Social Security a Ponzi Scheme

WELFARE STATE COLLAPSE
Social Security goes bankrupt
Administration to post $600 billion deficit over 10 years

Social Security will post nearly $600 billion in deficits over the next 10 years as a result of the most prolonged economic downturn suffered in the United States since the Great Depression in the 1930s and the millions of baby boomers who are beginning to reach their 65th birthday this year.

This year, Social Security is estimated to pay out some $29 billion more than is taken in.

Social Security last ran in the red during the stagflation years of the 1970s, characterized by Democratic Party President Jimmy Carter and his inept economic policies that generated both high unemployment and high inflation.

Under current actuarial assumptions, the Social Security trust fund is expected to be completely exhausted by 2037.

Social Security unfunded obligations amount to trillions of dollars

WND has also reported that the true negative net worth of the federal government was $70.7 trillion in 2009, largely because of unfunded obligations in Social Security, Medicare and Medicaid.

In other words, the total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, have effectively placed the U.S. government in bankruptcy, even before we take into consideration any future and continuing social welfare obligations that may be embedded within the Obama administration's planned massive overhaul of health care.

Under cash accounting, the government makes no provisions for the future Social Security and Medicare benefits in the year in which those benefits accrue.

The approximately 76 million U.S. children born between 1945 and 1964 represent some 28 percent of the U.S. population.

In 2008, baby boomers born in 1946 will be able to receive at 62 years old their first Social Security payments.

"Simply said, holding revenues constant, required Medicare, Medicaid, and Social Security spending and the related deficit financing costs will far exceed the government's ability to pay," the Citizens' Guide to the 2007 Financial Report of the United States Government concluded.

"The spending for social insurance programs," the Treasury's Citizen Guide noted, "is projected to grow at an alarming rate under current law."

The concern about the debt rating of the U.S. makes more problematic the future payment of Medicare, Medicaid and Social Security obligations that today are being accrued by about-to-retire baby boomers.

Moreover, the future obligations due retiring baby boomers will have to be paid by a smaller group of U.S. workers who will have to pay higher yields to sell downgraded, possibly junk-bond rated U.S. Treasury debt to attract potential buyers.

Social Security a Ponzi scheme

As Red Alert has previously reported, Social Security has become nothing more than a federal government-run Ponzi scheme.

That Social Security has perhaps irreversibly become a bankrupt Ponzi scheme was revealed last March by an Associated Press article that revealed the Social Security Administration has finally begun trying to cash in the $2.5 trillion in IOUs the federal government has placed in the Social Security "lock box."

In a 2000 presidential debate, Democratic contender Al Gore argued with Republican contender George W. Bush that if he were elected president, he would make the Social Security Trust Fund into a "lock box" that Congress could not invade to fund other programs.

What is clear now is that Social Security has become a Ponzi scheme in which the payroll taxes of those currently working are applied immediately to pay the retirement benefits of those already receiving Social Security.

A Ponzi scheme, named after the Boston-based swindler Charles Ponzi who in the 1920s launched an investment scam in which the money of later investors was used to pay off earlier investors, with Ponzi himself pocketing most of the proceeds.

For decades, Congress has routinely raided the Social Security Trust Fund, taking the cash and leaving behind IOUs in the form of Treasury bonds.

The problem is that with a $1.5 trillion budget deficit already projected by the Obama administration, the only way Congress has to cash in the $2.5 trillion in federal IOUs owed the Social Security Administration is to borrow yet more money.

Curiously, the AP article pointed out the records of the Treasury debt in the Social Security Trust Fund in a three-ring binder locked in the bottom drawer of a white metal filing cabinet in the Parkersburg, W.V., offices of the Bureau of Public Debt, a division of the Treasury Department.

The AP reported the Treasury Department opened the Parkersburg office in the 1950s as part of a plan to locate government functions outside Washington, D.C., to protect the federal government in case of a Cold War nuclear attack.

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