I'm sorry, sweetheart.

Todd doesn't like it when I'm brutally honest. Then again, we're all in a brutal business:

"I always get a little ticked when people refer to social security as a ponzi scheme... The young taking care of the old sounds a lot better."

Of course it sounds better, but the problem is that that's exactly what the design of SocSec is, its intentions notwithstanding.

In a proper Ponzi, those in early get paid by money coming in from those who join later, or as the SEC says, "...the Ponzi scheme continues to work on the 'rob-Peter-to-pay-Paul' principle, as money from new investors is used to pay off earlier investors..." SocSec says, "Social Security is largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees."

The Ponzi also promises that the money is at work, generating returns, but "Profits to investors are not created by the success of the underlying business venture but instead are derived ... from the capital contributions of other investors." SocSec says "Money not needed to pay today's benefits is invested in special-issue Treasury bonds," which just means the government has spent the money and will tax others in the future to pay the interest.

The reason the Ponzi collapses is because it is actuarially unsound: at some point, the money coming in is not enough to support returns to the people who have already paid in. It is a self-contained financial bubble, and in SocSec, the movement of the bubble can be clearly seen. In 1950, 16 workers paid in for what was paid out to each retiree. Today that number is 3.3. It will eventually be 2-1, then 1-1. Benefits will be cut long before then. That point is the breaking of the promise, the popping of the bubble, the collapse of the pyramid. Or as SocSec itself says, "Social Security is not sustainable over the long term at present benefit and tax rates without large infusions of additional revenue. There will be a massive and growing shortfall..." It is pictured above.

Now in all fairness, since the last time Social Security was 'saved' (1986?) it has claimed to be a "pay as you go" system, which is far more honest than calling it "insurance" because it's not remotely actuarially sound. But the major differences between this ponzi and a 'normal' one are that the government has the ability to change benefit outlays by law, and the government's ponzi is does not add members by persuasion but by compulsion. They will use all available force to keep it from collapsing if they can help it. The only question is whether they can help it.

An 'attaboy' (or 'attagirl,' considering my surprisingly majority-female readership) to the first person to name the movie reference. I'd offer a silver dime, but Toxic Granny would pummel me.