In the history of mankind, many republics have risen, have flourished for a less or greater time, and then have fallen because their citizens lost the power of governing themselves and thereby of governing their state. TR


Perry is Right, Social Security is a Ponzi Scheme

It just is. Rick Perry is correct.

And it’s not because Congress is filled with nincompoops or the government is irresponsible, although both of these things are true. It’s because the program was actually designed as a Ponzi Scheme.

Many Social Security recipients are under the misimpression that they worked all their life, contributed their money to their Social Security savings, and now have a right to get it back.

That’s a mistake. Their money went to fund people who were retired. The money you contribute is not going to you, it’s going to grandpa.

When was the last time grandpa said to you or your parents, “Thank you for your money?” Did you know that grandma was using your money to buy the ingredients for those pies?

The first retirees covered by Social Security were not, in fact, told to go back to work until they were 100 so they could get their money.

No, they almost immediately started getting cash from current workers. And that’s how the system continued. A classic Ponzi Scheme in which new participants – that is workers – were needed to pay out benefits to those already signed up – Social Security recipients.

The reason this particular Ponzi Scheme is now crashing is that during the era – now ending – when the working population of baby boomers far outnumbered the retired population, and more money was coming into the system than needed to fund current retirees, Congress didn’t save the money.


Many people think there is a Social Security Trust Fund brimming with money to be dispensed to the elderly.

Well, there is a Social Security Trust Fund, but all that’s in it is IOUs from Congress. That’s why Social Security is headed toward bankruptcy. Because Congress doesn’t have the money, and will have to raise taxes or ask the Chinese for it, or just not pay up.

And that’s what Perry means when he says Social Security is a failure and why he accuses its creators of “violently tossing aside any respect for our founding principles of federalism and limited government.”


Sure, Social Security is a lifeline to millions of Americans. But by putting the government in charge of it, its founders guaranteed that it would end up like most Ponzi schemes eventually do – bleeding cash and headed for bankruptcy.

39 thoughts on “Perry is Right, Social Security is a Ponzi Scheme”

  1. You are spot on in your analysis of Social Security, Keith. Agree it needs to be reformed, but I’m not happy that Perry seems to want to run on this issue. It is not the primary cause of our fiscal problems and it shouldn’t be the first issue addressed. Repeal of Obamacare is more important than reforming SS right now. His assertion that he would sign an executive order to stop Obamacare doesn’t present the conservative point of view. It must go through the legal process of repeal. Once Obamacare is repealed move to the issues that are preventing private industry from creating jobs. Stomp out the crony capitalism, roll back all of Obama’s onerous regulations and executive orders, enforce the immigration laws that are already on the books and stop prosecuting the States for trying to enforce those laws, and have a national discussion on tax reform. This will bring jobs back to America. Perry’s weak spot is illegal immigration. He’s already nixed the idea of building a fence along the border. Texas is one of the few states that funds in-state tuition for illegal aliens and that was one of Perry’s signature initiatives. He did a good job in the debate last night, but then he is a politician. His words rarely carry through to action.

  2. I read a few months back some liberal argue that it wasn’t a ponzi scheme because by definition there has to be the intent of fraud. Therefor – not a Ponzi scheme. They thought this would work.

  3. The biggest misconception about Social Security is that you’re getting “your” money back that you paid in. Not only because of the Ponzi scheme, in which you’re getting paid with today’s dollars, but because Social Security is NOT a savings or investment account like an IRA or 401K. It is an INSURANCE plan (hence, FICA = Federal INSURANCE Contributions Act). You and your employer pay into a fund that was was originally intended to keep widows, orphans out of the poor house. It is NOT a retirement plan that you saved your money into.

    It is more like house or car insurance. After 40 years of paying the premiums for these types of insurance you don’t call the insurance company when you’re 65 and say, ‘ok, now I want my money back.’

    Additionally, it was only set to kick in for those reaching the ridiculous old age of 65, a rare feat in those days. Today, thanks to better nutrition and the finest health care man has ever known, the elderly are easily living 10 to 20 years or more beyond 65, which puts a heavy burden on a system it was not designed for.

    The Social Security system needs to be revised back to its original intent, to help the truly destitute who need help to live out their lives. But the age of attainment should also be revised to something more like 75.

    As for a retirement plan for today’s younger workers, we need to beef up something like the IRA and let individuals keep a portion of their money in their own private account. We’ve seen what Congress does with it when it’s pooled in a centralized Federal ‘lock box’.

    1. I should have added that part of the benefit from your FICA premium is Disability insurance (added in 1956). The Social Security program was expanded to include those who become disabled. Someone who is any age and becomes totally disabled may collect far more in payments than they ever paid into the program.

  4. All you say it true–but if they aren’t going to honor this in any form–it’s fraud to keep taking the money from people. Period. Or maybe actionable malfeasance to just spend it and think, “I will think about this later.”

      1. I couldn’t find the channel either. Annoying, but I am sure Hannity will have reruns tonight. Oh wait a minute, the Loathsome Fool-in-Chief speaks tonight doesn’t he? Yawn…same sh!t, different day.

  5. All true…and the reason we do not have the contributors for the Boomers who are of retirement age, is because we have killed off 2 generations of American workers with the odious fraud of “the right to privacy” or “a woman’s right to choose, aka abortion. Social Security needs to be kept in place only to provide for workers retirement who are age 40 and older. Prior to that age, a full refund of what a person has paid in during their working life should be given back to them with the understanding that Social Security is defunct and they better provide for their retirement because no one else will.

    1. So we would have had those hypothetical babies who would have been unwanted and probably been a burden on taxpayers anyway…in order to pay for Gen X/Y retirements?

      The Earth cannot sustain the current population, and it’s going to get worse. The LAST thing we need is those hypothetical babies.

      The only sensible thing to do is to assume one is not going to be the recipient of Social Security. My husband and I – who have chosen not to have children – found it rather easy to amass 500K so far in our retirement accounts at age 40. Of course, we’re atheists who don’t believe God has given us a directive to breed.

      Stop complaining about women and our “privacy” – we’re the ones who aren’t taxing the system with passels of children.

      1. I do hope you are not trying to speak for all women, because you do not speak for me. My husband and I raised two fine young men, and it was the greatest gift our God ever granted us. I can’t even imagine what it would be without those two miracles of life. I could never compare raising our children to the amount of money we collected over our lives. Many young families would love to adopt those unwanted children. There are so few up for adoption because our lowered moral standards accept abortion, and gay adoption has run the Catholic church out of the unwed mother’s homes. I do not accept abortion. It is murder in my eyes.

      2. Amy – I hope all your dollars will make you happy and create warm memories for you in your old age. That seems a sad and cold existence; especially if by some unfortunate happenstance you end up alone at the end of your life. Not believing in a Creator is also sad and cold and lonely – not having the hope of an afterlife, relying on your own self for your strength and sustenance, not being able to rest easy in the belief that the Creator is perfectly in control of life. Finally, I am glad, in your reply, that you referred to them as babies. That is what they are and what abortion does is murder them. Privacy has nothing to do with child birth and child rearing. The whole privacy thing and over population thing is just a bunch of garbage that has been spoon fed to gullible people by liberals who now control the minds and hearts of those gullible people. And BTW, I am a female and I have raised two wonderful daughters and I am a much better person for it.

  6. One of the major issues with SS is the disincentive it gives to many retirees.

    When my mother, a die hard liberal Democrat, retired in 1994 she was given a gold watch and paperwork for her retirement fund. A fund that she was fully vested in, and that had a substantial amount of money. Rather than rolling that money into an annuity or some other safe investment she opted to take a total payout, pay the taxes on it and then spend it like a Washington politician. When I tried to discuss the money issue with her, her comment was that she had her SS and felt that she “deserved” to treat herself.

    Within a few years her lifetime of investment in her retirement fund was gone, and she was now broke with only SS to live on. She ended up relying on the generosity of family, friends and several credit card companies that she was able to convince to extend her credit.

    When she died 14 years later she left a legacy of debt (approx. $24,000), no assets and nothing more than a burial policy. When she became sick towards the end, and I was given power of attorney over her financial affairs I started to negotiate with the various companies, and was able to settle the debt obligations.

    Her mentality was that her “federal family” would take care of her, and that she was entitled to whatever monies she could get. Far too many of her generation came to believe that the money they paid into SS was theirs, and they were due everything back. Rather than save and invest what they had accumulated over a lifetime of work they opted to spend foolishly, leaving for their progeny the responsibility to clean up the mess.

    SS and SSD should be safety nets for those that have become disabled, and the elderly that have no retirement (unfortunately a growing number due to the economy). It should not be the end all for those that choose to act as fools with their money. Had mom invested her retirement she would have been able to live comfortably for her remaining years.

    There are those that will say that I should have taken her in, and helped her. I did for six years after her retirement. It was only when my wife (now ex-wife) and I tried to get a loan to build our dream house did we realize the extent of mom’s chicanery. My once A rated credit had been destroyed due to her using my SSN on credit applications and not paying the bills. When I confronted her about it she left, and we did not speak for nearly five years. It cost me tens of thousands of dollars to pay off or settle these obligations (it was either pay or file criminal charges against my own mother).

    Mom was a product of the New Deal and Great Society. She truly believed that anyone that was conservative was heartless and that personal responsibility was nothing more than an excuse to make people suffer. We are again developing a generation that holds to the same ideals that mom had, government over the people, directing the people, against the people.

    Mom is not an isolated incident, I have known many over the course of my professional career that have held the same philosophy. Just look at what is happening across the country and see.

    1. Back about 8 years ago I worked with an U.S. naturalized citizen who came here from India. When I asked if he had joined the company 401K plan he said no, and he had no intention of joining. His plan was that, upon retirement, moving back to India and living like a KING on S.S. His belief was that S.S. would pay more than enough for him and his family when they were in INDIA!

    2. Thank you, Shofar, for providing the most succinct repudiation of the idea that citizens, acting independently are, by default, the most intelligent actors vis a vis their own retirement.

      To sum up Shofar’s story:

      A) His mother retired with a company pension
      B) She cashed it all in and spent it like a drunk on payday
      C)She fell back on her SSI, and therefor it follows that
      D) Shofar, his mother, and America would have been better off if she had been able to shit away her Social Security investment as well.

      Does anyone see the error in Shofar’s logic? His mother was willfully reckless with her own money, call it her “conservative” money, her “private sector” retirement money, all hers to invest, spend or save however she wanted. Given the option, she crapped it away.

      But for the “liberal” money of SSI, she might have wound up homeless or much more of a burden on Shofar (though it sounds like she was one anyway).

      However, we are made to believe that Mother Shofar was corrupted by the evil of her Social Security, that it was the wickedness of a monthly check that made her ruin her savings.

      In fact, This story demonstrates exactly the problem that SSI corrects: people are stupid. They will even fuck over their children for no good reason other than casino spending. With at least some of her lifetime earnings put towards SSI, Shofar was saved from the worst excesses (though, unfortunately not all) of his lousy mother.

      It was the private, “conservative” pension payout that was Shofar’s mother’s downfall, and the “liberal”, ounce-of-prevention foresight of SSI that Shofar should be grateful for.

      1. You must have a read a different post than I did. You twisted Shofar’s words into a pretzel so you could make it about good vs. evil. Liberals and their moral relativism.

        1. Well, Susan, as I read Shofar’s comment it seems clear that he himself was making that same point, only with a completely different and baffling spin. Ultimately Shofar comes off sounding like exactly the kind of person conservatives hate. “Society is to blame for my mothers ruining my credit score!”


          1. I see. I expect that when you receive your Social Security checks, you exhale loudly, shake your head and ask “How can it have come to this?” before running them through the shredder.

          2. I donated to the Social Security trust fund during my 40 years of employment, but I will never collect Social Security. FDR’s Social Security was a program intended to make American’s dependent on the government for their survival. That is the way Obamacare will play out if it isn’t repealed or tossed out by the Supreme Court. Contribution to Social Security was forced on Americans. Because of this, the government has a duty to honor the contract it made with the current recipients. That whole morals thing again…


    You make it sound like it was a choice between T Rowe Price or Edward Jones. Those funds were confiscated.

    1. Yes, opting out of that deduction from my paycheck was not an option. All I am looking for is the monies that were taken from me plus the interest I would have earned if I had the option to handle my retirement funds myself.

  8. I find it refreshing that this issue is being discussed factually.

    Thanks Keith for this piece. Yes, Perry is correct. It is a ponzi scheme. I find it odd that more people can not see it this way. Mike Lester posted a cartoon that illustrates this.

    Yes, ObamaCare needs to be dealt with swiftly either by EO or any other means that will stand up to it being brought up to the supremes. But the other entitlements needs to be address quickly too. As Rep. Paul says, these are mandates and should be looked at as such.

    I once read an article about the very first person that collected a social security check. Her name was Ida Fuller. She paid $22.00 in contributions (just love that term huh?) over a 3 year period. Yet, her first check was for $22.54. She lived just over 100 years and collected $20,944.42 in social security.

    Will we ever see our full contribution or benefit?

  9. When Clinton had his budget “surpluses” at the end of his final term, the money that made up the part that kept the deficit off of the public debt portion came from social security, which is intra-governmental debt. Any excess generated from social security collections are required to be used in this way. That is why, as Keith puts it, the social security “lock box” is stuffed full of IOU’s, and not cash, like it should be. Social security may not be a ponzi scheme per se, but it is most certainly run like one. If it walks like a duck… My generation pays into social security while fully expecting to never, ever see a penny of that money. Kind of a financial Stockholm syndrom.

    Also, the original social security act came in at under 70 pages when it was passed in, I believe, 1935. It is causing massive headaches today even though, in my opinion, it was actually passed with the best intentions. Imagine what the monstrosity that is obama/pelosi-care will do coming in at 2000+ pages. I would say that it will be the prime example of the law of unintended consequences, but I’m not sure how “unintended” these consequences actually are.

  10. So, if Congress repeals the SS act and all it’s provisions and allows the population to provide funds for their own old age, what happens to the people who earn only enough money to provide for their day to day lives and have nothing to save or invest for the future? They go on “welfare”.
    If the people don’t have enough money to exceed the government’s criteria for poverty, they receive “food stamps”.

    No matter what you call it, our government is responsible for the care and feeding of 100 million citizens.

    1. Good point. Honestly, as a writer, I have been sort of subsistence all my career (except growing up and 16 yrs on the Hill). I didn’t have that million to sock away at interest or whatever you are supposed to have so you can swan around the world traveling or writing a novel. Then this crap hit and my head was pushed further under. Without SS, I would be under a bridge…

    2. You are right srdem. Over the years the government has conditioned Americans to depend on SS as a retirement plan. This mindset will not be easily altered. Congress won’t and can’t repeal SS. The program must be reformed to insure politicians can’t move our ‘contributions’ to a general fund. Younger contributors will not be able to opt out of the program entirely, because they are funding today’s retirees. Not sure how SS can be fixed, but it is good that we’re have a national debate about the program. It will not survive without reform.

  11. It’s not a Ponzi scheme. Such are bound to collapse.

    Social Security is a government program from which CONGRESS STOLE the funds.

    There is a huge difference.

    1. while I do not disagree with the theft of funds by congress, it still is a ponzi scheme. Several years ago, I read an analysis that showed the average WWII or Silent Generation person who worked until 65 and then took SS would actually get back everything they put into SS in less than 4 years. So someone living to 85 would get 16 years of money they didn’t put into the system. Yes, I know, there are other issues such as time value of money and interest they would have earned had they invested, etc, but in the end; if someone put in 15K and then was paid out 150K, that 135k came from someone else’s pocket.

      As for the theft, I’d be all for ending all retirement and health plans for any member of congress and make them go on SS and Medicare immediately.

  12. I did some research one weekend and looked back to 1984 when the SS/Med rates were doubled (you can find the video on YouTube with Dole/Moynie telling the american people that the extra money would be put aside and not used by congress) and figured out that there should be around a 1.8 trillion dollar surplus in SS when you take what was brought in and paid out over those years thru 2010. Except it’s now IOU’s of government treasury notes. That 1.8 funded many a agency and program. Now SS is running in the red and those agencies and programs need income tax dollars to stay alive; meanwhile the SS system is bankrupt. And just imagine how really bad it would be if the government hadn’t been cooking the inflation index that last 10 years or more in order to keep from having to provide cost of living increases in the payouts of SS.

    Yep, Perry hit the nail on the head.

  13. I only wish Perry had used some better language to describe the faults with SS. I worry that the “ponzi scheme” remark will haunt him, the majority of voters not understanding SS to begin with (and who does, really?). He may be right but at what price? I hope down the road, in another debate, or on some one-on-one interview (but NOT with Brian Williams, please!), Perry can detail what he meant on a level most can comprehend. Perhaps even posting something on his website or through his Twitter feed.

  14. Pingback: The Libertarian: Let's be fair to Mr. Ponzi

Comments are closed.