CIVICS: How Social Security Is SO Not A Ponzi Scheme


CHRISTIAN SCIENCE MONITOR: Texas Gov. Rick Perry is at it again, expressing himself pungently on a hot-button issue. This past weekend, it was Social Security. The front-runner for the GOP presidential nomination called the retirement program for seniors a “monstrous lie” and “a Ponzi scheme for … young people.” Add that to Governor Perry’s comments on man-made global warming: “a scientific theory that has not been proven.” On evolution: “just a theory” with “gaps.” And on the Federal Reserve’s practice of printing more money to boost the economy: doing so again would be “almost treasonous.” Many conservatives applaud Perry, even as liberals and the mainstream media express alarm. The long-term politics of these assertions is tricky. If Perry wins the nomination, the remarks – all on tape – could come back to haunt him. In the general election, he would have to appeal to moderates and independents, and these sorts of comments could give such voters pause. Short term, though, his play to the Republican base appears to be spot on. Perry has shot into the lead in the two latest polls of Iowa Republican voters, who will kick off nomination season early next year. MORE

EZRA KLEIN: So many Republican politicians call Social Security a Ponzi scheme that I’ve basically stopped taking notice of it. But Rick Perry’s recitation of the talking point has attracted a fresh round of ire from hardier souls than me. Jonathan Bernstein, for instance, writes that “anyone who says that Social Security is a Ponzi scheme either misunderstands Social Security, misunderstands Ponzi schemes, is deliberately lying, or some combination of those.”  As he explains, a Ponzi scheme is a fraud that relies on new investors being unaware of the program’s financing mechanism. Social Security is a fully transparent system of age-based redistribution that releases regular actuarial reports explaining, in great detail, how it is financed now, and what it will need to be fully financed into the future. Or, as Russell Long (apparently) put it, “Social Security is nothing more than a promise to a group of people that their children will be taxed for that group’s benefit.” You may like that structure or you may hate it, but it’s not a Ponzi scheme. And in case you forget, Nick Baumann went ahead and made a Venn diagram explaining the situation. MORE

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