Jeff Jacoby

Charles Ponzi was a Boston swindler who in 1920 bilked thousands of people out of millions of dollars by selling them bonds that guaranteed a fabulous rate of return -- 100 percent in just 90 days. The funds entrusted to Ponzi were never invested in legitimate enterprises. Instead, they were deployed in a classic pyramid scam: The first few investors were paid off with money collected from a larger, second round of investors, whose bonds were in turn paid off with money from a still larger group of investors who came after them. Like all pyramid swindles, which depend on a steadily expanding population of new investors, Ponzi's scheme was unsustainable. It collapsed within months. Ponzi went to prison, and his victims lost most of their principal.

Is Social Security just another Ponzi scheme? Texas Governor Rick Perry is only the latest public figure to make that claim. It's an analogy that provokes heated debate -- not surprising, given Social Security's powerful emotional and philosophical resonance. That might not be a bad thing, if the debate moved Americans closer to solving the program's long-term problems. But it doesn't.

For years, notable voices -- from the late economist Milton Friedman to Senator John McCain to former Slate editor Michael Kinsley -- have warned that Ponzi's ripoff was no different in principle from Social Security. Just as Ponzi's scheme — or the more recent fraud by Bernard Madoff — eventually crumbled when there weren't enough new investors to fund the payouts to the earlier investors, critics argue, Social Security will also fall apart as taxes paid into the system are outstripped by the benefits paid out.

That's the point Perry was making last month, when he called it "a monstrous lie" that younger workers paying into Social Security today can rely on collecting benefits when they retire. "It is a Ponzi scheme for these young people," he told an audience in Iowa. In interviews last fall, he made the same comparison.

Jeff Jacoby

Jeff Jacoby is an Op-Ed writer for the Boston Globe, a radio political commentator, and a contributing columnist for