Ponzi schemes

Every diminution of the public burdens arising from taxation gives to individual enterprise increased power and furnishes to all the members of our happy confederacy new motives for patriotic affection and support.
Andrew Jackson-former president

I look at what the government foisted upon me, for my own good, and wonder. I did not ask for Social Security, but I was forced to pay into it throughout my working life. I did not ask for Medicare, but I was forced to pay into it throughout my working life. Now that I am retired, and am the proud recipient of my bounty, I am . . . disappointed.

Both programs were started with the best intentions, but like most everything the government tries to do, they were both poorly conceived and underfunded. They were built on the framework of a Ponzi scheme.

The Wikipedia definition of Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.

That means, the first ones in the program, upon retirement, received benefits from what they paid in, as well as by the ones who came in behind them. The problem with a Ponzi scheme is eventually, the pyramid runs out of blocks. There is not enough new blood coming in to pay off the old blood that retires. They are never sustainable. It simply falls apart. That is why Ponzi schemes are illegal.

Once the wheels fall off, the only way for the government to keep them going is through infusions of tax dollars. Then the people who have paid into it for years and years get the privilege of paying twice for the same benefit . . . if they live long enough to collect.

If the payroll deductions had been placed in individual accounts, or even into a pool, where that was invested or drew interest (that “actual profit earned,” which would have removed the Ponzi scheme label), they would be solvent, and everyone who had paid in over their working life would have a tidy sum for Social Security or Medicare payments after retirement.

However, somewhere along the line, the politicians decided that the money could be better spent on entitlement programs for the few instead of the many who had paid it in. Now, those politicians, while defending Obamacare, keep throwing the, “you don’t want new government programs, but you sure want your Social Security and Medicare.” Hey, pal, I did not ask for Social Security or Medicare, but you made me pay for it; now you are darn right; I want what I paid for. The problem is you spent the money. For Obamacare you are starting out with the mandate that everyone must have insurance from the get/go. Like every other government program, it is underestimated and underfunded, but this time there is not going to be any “new blood” coming in for it to be a Ponzi scheme. It will be insolvent in a relatively short time and drive the country into a death spiral of debt.

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Published in: on May 10, 2010 at 3:46 pm  Leave a Comment  
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