It’s time again for another trip into the mind of Ezra Klein. Please take your motion-sickness pills and if, for some reason, your entire being is catapulted into a universe of unicorns and rainbows, please do not be alarmed. A rescue team will find you in relatively short order.
Klein has decided to take on the conservative contention that Social Security is a Ponzi Scheme. His argument takes the “two guys said so on the Internet” form and includes a Venn Diagram that asserts, without any actual proof, that Social Security is in no way a Ponzi Scheme. In brief, here are the reasons why Social Security is not a Ponzi Scheme:
- …because the government can print as much money as it wants and “tax people”, thus the fund will never, ever run out of money.
- …because people who collect Social Security know where their money comes from.
- …because it’s not a “deliberate fraud”.
- …because the administrator of the Social Security Fund only makes $200,000 a year.
- …because it promises you little to no return.
- …because it’s “invested” in Treasury bonds.
- …because it can be changed or ended by the people ultimately responsible for it.
- …because it’s been around for a long time.
- …because it’s not a Ponzi Scheme. Seriously. That is really a bullet point in the Venn Diagram.
AG Conservative wrote a pretty good rebuttal to Klein’s cloud cuckoo land “proof”, which could best be translated as Quod Erat PowerPointum and I recommend you read it. First, though, let me take my shot as smacking down Klein’s adopted assertions in brief bullet points.
- The government can not always print money and there is a limit to how much more taxing can be done, mostly because we have a finite number of rich people and they have a finite amount of money. Social Security payouts, however, have no bounds.
- Not all participants in a Ponzi Scheme are ignorant of the source of their revenue. See, for instance, multi-level marketing schemes.
- So a Ponzi Scheme is only a Ponzi Scheme if it’s intentional? I’m fairly sure a judge would laugh at such an argument. For more laughs, refer to this document, sent to people in 1936, when Social Security began.
- This is not proof that Social Security isn’t a Ponzi Scheme. It’s proof that it’s not a very profitable Ponzi Scheme. However, at the risk of rebutting myself, let me note that the Social Security Trust Fund should have about $2.6 trillion dollars in it. It does not. The people in charge of the trust fund spent the money. That is how a Ponzi Scheme works.
- Again, this is not proof that Social Security is not a Ponzi Scheme. It’s proof that those who have gotten paid by the scheme settled for a paltry return on their “contribution”.
- This is half-true. Social Security is not “invested” in normal Treasury bonds but in special bonds issued by the Treasury specifically to act as IOUs for Social Security. Those IOUs can only be paid back by going outside the scheme…err, fund…and press-ganging new people to pay into the scheme or to take more from those who are already in it. In other words, Social Security has acted for decades in exactly the way a Ponzi Scheme acts when it gets into real financial trouble because those in charge of it have paid out far more money than they collected.
- Anyone running a Ponzi Scheme can end it at any time. Of course, when they do, they’ll have to explain to the people in the scheme what happened to all the money and why they’re ending it, and the comeuppance will be great. That’s why the people at the top of the scheme don’t end it until it comes crashing down around their ears. It’s easier to postpone the pain until they’ve made plans to be far, far away from the fallout where they believe they won’t be affected by it and…wait…that sounds a bit like Congress, doesn’t it?
- If you let me set up a Ponzi Scheme backed by the authority of the Federal Government, with the power to force people into it for their entire working lives and if I was willing to continue to print money and run up a deficit larger than the entire country could pay off in a year, my scheme would be around for a long time, too.
- Stop. Ezra, please stop. You’re embarrassing yourself.
Unfortunately, I don’t have a fancy-schmancy Venn Diagram in which to put my points, so I’ll understand if you don’t take everything I’ve written to this point seriously. I do, however have another diagram that you might find shocking and even unbelievable, but by Klein Logic it is unassailable because it is a Venn Diagram.
Behold the power of two circles with some words inside!
I remind you, by the way, that the Washington Post, Bloomberg, and MS-NBC actually pay Klein pretty handsomely for his insightful economic analyses.