Perry had the guts to call Social Security what it is, a Ponzi scheme. That won him brownie points in my book right away. Romney, the "establishment" Republican, ("Establishment Republican" is a euphemism for RINO), took exception to the Perry statement. So who is right ?
Prof. Mark Perry of the Univ. of Michigan, has this to say on the subject :
"Similarly, like a Ponzi scheme, there really isn’t any actual investment going on with Social Security. While the trust fund has a $2.5 trillion balance it can call on to pay benefits, this fund won’t be of any help to the taxpayer. When Social Security goes to redeem bonds in the trust fund, the Treasury must raise taxes, cut other programs, or borrow the money—exactly the same steps as if there weren’t a trust fund at all.
Read his blog : http://mjperry.blogspot.com/2011/09/from-ponzi-to-perry-truth-about-social.html
In other words it is an accounting "gimmick". Congress, (both parties), spend the SS "inflow" which goes into the general fund. The Treasury merely records on a piece of paper, the "inflow" from SS taxes, and files it in the "lock box". The only difference from a Ponzi scheme is, this game can go on forever. All Congress needs to do is raise taxes or cut benefits to SS recipients. The Madoff Ponzi scheme too could have gone on forever. All he had to do was convince people to accept a 2% return instead of a 20% return.
Robert Reich, former Labor Secretary, opines that the $2.5 trillion in the Trust Fund is a "loan" from SS to the government. According to him the government can pay back the "loan" and that should keep SS solvent for 26 more years. What he conveniently ignores is the fact that the government has already spent that $2.5 trillion of our retirement money. So to "repay" that loan back to us, it has to tax us some more to pay back the loan it took from the our trust fund. This is the Reich piece : http://robertreich.org/post/3331762717
Prof. Mark Perry of the Univ. of Michigan, has this to say on the subject :
"Similarly, like a Ponzi scheme, there really isn’t any actual investment going on with Social Security. While the trust fund has a $2.5 trillion balance it can call on to pay benefits, this fund won’t be of any help to the taxpayer. When Social Security goes to redeem bonds in the trust fund, the Treasury must raise taxes, cut other programs, or borrow the money—exactly the same steps as if there weren’t a trust fund at all.
Read his blog : http://mjperry.blogspot.com/2011/09/from-ponzi-to-perry-truth-about-social.html
In other words it is an accounting "gimmick". Congress, (both parties), spend the SS "inflow" which goes into the general fund. The Treasury merely records on a piece of paper, the "inflow" from SS taxes, and files it in the "lock box". The only difference from a Ponzi scheme is, this game can go on forever. All Congress needs to do is raise taxes or cut benefits to SS recipients. The Madoff Ponzi scheme too could have gone on forever. All he had to do was convince people to accept a 2% return instead of a 20% return.
Robert Reich, former Labor Secretary, opines that the $2.5 trillion in the Trust Fund is a "loan" from SS to the government. According to him the government can pay back the "loan" and that should keep SS solvent for 26 more years. What he conveniently ignores is the fact that the government has already spent that $2.5 trillion of our retirement money. So to "repay" that loan back to us, it has to tax us some more to pay back the loan it took from the our trust fund. This is the Reich piece : http://robertreich.org/post/3331762717
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