The Next Step in Social Security’s Ponzi Scheme

9 HOURS AGO     

On January 30, Rep. John Larson and 200 Democratic co-sponsors introduced the Social Security 2100 Act. Portrayed as giving retirees long-overdue benefit increases, it would actually add another step to Social Security’s long-running Ponzi scheme.

Despite Democrats’ history of rejecting that term for Social Security, it has been the biggest series of Ponzi schemes in history, redistributing tens of trillions of dollars of wealth to earlier recipients from subsequent generations.

After Social Security’s creation, those in or near retirement got benefits far exceeding their costs (Ida Mae Fuller, the first recipient, got 462 times total contributions made on her behalf). Those excess benefits inherently required that future Americans would have to pick up the tab for the difference.

Social Security has also been expanded multiple times. Each expansion meant those already retired paid no added taxes, and those near retirement paid a bit more for only a few years. But both groups received increased benefits throughout retirement, increasing the unfunded benefits whose burdens had to be borne by later generations. Thus, each such expansion started another Ponzi cycle benefiting older Americans at others’ expense.

Social Security benefits doubled between 1950 and 1952. They were raised 15 percent in 1970, 10 percent in 1971, and 20 percent in 1972, in a competition to buy the elderly vote. Benefits were tied to a measure that effectively double-counted inflation and even now, benefits are over-indexed to inflation, raising real benefit levels over time.

Disability and dependents’ benefits were added by 1960. Medicare was added in 1966, and benefits have been expanded (e.g., Medicare Part B, only one-quarter funded by recipients, and Part D’s prescription drug benefit, only one-eighth funded by recipients).

The Social Security 2100 Act would be the next episode. It would increase all retirees’ benefits (including current retirees who would pay nothing toward the boost) and increase the inflation (over)adjustment for benefits, picking future high-income earners’ pockets to pay for the vast majority of it, by taxing wage income beyond the $132,900 ceiling now in place (eventually to all wage income).

With the multiple Ponzi giveaways to recipients creating Social Security’s 13-digit unfunded liability and Medicare’s far larger one, how can the proposed law be rationalized? Without the benefit of being in the startup generation of earlier Ponzi expansions, the present generation is being forced to begin bearing some of the costs.

This was illustrated by an Urban Institute study of lifetime payroll taxes and benefits. Especially with recent expansions, Medicare, recipients were getting a great deal. In 2012 dollars, an average-wage-earning male would get $180,000 in benefits, $119,000 more than their contributions. A similarly situated female did even better. In sum, it yielded “excess” benefits of $105 trillion, with net benefits increasing over time.

However, for Social Security, whose major Ponzi expansions came further in the past, an average-earning male retiring in 2010 would make $300,000 in contributions, for only $277,000 in lifetime benefits. For women, with smaller average lifetime contributions and longer life expectancies, it was about a wash. And things are worsening. By 2030, that such men will be “shorted” 16 cents (10 cents for women) of every tax dollar paid.

Social Security is now a “bad deal” for current and future recipients precisely because the costs of its Ponzi structure are starting to be felt. But rather than admit that their “greatest accomplishment” relied on massive theft from future Americans, they want to restart the scheme, keeping restive seniors in their camp, by dumping even-greater burdens on future generations than they already have (hidden behind a flimsy cover story that high-income earners, actually big net losers from the system, would finally be forced to pay their “fair share”).

Democrats think they can finesse older Americans out of their votes for still more elections with Ponzi Security. But if other Americans recognized the dishonest ploy aimed at their wallets, they might end up in the electoral wilderness instead.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read.

  • Social Security is bankrupt. It’s creditors, like any creditors of a bankrupt institutions should have a call on the assets of the underwriting enith which is the US government. All participants in the program should be repaid by selling government assets. There are plenty of sellable assets to cover the repayment.

    The added benefit to the country’s people is that returning those government assets to private hands will likely make them performing assets. This would be a huge boon to the economy. And greatly weaken the political power of the DC establishment.


    Lost in all the anti-socialism commentary (that I genuinely agree with) is the comment of Aaron Lauer. He is absolutely correct that too many of our wealthy Capitalists are all too guilty of fascist-leanings and find no contradiction in using their crony connections to exploit personal and corporate gain through government regulations. Our central banking and financial regulatory system are perhaps the most obvious recent and egregious example. We need to clean up both sides of the isle.


    Hello all, this is Bernie Sanders. I’m afraid Mr Galles is victim of a common misunderstanding. To say that some people are getting more money than they put into the scheme is to believe that your money belongs to you and that benefits are somehow related to payments. This is not true, all money, including that in your pockets belongs to the government. We are the guardians of your life from cradle to grave and we let you have money in your bank to give you the illusion of ownership, but the fact is that we’ll take it whenever we want and there’s nothing you can do to stop us. Just like we are the owners of your body (next time there’s a war, you’ll see), we own your property, your kids and all your cash.

    Mr Galles could be a little bit more grateful. Money, schools or hospitals wouldn’t exist if it wasn’t for us. These things exist because we care. Wicked capitalists think just because you work your income is yours. Money appropriation is a form of cultural appropriation and we will not tolerate it. Remember when Obama said “you did not build this”, the same goes for money.


    Gladly pay you back on Tuesday


    A lot of valid points are made in the article but no mention is made of the fact that while everyone who has worked all of their adult lives has been forced to pay tens of thousands of dollars (at minimum) into the scheme – none of the families of those who die before retirement or shortly after ever see a dime of what their family member was forced to “invest”.

    How many of your family members have died in their 60s? Where are the tens of thousands they paid in? Did the government write you a check? No? Didn’t think so.

    Unless there’s a willingness to make this point, continually making the point of how much people have “gained” (when they live into their 80s, etc) is not a useful math argument.


      False. Surviving spouses are eligible to receive survivors benefits.


        If the surviving spouse was also paying into the system over the decades, the actual dollar amount that will benefit her is miniscule. Saying the “surviving spouses are eligible to receive survivors benefits” as a blanket statement does not make it so.

        If it were true that the decedent’s SS was rolled over to the spouse, my current SS benefit would be about $1500 more than it is.

        Your statement is not true in the way that you intended it to be true. It is a partial truth generally applied, resulting in a tenuous link to Reality.


          It is true. Just because the amount isn’t what you believe it should be doesn’t make it false.

          You need to educate yourself about what SS really is, not what you believe it is. I’ll give you a hint, it’s not income that the the individual earned.


            During the 80+ years that my late husband and I were both pulling paychecks, we earned a wage. Before that wage was given to us in a paycheck, a chunk of it was taken out and given to the SS program.

            It may not be income earned in its present form, but it is certainly income lost over the decades and I have the paperwork that illustrates that.

            I will try to educate myself. Sorry I’m so stupid that I can’t add and subtract. That paperwork we received from the government identifying specifically the nearly $100,000 that was taken out of our combined paychecks must have been wrong. I assumed it was accurate. Oh well – – – I will set aside that silly adding and subtracting – with a running total.

            What is neat to realize is that, according to your assertions, if both spouses are killed the same day in a car accident, their estate will receive the benefit of what would have been their ss. /sarc.


              SS is a transfer payments system paid for entirely by your employer regardless of the govt gimmick saying there’s a shared responsibility between employer/employee.

              It never was set up to be some sort of savings account.


                “entirely by your employer”?
                I dont know what you do, but I was hired to do a job at 14. I took the job based on the work and what they told me they would pay me. I said sounds fair. I get my first check and immediately notice that the math of hourly rate x hours worked dont add up. Then he explains the deductions for things like socialised insecurity.

                I agree the employer pays in and the employee pays in. To say it is entirely paid by the employer is false.


                We as people actually have no right to the money therein SS either.


    Democrats don’t think, they know they will be successful. And why shouldn’t they. The US Federal Government is a paltry $20trillion in debt. These won’t really matter until it’s 2 to 3 times that much. Besides, it isn’t their money anyway because these folks get generous government pensions.
    And don’t think for one minute that the true losers are people with incomes higher than 133,000. The losers in Social Security have been and will continue to be men, mostly from non-Asian minority groups, who have the lowest life expectancies in the population and will see the least of these benefits. But don’t worry the real winners are and continue to be majority and Asian women who have the highest life expectancies. And don’t forget that these same men who are typically in the lower wage groups get (and have been getting since the inception of the program) double blasted as their retirement savings are predominately in (anti) Social (in) Security and not in private investments that can be transferred to their heirs.


      Oops, I was wrong. From the CDC:
      Alternate Text: The figure above is a bar graph showing life
      expectancy at birth, by sex and race/ethnicity, in the United States
      during 2011. In 2011, life expectancy at birth was 78.7 years for the
      total U.S. population, 76.3 years for males, and 81.1 years for females.
      Life expectancy was highest for Hispanics for both males and females.
      In each racial/ethnic group, females had higher life expectancies than
      males. Life expectancy ranged from 71.7 years for non-Hispanic black
      males to 83.7 years for Hispanic females.

      So all of the money will go to Hispanic women with non-Hispanic black males paying for the whole mess. Well maybe not all as non-Hispanic black males have higher suicide and murder rates among the younger of the group so I am curious to see the numbers for adults over 30.


    While I receive Social Security it has saved my life, and offers not only the only retirement possible, but also the only resource to support my well being. I am a white male of 66 years of age, I have not received health care since the 1990s due apparantly to the practitioners who bill and provide no services. I have been denied access to safe or valid housing since 2011 due apparently to International drug lords nationwide controlling housing. Since the 1980s “downsizing” established a system where only the people unfit for employment (women and or minorities or graft management) are guaranteed employment. I would work rather than take Social Security however my employment and employment record was destroyed by managers engaging in limitless corruption under the supervision in the United States by Russian and Ukrainian Military Officers.

    I survive with a wonderful program of Social Security in a society of sick disgraceful incompetent women, and completely incompetent minorities void of a functioning Justice System.


    A ponzi scheme runs out of money. The government will not. So IMO false analogy. Thanks.


      The Government will not run out of money, they will run out of trust. Trust is what gives the standardized bank notes they call money value, even as they devalue them continually by making more of them to meet the obligations of their promises. Mechanism is somewhat different but result is the same. Therefore, YES. Ponzi.


    So, what now would foster discussion about putting the dead horse on life support? Can you say “inter agency purchase”? As in orphaned Treasuries being purchased by US government agencies with an on balance surplus? An on balance surplus of the Trust Fund that was recently spent down to zero?

    So let me get this right, we now have government employees with a guaranteed government pension now telling those who pay for those benefits that they can not afford for themselves being told there is a new plan to replace the one they drained?

    So when does the government employees take a cut that is equal to that dictated to all of us?
    Whats the difference between an armed robber and common pic pocket? The armed robber has enough respect to grant choice where as the Politicians and Bureaucrats do not.
    Trust Fund? There’s an oxymoron.


    Social Security has always been more like a poorly performing annuity than a Ponzi scheme.


    Start with getting the liabilities onto the balance sheet.

    Then you need to get everyone a personal statement with their share, sent annually.

    Otherwise you won’t win

♥Thanks for sharing♥

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: