According to the Merriam Webster dictionary, a Ponzi scheme is a “fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors.” The Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”
So Texas Gov. Rick Perry is accurate in his notion that our Social Security program is being run as a federal government Ponzi scheme. The folks getting benefits are being paid with money from those who have not yet retired, not from some Social Security “trust fund.”.
Therefore, with no money being paid from any “trust fund,” Social Security indeed has become a rather expensive Ponzi scheme. But why do we not then allow John Doe to create his own account? If John is forced to pay for retirement, why not take the $100 he might pay to Social Security and let someone look after that money in a private account until he is ready to retire?
Well, the answer is very simple. In the case of Social Security, President Obama’s government can take the funds at any time without permission to satisfy payments to unions or political allies and just leave an IOU for us. However, if those funds became private property, Mr. Obama’s access to those funds would be shut off.
Mr. Perry is now vindicated.