Social Security is no Ponzi scheme: Article by Bill King

Interesting article about the current social security system. What do you think? Is it a ponzi scheme? The income that Social Security has received in excess of its expenses has been placed into separate trust funds for the payment of pensions and disability benefits. In addition to the income that Social Security receives from the payroll tax, it also earns interest on the investment of these trust funds.

Since the federal government has used the proceeds to finance its ongoing expenditures, the criticism is in some sense true. Instead of investing the money as promised, the promoter uses a portion of the money to pay phony returns to the investors and pockets the rest. To fairly call Social Security a Ponzi scheme, one would have to conclude that the federal government is not using the contributions as it has promised and that the system is growing geometrically and is, therefore, unsustainable over time. There is no question that Social Security’s income is first used to pay benefits and that the balance is invested in U.S. securities. […] unless one is prepared to argue that U.S. securities are not a legitimate investment, it is hard to argue that the federal government is not using the funds as represented to the participants in Social Security.