Friday, September 16, 2011

Social Security as Ponzi scheme

I find it curious that there has been such a harsh reaction to Gov. Perry’s description of Social Security as a Ponzi scheme.  Of course it is.  And yet today an online Washington Post poll had about two thirds of respondents objecting, and a Gallup poll shows independents less favorably inclined towards Perry by a margin of 32% to 12% because he described it as such.

I don’t know where the controversy lies.  Are there still people out there that think their Social Security contribution is being invested in treasuries waiting for the day they retire and then being returned?  If so, then Perry’s comments are long overdue.

There is another way of thinking which is even clearer and that is to ignore the distinction between distinct taxes and benefit programs altogether.  In truth, we have different schemes for paying taxes—on property, on income, on usage—and we have different benefit programs which pay out based on various qualifications.  Total money in versus total money out equals the deficit.  The distinction of income, unemployment, medicare, social security taxes, etc. have more to do with political marketing—establishing buy in-- than economic reality. 

At any rate, Charles Krauthammer’s column on the Social Security/Ponzi description is worth a read

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