The World’s Biggest Ponzi Scheme

Ponzi Scheme: “A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.”  Source: Wikipedia

http://en.wikipedia.org/wiki/Ponzi_scheme

Liberals are upset if you call Social Security a “ponzi scheme”.  But what do you call a program where individuals are “encouraged” to contribute and the returns aren’t based on investment principles and market returns.  If you want to see an extreme historic example of that in action check out Ida May Fuller.  She was the first official recipient of Social Security (Old Age) benefits.

http://en.wikipedia.org/wiki/Ida_May_Fuller

According to the article, Ida contributed $24.75 into Social Security over 3 years prior to retiring.  She received benefits from 1939 until her death in 1975 (age 100).  Over that period of time she received $22,888.92 in benefits. 

 The Social Security Act was passed into law in 1935 at a time when there were 322 Democrats and 103 Republicans in the House of Representatives and 69 Democrats and 25 Republicans in the Senate.  From 1935 until 1982 Democrats controlled the House of Representatives in all but one term (average majority of 83 seats) and the Senate in all but two terms (average majority of 21 seats).  So the fate and future of the Social Security program was firmly in the hands of the Democrats.

Democrats have proudly proclaimed that Social Security was a “Pay As You Go” program.  That meant that current workers contributions were used to pay current retirees.  This seemed to work fine until 1982.  That year the Social Security Trust Fund balance dropped to only $12.5 billion or $112 for each individual contributing to the program that year.  Many of those workers had been contributing for their entire careers, but the funds weren’t there.  They had been paid out to retirees.  The trust fund had paid out 99% of what had been contributed since its inception, leaving nothing to pay the worker’s future benefits with. 

At that point Congress did two things to “save” Social Security.  They raised the percentage of earnings being “contributed” into the trust fund and the maximum income level that withholdings came out of.  What started out in 1935 as a very minor “contribution” to help senior citizens became a major drain on the middle class’s income to support the Social Security and Medicare programs.  Individuals not only had to pay for the benefits of retirees, but contribute what was to be for their own benefits.

Democrats have consistently rejected any attempts to actually reform the program and put it on sound footing.  In recent years they’ve resorted to lying about the program’s impact on the Federal Budget.  While they claim that Social Security isn’t in the Budget, it appears in each of the WH OMB’s budget projections.  And while they tell people that it doesn’t add to the deficit, the 2015 WH OMB Budget projections show that Social Security Outlays ($11.7 trillion) will exceed Social Security Payroll Tax Receipts ($9.7 trillion) by $2 trillion over the next ten years.

There is one big difference between Social Security and a normal “ponzi schemes”.  Since Social Security was established by Congress, it’s “legal”.  And since the Social Security rules were set up by Congress, Congress can change them at any point in time.  And based on the current discussions on how to “fix” the Social Security program, for many Americans their contributions to a retirement plan is about to be turned into nothing more than a different name for a Federal Income Tax.

But Democrats still insist Social Security is the most successful program Congress has ever established.  The rest of us know it’s been nothing but a huge “ponzi scheme”.

http://en.wikipedia.org/wiki/Social_Security_(United_States)