Social Security Disaster
Walter E. Williams
by Walter E. Williams: The
Financial Mess in the US and Europe
who are principled enough to point out the fraud of Social Security,
referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment
of Social Security's problems is not the same as calling for the
abandonment of its recipients. Instead, it's a call to take actions
now, while there's time to avert a disaster. Let's look at it.
The term was
derived from the scheme created during the 1920s by Charles Ponzi,
a poor but enterprising Italian immigrant. Here's how it works.
You persuade some people to give you their money to invest. After
a while, you pay them a nice return, but the return doesn't come
from investments. What you pay them with comes from the money of
other people whom you've persuaded to "invest" in your scheme. The
scheme works so long as you can persuade greater and greater numbers
of people to "invest" so that you can pay off earlier "investors."
After a while, Ponzi couldn't find enough new investors, and his
scheme collapsed. He was convicted of fraud and sent to prison.
The very first
Social Security check went to Ida May Fuller in 1940. She paid just
$24.75 in Social Security taxes but collected a total of $22,888.92
in benefits, getting back all she put into Social Security in a
month. According to a Congressional Research Service report titled
"Social Security Reform" (October 2002), by Geoffrey Kollmann and
Dawn Nuschler, workers who retired in 1980 at age 65 got back all
they put into Social Security, plus interest, in 2.8 years. Workers
who retired at age 65 in 2002 will have to wait a total of 16.9
years to break even. For those retiring in 2020, it will take 20.9
years. Workers entering the labor force today won't live long enough
to get back even half of what they will put into Social Security.
Social Security faces Ponzi's problem, not enough new "investors."
In 1940, there were 160 workers paying into Social Security per
retiree; today there are only 2.9 and falling.
claim that Social Security has a huge trust fund and is in good
health. An uninformed public and a derelict news media don't challenge
that lie. Back in August, politicians were in a tizzy over raising
the federal debt limit. In an effort to frighten seniors, President
Barack Obama said in a CBS interview, "I cannot guarantee that those
checks go out on Aug. 3 if we haven't resolved this issue, because
there may simply not be the money in the coffers to do it." Here's
how we reveal the trust fund lie: According to the Social Security
Administration, it has a trust fund with $2.6 trillion in it. If
those were real assets, then the Social Security Administration
could have mailed checks out regardless of what Congress did about
the debt limit. The reality is that the Social Security trust fund
consists of government IOUs that have no real value at all and probably
are not even worth the paper upon which they are printed.
believe that a person who is 65 years old and has been forced into
Social Security is owed something. But the question is, Who owes
it to him? Congress has spent every penny of his Social Security
"contribution." Young workers have no obligation to be fleeced in
order to make up for the dishonesty and dereliction of Congress.
The tragedy is that most seniors just want their money and couldn't
care less about whom Congress takes it from.
might be a temporary fix: The federal government owns huge quantities
of wasting assets assets that are not producing anything 650
million acres of land, almost 30 percent of the land area of the
United States. In exchange for those who choose to opt out of Social
Security and forsake any future claim, why not pay them off with
40 or so acres of land? Doing so would give us breathing room to
develop a free choice method to finance retirement.
E. Williams is the John M. Olin distinguished professor of economics
at George Mason University, and a nationally syndicated columnist.
To find out more about Walter E. Williams and read features by other
Creators Syndicate columnists and cartoonists, visit the Creators
Syndicate web page.
© 2011 Creators Syndicate, Inc.
Best of Walter E. Williams