Why Social Security Is Not A Ponzi Scheme
Last Friday, Jim Mitchell blogged about the Bernard Madoff Ponzi scheme on The Dallas Morning News Opinion blog. Today, Nicole Stockdale blogged on the same subject. In both cases, readers quickly responded, asking how Social Security differs from Madoff's illegal Ponzi scheme.
The readers' questions really weren't intended to solicit answers as much as they were intended as indictments of Social Security, but here goes anyway. Social Security is not a Ponzi scheme. Ponzi schemes have an unsustainable progression driving their growth. This caused the original Ponzi scheme to collapse in 200 days. Social Security is a pay-as-you-go system that has been operating for over 70 years, and with future adjustments to account for demographically-driven variability (e.g., the Baby Boom, enhanced life expectancy), Social Security can theoretically go on forever. It's the resistance to these periodic, necessary adjustments that threatens Social Security's viability, not its nature as a pay-as-you-go system.
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