Ponzi, short for Social Security

Richard Luettgen
New Jersey

It's not that reasonable conservatives believe that government is always the problem, never the solution: it's that we believe that while government can do important things that individuals cannot, it is almost never the entire solution. The problem with liberals is that they believe that pervasive government that robs us of our liberty and beggars us to pay for itself is the only solution.

That said, Social Security's dedicated trust fund is nonsense. It's never been cash, out there earning money by allowing private enterprise to actually build something useful; it's been T-Bills that the government trades for the excess cash collected from workers that isn't paid out immediately to beneficiaries in this massive Ponzi scheme that makes Bernie Madoff look like a piker. The government then spends that excess cash on whatever it chooses, year after year, promising that someday it will pay the T-Bills as they become due and are needed to pay benefits. Unlike the states, that are close to bankrupt (and if you were to consider their unfunded public pension liabilities as real, they would be bankrupt in any sensible accounting scheme), the feds think that they can forever print money today and tomorrow to meet obligations that they entered into yesterday and keep entering into today; or raise taxes again and again and again, until they've expropriated all productive output and find that it's still not enough to satisfy them.

So, what happens when Social Security tax receipts no longer exceed what is actually paid out, and when outlays start exceeding related tax collections by significant sums? Well, one thing is that the federal government no longer will be able to hide a much larger actual operating deficit behind this thin set of skirts, since they can no longer take excess money that no longer exists, to spend as they see fit. The second effect is that those T-Bills start coming due. That would be a hoot, except that our children and grandchildren, and maybe our great-grandchildren, will need to be taxed at truly ruinous levels to collect the cash to make good on those promises. At that time, you will necessarily see a massive reduction and means-testing regime for Social Security and Medicare that will limit recipients to the poorest among us. It won't be law that requires people to work into their seventies (or eighties), it will be the need to feed themselves, because there will be no other help unless your kids can support you.

FDR believed that Social Security would need to be privatized, probably in the sixties, or it would become a Ponzi scheme far too vulnerable to a demographic shift that had a very large number of retirees appearing with too few active workers to support them -- sound familiar? But it was never privatized, not because the markets are too flighty but because Congress refuses to give up the excess cash it spins off, or they'd have to admit that they're actually burning deficit dollars at a much higher rate than they admit to; or, they'd have to cut spending to levels closer to the sum of other tax collections, something that might actually get them kicked out of office by the dependents of all the programs those deficit dollars fund; or, they'd have to increase income taxes enough that middle class people would be converging on D.C. to hang them.

This is the legacy of believing that government is the whole solution all the time.

So, what really to do? If we want a social safety net for the elderly (and just about all of us do), then we'd better start taxing ourselves now to pay for it, now and tomorrow; but take every dime of the excess collected now, DO NOT invest it in T-Bills but in very conservative market instruments that pay real cash as interest, and stop Congress from its decades-long spending spree. If we need to cover expenses that current income tax levels can't satisfy, then make some hard choices -- like getting out of Afghanistan now, calling our troops home from all over the world and cutting the military's budget by at least 50% over ten years. And getting rid of every U.S. Representative and Senator over seventy wouldn't be a bad move either, since they clearly haven't the foggiest idea how to deal with today's and tomorrow's problems.