Social Security - one step forward

The public debate does not favor enacting President Bush's ownership reform of Social Security this year. But to make large changes requires the public debate and we are having it now. And I think we have made one step toward reform.

It is becoming known and some who knew it all along are now admitting - that Social Security is a Ponzi scheme. The money I have been putting in has not been saved. There is no trust fund. Some of it went to send the checks to current recipients including my in-laws, parents and step mother. But most of what I pay in - hundreds per month - goes to pay for a dead-end freeway in Pennsylvania named after the Congressman who won the arm wrestling match for the pork.

What we pay is not saved for the future, but is spent this year for pork. This is a Ponzi scheme. See Wikipedia Where the salesman says that what he is investing your money is so profitable that he can promise a huge return. And to prove it he shows you happy customers who got the promised pay out. But all he does is take the next sucker's money to pay off the sucker before. And when he no longer succeeds in luring new suckers the money inflow stops and the whole thing collapses.

"But Senator XYZ says there is a trust fund; that in Scranton, PA, there is a drawer with Treasury bills in it."
That T-bill has no value of its own. It is only a promise that the US government will in the future pay. But how will it pay? Not from saved money. NO. The government will tax the future workers to pay off the T-bill.

"Paul Krugman says that T-bills are the most trusted investment in the world"
That is true as an investment. But there is a huge difference here. That is as an obligation to pay the person holding the bill. But this is an obligation to self. The government is not obligated to pay your Social Security benefit. Taxpayers have claimed ownership of what they paid to SS. But the Supreme Court said "No, you don't own anything. Just the government's promise." So that T-bill is not owned by you, but by the US Government. It is not an obligation to you.

So we are back to the Ponzi scheme. What you pay SS today is spent. When you start receiving SS benefits the government will raise taxes on your kids. You have been sold a bill of goods.

I think the lie of the Ponzi scheme is now in the open. That is progress. Tip: Megan McArdle aka Jane Galt has a good explanation.

Social Security Choice is a group blog about options for reforming Social Security. It has some big guns including Herman Cain, past CEO of Godfather's Pizza (corrected), Stephen Moore of the Club for Growth, and Donald Luskin the very busy fact checker for Paul Krugman.