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Social Security IS a Pyramid Scheme

By Mark Perry

Is the Social Security system a Ponzi scheme? Texas Governor Rick Perry says Yes, and calls it a "monstrous lie for younger people."  Cato Institute's Michael Tanner says Perry was being too kind, and writes:  "As with Ponzi’s scheme, when the number of new contributors dries up, it will become impossible to continue to pay the promised benefits." Boston Globe columnist Jeff Jacoby says that's not the point, and points out that "Ponzi schemes are intended to defraud; Social Security was designed to be a social safety net for the old."

The debate will continue, but the facts in the graph above are crystal clear: the number of active workers per Social Security recipient is declining, and will continue to decline, and the Social Security system is clearly unsustainable.  Whether Social Security technically meets the technical definition of being a Ponzi scheme is less important than the fact that the current system has become a Pyramid scheme as the population ages.  We will eventually run out of money from active workers, and money from the "trust fund," to pay for the unfunded liabilities due to Social Security recipients.