And one more question for Governor Perry:
The fix for a Ponzi Scheme is for administrators to take money from the scheme’s “net winners” and give it to the “net losers.” That is, if you were one of the first people into the scheme, and made out well before it collapsed, you must pay some of those ill-gotten gains to the people who came after you in the scheme and weren’t so lucky.
That’s true, even though some, perhaps all, of these “net winners” are unwitting victims of the fraud, too. To learn more about this principle, read Diana B. Henriques’s The Wizard of Lies, about the continuing clean-up after Bernie Madoff’s scheme.
It just so happens that the “net winners” from Social Security are today’s retirees — people who paid into the system when payroll tax rates were much lower, and thus are making out well in their dotage. As Brookings’s Henry J. Aaron notes:
all of the projected funding gap facing the Social Security Trust Funds — and more — results from the payment of benefits to people who qualified for benefits early in the life of the program. How to service the debt incurred because of payments made to people, most of whom are dead or retired, goes to the heart of the way the financing of Social Security is framed in the public mind.
Aaron cites “perhaps the most dramatic example” of these net winners, Ida Mae Fuller, who paid $49.50 into the system and got “back” $22,888.92.
So, does Governor Perry think that some independent administrator should take money from Social Security’s current “net winners” or their estates and use those funds to bulk up the Social Security “trust fund,” so that net losers don’t lose as much?
If not, why not?
And if not, why use the Ponzi analogy (an already tired one even before Perry got to it)? Since the Ponzi remedy can’t be a solution in this case, does using the term do anything to advance the cause of fixing the program?
— Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.