Interesting trivia: friend of the Razor Stetz is the one who submitted this question to FOX for the GOP debate. As he expected, it caused a firestorm!
For all the work it took to get Rick Perry to throw his hat in the ring in the presidential race, I’ve got a funny feeling that his supporters are quickly starting to regret it. At the latest GOP debate, Perry stood by his both unpopular and hilariously inaccurate assertion that Social Security is a Ponzi Scheme and in the process firmly took a position that’s even too extreme for the likes of Karl Rove and Dick Cheney.
“You cannot keep the status quo in place and call it anything other than a Ponzi scheme,” Perry said at a Republican debate in California. Acknowledging that several have called his remarks controversial, he added, “Maybe it’s time to have some provocative language in this country.”
“You know, Karl has been over the top for a long time in some of his remarks, so I’m not responsible for Karl,” he said. He added, “If Vice President Cheney or anyone else says the program we have in place today [is sound]… that is just a lie.”
Before we go any further, it’s important to define our terms.
The Ponzi Scheme was devised, appropriately enough, by one Charles Ponzi in which he told investors that he could double their money in 90 days by buying up international exchange coupons (think currency transfer from country to country with an exploitable loophole). However, instead of doing any actual investing, he simply took later investor’s money to pay off early investors. Thus, the Ponzi Scheme was born.
On the surface, that likely does seem suspiciously like Social Security; your money goes in and is used to fire checks off to the elderly, whose money was used to supply their parents and grandparents with retirement money. No one’s money actually lands back in their own pocket, there’s no assets invested, it’s certainly similar.
There are key differences. For one, no one’s getting tricked by Social Security. That’s kind of obvious. We know how it works. The more critical portion, however, is the fact that it’s built on the idea of providing retirement security (among other things) to those with no means of income. That’s the “security” thing. See, the point of it all is for the country to weave a giant safety net for our own citizens for when we need it. That’s not a Ponzi Scheme, it’s an insurance policy. And finally, the only reason your own money isn’t used for your own retirement is… you’re not there for it yet.
Okay, I misspoke a bit when I said nothing is invested. The money is invested via the Social Security Trust Fund, which actually does have a nice little rate of interest, but that’s a fairly minor point.
Anyway, what I’m getting at here is that the “ponzi” aspect of it is actually Social Security’s greatest strength. By having the trust fund supplied by current generations, it’s actually fairly insulated from economic disaster. We’re talking a program that’s lasted through every economic up and down over the past 60 years. Social Security is a god damn strong institution.
Is it flawless? Of course not, and we’re running into a number of problems now. For one, the government’s been raiding the trust fund like it’s their parents’ secret money stash since the 1980’s. For another, people just plain live a lot longer than they used to. The retirement age has never changed, but when Social Security first popped up, people didn’t live much beyond 65 on average. You’d retire and have a nice little hunk of cash to relax on in your sunset years.
These days, the average life expectancy is in the late 70s, and when you take out early deaths (as in, how long someone will live if they’ve already made it to 65), that number goes way up. Most of us have parents/grandparents who lived well into their 80s if not further. A person hitting 90 is a good milestone, but far from outlandish, meaning people in the 21st century are collecting Social Security for 25 to 30 years.
There’s a lot to be done to remedy Social Security, but pure abolition is not the answer. Rick Perry doesn’t get it, and that’s gonna be a big reason he’ll get torpedoed come the main election.