Tom Margenau, who writes the feature on Social Security, is clearly a true believer in that program. His column titled “Social Security Will Not Go Broke” [published online on Sept. 24] is a case in point. Without realizing it, he has included examples of every single aspect of the definition of a Ponzi scheme. The scam is named for an Italian-born American (1949) swindler. Social Security, like all Ponzi schemes, is a swindle.
Merriam-Webster defines a Ponzi scheme as “(noun) an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.”
In other words, one way or another, in order for benefits to continue to accrue, the base (number of people or amount of money “invested”) has to continually increase. Years ago, the government ran into that wall. So they changed the rules so that the base would continue to increase.
Mr. Margenau left out some important points. While he claims to know about the 80-year history of the program, he conveniently leaves out many numerous promises that have not been kept. I will list just a few:
- “Social Security will always be completely voluntary” Try to bring your newborn child home from the hospital without a Social Security number. It’s an almost universal requirement. They needed more money because they were going to run out even back decades ago.
- “Your Social Security number is private; only the Social Security Administration, you and your employer (who has to file reports with the Government) will ever have to know your SS number. It will never be used as an identification number.” Now, of course, you cannot have a bank account or an investment account of any sort, and you can’t buy a home, or have a credit card, without that number.
- “Professionals, like doctors, lawyers or business owners are exempted from Social Security.” Not anymore. The base had to be continually expanding. See No. 1, above.
- “Social Security will never exceed a certain percentage of your income.” I don’t remember if it was one or two percent, but it was a lot lower than it is today.
- “Social Security taxes will not be applied after a certain level of income.” When I started working, I exceeded that amount almost every year for over a decade. Then the amount continued to rise faster than my income. The current limit is now $142,800; I’d be willing to bet that the majority of working people either never heard of that limit or will never see it.
- “You will never be taxed on the income from Social Security because you paid into it.” Well, now you are taxed on a percentage of your Social Security income, and Mr. Margenau is proposing the possibility of another increase. Again, expanding the base of money coming into the program.
- Our Social Security retirement age was set at 65 years of age. It follows a similar retirement program initiated in Communist Russia, about a century ago. The Communists selected 65 as the retirement age because almost nobody ever lived that long in those days. Therefore, there would be almost no “beneficiaries” and those were pointed to as “successes” of the program.
If the promises the government made when they first implemented the program were kept,
Social Security would, indeed, have gone broke decades ago. If the progression we’ve seen had been proposed, it would never have been passed. Mr. Margenau was a party to the scam that is Social Security even though it looks like he never saw it that way. A much better solution, albeit without as much government involvement, would have been a mandatory, privately run retirement account with the employer kicking in at the same level as they do today. But, no, that would not have given the government enough control.
Charlie Ponzi would have been proud. The government can get away with scams that he couldn’t because they have the power to keep changing the rules. As long as they can change the goals, they can keep the scam going.
Charlie Gruner
Illinois
