Commentary 53- Mulshine on Social Security

The Ponzi scheme that Baby Boomers are waiting to cash in on

Posted by Paul Mulshine December 26, 2008 11:19AM
(Note: This column ran in the Star-Ledger on Christmas Day)

I think it is fair to say that 2008 has been the worst year in the history of the Republican Party. Every conservative columnist in America has weighed in with a theory on how to rescue the right. So here's mine: Stop treating the young people of America the way Bernie Madoff treated his investors.

A lot of people have been comparing the Ponzi scheme allegedly run by Madoff to the Ponzi scheme run by the U.S. government, also known as Social Security.

That's entirely unfair.

To Madoff.


From what I can gather, Madoff at least made an attempt to invest the money he got from early investors to give them the returns he promised. Those investments failed to bring in enough money and the scheme was doomed to fail sooner or later. But if Madoff had been a more brilliant investor, it might have worked.

The federal government, on the other hand, never tried to make the Social Security system work. The feds didn't invest the money in the market. They took the money that we gave them and lent it to themselves, promising themselves interest. To be paid by themselves.

This scheme is even more crooked than Madoff's. But try and explain that to adults, especially Baby Boomers. The math is complicated, but the typical boomer seems to understand that he or she is on the winning side of the curve in this scheme. We will get a good return on our Social Security payments and a fantastic return on our payments into Medicare.

But try talking to kids about it. I do so regularly, often in college classes that I visit.
Whenever I am before a class, I make it a point to tell the students the truth about Social Security. And the truth is that when the current crop of college kids are in their peak earning years, each will be supporting half a retiree. "I'll be on the beach sipping a margarita and you'll be paying my bills," I tell the kids.

And those bills won't be cheap. When you look at the projected costs of Social Security and Medicare 20 years out, you see that each kid in that class will have as much as $500 a week deducted from his paycheck to support his half of a retiree.

"And you have to adjust that for inflation," I tell them. "In other words, you'll have to pay $1,000 or so a week to keep me in tequila and triple sec. I might pay for the lime juice, but that's about it."

But what about the trust fund? The government owes that money to itself. Therefore these kids will be paying our retirement costs both in their payroll taxes, which will go to Social Security and Medicare, and in their income taxes, some of which will go to pay back the money the feds are borrowing from Social Security today.

In a typical college class, half the kids are daydreaming or sending instant messages on their laptops. But they all pay attention when I tell them this. From the reaction, I can see that no one has explained this to them before. Neither political party will tell the truth about the trust fund for the same reason Bernie Madoff didn't tell the truth about his trust fund.

The only major-party presidential candidate who ever addressed this issue honestly was Republican Barry Goldwater in 1964. He wanted to make Social Security voluntary and he was opposed to Medicare, which was then in the planning stages.

Goldwater lost in a landslide. It's not hard to see why. Everyone who voted in that election was on the winning side of the Ponzi scheme.

That was still the case for the majority of voters in this year's election. But it won't be the case for long. If we assume that Barack Obama gets re-elected in 2012 - a likely assumption given the ineptitude of the current GOP leadership - then the next presidential election of consequence will be in 2016. By then a majority of Americans will be on the losing side of the scheme.

The party that first figures out a way to appeal to these voters will have a decisive advantage in the future. It won't be the Democrats. Obama proposes to "save" Social Security by raising taxes rather than trimming benefits.

As for the Republicans, they treated Texas congressman Ron Paul as a pariah in the presidential primaries for reviving the Goldwater worldview. But the oldest candidate in the GOP field had the youngest supporters. So that should be a word to the wise.

Or perhaps the Republican leadership will decide to dismantle this Ponzi scheme simply because they are honest and they realize it's the right thing to do.

And maybe Santa really did come down your chimney last night. Merry Christmas.


My Commentary:

Posted by Zemack on 12/26/08 at 7:35PM
My wife and I have paid precisely $312,551 in Social Security taxes over our working lives as of 12/31/07, according to our latest S.S. statements (not counting Medicare!!). This includes the employers' "share", a grossly dishonest means of camouflaging how much money each of us actually pays. If those taxes (dating back to 1966) had been placed into a personal, balanced investment account earning a reasonable, modest rate of return, we would have probably upwards of three-quarters of a million bucks, of our own money, to start drawing on in a few years. Instead, that money was spent by congress or transferred to other retirees who did not earn it.

Now, when we begin to collect in a few years, we will have to depend on other workers' taxes to collect on our contributions. This will include our own children and, eventually, our grandchildren. No honest person would voluntarily submit to such a scheme. This is the horrendous position that that hideous program forces on its "contributors".

Social Security turns everyone into first a slave, then a parasite.

If that is not a Ponzi scheme, then there is no such thing.

Social Security is thoroughly immoral, violates individual rights to life and property, and should be phased out and abolished.