Last year I wrote an post titled, “Compared to the Federal Government, Bernie Madoff is a Piker.” In it, I wrote:
There is a history of Ponzi schemes in America. It’s where Charles Ponzi started his. While it wasn’t the first, it was one of the most publicized. However, there is a scheme being pulled right now that makes Bernie Madoff look like a piker. Madoff’s scam toppped at $7 billion. Peanuts. The Ponzi scheme I’m talking about pulls in hundreds of billions. And if you have a job, you are part of it.
It’s called the Old Age, Survivors, and Disability Insurance (OASDI). Most call it “Social Security.” Consider what Ponzi did, and then consider how Social Security operates:
Under Social Security, lower- and middle-class individuals are forced to pay a significant portion of their gross income–approximately 12 percent–for the alleged purpose of securing their retirement. That money is not saved or invested, but transferred directly to the program’s current beneficiaries–with the “promise” that when current taxpayers get old, the income of future taxpayers will be transferred to them.
Boortz has a chart on his blog today that I read, reminding me of what I wrote before. Here’s the chart, backing up my above position:
BERNIE MADOFF SOCIAL SECURITY Takes money from investors with the promise that the money will be invested and made available to them later Takes money from wage earners with the promise that the money will be invested in a “Trust Fund” and made available later. Instead of investing the money Madoff spends it on nice homes in the Hamptons and yachts. Instead of depositing money in a Trust Fund the politicians use it for general spending and vote buying. When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors. When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers. When Madoff’s scheme is discovered all hell breaks loose. New investors won’t give him any more cash. When Social Security runs out of money they simply force the taxpayers to send them some more. Bernie Madoff is in jail. Politicians remain in Washington.
It’s a Ponzi Scheme on an intergenerational scale. And like all others, it will eventually collapse upon itself. The solution? Well, after nearly three years here, I’ve written about that as well.
