Most people have heard of a Ponzi Scheme.
Titled from Charles Ponzi's investment fraud in the 1920s. A Ponzi Scheme is a fraud that involves
paying existing investors in a nonexistent enterprise with the funds collected
from new investors. They work by
promising high returns with low risk to lure in investors. Eventually the scheme will collapse by not
bringing in enough money from new investors to pay those pulling money out.
While Social Security is not an investment and every working citizen is
forced to contribute, whether they want to or not, it very mush is
Ponzi-Like. What most people don't
understand, is that the money they are paying in today, is not going into some
special lockbox or account for them in the future. Today's contributions are paying for today's
retiree distributions. This is where
Social Security acts like a Ponzi scheme.
With people living longer in retirement and generational population
changes, if there are few workers paying into the system than retirees pulling
from the system, then we could have a Ponzi-like collapse.
According to the 2020 CBO (Congressional Budget Office), the trust fund for
Social Security will run short of money in 2031. There have been some small changes over the
years on how Social Security is taxed that have help delayed the sky from
falling. But without some sweeping
changes, we have a problem. In a Ponzi
scheme, you have to keep getting new investors.
With Social Security, we need to keep getting more workers. And with the average family birthrate
shrinking, there just won't be enough workers to cover the original promise. It is too late to set up private social
security accounts, because current retirees still need to be paid. So benefits will have to get watered down
every decade, until population demographics change.
Since what you paid into the system, is not your specific dollars, when you
pass away your heirs do not get those dollars.
So that makes Social Security very discriminatory. Black Americans life expectancy is five years
less than White Americans. This means
they are not likely to get back as much in benefits. Asian Americans, expectancy is eleven years
more and Hispanic Americans are seven years more than African Americans.
Social Security may not technically be a Ponzi Scheme. But it sure isn't a fair system.
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