Ponzi - part the first

Well, The Musk Ox is on his hobby horse again: the evil of Social Security. He's been repeating the lie that SS is the worst kind of ponzi "scheme of all time". Of course, being an Apartheid South African, the notion of social safety net was rather different from what the USofA has, until now, been doing.

While one can argue that SS was established in the wrong way (we'll get there in a second), it ain't Ponzi. Not at all. Here's what Ponzi did.

[The scheme] is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.

Simple enough, right? Kind of like multi-level marketing, truth be told. But SS isn't an investment vehicle/scheme; never was, and by intention. FDR/Congress had, basically, two ways to run SS from the outset:

- make it exactly an investment scheme, to which each worker would have an identifiable slice of the FICA funds credited to him. when said worker reached retirement, the funds + interest would be disbursed to him. until said funds run out. the SSA would manage the funds on behalf of all 'enrollees'. again, two choices: invest the funds in private (not necessarily USofA) corporations or in government instruments. either way, no one would have a meaningful addition to his retirement for some decades. about 1965, or thereabouts; 30 years of working and contributing. assuming, of course, that other Great Depressions don't interrupt employment along the way.

here's another problem: if SS were to invest in USofA corporations, which takes precedence - enforcing various laws on corporate behavior (mononpoly or price fixing for example) or allowing corporations to be, essentially, unregulated in pursuit of profit. and, of course, how to ensure that such profit seeking actually accrues to the SS enrollees, rather than just the CxO class and oligarches.

that scheme gets really messy, really fast.

- the other approach, which is the one adopted, was to fund SS benefits on the Damn Gummint's current account. all that means is that current FICA taxes are used to fund current retirees. no one has to wait 30 years or so to have meaningful SS benefits. in order to boost the level of the endowment, which isn't assigned to each worker specifically but as a general pool, the 'interest' accrued to the endowment was/is only in the form of Treasury instruments. IOW, Uncle Sugar moves some moolah from one pocket to another, i.e. the SS endowment.

The meaningful side-effect, not likely envisioned in 1933, that there would be a WWII and a subsequent baby-boom following, means that there was a bulge in the working cohort for a few decades (what Dr. McElhone called "the pig in the python"), which boosted the FICA monies which in turn 'justified' increased payouts in the 60s, 70s, and (a bit) 80s. Now that the baby-boom is retiring, and didn't produce a bumper crop of wage earners, the Evangelical Reactionary Radical Retrograde Right Wingnuts are screaming that the sky is falling. It isn't; we'll all be gone soon enough. Contrary to right wingnut propaganda, geezers are not living substantially longer than their grandparents, or great grandparents, from age 65.

In no way is the fiscal problem of SS the result of a Ponzi scheme, it's that the baby-boom didn't fuck enough high wage workers into existence. Let that be the lesson.