Monday, July 26, 2021

Social Security, A Ponzi Scheme?

August 7, 2011 by  
Filed under News, Opinion, Politics, Weekly Columns

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( “Social Security is indeed a Ponzi scheme” Texas Governor Rick Perry, November 2010.

Social Security is one of Americans’ most important safety-nets.

The current Social Security program is a mainstay for women. Women are 52 percent of all adult beneficiaries, including retirees, the disabled, and the survivors of deceased workers. Twenty-five million adult women receive Social Security checks every month.

Social Security may be the chief support for adult American women, but there are warnings that Social Security is in danger. Texas Governor Rick Perry says Social Security is “bankrupt” and likens the program Social to a Ponzi scheme that is a “safety net” young 20-somethings are “not ever going to see.”

There is also reason for Auntie to have some angst about the stability of Social Security. Social Security is actually a social insurance program that is officially called the federal “Old-Age, Survivors, and Disability Insurance” (OASDI). It is primarily funded through dedicated payroll taxes called Federal Insurance Contributions Act tax (FICA). For the moment, Social Security is solvent, and will be until 2037. Social Security currently has “$2.6 trillion in reserves. During 2009, total benefits of $686 billion were paid out versus income (taxes and interest) of $807 billion that produced a $121 billion annual surplus. In 2011, 156 million people paid into the program as 53 million received benefits – a ratio of 2.94 workers per beneficiary.

Social Security’s main problem is that long-term revenues are smaller than promised benefits. Starting in 2015 program expenses are expected to exceed cash revenues. The aging of Baby-boomers has resulted in a lower ratio of paying workers to retirees, as have continuing low birth rates and increasing life expectancies. The government has borrowed and spent the accumulated surplus funds – the Social Security Trust Fund. The Trust Fund consists of the savings of worker contributions and associated interest, to be used towards future earned benefit payments. Funds are held in U.S. Treasury bonds and securities. The funds borrowed from worker contributions are part of the total national debt of $14.3 trillion as of March 2011. The U.S. Government has perpetuated a Ponzi scheme by looting the Social Security Trust Fund. By 2015, the government is expected to have borrowed nearly $3.25 trillion from the Social Security Trust Fund.

To fix Social Security and other entitlement programs Congress and the Obama administration are going to have to go beyond the mundane and employ new and sounder practices and policies. Changes are certainly needed to keep Social Security working to reach the goals it was established to meet. Either benefits will need to be curtailed or the government will need to kick in funding. Between 2015 and 2037, Social Security has the legal authority to draw amounts from other government tax sources besides the payroll tax. However, this will liquidate the Trust Fund, which by 2037 experts it to be “officially exhausted”.

By dollars paid, the U.S. Social Security program is the largest government program in the world and the single greatest expenditure in the federal treasury and is currently keeps roughly 40 percent of Americans age 65 or older out of poverty. Like Auntie, nearly two in every five African Americans expect Social Security to be a major source of income during their retirement. African Americans who were low-wage workers receive back more benefits in relation to past earnings than do high-wage earners. In 2009, among African Americans receiving Social Security, 29 percent of elderly married couples and 56 percent of unmarried elderly persons relied on Social Security for 90 percent or more of their income. In 2010, Social Security’s total income was $781.1 billion and expenditures were $712.5 billion.

America’s government is broke and Social Security is evolving into more of a “feather bed” than safety net. For Social Security to be relied upon and more relevant, we will have to require much more in legislation and practices from government officials. Stop staying stuck on stupid, remember: When government increases its debt limit, it’s still a debt Americans have to pay.

Written By William Reed

Mr. Reed William Reed is available for speaking/seminar projects via;


One Response to “Social Security, A Ponzi Scheme?”
  1. James Davis says:

    Mr. Reed,
    I think your article was insightful about the Social Security Trust Fund, and how federal politicians continue to corrupt the fund, by milking it of any surplus cash, thus depriving the fund of its purpose of supporting an aging and disabled population. The only way to stop the politicians from using the surplus cash in the fund is for the beneficiaries to make a claim on surplus cash themselves!! This can be done and at the same time lift us out of this recession through what I called a Deficit Neutral Stimulus Plan. This plan doesnot look at Baby Boomers as negative but a positive. The baby-boomers, who are estimated to be 68-72 million who are retiring over the next 20 years at a rate of approximately 9,600 per day. They do not currently have the option of taking down “partial distribution payments” from the Social Security Trust Fund. While this has long been a requirement for private sector pension plans to offer this option to potential retirees, government sponsored Social Security is not required to offer this option, to potential Social Security retirees. ( I feel it s/b offered to all retirees @ 66 years of age who are taking down “full” retiree benefits ).

    Imagine, the economic impact, if the laws governing the largest retirement payor in the world, Social Security, were altered to allow “PARTIAL DISTRIBUTION” payments. This modification would make it possible for retirees to take up to a suggested 20k or 40k in a partial distribution payment from their Social Security Retirement Trust Fund, as they retire, leaving the remainder of their retirement funds to be received in monthly annuity checks. For example, if my principal is $170,000.00 ( the amount my monthly Social Security check of $1,000.00 is based on ), and I chose to roll over a principal of $150,000.00 to Social Security, taking down 20k to use as I choose, Congress could alter the laws to allow me to do this. This plan will not add to the deficit, keep in mind, my monthly Social Security check will be reduced correspondingly because it now based on 150k rather 170k. This plan will not bankrupt the Social Security Trust Fund, because the Social Security Trust Fund owes these boomers the money anyway. All Social Security will be doing, is giving an advance payment option of up to 20k or to 40k to eligible recipients as they retire. IT’S THEIR MONEY. To incentivize the plan, the government could waive the taxes on the first $20,000.00, or if they do tax it, tax it at a reduced rate. By extending the partial distribution option, which is required among private pension funds( private pension plans must present this option, among other options also, at the time you are thinking of retiring and rolling over your retirement funds), to Social Security and modifying the taxation on the first 20k withdrawn from a retirement fund, Social Security included, Congress effectively creates a pool of capital big enough, to stimulate the economy, creating jobs. Boomers could dump as much $192,000,000 million dollars into our economy each day, based on the 20k advance, ( $20,000.00 x 9,600 ) which amounts to approximately 70 billion a year, AS THEY PURCHASE PRODUCTS, SERVICES AND REDUCE DEBT TO COMFORTABLY RETIRE. Imagine, that number doubles to $384,000,000 million per day pumped into the economy if the take down amount of the advance is raised to 40k.

    Our objective should be to have Congress enact legislative changes to Social Security to make this possible. And put our country back to work !!! Go to for more information. Let’s start this conversation.

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