Social Insecurity
Social Security is self-abolishing. It is was economists call a Ponzi Scheme or Pyramid Scheme, or demolitions guys call a ticking time bomb.
What is a Ponzi Scheme? Ponzi was a confidence trickster who realized he could pay off investors their principal and interest by attracting a second group of investors and using the money loaned from them to pay the first group; and then a third group of investors would pay the second group; and a fourth group would pay the third; and the scheme could work indefinitely without any good or service of any value ever being produced or sold, PROVIDED each group of investors is larger than the group before them, and provided there is no upper limit to the number of groups. You borrow one dollar from one guy promising to pay him back two: you borrow two dollars from two men promising to pay them back four; and four dollars from four guys promising them to pay back eight; in only a few iterations, you are borrowing from the entire population of the earth.
The problem with a Ponzi Scheme is that it cannot last forever.
It cannot even last past the moment the investors realize their debts are covered by nothing but promissory notes with no stock, no goods or services of value, no gold, nothing behind them; because at that moment all investors sell as quickly as possible, even at a loss, in order to not be the debtor left standing when the music for musical chairs stops.
Not to sound like a Marxist, but by its own logic, Social Security has to destroy itself. Social Security is not, as it was originally advertised to be, a system of forced savings against retirement. The payments go into the general fund and the liabilities come out of the general fund. Your Social Security taxes from your paycheck merely go to whatever current projects of the government stand in need of funding, payola to Democrat contributors, the study of Alaska Moose mating habits, the National Hydrogen Reserve, or welfare payments to ADM, supermarket to the world. When Gramps retires, his liabilities are paid out of that year’s tax receipts, or out of the national debt.
This can be kept up for as long as the people paying-in work until retirement age, and die quickly thereafter, and the next generation is larger in number and works longer and dies even more quickly, or all three. In other words, it can work during and only during a baby boom, and, at that, only when the economy is humming, because then you can use the new generation of incoming chumps to pay off the older generation.
If the number of babies being born drops, or contraception or abortion becomes popular, or if the divorce rate lowers the population rate (because the number of stable non-broken households in which an average woman can raise many children over her whole life is ever lower) then the Ponzi scheme is up.
Because Social Security is coercive and universal, no investor can divest himself of the worthless Ponzi-style assets. The scheme can limp along for a while by driving up ever greater amounts of national debt, and then only for so long as banks are willing to accept worthless promises to redeem the IOU’s being printed by the government press.
There are several direction the boiler explosion can go off, either via reputation of the debt, inflation, hyperinflation, and so on. Each different type of boiler explosion will betray one group of debtors or another, either screwing over the retirees, or the banks holding promissory notes, or creditors whose debt is eaten by inflation, or someone else. That is not something economics can predict, since it depends on the strength and ruthlessness of each political faction trying to force the bankruptcy onto the constituency of another faction. Since the unborn are the weakest constituency of all — they do not yet exist, much less vote — shoving the worthless debts onto the tab to be paid by future generations is the best practical solution, particularly for politicians near retirement age themselves.
It is a massive fraud, obviously immoral, massively evil, notorious, public, known to all men who care to look at the facts.
About John C Wright
John C. Wright is a practicing philosopher, a retired attorney, newspaperman, and newspaper editor, and a published author of science fiction. Once a Houyhnhnm, he was expelled from the august ranks of purely rational beings when he fell in love; but retains an honorary title.
