But every analogy goes only so far, and there are flaws in this one too. Boston University journalism professor (and former Globe reporter) Mitchell Zukoff, who in 2005 published the definitive history of the Ponzi scandal, notes the dissimilarities. Ponzi's scheme was a deliberate swindle that lured its victims with bald lies and get-rich-quick promises, Zuckoff has written, whereas Social Security fully discloses its operations and makes no promise of huge returns. Ponzi schemes are intended to defraud; Social Security was designed to be a social safety net for the old.
The Social Security Administration itself tackles the issue in a 2,400-word essay that not surprisingly concludes that there is no comparison between a pyramid scheme like Ponzi's and the government's 75-year-old pay-as-you-go pension program. The key difference: The former depends on a never-ending geometric increase in the number of participants, whereas Social Security is simply a financial "pipeline" that transfers income from current workers to current retirees. "As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever."
Ah, but that's the key question: Can that "rough balance" be maintained? When Social Security began, there were dozens of workers paying taxes into the system for every retiree who was taking benefits out of it. By 1950, the ratio had slipped to 16.5-to-1. Now it is a little less than 3-to-1, and continuing to shrink. When the last of the baby boomers retire, there will be just two working taxpayers for every beneficiary. In the face of such a demographic tide, isn't Social Security ultimately as doomed as any pyramid scheme?
And yet whole furor over Social Security's "Ponzi-ness" has mostly served as a giant distraction. Back and forth the arguments go -- one side notes with alarm the exploding number of retirees, while the other side says Social Security taxes and benefits can always be adjusted. One side warns that Social Security's future unfunded liabilities already amount to a staggering $20 trillion; the other side points to its huge current surpluses.
But fighting over an analogy gives both sides too easy an out. What Americans should really be wrestling with is not whether Social Security is or isn't a Ponzi scheme, but whether its all-important surpluses are wisely invested. Or whether, to be precise, they are invested at all.