# Are Social Security & Medicare "Ponzi schemes" or not? **URL:** \ **Category:** Great Debates\ **Created:** [June 15, 2010, 2:57am UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249 "2010-06-15T02:57:18Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [June 15, 2010, 3:10pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/21 "2010-06-15T15:10:16Z")
I have no opinion on this subject. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 15, 2010, 3:15pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/22 "2010-06-15T15:15:08Z")
> [@A.Selene](#): > > Difficulty reading? I said that there were similarities, **not** that they were the same thing. Please. Avoiding the key similarity is misleading. Was that on purpose? > [@](#): > > Notice how I said “at current levels”? In case you missed it here it is again: Notice how you said “Ponzi scheme”? :rolleyes: > [@](#): > > To call it a Ponzi scheme is to highlight the similarities Except for _the only one that matters_. :rolleyes: > [@](#): > > the unsustainability of the program Wrong. As you know. > [@](#): > > Don’t know why you came out with guns-a-blazing. Take a deep breath. Because you are being misleading. This board is about fighting ignorance, not spreading it. Now try a little more honesty - it goes a long way. Goes for you too, **Smashy** - unless you were just being ironic. ---
**Author:** ![Steve\_MB](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/steve_mb/32/5339_2.png) [@Steve\_MB](https://boards.straightdope.com/u/Steve_MB)\ **Post date:** [June 15, 2010, 3:30pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/23 "2010-06-15T15:30:51Z")
> [@SenorBeef](#): > > Is it meaningfully an insurance program in any way? Under what situations will it pay off or fail to pay off? What risk are people looking to alleviate or manage by using it? > > It doesn’t work like any other sort of insurance. Don’t tell me; tell the politicians who sell the program on that basis. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [June 15, 2010, 3:32pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/24 "2010-06-15T15:32:11Z")
> [@Steve\_MB](#): > > Don’t tell me; tell the politicians who sell the program on that basis. I know, but it’s relevant to my point. If it’s sold as some sort of retirement account then it’s relatively more fraudulent and shares more in common with a ponzi scheme. ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [June 15, 2010, 3:45pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/25 "2010-06-15T15:45:59Z")
I think this question is silly: A Ponzi scheme is intended BY DESIGN to defraud investors. Social Security may be bad policy, but it is not intended BY DESIGN to defraud. ---
**Author:** ![A.Selene](https://avatars.discourse-cdn.com/v4/letter/a/3ec8ea/32.png) [@A.Selene](https://boards.straightdope.com/u/A.Selene)\ **Post date:** [June 15, 2010, 4:13pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/26 "2010-06-15T16:13:19Z")
> [@ElvisL1ves](#): > > Please. Avoiding the key similarity is misleading. Was that on purpose? Are you being deliberately obtuse? I addressed the definition in Wikipedia, which the OP linked to, and was pointing out the similarities in said definition. In addition, I have provided a cite showing that SS is currently failing just like a Ponzi scheme does: there is more in payouts then revenue this year, and more people paying in is a necessity. > [@](#): > > Notice how you said “Ponzi scheme”? :rolleyes: > > Except for _the only one that matters_. :rolleyes: Others not suffering from a severe case of eyerolls see the other similarities and their importance, and recognize that SS is currently failing. Not doomed to fail, it could be fixed, but it is currently failing, just as a Ponzi scheme would. > [@](#): > > Wrong. As you know. Wrong. As I have cited, SS is in the red **this year**. It is currently not sustainable. I don’t care how it might be, or should be, or could be. The two similarities between SS and a Ponzi scheme I mentioned earlier stand: 1. The money is paid by subsequent investors, rather than from any actual profit earned. 2. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. Yes, it hopefully will be fixed. But this has been a looming problem for years, and it’s only going to get worse. The population is aging and more are claiming benefits. As it is designed now, it is failing. > [@](#): > > Because you are being misleading. This board is about fighting ignorance, not spreading it. Now try a little more honesty - it goes a long way. I’ve been honest. I suggest you try a little less hyperbole and a little more reading comprehension. It will help your postings immeasurably. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 15, 2010, 4:35pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/27 "2010-06-15T16:35:14Z")
> [@What\_the](#): > > To the extent they are “sold” as something other than they are then I’d say yes. > > Can you say government “lock box”? Please show me an official government statement about Social Security which sells it as something other than what it is. I suspect “lockbox” appears no where in any official description of the program. Now, I have no doubt that cretins who believe whatever they hear on Fox News are being told that Social Security is being sold as something other than what it is, but that is the fault of the lying liars, not the program. No Ponzi scheme has run for almost 80 years, and no Ponzi scheme has its books open to the public. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 15, 2010, 4:39pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/28 "2010-06-15T16:39:18Z")
> [@ElvisL1ves](#): > > The only interesting part of this discussion, to me, is why so many insist on affixing the name of a prominent fraud scheme to a transfer payments program. Is that just a sideways attempt to discredit the US’ most notable example of government acting to improve or society, born of a visceral attitude that “government is bad and must be strangled in the bathtub”, since a straightforward and honest discrediting is not possible? It’s certainly acceptable to complain that the system is unfair, or bad policy, or to simply begrudge the money, but to call it a Ponzi scheme is worse than ignorant. That’s easy - pure demagoguery of the same order as calling Obama a Socialist. Social Security is kryptonite to radical conservatives - a widely liked government program, efficiently run, and successful for almost 80 years. Note how in this thread one year of negative cash flow - not surprising during the worst recession in 80 years - is reason to say Social Security is failing. It just goes to show the bankruptcy of conservative economic thought. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [June 15, 2010, 4:41pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/29 "2010-06-15T16:41:00Z")
> [@ElvisL1ves](#): > > Goes for you too, **Smashy** - unless you were just being ironic. 😃 The similarities to a Ponzi scheme are close enough that the [liberal weenies](http://www.huffingtonpost.com/damien-hoffman/outrageous-but-legal-soci_b_449538.html)and the [right wing nut jobs](http://www.socialsecurity.org/daily/05-11-99.html) use the term. Slate actually does a good job of detailing the 3 problems > [@](#): > > First, with baby boomers in their peak earning years, Social Security currently brings in more revenue than it pays out in benefits. The surplus is invested in government bonds. These are special government bonds. Statistics about the federal deficit–and both parties’ promises to balance the budget over the next few years–count the Social Security surplus as revenue, and don’t count these bonds as debt. But within a couple of decades, the annual surplus will evaporate, and Social Security will have to start drawing on this nest egg. For the government to honor these bonds will require huge borrowing (essentially replacing these IOUs to itself with real IOUs to private individuals) or a huge tax increase. > > The second problem is that even if the government honors these bonds in full–principal and interest–a point will be reached, well into the next century, when the Social Security “trust fund” is exhausted, and not enough money is coming in to pay the currently promised benefits. > > The third problem is that even if today’s benefit promises can somehow be kept, Social Security represents a much worse return on “investment” (taxes paid in) for future retirees than past and present retirees have enjoyed. This is partly because some minor benefit reductions are scheduled already (raising the retirement age slightly and gradually). It is mainly because younger people will have paid much higher Social Security taxes throughout their working lives. The average return on Gen-Xers’ Social Security investments will almost certainly be worse than they could have done by investing in the stock market. Note that this is dated; we’ve already gone through our annual surplus, which wasn’t supposed to happen until 2016. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 15, 2010, 4:41pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/30 "2010-06-15T16:41:50Z")
> [@Voyager](#): > > No Ponzi scheme has run for almost 80 years Check Google News under “pyramid scheme” and you’ll be disabused of that notion rather quickly. An offer of free money will always have its takers among the most-basically-innumerate of the population, who will always be numerous. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 15, 2010, 4:46pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/31 "2010-06-15T16:46:11Z")
> [@SenorBeef](#): > > I know, but it’s relevant to my point. If it’s sold as some sort of retirement account then it’s relatively more fraudulent and shares more in common with a ponzi scheme. Now I don’t know if you people are calling it insurance, and fraudulent, or a retirement scheme, and fraudulent. It clearly has things common with both. It is insurance in the sense that you are not guaranteed to get exactly the money you put in, plus interest. You can get more if you live a long time, or you can get less if you choose to die at 66. And it is clearly a retirement plan in that it does not cut in until the time most people retire. And in neither case is it the slightest bit fraudulent, since everything about it is open for examination. The only thing fraudulent connected with Social Security are the claims that it is like a Ponzi Scheme. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 15, 2010, 4:47pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/32 "2010-06-15T16:47:22Z")
> [@ElvisL1ves](#): > > Check Google News under “pyramid scheme” and you’ll be disabused of that notion rather quickly. An offer of free money will always have its takers among the most-basically-innumerate of the population, who will always be numerous. Oh, Ponzi schemes have been around for a lot longer than 80 years, but no single one has lasted that long - or can by its very nature. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 15, 2010, 4:49pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/33 "2010-06-15T16:49:30Z")
> [@A.Selene](#): > > Are you being deliberately obtuse? No, just pointing out that you’re strenuously ignoring the key characteristic. > [@](#): > > I addressed the definition in Wikipedia Except for the only part that matters. > [@](#): > > In addition, I have provided a cite showing that SS is currently failing just like a Ponzi scheme does: there is more in payouts then revenue this year, and more people paying in is a necessity. Why do you insist on using a term that means fraudulence? Please. More people paying in is NOT a necessity; there are a number of other ways to balance the cash flow, as _you have already been told_. > [@](#): > > Wrong. As I have cited, SS is in the red **this year**. It is currently not sustainable. Perhaps you need to learn the meaning of sustainability. Or even repairability. _Neither of which terms applies to a Ponzi scheme_. :rolleyes: > [@](#): > > The two similarities between SS and a Ponzi scheme I mentioned earlier stand: > > 1. The money is paid by subsequent investors, rather than from any actual profit earned. SS is not an investment. That is not a similarity. > [@](#): > > 1. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. A Ponzi scheme does that by requiring an exponential increase in the number of investors, not in the amount each pays in. Also not a similarity. So you’re fundamentally wrong even on the side details that are the basis of your entire position. That is nothing to be proud of, and no basis for you to claim you haven’t been understood. Your position is understood better than you understand it yourself. > [@](#): > > I’ve been honest. No. You are continuing to spread ignorance even after it has been fixed for you. Why is that? ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 15, 2010, 4:50pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/34 "2010-06-15T16:50:51Z")
> [@Voyager](#): > > Oh, Ponzi schemes have been around for a lot longer than 80 years, but no single one has lasted that long - or can by its very nature. Okay, I see what you meant. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [June 15, 2010, 4:53pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/35 "2010-06-15T16:53:55Z")
> [@Voyager](#): > > Please show me an official government statement about Social Security which sells it as something other than what it is. One candidate could be the “I” in FICA - as run, it little resembles any real form of insurance. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [June 15, 2010, 5:01pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/36 "2010-06-15T17:01:56Z")
FICA includes Medicare, which _is_ insurance. ---
**Author:** ![yorick73](https://avatars.discourse-cdn.com/v4/letter/y/b5a626/32.png) [@yorick73](https://boards.straightdope.com/u/yorick73)\ **Post date:** [June 15, 2010, 5:05pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/37 "2010-06-15T17:05:07Z")
> [@septimus](#): > > 😃 😃 :smack: > > Which is iit, Mr. Bandit? If the taxpayer isn’t paying enough to fund his Grandma’s SS income, he’s not exactly getting bilked, is he? To use your logic, the less he pays the more he’s being bilked. But then I guess “logic” doesn’t enter into your thinking, does it? Certainly you can understand this point. Any excess in SS money not paid to retirees is spent in the general fund. So, the government can both pay grandma AND bilk the taxpayer at the same time. That’s the beauty of government accounting. Either grandma should get a bigger check each month or any excess funds should have been set aside for future benefits. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [June 15, 2010, 5:06pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/38 "2010-06-15T17:06:54Z")
> [@ElvisL1ves](#): > > Perhaps you need to learn the meaning of sustainability. Or even repairability. _Neither of which terms applies to a Ponzi scheme_. But he said “not sustainable”, which definitely does apply to a Ponzi scheme. > [@](#): > > SS is not an investment. That is not a similarity. This appears to be a quibble. For “investor” substitute whatever term you feel is best for those who contribute money to SS. > [@](#): > > A Ponzi scheme does that by requiring an exponential increase in the number of investors, not in the amount each pays in. Where did he say that the amount each pays in must necessarily increase? Elvis, you appear to be trying to misunderstand what’s being said. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 15, 2010, 5:07pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/39 "2010-06-15T17:07:14Z")
> [@A.Selene](#): > > Are you being deliberately obtuse? I addressed the definition in Wikipedia, which the OP linked to, and was pointing out the similarities in said definition. In addition, I have provided a cite showing that SS is currently failing just like a Ponzi scheme does: there is more in payouts then revenue this year, and more people paying in is a necessity. Odd that you have been neglecting the most significant difference - fraud. Ponzi schemes do not reveal the details of their operation - the Madoff one, for instance. Social Security does. Currently failing? Only in the sense that a business with one year of loss during a recession is teetering on the edge of bankruptcy, even though it has huge cash reserves. In other words, not much. Demographics will require an adjustment in payments and benefits which is already underway - take a look at your statement and see the incentives to retire later. And the situation is far better than it was when Reagan was president - when he charted the commission that fixed Social Security. Now, Social Security doesn’t offer a huge return on investment, so that is not a similarity. It does offer a steady return - but so do annuities. Are they like Ponzi schemes also? Ponzi schemes require ever increasing participation or else they crash - Social Security has near 100% participation by law and has for decades. And I also would be surprised to see a Ponzi scheme with a cash reserve to pay off future claims. If you are selective enough you can find similarities between almost any two things. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [June 15, 2010, 5:09pm UTC](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249/40 "2010-06-15T17:09:39Z")
> [@ElvisL1ves](#): > > FICA includes Medicare, which _is_ insurance. But FICA (in the form of Social Security) was in existence long before Medicare. [Previous page](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249.md?page=1) [Next page](https://boards.straightdope.com/t/are-social-security-medicare-ponzi-schemes-or-not/543249.md?page=3)