Social Security not deal it once was – always a Ponzi Scheme

Social Security is not as good a deal as it once was for workers years ago. Previous posts on this blog concerning Social Security are here, here, here and here

Workers in the beginning of the program did well, receiving multiple times the amount they put in, but future beneficiaries will not receive the same ratio of benefits as those in the past or those of today.

The so-called Social Security trust fund has no money in a trust, having paid out more than it received in annual payroll taxes last year and having to borrow money from the general fund to make up for the lack of tax revenue, thus contributing to the burgeoning national deficit.

Most of today’s beneficiaries will not even get back the money, they and their employers, “invested” in the plan through payroll taxes paid typically for a minimum of over four decades. This is a typical Ponzi scheme – last out of scheme gets less than first ones in!


If you retired in the 1960’s, you could expect to get back seven times more in benefits than you paid in Social Security taxes, and more if you were a low-income worker, because the system pays progressively, as long you lived to 80.

Even as late as the mid-1980s, workers at all income levels could at least expect to get back what you paid into the system.

You could have done just as well putting your money under the mattress – to equal the investment return of this government retirement system – the government does nothing well except collecting taxes and spending the money.


As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in Social Security taxes, though they didn’t do quite as well as their parents and grandparents.

Not anymore.


How can you get a better return on your Social Security taxes?

Live longer. Benefit estimates are based on life expectancy. For those turning 65 this year, Social Security expects women to live 20 more years and men to live 17.8 more.

But returns alone don’t fully explain the value of Social Security, which has features that aren’t available in typical private-sector retirement plans, said David Certner, legislative policy director for AARP.

Spouses can get benefits even if they never earned wages. Children can get benefits if they have a working parent who dies. People who are too disabled to work can get benefits for life.

These new benefits were added without sufficient revenue and the new benefits are currently depleting the original intent of Social Security, which was retirement.

The lie perpetrated by the Social Security Administration is that there is a trust fund that will last until 2033, at which time beneficiaries would still get 75% of what they project.

The Social Security trust fund, which never really existed because all the money was borrowed and spent each year for decades by Congress – only non-negotiable bonds remain – IOUs – pieces of paper that were created when the government spent the money off budget each year .

Younger beneficiaries are now realizing that they are not contributing to their retirement but to someone who is currently retired – a Ponzi scheme.

“The money that I put aside now, it’s not like that money is going to be waiting for me. That money is going toward someone else,” a recent college graduate said. “If I wanted Social Security 50 years from now, when I wanted to retire, I would have to hope that someone else is still working and putting money aside in their paychecks to pay for my Social Security at that point.”



  1. Adam Faber

    Ted wrote: “’The money that I put aside now, it’s not like that money is going to be waiting for me. That money is going toward someone else,’ a recent college graduate said. ‘If I wanted Social Security 50 years from now, when I wanted to retire, I would have to hope that someone else is still working and putting money aside in their paychecks to pay for my Social Security at that point.'”

    Duh. It didn’t take some unnamed “recent college graduate” to tell us that. For the entire history of Social Security, benefits have been paid almost entirely by using revenue from payroll taxes. That’s how OASDI was set up. Everybody already knows it’s a pay-as-you-go system.

    • Ted Biondo

      Adam – if you would have read the entire link the person was named – it wasn’t an unnamed source – “At 22, Mackenzie Millan of Los Angeles has even greater doubts about whether Social Security will be a good deal for her.”

      It was simply a young person that is just realizing that the money that is being taken from her is going for someone that’s retired today – and that the system will suck as far as she is concerned when she is rady to use it – typical Ponzi Scheme!

  2. But, that is not how Liberals presented it. In addition, the program has been expanded FAR beyond it’s original intent, as a SUPPLEMENT to your retirement income. It isn’t even a “pay as you go” system anymore. Every cent of Social Security revenue is spent on current recipients, and more is taken from the general fund to pay the rest.
    ObamaCare will be the same, if not worse. It was budgeted at less than a trillion dollars, but is now estimated to cost almost triple that figure. When it comes time to pay the piper, where does that money come from?

  3. Adam Faber

    Which is nothing new. That’s how OASDI works: it takes money from the current workforce and gives it to those who are retired. That is not what a Ponzi scheme is and your comparison is hyperbole, at best. A Ponzi scheme is a fraudulent investment scheme where the fact that there is no return-generating mechanism beyond just contributions from new entrants is obscured; OASDI has always been completely transparent that payouts are underwritten by incoming tax revenue and benefits can theoretically always be sustained by raising taxes on new participants or reducing promised payouts. Whether we like that or not, or whether you even know how OASDI works or what a Ponzi scheme actually is, OASDI is not a Ponzi scheme to to call it such is disingenuous.

  4. So, Ted, instead of continuing to bang this Ponzi scheme drum like you do, what do you propose to fix it? If, as snuss mentions, it’s become a supplement to retirement, then surely you would agree to a means test, in which you’d give up your SS benefits if your other retirement income was adequate. Would you? Perhaps we should treat it as pure insurance; we all pay into it but hope we don’t have to use it.

    I find it ridiculous that people with millions in dividend income or retirement income hit their “golden” years and still draw SS. SS was never meant to be a retirement plan; it was meant to be a safety net to keep the elderly off the street once they were not working or not able to work. Put an income limit on those who can draw and you’ll put billions back into it, ensuring that those who really need it can draw from it.

    I’m a younger worker and I don’t expect to use SS as a big part of my retirement income; I often refer to it as “golf money.” If it’s still there in its current form, I’ll use it as a supplement or as fun money but I don’t plan on it as my retirement income.

    • Ted Biondo

      Monkey – What you are proposing is another 12% tax on people and their companies for what – to give to people who don’t work or plan for their futures? Can I opt out -No – then Social Security would become a 12% tax on working people for a new welfare program! How much of the working preple’s income do you socialists want – 60 – 70%?

      If you want to give your money to someone else be my guest. I will give to Charity – you give your money to the government and I bet my donations will help more people than yours does.

  5. Monkey, it didn’t just BECOME a supplement, it always was one.

  6. your great

  7. Arianna

    I seem to recall recently in the RRStar that your oppenant for the county board race David Soll wrote about Social Security and how to fix it. While he appears to have been wrong to have called it a pre-paid system instead of the pay-as-you-go system it is, he did have a couple sound ideas:

    Remove the cap which is currently set at about $109k so that it reflects upon every penny of all income, earned and unearned

    Cut the tax in half.

    Not sure about lowering the eligiblilty age to 59 (as Mr. Soll also suggested) although 62 might work.

    I understand the cuurent GOP attacks upon Social Security, just like the post office is all about profit, greed, and hate of anything that looks like good government. In the case of Social Security, Wall Street is salavating at the prospect of getting its paws on that cash cow.

    Near as I can tell, your entire stance on anything that government does well seems to be something to fear and hate. This is your blog and you can do what you want with it, and bless you for that. But it might be time to consider changing the description of your blog from “fact based discussion” to “current talking points as seen on Fox, regurgitated here for everyones amuzment”

    • Ted Biondo

      Sorry Arianna I can’t comment on my elected positions on this blog and I certainly will not debate on the blog. Many more people than you few who comment on this blog, value what I post on this blog about local taxes, how to protest assessments and other local tax issues that save many dollars for them – it’s the main reason I do this blog to keep as much money from liberal bureaucrats that I can.

  8. Arianna

    My apologizes Ted. My intent was not to get you to debate your opponent. I was simply bringing up his column in contrast to your seeming attacks upon Social Security.

    To be sure the system needs fixing, but what you seem to be suggesting is that the system needs to go away or be taken out of the hands of the government and privatized.

    Also, calling Social Security a Ponzi scheme is disingenuous at best, grossly inaccurate at worse. I agree that SS should just be a supplement, but for many that is never going to be the case. What do we do with those people, let them starve? Suffer? Live on the streets?

    In the end it would be infinitely cheaper to pay a little now, than a lot more later once those people get sick, or get in legal trouble, or any number of things that happen to people with no money to spend. It is after all the price we need to pay for civilization.

    And in the end, we are all in this together. SS was created as something of a ‘thank you’ from all society to the individual for giving 40 to 50 years of his/her life. The disability part of SS is its own wonderful thing for what it does.

  9. Brian Opsahl

    Ted, You can give up those rotten Government checks anytime you want!! Just think what would have happened if Your GW Bush would have been allowed to privitize as he wanted to …Those checks you cash every month Ted would not be showing up anymore would they ? I think I remember you supporting that idea. Didn’t you ?

    • Ted Biondo

      Brian, with the money I and my company paid into the Social Security system, invested at 7-8%, which was the minimumyou could have obtained, over 45 years always paying the maximum Social Security tax, with private investments I would have had over $1M to $1.5M easy.

      Instead, I get $1400 a month = $16,800 annually from the great government retirement plan in the sky, actually from you young workers. So, 90 years from now, when I’m 158 years old I will break even with what I could have done investing the money myself and that’s even with the great recession and the recent stock market decline because it came back.

      I’m not going to return any money to the government that they forced me to pay so they could have another social system and now you want it to be an additional tax with ZERO return on our money. You need to spend 20 years in school, work 84 hour weeks like I did many times for a fixed salary, instead of trying to freeload off someone else’s earnings

      It’s just another tax and you guys want it mean tested because you know there is no money in the system and there will be nothing left for you – and I don’t blame you – do the darn math – it’s a lousy system just like most government programs are!

  10. JRM_CommonSense

    I paid into SS for over 35 years. I don’t care how much “extra” money I make through my other retirement investments, I will still take whatever SS gives me. Like my guns, “they will have to pry it from my cold, dead hands”

  11. Arianna sez: “What do we do with those people, let them starve? Suffer? Live on the streets? ”

    What do ALL OF US do, when our debt becomes so large, that the government goes bankrupt?
    Google “Weimar Republic” for a smaller-scale example.

  12. Like any gov’t social program, the original cost to the taxpayer has been dramatically increased (remember this with ObamaCare). Back in 1937, the original tax on Social Security was 1% (plus the employer match) on the first $3,000 of earnings for a total maximum tax of $60. Now the tax rate os 6.2% (plus the employer’s match) on the first $110,100 of income for a total tax of $13,652. Medicare/Medicaid and SocSec are slowing economic growth and when ObamaCare is piled on, it just gets worse.

    It’s time for Romney/Ryan to get this country back on track. Give the veep choice of Paul Ryan or Joe Biden, which one would you want formulating economic policy?

  13. Arianna

    As long as you are willing to acknowledge that it was Ronald Reagan who doubled the tax you are referring to, not Democrats. That is not hyperbole, it is not liberal lies. It is fact! –> http://www.ssa.gov/oact/progdata/taxRates.html

    If you look closely, Republicans were in the White House nearly every time the SS tax went up. So please stop acting as if the Republicans are the only ones good at economic policy.

    Also, Obama gave us a tax holiday on SS and Medicare of 2% which sounded good, but is a disaster waiting to happen… unless of course the cap is removed, which is a sound idea.

    I suspect under the rule of a Romney/Ryan White House you can kiss SS and Medicare goodbye for basically ever. The very fact that the GOP has been clamoring to privatize the system shows the system is not broke. I doubt very much Wall Street would want to get its hands on a system that is allegedly broke.

    So please, get your facts straight. Unless your point for posting is just to spew right-wing lies about one of the greatest government programs ever conceived of figuring you won’t be called out on them.

    • Ted Biondo

      Arianna – Obamacare, according to the newly released CBO estimates will remove $741B from Medicare in the next decade. Who is destroying Medicare?

      You are very correct about the SS holiday from Obama is a disaster waiting to happen and now many of the entitled ones are expecting it to continue bankrupting the system even faster!

      However, the system is broke. The so-called trust fund is IOUs in a West Virginia drawer. The money has been taken by Democrats and Republicans for decades and there is nothing left except “the full faith of the U.S. government”, whatever that is worth these days borrowing 40 cents on every dollar and owing 16T dollars!

      My facts are straight! Also you are lying about the Medi scare and social security – none of the Republicans or plans affect the current insured people but it does affect the younger people because it’s a Ponzi Scheme!

  14. The system is broke BECAUSE government runs it. Private health insurance companies reject a lesser percentage of claims than government-run Medicare does. Government has no incentive to be cost-effective or efficient, and is shown to INCREASE medical costs, while the private sector MUST spend less than it takes in, or it will go out of business.

  15. Arianna,

    “Republicans were in the White House nearly every time the SS tax went up”

    FDR – 1933 – 0% 1945 – 1%

    Truman 1949 – 1.0%, 1951 1.5%-

    JFK/LBJ 1961 – 3.0%, 1968 – 3.8%

    Carter – 1977 – 4.9% – 1980 – 5.08%

    Do you want to try again?

    Removing the cap is not a sound idea since SocSecurity was not designed to be a welfare system, but a minimal retirement, disability, and survivor benefit fund. Obama’s SocSec which he thought would be stimulative, failed just as much as “Make Work Pay” Credit in the Stimulus package.

    “I suspect under the rule of a Romney/Ryan White House you can kiss SS and Medicare goodbye for basically ever.” – You suspect wrong. Shut-off PMSNBC and read some real news. Try the WSJ, you might learn something about economics which you woefully are under-educated.

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