The Government Runs the Ultimate Racket

Social Security is a Ponzi Scheme

• Social Security involves far longer generations, with people collecting on current promises far into the future.
• Pyramid scams collapse when they run out of enough new "investors" to pay earlier promises.
• With Social Security, however, it benefits those older at others' expense.

The massive expansion of Social Security is evident from the increased tax burden since its $60 per year initial maximum.

• Tax rates have risen and been applied to more earnings, so that Social Security and Medicare took 15.3% of earnings up to $97,500 in 2007.

Social Security's good deal for retirees has resulted from a series of Ponzi schemes to benefit those then older at the expense of later generations

• The system is in perpetual crisis now, always seeking new sources of money to keep the system of massive overcommitments from imploding
• With expansion tricks nearly exhausted and baby boom retirements starting, it will only get worse.
  1. Therefore, the good deal Social Security has given retirees (e.g., Ida Fuller, Social Security's first retiree, received benefits 924 times her contributions) does nothing to prove it is not a Ponzi scheme; instead, it demonstrates why it is.
  2. That assertion misses two substantial differences between Social Security and other Ponzi schemes however: Social Security involves far longer generations, with people collecting on current promises far into the future; and it has been not one, but a series of Ponzi schemes.
  3. Social Security's good deal for retirees has resulted from a series of Ponzi schemes to benefit those then older at the expense of later generations.
  4. While sad, the story reminded me of Social Security, since it is also a Ponzi scheme involving those older, with high payoffs to early recipients coming from pockets of later participants.
  5. Tax rates have risen and been applied to more earnings, so that Social Security and Medicare took 15.3% of earnings up to $97,500 in 2007 (Medicare taxes also apply beyond that income level), with further increases scheduled and still more proposed.
  6. Since Social Security began, each of the many times it has been expanded, those in or near retirement got benefits far exceeding their costs.

https://mises.org/library/government-runs-ultimate-racket