Social Security and Ponzi Schemes, a Comparison

Jul 31st, 2011 | By Sharon Shaw Elrod MSW EdD | Category: Social Security & Medicare

A friend sent me an interesting email that illustrates the Social Security Trust Fund issue well.  The author/originator of this information is not identified, so unfortunately, we cannot give appropriate credit.

The comparison is made between what Bernie Madoff did with his Ponzi scheming over the years, and how elected officials have handled the Social Security Trust Fund.  Take a look…

  • Madoff takes money from investors with the promise that the money will be invested and made available to them later.  Social Security takes money from wage earners with the promise that the money will be invested in a “Trust Fund” (Lock Box) and made available later.
  • Instead of investing the money Madoff spends it on nice homes in the Hamptons and yachts.  Instead of depositing money in a Trust Fund the politicians transfer it to the General Revenue Fund and use it for general spending and vote buying.
  • When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors.  When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the older people.
  • When Madoff’s scheme is discovered all hell breaks loose. New investors won’t give him any more cash.  When Social Security runs out of money the politicians try to force the taxpayers to send them some more; or they cancel S/S to all those who paid into it.
  • Bernie Madoff is in jail.  Politicians remain in Washington… with fat medical and retirement benefits.

The above comparison is somewhat simplistic, and leaves out some obvious reality.  However, the heart of it seems to be fairly accurate.  Our elected officials have been irresponsible in the manner in which they have handled Social Security funds.  We need to hold them responsible.  It’s time Senators and Representatives have term limits and are not allowed to raise their own salaries and create job-related benefits without oversight and appropriate controls.



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