The Ponzi Scheme Scheme
The phrase “Ponzi scheme” sees a lot of action these days. Like most buzzwords circulating in the political pool of pejoratives, it’s a code intended to promote an agenda while stopping people from thinking about the facts. Declaring Social Security a Ponzi scheme is dishonest, plain and simple.
Charles Ponzi was a criminal in 1920s Boston acting with the specific intent to commit fraud. He did so by promising high returns on an investment that didn’t actually exist. Though he made a great deal of money, lived luxuriously, and rose to prominence in the financial industry, he ended up in prison when his scheme unraveled. A clear line runs from Ponzi all the way through Bernie Madoff and passes though dozens of other perpetrators along the way. Somewhere on that line, though, a woman named Ida May Fuller was looped into Ponzi’s legacy.
The notorious Ida May Fuller died in January of 1975 at 100 years old. She was eligible to collect Social Security payments, and did so, for the last 35 years of her life. Certain bloggers and pundits have recently circulated her story as an example of Social Security’s inherent Ponzi-ness, the crux of their argument being she paid less than 25 dollars into a system which eventually paid her a total of $23,888.00. This proves that she bilked the government and all the Social Security “investors” by being fortunate enough to participate in the scheme early.
It’s been said that Ida May “made out like a bandit.” The thing is, though, that it took her 35 years to “rip us off” for 23 thousand dollars. She collected about 650 bucks a year from the federal government on average. Not 650 dollars a month – 650 dollars a year. Between the ages of 65 and 100.
She made one lousy bandit.
Social Security was never sold to the public as a savings account. It’s a social contract to take care of America’s senior citizens in the present while expecting Americans of the future to also honor that contract. Did early beneficiaries get a lopsided good deal? Maybe so, if you don’t count enduring the Great Depression and both World Wars. Does the system rely on current contributions to pay current beneficiaries? It does. But it’s no more a Ponzi scheme by that measure than paying for last month’s credit card purchases with this week’s paycheck, or any more than putting your money into a bank. Do you think the bank takes your little pile of money and puts it somewhere for safe-keeping until you come back for it? They don’t. They use the money you gave them to invest, to acquire, to pay shareholders and executives today, operating under the agreed contract that you’ll get your share tomorrow, or later, when needed. Social Security isn’t a Ponzi scheme, but nor is it a bank. It’s a responsibility in need of attention.
The “crisis” facing Social Security is only a crisis if we let it be one. Social Security can draw from other tax pools to pay benefits at 100% through 2037. Projected revenue is expected to cover 78% of projected payouts through 2084. If any of us are still alive to worry about it then, I’d be surprised, but that’s not really the point. The point is Social Security isn’t in as much of a crisis as detractors would have you believe. Three concerns must be addressed. Problem one is the large baby-boomer generation reaching the age of eligibility but the U.S. not having a subsequent generation of equal size as contributors. Problem two is the government’s use of surplus Social Security contributions for other spending purposes rather than protecting the surplus for future pay-outs (the system still brings in more than it spends, but current projections have that changing by 2015). The third problem is an extension of problems one and two – find a way to increase revenues that will cover future payouts.
The system needs more money, and action should be taken now to find that money, but the answer is not villainizing and dismantling social security. The boomers will get theirs, and they should. But while some of them remain productive workers and Social Security contributors, changes to the system should be made. A good start might be setting a specific amount to the benefit rather than having it tied to earnings. The current structure provides less benefit to those who earned less and more to those who earned more, but equalizing payouts regardless of contributions could control costs. Second, any surplus collected must go untouched. Third, increase overall tax revenues across the board by repealing the Bush tax cuts and ending current military conflicts. Last but not least, raise the upper limit cap on payroll taxes, or (better) eliminate the cap entirely. Earning enough money to not rely on social security should not eliminate or reduce the responsibility to contribute. Again, Social Security is not an investment fund or a savings account for you. It’s a means of providing help to fellow Americans who have reached retirement age.
When critics attempt to criticize Social Security by comparing it to an investment, they misrepresent the nature of the program, and that misrepresentation comes closer to being a true con. The notion that they’re looking out for your money is deceptive. They’re looking to give your money to their cronies. The users of the “Ponzi scheme” code word are almost universally in favor of privatization, in whole or in part, of Social Security. Those politicians calling for privatization are overwhelmingly pro-business, influenced tremendously by lobbyists working to deliver your money into private hands. Not your hands. The private hands of international banks and multi-billion dollar investment firms.
It’s a shell game of true intentions. That’s the real scam. Scheme. Whatever you want to call it, just know the con.
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Jake Negovan drives Red Brown and Blue to be an outlet for progressive political opinion that leads to the betterment of life for the real, multicultural population of the U.S. and the rest of the world. His columns address the issues faced by our country as we continue growing toward a society of equality. More about Jake can be found on the web at jakejots.com or on Twitter@jakenegovan.
