama WILL become a Dictator.
He WILL take away our Weaponry.
He was trained by Saul Alinsky, Bill Ayers, Rev.Wright and all the super creeps and HE IS what was said about him during the Campaign.
Then find Links and Websites for Survival Blogs, and Lists of THINGS/ITEMS you NEED to have to make i thru the 'SHTF' Times!
There's a guy from Argentina that has lived thru it's Economic Collapse and he's got a GREAT Blog, his name is Farfel, and you can GOOG his blog.
Start Gathering up things right away.
Dry beans everytime you go to the store.
A nice thick black kettle with a lid.
Forget it for Electricity and Gas, Oil, Electric, Propane HEAT.
You WILL have to go PV System. Cause' you will NOT be able to afford the Heat Utilities.
The 'Entitlement's will use up all the GRANT/Funds until they run out of money..
If your in a remote area, bury your NEEDS!
It will be much harder for them to be FOUND!
Read these books:
Civil War II: The Coming Break Up of America by Thomas Chittam
Atalas Shrugged by Ayn Rand
and of course if you have not read George Orwell read his book too!
Get a video on 'Small Infantry' and WATCH IT, and learn from it.
Learn Archery.
Learn to shoot.
If some Nice people come to your door and tell you there's going to be a Chemical Weapon dropped into the U.S. within a day or two and you MUST leave immediately with them, quietly and only bring your backpack, DON'T GO WITH THEM!
Run/Sneak OUT your back and go hide in the Forest or a nice CAVE.
Old Mine Shafts are dangerous but make perfect hiding places.
Remember when the Nazi's came to get the Jews out of their houses? They went with the SS QUIETLY because they were told it was for their safety!
But, that's NOT what happened, they were taken to trains and put in concentration camps.
There's FEMA camps being built on ALL, including abandoned Military Camps/Installations.
Become as 'Non Existant' as possible to the World. Don't advertise your address or phone number.
Don't sign up for newspapers or magaazines or Netflix.
Become a Hermit except for trusted country neighbors or family.
Obama WILL form his 'Civilian Military Security Force' don't doubt he will NOT for a second.
Remember to GROW as much of your own food as possible and learn how to STORE it! Canning, freezing in snow works too, I've tried it out.
Kim-Chi pots in the ground work well.
The person up above that explained how to live OFF THE LAND, do it, and also Live Off the Grid.
Good Luck Everyone!


April 6, 2009 08:59 PM

sSocial would be here for meny years if the government hadnt robed it. if they were made to give it back the trillions they stole it would be good for meny yrs. Some how we should mske them pay it back'then the younger generation would be able to retire on it . They are giving trillions away why shouldent they bail out social security out and not be able to steal it again ,where there is a will there is a way.CJ 74yrs.old husband 76yrs old


April 6, 2009 08:59 PM

sSocial would be here for meny years if the government hadnt robed it. if they were made to give it back the trillions they stole it would be good for meny yrs. Some how we should mske them pay it back'then the younger generation would be able to retire on it . They are giving trillions away why shouldent they bail out social security out and not be able to steal it again ,where there is a will there is a way.CJ 74yrs.old husband 76yrs old

john michaels

April 8, 2009 09:24 PM

More big government apologia from the media. The government can do no wrong.

A government run Ponzi scheme isn't a Ponzi scheme. Big government deficit spending isn't a deficit. Nationalizing firms isn't socialism.

What is wrong with you people!?! I can't believe this is really happening.


April 29, 2009 03:37 PM

I do believe that SS is a Ponzi scheme
1-Senator, and Congress members and executive branch members do not have to contribute to it
2-The only difference between Madoff scheme and SS (social security) is that these same above mentionned individual when the fund gets depleted can enact a law stating that you have to be over 100 years old to start cashing it. How do they care, they have their own retirement funds.
Madoff did not enact any laws therefore what he did was illegal
Politician and (verminous counter part lawyers) can so it is legal and legitimate.

Get it!!!!

Mike Reardon

May 12, 2009 06:10 PM

Just move SS and Health Care into the same status we now hold the Military, we must provide the services from general funds as needed to guard peoples security.


May 15, 2009 06:47 PM

The author points to technological advancement as the main difference between SS and Ponzi Scheme.

"...Technological change. Over the past century, new technologies have enabled the output of the country to grow much faster... U.S. economic output has gone up by more than 20 times"

Most of the economic output that the author refers to, is simply a valuation on paper. Which when true valuation of commodities/assets in this country doesn't match up to, the whole thing crashes. Isn't this what happened to Iceland?

My view is that SS is a Ponzi Scheme.


June 7, 2009 05:30 PM

Definition of a PONZI SCHEME. A financial system where the obligations increase faster than the system's ability to pay back its investors, forcing the system to pay back old investors with new investor money instead of investment returns.

This technology advancement idea is a bunch of wishful thinking. Since all our money is tied up in Treasury bills, we have to tax ourselves to pay ourselves, as these bills come due. The Treasury is going to have to roll them in the credit market, driving up interest rates even more.


July 8, 2009 04:12 PM

Correct - technology has advanced, but output per worker {as measured by GDP} has been largely advanced by Government spending taxpayers money.

In 1903, % of Govt spending as GDP was 6.8%. It is now 44.72%

Social security is TOTALLY a ponzi scheme. The solution is not to remove the cap and pump MORE money into a ponzi, as that only further delays the inevitable.

This crap about "guarding people" and "taking care of people" is a load of bollocks. Government can't even wipe it's own ass without setting up 4 special committees to study the process, donating a $1b taxpayer-funded endowment to an ivy-league university to study the variances for 7 years, and then losing the findings and recommendations in MOUNTAINS of useless, non-actionable data.

Recommendation >>>Follow Joe's simple solution:

1. Reduce government oversight to simple areas of operation - Police, the armed forces etc. Institute a FLAT TAX to fund ACTIVE PERSONNEL and support payroll.
2. Beyond that, people are responsible for their OWN LIVES. Health, money, family...everything! {OMG!Everything?}
3. Yes - EVERYTHING. {but what about poor people? And fat people? And the evil rich people that would exploit society if left unchecked? A - they make money or die - B. They lose weight or die - C. We kill them if they become too exploitative.
4. ........
5. ...........



August 1, 2009 11:11 PM

oldduke, you perpetuate the slimiest rationale for why Social Security is secure - that it is backed by the most rock solid investment in the universe--US treasury bonds. Protected by the full faith and credit of the U.S. Governemnt, eh? All that means that the government is able to either print money or tax the very people they owe - the tax payer. How about if I guaranteed your investment in my retirement fund by writing checks against your bank account? And if you don't have enough money in your bank account, I can liquidate your assets to pay you back. And if that is not enough, I can write checks against your children's bank account.

Dalton Fury

September 7, 2009 11:36 PM

I look at any similarities between SS and a Ponzi scheme in what is done with the "invested" assets. In both cases, assets are not really invested to produce a return on investment for over-hopeful investors. IOU's serve the same purpose as fictitious financial statements of returns on money that isn't in your account anymore. But, a big problem in any kind of privatization is the size of SS. Even half of it would dominate the stock market and influence returns and stock prices on any and every given day. I'm more scared of the government investing SS money in private companies. That is when the real problems with fraud and deceit are likely to ruin the system.


October 6, 2009 08:03 PM

There are no real USA bonds held by SS. So called interest paid on them is not part of the budget as is true of interest paid to real bonds. SS bonds are phony IOU's.

The government can forfeit on SS obligations without defaulting on the national debt. This is good news to China, but not so good for future SS recipients.

Richard Wolfe

December 28, 2009 12:43 PM

It is a Ponzi scheme.

First of all the trust funds were replaced with IOU's, so yes, the money was robbed from those going to retire.

Secondly, even if technology & productivity increases, the added benefit does NOT go to those working and they will not have EXTRA money big salaries to tax. Look now how unemployment is increasing and those working now are having their wages CUT and hours reduced like 4 out of 5 of my friends. The rich will get the spoils, worthless IOU's will be in the fund and younger people will have less income to tax not more and they will not be able to make up the difference betweeen what is owed to the older and what is available.

Richard Wolfe

December 28, 2009 12:43 PM

It is a Ponzi scheme.

First of all the trust funds were replaced with IOU's, so yes, the money was robbed from those going to retire.

Secondly, even if technology & productivity increases, the added benefit does NOT go to those working and they will not have EXTRA money big salaries to tax. Look now how unemployment is increasing and those working now are having their wages CUT and hours reduced like 4 out of 5 of my friends. The rich will get the spoils, worthless IOU's will be in the fund and younger people will have less income to tax not more and they will not be able to make up the difference betweeen what is owed to the older and what is available.

Rich B.

January 11, 2010 01:27 PM

The primary characteristic that differentiates the US Social Security system from a Ponzi scheme is that a Ponzi scheme relies on fraud to succeed, the SS system relies on force. Otherwise, the definition of a Ponzi scheme fits the SS system like a glove.

The argument that the difference lies in technological advance is specious. Victims of a classical Ponzi scheme can get better jobs, make more money, and pump it into the Ponzi scheme. That doesn't make it any less of a Ponzi scheme. The unsusainable structure is still there and sooner or later, it must collapse.

Then there is the consideration that, even if the SS system were not a Ponzi scheme, extorts money from unwilling participants. Even if the SS system were sustainable (which it is not), it would still be immoral on its face for the reason just described.


February 6, 2010 12:55 AM

Obviously it's a Ponzi scheme but apparently not everyone can connect the dots. Sure there are technical differences but those are inconsequential to the ESSENCE of the systems. Both are unsustainable models with similar mechanisms. You can call them different names all you want, that doesn't mean they are fundamentally different though.

check it out

February 10, 2010 07:40 PM

bush and his cronies tried to privatize social security, since 03.

article: "The Plot to Kill Social Security"

by: Farhad Manjoo/

Ruth Case

March 24, 2010 08:51 PM

The Social Security fund would be solvent forever if the Earnings Cap is completely removed, not just raised. The only cap should be on pay-out as is standard with unemployment and disability benefits.Then our federal government must pay back the trillions it has borrowed from the fund and the entire system taken out of the general fund and put in a 'lockbox' where Congress and Presidents cannot steal from it anymore.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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