“The Whole Government is a Ponzi Scheme.” – Social Security the Great Ponzi Scheme
New Deal President Franklin D. Roosevelt signed the Social Security Act of 1935 into law to address the fallout from the Great Depression. As a result, the government would secure your future in exchange for weekly contributions straight out of your paycheck. Actuarial studies determined 65 as the soundest age to retire to allow the program to support itself without additional money from the government. For many, the new plan provided a sense of security they could rely on for their inevitable retirement. A group slush fund managed by bureaucrats. What could go wrong?
In Donel Smith’s 2020 book, “Social Security the Great Ponzi Scheme”, Smith reveals how Social Security, as a contributory pension system, never did what it intended. Created as a supplement to cover 40 percent of living expenses for the elderly, the money collected was never secured in a lock box waiting for your retirement. Instead, the government cunningly kept a key and quickly lent itself the cash for other means. Unsurprisingly, the funds have run dry, first in 1983 and projected again within the next decade. With deficits of 2 trillion expected over the next 75 years, more taxpayer-funded injections into this “self-supporting” plan will be needed.
Social Security began with the feds taking a mere 1 percent of salary up to $3,000 with an employer match to boot, with rate creep growing to 6.2 in 1990. In 1982, however, the trust fund ratio had dwindled to 15 percent, prompting a tax on social security benefits for the first time, a double tax on earnings, while also increasing the retirement age to 67. Eating even more around the edges, early retirement benefits would begin to be means-tested, suggesting that if you earned too much, YOUR retirement income was either limited or delayed. A recent assessment reveals that the fund will once again become depleted in 2033, requiring a 23 percent reduction in benefits, to keep the fund going.
In 1940, when the first social security checks were mailed, there were nearly 160 workers for every beneficiary. Today, that number is 2.7. Social security taxes of 12.4 percent (6.2 from both the worker and the employer) are collected and distributed into a trust fund, with 85 percent used for retirement, and 15 for disability. Funds are immediately loaned to the Treasury and invested in special-issue Treasury securities, backed by a government that is trillions of dollars in debt. The government then uses this taxpayer money for whatever they wish, rendering the Social Security scheme a social welfare program. There is no growth or compounding from your deduction, other than a small interest in the security. Although often called an entitlement or government benefit, social security is funded with your own money and is not a benevolent gift from the government.
Likened to a Ponzi scheme, a plan to defraud investors of their money, social security, too, is simply a pay-as-you-go system with the current workforce paying for current beneficiaries. It is not, in fact, the savings plan that many expected. Money was never put into individual accounts for your subsequent retirement. Money was not invested for the duration but was immediately seized by the government for expenses other than YOUR retirement, often for people who had not paid into the fund. The government has become nothing more than a fox in the hen house with the guarantee of our retirement in their duplicitous hands.
Under a private account, however, regular contributions are appreciated over time, with earned interest compounding annually, resulting in assets that can double four times over a working career. It is a personal account with your name on it, with all accumulations available to you or your beneficiaries.
While the government will continuously remedy the growing social security deficits by increasing the retirement age, reducing benefits, and raising taxes, a permanent solution is needed. Individual private accounts must be created in each worker’s name, giving American workers absolute control over their accumulating assets and investments. Eberstadt also recommends a Constitutional Amendment to keep the government from any future access to these individual accounts.
Despite the bad news, social security is still a system judged by its intentions, not its outcomes. The continuous raiding of these accounts continues at our own ignorance.
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