Debunking Rick Perry's "Ponzi Scheme" Lies About Social Security
Talking Points Memo has a brief overview of the history of the Ponzi scheme as a courtesy to Rick Perry—who's constantly comparing Social Security to Ponzi, despite not actually displaying any knowledge that proves he knows what either is. Depressingly, writes Benjy Sarlin, "Nowadays the Ponzi scheme label is misapplied so often to Social Security that the Social Security Administration posted a detailed history of the Charles Ponzi simply to explain the difference." Since the most recent high-profile Ponzi scheme was that of Bernie Madoff, it seems like it would be easy for state governors to comprehend the difference: Madoff stole sizable amounts of cash from older Americans who wanted to invest their retirement funds. Social Security distributes moderate amounts of funds to elderly and otherwise needy Americans based on what they've paid into it during a lifetime of work. But there's more:
On a basic level, Ponzi’s famous con and its many successors relied on deception — their finances were hidden in order to conceal their true nature and enable massive theft. Social Security’s finances are completely out in the open and no one is making any kind of illicit profit off the tax contributions that finance it. And while Ponzi schemes quickly become unsustainable, Social Security has worked as planned for more than 70 years. Which is apparently not long enough for Rick Perry, who called it a “failure” in his book and strongly suggested it should never have been passed at all.
Social Security’s detractors apply the Ponzi label based on superficial similarities between their financing. In both systems, it’s true that people who “cash out,” don’t receive the same money they put in themselves. In the case of Social Security, young workers’ taxes pay for retirees’ benefits. But they’re hardly getting ripped off, because they’re working under the premise that — just as their predecessors did — they’ll one day receive benefits from the next generation’s taxes in their old age. So long as workers pay enough in taxes to fund the system, retirees get their checks just fine and the cycle continues as it has for decades.
It goes much deeper than that, but you get the idea. Head to TPMfor the rest of the piece and to view a handy, easy-to-understand Venn Diagram comparing the two.