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Perry's Social Security Voter Test

Can voters handle the truth?

By Petrarch  |  September 14, 2011

  In last week's Republican Presidential debate, Texas Gov. Rick Perry reached out and grabbed the legendary third rail of American politics with both hands.

[Social Security] is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you're paying into a program that's going to be there. Anybody that's for the status quo with Social Security today is involved with a monstrous lie to our kids, and it's not right.

It didn't take long for Mitt Romney to smell the burning flesh, pop up, and defend that "monstrous lie":

The issue in the book "Fed Up," Governor, is you say that by any measure, Social Security is a failure. You can't say that to tens of millions of Americans who live on Social Security and those who have lived on it.

The governor says look, states ought to be able to opt out of Social Security. Our nominee has to be someone who isn't committed to abolishing Social Security, but who is committed to saving Social Security[emphasis added]

To everyone's surprise, this week Gov. Perry doubled down, insisting that Social Security was in fact a lie to our children that couldn't and wouldn't ever be paid as currently set up.  His opponents, Republicans as well as Democrats, danced with glee as they contemplated his impending incineration.

Does Telling Truth Ruin The Truth-Teller?

They all overlook one small detail: Gov. Perry is correct.  Social Security is, quite literally by the dictionary definition and by longstanding court decisions, a Ponzi scheme.

You don't have to trust us for this.  You don't have to trust Gov. Perry.  Let us cite as authorities Nobel Prize-winning economists:

Milton Friedman, the supply-side-conservative-god, called Social Security nothing less than "The Biggest Ponzi Scheme on Earth" in an article by that name, published in 1999.

Too recent?  How about Nobelist Paul Samuelson, who also called it a Ponzi scheme in the 60s - though he said it was a successful Ponzi scheme because it hadn't collapsed yet.  However, he gave a caveat: success was based on an ever-growing economy - "A growing nation is the greatest Ponzi game ever contrived" - which Obama's America manifestly is not.

Too tendentious?  Let's hear Nobelist Paul Krugman - that's right, the rabidly partisan, deranged lunatic whose 9-11 essay condemned all patriotic Americans as evil frauds - called Social Security a Ponzi scheme that "will soon be over."

Too academic?  How about a 1959 court ruling acknowledging that the government has been lying about Social Security all along:

The OASI [Old-Age and Survivors Insurance] program is in no sense a federally-administered 'insurance program' under which each worker pays premiums over the years and acquires at retirement an indefeasible right to receive for life a fixed monthly benefit, irrespective of the conditions which Congress has chosen to impose from time to time.

While the Act uses the term 'insurance,' the true nature of the program is to be determined from its actual incidents.

The court had to decide whether Congress could stop Social Security payments to an individual who had done something Congress didn't like.  When his payments stopped, he did the all-American thing and sued.  He cited the statements of various politicians that Social Security was insurance.  He'd paid for his pension, he claimed, and Congress couldn't take it away from him.

The court ruled that Social Security is not insurance, it's a welfare program.  The law calls it insurance, but the Court said we know it's not insurance by what it does.  Unlike an insurance program where you pay a certain amount and get specified benefits, Congress can raise your cost to particpate by raising Social Security taxes at any time.  They can also change the payments you get at any time.

The bottom line: Social Security payments are just like any other taxes and the money can be spent just like any other government revenue.  The court ruled that what you pay in Social Security is not earmarked in any way.

There is no Social Security Trust Fund.  It's not an investment scheme, and never was.  It's not even a pension scheme, in the sense that your contributions purchase rights to a benefit of any kind.  That part of Social Security is a lie, pure and simple.

The dollars you paid in were spent to pay pensions of the people who got in before you did - precisely like any Ponzi scheme.  If a private insurance company did that, there'd be orange jump suits for everybody - which none other than Gov. Mitt Romney used to believe:

Let’s look at what would happen if someone in the private sector did a similar thing... They would go to jail. [emphasis added]

What is it with Massachusetts politicians and flip-flopping?  Maybe it's something in the water.

No Argument Any More

Let's go with the court ruling and myriad experts from both sides of the aisle, and take it as unarguable that Social Security is in fact a Ponzi scheme.  It's a welfare program which pays out more to early "investors" than they pay in - nothing more, nothing less.

This works only so long as fresh investors add more money.  Even though it was promised that Social Security would be voluntary, the government soon forced everybody to participate.  Running a Ponzi scheme is easier if you have the power to force new "investors" to cough up.

When the time comes for later investors to withdraw their funds, there won't be anything to take out unless even more new investors are shoveling money in.  America's falling birthrate and ever-increasing longevity has reduced contributors and increased withdrawals.  Combined with our stagnant economy, the collapse of Social Security is nigh.

Scragged has thoroughly documented this well-understood fact about Social Security; there isn't any room for sensible argument on this point.

Mr. Perry's opponents are far too intelligent and far too well-informed to believe that he's wrong.  Quite the contrary, they know perfectly well that he's right.

They are hoping that the American people are too stupid to understand what Gov. Perry is saying and that they'll opt for soothing lies about "shoring up Social Security" and "keeping our promises."  They're hoping that our voters will ignore the obvious truth that we're broke and can't possibly keep the promises our Federal government has been handing out like cost-free candy.

Are they making the right political decision?  Do Americans really prefer a comforting lie to a hurtful truth?  Or have the past years of misery and disappointment readied America to look unappealing facts squarely in the face, preparatory to grasping the bull by the horns while disregarding the fog of falsehoods and mixed metaphors?

Gov. Perry thinks they are.  Gov. Romney and the entire Democratic party from President Obama on down thinks they are not.

Scragged finds itself working alongside Gov. Perry to tell everyone the truth, no matter how distressing it might be.  Fascinating.