Home > Social Security > Is Social Security a Ponzi Scheme? Is the Washington Post a Criminal Enterprise?

Is Social Security a Ponzi Scheme? Is the Washington Post a Criminal Enterprise?

from Dean Baker

Ever since Texas Governor Rick Perry attacked Social Security as a Ponzi scheme as an opening gambit in his presidential campaign we have been treated to a spirited debate in the media on the truth of this proposition. Those of us who consider this to be ill-informed nonsense that has the effect of misleading the public about the state of Social Security’s finances were told to lighten up. After all, what is wrong with debating the topic? 

In this spirit of free and open debate, perhaps our attention should be devoted to the question of whether the Washington Post is a criminal enterprise. While it is ostensibly a newspaper that purports to give the public an objective take on key events in the country and the world, it has been involved in several actions that raise serious questions about this status.

For example, a few years back its management came up with a plan to have high-priced dinner events where lobbyists would be given direct access to the papers’ reporters. The plan was to have the reporters lead discussions on important issues. The lobbyists would be given the opportunity to argue their positions, ensuring that the reporters knew these arguments the next time that they wrote on the topic. Needless to say, those who could not afford the price of admission would not get the same opportunity to educate the Post’s reporters.

Thankfully this plan was nixed by some clearer-thinking folks in the Post’s management after it got leaked to the public. But there is a more general question of whether advertising dollars influence the Post’s news and editorial content. For example, the pharmaceutical industry is one of the Post’s leading advertisers. It regularly runs large ads touting the benefits of new drugs.

Does this have any influence on the fact that it routinely misleadingly touts trade agreements that will increase protection for the industry’s patents in other countries as “free trade” agreements? Do these ads affect the paper’s editorial position that strongly supports such agreements?

Do the ads affect its willingness to run pro-industry columns? For example, it ran a 2007 piece from a Manhattan Institute-affiliated researcher “Yes, New Drugs Save Lives,” that purported to find huge health and economic benefits from new drugs. It turns out that the research finding large benefits for new drugs also shows that higher income is strongly associated with shorter life expectancies.

These items, and many others, could be cited as evidence that the Washington Post is in fact not a real newspaper, but it is rather engaged in the business of selling its status as one of the country’s premier newspapers to the highest bidder. Personally, I don’t think the Post is engaged in corruption of this sort. The biases within the paper are more subtle. They are attributable to the narrow social circles inhabited by its editors and senior reporters much more than the direct influence of advertising dollars.

More importantly, the Post’s editors and reporters would no doubt find it incredibly offensive that there would be a major national debate on the integrity of the newspaper. This should say a lot about how the public, the vast majority of whom either currently or in the future will be largely dependent on Social Security, should view the debate over whether Social Security is a Ponzi scheme. The comparison is quite deliberately intended as a slander against the integrity of the program. It has no meaningful basis in reality.

At the most basic level, Social Security has 100 percent transparency in its finances. Anyone who cares can find the past, current, and projected future income and cost of the program in great detail in the annual trustees reports. The basis of every Ponzi scheme is deception: the claim of enormous returns. There is zero deception in Social Security.

And, these projections show that the program can pay all benefits for the next 35 years with no changes whatsoever. They also show it can pay more than 75 percent of benefits indefinitely. A tax increase that is less than 5 percent of projected wage growth over the next three decades would allow it to pay all benefits into the indefinite future.

The way in which Social Security is ostensibly similar to a Ponzi scheme is that it depends on new workers in the future to meet obligations that it incurs today. This also happens to be true of any debt issued by either the government or the private sector.

If the size of the working population in the United States collapsed tomorrow, then it would not have the tax revenue to pay off government bonds. Similarly, if the public stopped buying General Electric’s products, it would also be unable to pay off its bondholders. Yet no one in their right mind would describe the bonds issued by the federal government or General Electric as Ponzi schemes.

The reality is that there is no realistic basis for the comparison between Social Security and a Ponzi scheme. The proper response to Governor Perry’s charge should have been to ask whether he had any understanding at all about the country’s most important social program. He had committed a gaffe of monumental proportions. The media should have focused on exposing the governor’s ignorance, not trying to imply that in some alternative universe he might be right.

See article on original website

  1. Podargus
    September 25, 2011 at 7:24 pm

    In a sovereign nation with a fiat currency there is no danger,apart from political stupidity,that schemes like Social Security will ever run out of money to pay their obligations.
    When governments indulge in this charade of talking about tax rates and an aging population etc to caste doubt on their ability to fund necessary projects for the good of the citizens then they are playing straight into the hands of fools like Perry.

    Regardless of the venality or otherwise of the media do you have anybody in the political leadership of the US who has the faintest clue?

    • September 26, 2011 at 3:29 am

      Depends on the definition of “political leadership”, at a minimum; but once in a very while, I think I detect some MMT analysis coming from the mouth of Dennis Kucinich (Congressman from Ohio, should any “foreigners” be reading.) Even if it is coming from his mouth, I cannot say he knows what he is saying….

  2. Lucy Honeychurch
    September 25, 2011 at 8:53 pm

    By Perry’s definition, aren’t all banks Ponzi schemes too?

  3. September 26, 2011 at 3:44 am

    I must be getting really old and really cynical. I thought most all the newspapers of record – the Wapo, NY Times, etc – had already lost their “integrity” long ago. I know I mostly read them for the same reason I watch CSPAN or CNN – to hear the spin and lies of the day. The “facts” are but a “prompt” (the horrible locution used in the teaching of contemporary composition) about which media hacks concoct a story. Personally, and regardless those rare exceptions, I’d be surprised that most media aren’t selling themselves in some manner such as Professor Baker describes.

  4. Carly EngageAmerica
    September 27, 2011 at 6:34 pm

    Whether or not Social Security is a “Ponzi scheme” doesn’t change the fact that the program is projected to go bankrupt in 2036. The way in which the program functions now is simply unsustainable. Currently Social Security and Medicare use 8.5% of nonentitlement revenuees (federal revenues dedicated to all other programs besides the two). By 2020, the deficits will grow to almost 25%. This means that within 9 years, in order to pay projected benefits to retirees and the disabled, the federal government will have to stop doing about one out of every five things it does today (http://eng.am/poetWU).

    All of the following solutions will substantially eliminate these problems: Reducing benefit payments by 5% AND increase the retirement age to 70 over time; increasing both the employee and employer contribution immediately by 1.1% for income up to $106,800 (its current limit); reducing benefit payments by 5% AND increase both the employee and employer contribution immediately by 0.05% each year for the next 20 years for income up to $106,800 (its current limit); removing the $106,800 limit and count all income towards the SS tax; decreasing the cost of living adjustment by 1% per year AND raise the retirement age to 67; or taxing income over $106,800 at 3%, index the retirement age to longevity AND decrease cost of living adjustment by 0.5% (http://eng.am/oTlck2).

  5. September 27, 2011 at 10:37 pm

    “Solutions” to the SSA system that ignore Club Fed’s global Ponzi Scam and the essentials of genuine money systems are nothing other than ridiculous nonsense. If we rally massive support for the American Monetary Act, then [eventually] we won’t need the Fed or the SSA or personal income tax. If we disempower corporations and let them make the USA a 50% stockholding owner in lieu of taxation, then we won’t need the IRS. The Treasury and GAO would then be sufficient for all financial needs (public & private). Still, in the awkward transition period, a nonmonetary, nonprofit cooperative community credit system will enable a sustainable recovery and act as a counter-balance and safeguard against further abuse of the national economy & humane culture. For more detailed consideration, see the Greenbook > mm-greenbook.blogspot.com < Your critical comments & suggestions will be appreciated.

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