Social Security Administration Admits It's Running a Bankrupt Ponzi Scheme!Submitted by RonPaulLIVES on Wed, 12/09/2009 - 12:05
My 26 year old son got the most extraordinary letter from the Social Security Administration last week. In plain English it admitted that the system was a Ponzi scheme destined for bankruptcy more than a decade before he reaches retirement age. It warned that if he is to have any hope of retiring he'd better start saving on his own. Anyone who wasn't personally hypnotized by FDR knows this to be true. Yet I was still surprised that such a frank government confession didn't make national news.
The two-page pamphlet entitled "What young workers should know about Social Security and saving" reminds us that 50 million, or one in six, Americans will collect more than $614 Billion dollars in Social Security benefits this year. It informs young people that the Security Taxes they now pay go into a "Trust Fund" that is used to pay current beneficiaries. Paying off early investors with funds taken from later investors is precisely how Wikipedia defines a Ponzi scheme. The pamphlet advises that the Social Security Board of Trustees estimates that the "Trust Fund" will be depleted before my son's 54th birthday. Because people are living longer and the birth rate is low, it goes on, taxes paid by workers in the future will not be enough to pay the benefits promised in his personalized retirement account statement enclosed with the pamphlet. Imagine what hell would break loose if Schwab or Fidelity Investments enclosed a confession like this when they mailed investors their 401(k) statements.
On top of the negative rate of return young people paying into Social Security are expected to suffer, the pamphlet concludes that my son should plan on taking an additional 24% haircut on the benefits promised in his statement. This is the same healthy young kid being told that he will soon have to buy an artificially overpriced health insurance policy so his premiums can be redistributed to aging Baby Boomers lobbying Congress for free stuff.
Given the fact that Social Security will be bankrupt before my son even reaches my age, the pamphlet directs him to a handy web calculator that shows how much he will have to save every week if he hopes to retire on his own. Play with it for a few minutes and you realize that there is only one field in the calculator that really matters, and that is the rate of inflation. Plug in an annual inflation rate of one or two percent and the numbers look pretty reasonable as compound interest works its magic. But stick in the double digit inflation figures that were in vogue when Jimmy Carter was president and a funny thing happens. In order to prepare for retirement, young people would have to save more than they make!
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