American Elephants

Gasp! Rick Perry Called Social Security a “Ponzi Scheme” by The Elephant's Child

                      (click to enlarge)  Venn Diagram by The Examiner’s Tim Carney*

Goodness!  Rick Perry called Social Security a “Ponzi Scheme” and a “monstrous lie” and the Left simply quivered with excitement. He touched the “third rail” of politics. Democrats can tell all the old folks that Perry wants to take away their Social Security.  Democrats can win.

Are there really people out there that don’t know that Social Security has always been a Ponzi Scheme? “A fraud that involves the payment of purported returns to existing investors from funds contributed by new investors?” (Milton Friedman once called it “the Biggest Ponzi scheme on Earth”)

That is the problem that faces the social welfare states of Europe and the United States.  When programs to provide for the aged and infirm were instituted, it was assumed that populations would always increase.  If a couple had three or four children, as was common, and each of those children had three or four children, all paying in their taxes, there would be plenty of money to ensure retirement and cover whatever inflation there was as well..

Well, it worked for a while, but in the glow of peace and prosperity that followed the end of World War II, people had more babies.  Lots more.  Big families were not uncommon among those who grew up in the deprivation of the Great Depression. They called it the Baby Boom.

In 1930, Americans over 65 numbered less than 7 million, about 5.4% of the population.  The 2010 census found over 35 million Americans age 65 and over, another number is 40.3 million over 65 today. The first cohort of Baby Boomers are reaching age 65 this year, and by 2030 will reach 72 million, more than double the number in 2000.

These increasing numbers are a tribute not just to the parents of the Baby Boom generation, but to the success of American healthcare.  Mortality rates for eight of the 15 leading causes of death have declined significantly: influenza and pneumonia -8.4%; homicide -6.5%; accidents -5%; heart disease -4.7 percent; stroke -4.6%; diabetes -3.9%; hypertension -2.7%; and cancer -1.8%.  More Baby Boomers are exercise conscious and go to the gym regularly, and are far more conscious of what they eat.

I don’t know to what extent the exercise bit is true.  The media has trumpeted the intelligence, health, and general superiority of the Baby Boom generation since they were born. (Don’t forget, this is also the Vietnam Generation, the Flower Children, the Hippies)  It didn’t take long after the Baby Boom was recognized for marketers to realize that they had a huge new market.  Advertising has been directed at Baby Boomers ever since.  Did you think it was an accident that Depends now come in colors and patterns?

But the “trust fund”, the “lockbox?” Isn’t all the money you paid in— there, waiting for you? Congress changed the law in 1983 so that in any given year if current tax payers pay more in taxes than is needed to pay the benefits the excess will be invested in treasury bonds in a trust fund. What has Treasury done with the money? The government has spent it in exchange for IOUs. By 2015 the Trust Funds will run out of cash and the program will begin redeeming the IOUs and use them to pay seniors’ benefits until it runs out of IOUs.

We simply can not continue with Social Security and Medicare as they are currently structured. No one of either party suggests changing Social Security and Medicare for current recipients or for those 55 and over. But demographics forces us to reform the programs. Recognizing the demographics allows us the time to fix the programs in a way that doesn’t hurt anyone., but we cannot put it off for long.

Social Security and Medicare are programs created by Democrats to give people benefits that will make them dependent on Democrats for their continuation. In England, in Europe, these welfare-state programs have been disastrous. They have created a permanent underclass on the dole, dependent on government, and economies that are spiraling down. Any suggestion that benefits might be cut back is met with riots and cities in flames. That is not a future that Americans should accept.

* (h/t: economist Veronique du Rugy)

%d bloggers like this: