Ponzi scheme of the century Social Security is supposed to serve as a forced government savings program for workers who pay into the system, with the idea that when workers retire, the money they payed in for decades will be available to them. Every two weeks, the government takes money out of American paychecks, under the argument bureaucrats are better than individuals at putting money aside for their retirement as a "security system," but the problem is, as soon as that money is pulled out, it is worth nothing because it has already been spent on other government programs and on Social Security checks going to people who never paid into the Social Security system.
Today, in an interview with CBS News, President Obama confirmed what we already knew: Social Security is broke and isn't working as the government continues to promise.
"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it," Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.
If Social Security was such a "secure," responsible and effective government program, there would be money in the coffers on Aug. 3, regardless of what happens with the debt ceiling. At this point, money taken out of a worker paycheck every two weeks would be worth more sitting under their mattress for 50 years than with the federal government.
Ponzi scheme: an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks
Scam: a fraudulent or deceptive act or operation
Fraud: deceit, trickery; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right
Plunder: to take the goods of by force, pillage, sack, to take by force or wrongfully : steal, loot, to make extensive use of as if by plundering, use or use up wrongfully
As Thomas Sowell wrote on June 21, 2011:
Many retired people remember the money that was taken out of their paychecks for years and feel that they are now entitled to receive Social Security benefits as a right. But the way Social Security was set up was so financially shaky that anyone who set up a similar retirement scheme in the private sector could be sent to federal prison for fraud.
This is not some newly discovered problem. Innumerable economists and others pointed out decades ago that Social Security was unsustainable in the long run, including yours truly on "Meet the Press" in 1981.
And Sowell also points out, it's young people, not seniors who suffer the most from the Ponzi scheme known as Social Security:
Retired seniors have the least to fear from a reform of Social Security, since neither political party is about to take away what these retirees already have and are relying on.
Despite irresponsible political ads showing an old lady in a wheel chair being dumped over a cliff, the people who are really in danger of being dumped over a cliff are the younger generation, who are paying into Social Security but are unlikely to get back anything like what they are paying in.
The money that young workers are paying into Social Security today is not being put aside to pay for their retirement. It is being spent today, paying the pensions of the retired generation -- and it can't even cover that in the years ahead.
What needs to be done is to allow younger workers a choice of staying out of a system that is simply running out of money. Nor can the system be saved by simply jacking up taxes on "the rich."