© 2011 Michael Swickard, Ph.D. The presidential election heated up when Rick Perry correctly labeled the financial structure of Social Security to be the same as a Ponzi scheme. Other candidates cursed quietly to themselves that they had not told the folks back home the bad news because the folks back home might blame them for the problem.Social Security became a Ponzi scheme in the late 1960s. The other presidential candidates were caught not telling the truth about Social Security. They in mass politically attacked him. Each crossed their fingers and shouted Social Security is as solid as the Rock of Gibraltar. But their voices quivered and their eyes rolled wildly. Each knew it was a huge lie and a day of reckoning was coming as they always do for Ponzi schemes.
The good news is that little by little some of the candidates are grudgingly admitting that Rick Perry is right about Social Security. As quick as a flash, though, out of the other side of their mouths many say that people should not worry since full disclosure of the Ponzi scheme will not be made on their watch. So much for telling the truth.
Is it a Ponzi scheme? Yes, because the money paid by each person into Social Security is not put in an annuity account in their individual names; rather, the sum total of the money is entirely consumed each year, some on Social Security and the rest in the general budget. None of their money is saved. Metaphorically a piece of paper is put into the donor’s account telling the next generation to tax themselves to pay this account since this person’s money has already been spent.
Structurally even the way government runs their budget is terrible. At the end of each year most public sector departments spend all of the available money regardless of need. The thinking is if they do not spend all of the money, the difference will be subtracted from next year’s budget. Add to that the issue of baseline budgeting where there is a built in increase regardless of need to every department. And any cut to the increase is portrayed as a cut to the budget. Baseline budgeting guarantees the growth of government for no other reason that just to grow.
The “Mother” of all bad structures is known by the term, “Log rolling” where legislators agree to vote for each other’s “Pork” legislation as a way of getting it through. At times this practice is referred to as earmarks in that each legislator is given a certain amount of money to buy the votes of citizens back home.
The incumbency effect for reelection is about 97% and it is no accident that the products of earmarks are in every newspaper almost every day. We see a new library, senior citizens center, highway and more projects. Integral with that is the practice of putting “Pork” projects inside other unrelated bills. Often in the Defense Authorization Bill there are several other spending authorizations for pet projects that fly under the radar. Tens of billions of dollars are spent each year for the pet projects. The Obama care legislation passed on Christmas Day 2009 without any legislator reading it completely is full of special projects unrelated to health.
None of these structural defects are sustainable over the generations. Each will cause catastrophic effects at some point. Nothing will ever get better in our government if we do not tell the truth about the effect of bad structures within our government. We cannot continue to have bad structures without bad outcomes. While it is not always easy to see, everything ultimately is in the open. The Social Security change to the structure of a Ponzi scheme was covered by the news media.
Young people today, the victims of this Ponzi scheme have the ability to see the truth. What they do with that ability to see the truth is up to them. Perhaps they will vote to cancel Social Security, that is, out vote seniors who have know for decades that it was a Ponzi scheme which will provide no benefit to young people. Who would blame them if they finally shut down that Ponzi scheme?
Dr. Michael Swickard is co-host of radio talk show News New Mexico 6 to 9 a.m. Monday - Friday on a number of New Mexico radio stations and through streaming. Email: michael@swickard.com
