During last night’s Republican Debate in Southern California, Governor Rick Perry once again reiterated that Social Security was a Failed Ponzi Scheme! Romney and the progressive media hacks were aghast in disbelief that Perry could malign this great social safety net. Fortunately, we have a candidate, Perry, who is not afraid to talk about the elephant in the room, Social Security the Ponzi Scheme. Is Perry right?
Well, the best place to start is the definition of a Ponzi Scheme. Before we start, you should know that today’s maximum social security payment per individual is $2,366 per month or $28,392 per year if you earned the maximum wages per year. There have been no cost of living increases “granted” to recipients for years 2009, 2010, and 2011.
The Merriam-Webster Online dictionary definition of a Ponzi Scheme is:
“An investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.”
Wikipedia defines a Ponzi Scheme as:
“A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors.”
So, to simplify the definitions:
The 1st group investors cannot be paid anything until the 2nd group of investors pay into the pool. Then the 3rd group is added so the 1st and 2nd groups can be paid, etc.
There is no difference between what Bernie Madoff did with his Ponzi Scheme and Social Security
Social Security works the same way as any other Ponzi Scheme. Assume that all of the SS recipients receive $28,392 per year; and assume that all workers earn $106,800 and the total FICA taxes paid in for each worker is $13,243 per year; it would take 2.2 current workers to pay for 1 retired worker. The retired worker is not receiving the money he or she paid in as it has already been paid out to another worker who retired earlier… unfortunately, since Congress and Presidents have added on more programs to Social Security over the years, it actually takes 4 current workers to pay for 1 retired worker!!!
What Social Security Is Not and Why it is Failing!
- No Individual Accounts: There is no concept of an individual account like you have at your bank, your 401-k or other retirement account in the Social Security program. It is a massive pool of funds that Congress and the Presidents use for anything they wish, including loaning money to itself to cover the deficits.
- Social Security Is Not Just Social Security: Social Security is not longer just a program to provide for Senior’s retirement, it now includes:
- Disability Payments: designed to provide income supplements to people who are physically restricted in their ability to be employed because of a notable disability, usually a physical disability. SSD can be supplied on either a temporary or permanent basis, usually directly correlated to whether the person’s disability is temporary or permanent.
- Unemployment Benefits: The Federal Unemployment Insurance is under the Social Security umbrella.
- Temporary Assistance for Needy Families: Act provides temporary (60 months) of financial assistance while aiming to get people off of that assistance, primarily through employment.
- Medicare: Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other special criteria… I.E., the processor to Obamacare…
- Medicaid: Medicaid is the United States health program for certain people and families with low incomes and resources.
- State Children’s Health Insurance Program (SCHIP): Provides matching funds to states for health insurance to families with children. The program was designed with the intent to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid.
- Supplemental Security Income (SSI): Provides stipends to low-income people who are either aged (65 or older), blind, or disabled. This is funded out of general funds and not the Social Security Trust Fund.
- Patient Protection and Affordable Care Act (PPACA)–Obamacare!: You thought Obamacare was a nightmare by itself but it is worse since it is under the Social Security Umbrella… This is no way to predict the ultimate impact on Medicare and Medicaid but this new universal health care system is intertwined with Social Security.
So, when you hear politicians lament the sad state the Social Security is in, remember that those same politicians took a somewhat simple Ponzi Scheme and made it into a behemoth set of social welfare programs. Worse yet, it is nearly impossible to get an accurate accounting of the 9 major functions within Social Security and if they are paying for themselves via the taxes levied specifically on their behalf. No, the politicians just keep piling more and more programs under this huge Ponzi Scheme in the hopes that it will be too complex for you to even question.
What Social Security Benefit Payments to Retirees Would be if Invested Privately:
Social Security funding comes from payroll taxes known as FICA taxes, collected from employers and employees and self-employed individuals, on all wages or net income earned up to $106,800. Remember when we started, today’s top Social Security payout it $2,366 per month or $28,392 per year. Let’s create a case study to see what would happen if a 20-year-old person invested the same money that he or she paid in plus their employer’s matching contribution.
- Age: 20 Years of age
- Retirement Age: 65
- Starting Salary at age 20: $40,000
- Average Salary increase/increase in earnings: 5% until year 22 when their salary tops out at $106,800 (maximum amount subject to FICA)
- Average Standard and Poors Investment Increase per Year (Stocks over last 40 years): 7%
- Average Annual FICA contributions paid in Per Year: $11,000
- Total Years to contribute into Social Security: 45
- Social Security:
- Total Amount you would pay into Social Security: $495,000 (not adjusted for FICA Changes)
- Total Amount you would receive from Social Security: $7,012 per month (Assuming average 2.5% COLA Increase/Year)
- Private Account:
- Total Amount you would pay into your Private Social Security Account: $495,000
- Total Amount you would receive from your Private Social Security Account: $18,600 per month. (Assumes S&P 50 year yield average)
A private account would yield 2.6 times the return of Social Security, assuming, that Congress at some point would start giving recipients their COLA increases! Applying the same factor to today, today’s Social Security recipients would receive $6,151/month or $80,000/year. Which one would you choose?
Social Security is the Progressives end all and be all to control its weakest citizens, aged and poverty-stricken. They do not seek to lift those groups up, they seek to keep them enslaved and beholden to the Progressive Agenda. In this regard, Bernie Madoff was only greedy. The Progressives are sick power-hungry politicians who want to control every aspect of our lives…
So, Governor Perry was not only right when he called Social Security a Ponzi Scheme, he was actually being timid. It is a Ponzi Scheme intended to enslave seniors and the poor and keep them underfoot by being beholden to a group of sick politicians…