Since Bernard Madoff has brought Ponzi schemes into the news recently, it seems like a good opportunity to remind people that the U.S. Social Security system is structured very similarly to this type of fraudulent scheme.
Here’s a short page from Cato’s SocialSecurity.org site describing the similarity:
Just like Ponzi’s plan, Social Security does not make any real investments — it just takes money from later “investors,” or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi’s scheme.
And, here’s a page that used to be on the Social Security Administration’s site trying to explain away the similarities.
The longer we wait to reform this system the more painful it will be; both to those who will have grown dependent on it and those others who will have to pay to mitigate the damage.
If our new president really believes in honest change, he’ll move quickly to end this horrible fraud.