The Social Security Ponzi Scheme

According to Wikipedia, a Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.  A Ponzi scheme is named after Charles Ponzi who organized the scheme in the US from 1919-1920.

The scheme will eventually collapse because the earnings will always be less than what is needed to pay the older investors.  You will always need new money to pay the old money. Even Bernie Madoff’s scheme eventually collapsed under its own weight.  Social Security makes the Madoff scandal look like a mouse standing next to an elephant.  The authorities were supposed to catch guys like Madoff but for some reason they never did.  He was taking money from investors for 20 years before it came to an end.

According to the Social Security Administration, the administration is now cashing in on Uncle Sam’s IOU’s.  They have $2.5 trillion dollars in bonds held in a 3 ring binder in an undisclosed drawer in West Virginia.  Our government has to borrow more money from foreign governments which could not come at a worse time. 

Remember Al Gore and his “lock box?”  He might have been laughed at but he was on to something.  The government has been borrowing money from the Social Security Trust fund for years to pay for their pet projects.  Had our leaders been held to the same standards as businessmen, half of Congress would be in prison for a very long time.

This morning before I headed out to the office John McCain was speaking to Ann Curry on the Today Show and he mentioned that as of today, Social Security will be paying out more in benefits than they are taking in.

According to the Congressional Budget Office, the Senator is correct.  I just received my Social Security statement in the mail and it says that in 2016 Social Security was date that outflows would exceed inflows. I believe the 2016 number was not accounting for the 10-15% national unemployment rate.  Those people that are out of work or are not actively looking for work are no longer on payrolls and paying into the “system.” The CBO report confirmed what most of our probably already thought.

As is stands right now; there is great debate on what should be done to attempt to make Social Security solvent.   Some people suggest cutting benefits and raising the age limits or both.  Either way something has to be done and kicking the can down the road will have to be dealt with now.

People who are 40 years old and younger are asking themselves why they should contribute to a system that might not be there when they need it for retirement.  By the way, if you do not pay into the system you go to jail. 

If you are retired and about to retire you must believe the system will be there when you need it.  The country must take care of our older generation and make good on the promises that were made.  As far as the younger generations are concerned, you should save like you will not have the Social Security safety net because after the baby boomers exhaust the system, who knows what they system will look like by the time you decided to retire.