Re: Re: Re: Romney Camp: Perry Wants to 'Dismantle' Social Security
Thanks, Andy — and you’re right that the fraud prosecution as the remedy for a Ponzi scheme comes first, and that, therefore, my definition was incomplete.
Yet the fact that Ponzi schemes are so egregious that officialdom’s only remedies are to a) shut them down immediately, b) as you note, prosecute and “incarcerate their designers, often for decades,” and c) use the funds that the scheme collected to make partial restitution, suggests that the analogy between Social Security and a Ponzi scheme is in no way apt.
The solutions are part of the definition of the problem. I’ve never heard of authorities trying to “reform” a Ponzi scheme. The fact that Social Security is salvageable with reform, then, is evidence that it is not a Ponzi scheme.
Further, another one of the hallmarks of a modern Ponzi scheme is that each victim of the scheme believes that his principal is held in a segregated, individual account, earning a return.
This belief was held by Bernie Madoff’s victims, and is at the heart, too, of the new Full Tilt poker allegations. In reality, the Ponzi money is commingled with others’ money to pay off previous victims.
It is fraud that bridges the difference between the perception and the reality. And it is the outright fraud that constitutes the Ponzi scheme.
Social Security does not attempt to perpetrate a similar fraud, or any fraud at all. Everyone knows — or should know — that his funds are commingled with others’ funds. Social Security is not a collection of private investments whose principal generates individual income streams for the future. Social Security overtly redistributes money, with today’s workers paying for today’s elderly benefits.
And everyone knows — or should know by now — that the problem has a long-run mismatch between revenues and expenses.
Therefore . . . Social Security is not a Ponzi scheme. The public cannot be outraged at a perpetrated fraud, when no fraud has been perpetrated.
Social Security is a government program, and a popular one, that needs reform if it is to achieve its goal. In a Ponzi scheme, the only goal is to perpetuate the fraud to enrich its designers.
This piece originally appeared in National Review Online
This piece originally appeared in National Review Online