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Rick Perry’s comments over the weekend that Social Security is a “Ponzi scheme” and a “monstrous lie” have drawn predictable fire.
It seems like it’s taking the media awhile to recogize that Rick Perry employs a verbal art called "hyperbole" rather comfortably.
The funny thing about the ordeal is that the Ponzi scheme expression isn’t really all that hyperbolic, at least not when you pay attention to what Perry said:
It is a Ponzi scheme for these young people. The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie…It is a monstrous lie on this generation, and we can’t do that to them.
First of all, aside from the point about the hyperbolic arts, we all ought to thank a candidate who talks about the inherent unfairness of Social Security for the young, rather than the usual approach of reassuring seniors that everything will be okay. On this front, Perry's being bold and accurate.
And with regard to the the Ponzi analogy, he is certainly speaking hyperbolically (a "monstrous lie" is a bit over the top), but his point isn’t all that far off the mark. You know those statements you get from the Social Security Administration that make it look like you’re paying into an account? They aren’t too different than the statements an “investor” into a Ponzi scheme gets who thinks his money is truly invested when it’s being used to fund the returns for some earlier investor.
The Wikipedia page on Ponzi schemes details three ways the schemes can break down. Here’s the second one:
Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme will begin to collapse under its own weight as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.
We could tweak this a bit, and it would sound like Wikipedia entry on Social Security in a couple of decades:
Since Social Security the scheme requires a continual stream of investments of worker’s payroll taxes to fund benefits for seniors higher returns, once investment tax revenue slows down as there are fewer workers per retiree, the scheme program will begin to collapse under its own weight as the government promoter starts having problems paying the promised benefits returns (the higher the benefits returns, the greater the risk of the program Ponzi scheme collapsing). Such liquidity crises often trigger panics (and sometimes riots), as more people start asking for their where the money they thought they were paying into the program has gone.
I'm pretty sure most non-hyperbolic, sober-minded assessments of Social Security's underlying problems sound something like that.