Can Social Security Be Fixed? Ja, Sure, You Betcha.

Charles Ponzi

Today, we're gonna learn about Ponzi schemes, a term bandied about by lots of people, few of whom actually knows that that is. Most people ascribe it to Bernie Madoff who made off like a bandit using a Ponzi scheme, but that's a different history lesson.  This one is about Social Security.

By definition, a Ponzi scheme, named for Charles Ponzi, is:

a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors. (from Oxford Languages )

According to the U.S. Securities and Exchange Commission, Ponzi schemes share a set of red flags:

1. High investment returns with little or no risk
2. Overly consistent returns.
3. Unregistered investments.
4. Unlicensed sellers.
5. Secretive or complex strategies.
6. Issues with paperwork.
7. Difficulty receiving payments

The typical Ponzi scheme requires an initial investment, usually a significant amount, then promises above average earnings. The purveyors of the scheme are cloudy in their information about the investments and its structure. Often, terms like secret strategy or off-shore investments are used to keep the inexperienced investor from asking more questions, thereby playing to their naïveté. 

In the Presidential Debate held on September 7th, 2011, then Texas Governor Rick Perry stated:

“It [Social Security] is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you're paying into a program that's going to be there. Anybody that's for the status quo with Social Security today is involved with a monstrous lie to our kids, and it's not right.”  

Howard Gleckman of The Urban-Brookings Tax Policy Center immediately took issue with that. The next day, he published Rick Perry's Social Security Myth through TPC, writing:

Here is the real story of Social Security in one sentence: It is underfunded and badly needs to be modernized but even if Washington does nothing, young people will receive three-quarters of their promised benefits. And last I looked, three-quarters of promised benefits falls somewhat short of a “monstrous lie.” Don’t believe me? Just ask the bipartisan Social Security Trustees—even those who served during George W. Bush’s administration. Here is a link to the trustees report from 2007. This year's isn't much different.

Granted, a fair amount of time has passed since then, but what Gleckman says remains a pretty accurate assessment of Social Security.

Borrowing from Social Security began under George W Bush, but whenever it has happened, it has been a pretty transparent action. From the Social Security Agency history page:

Inter-Fund Borrowing Among the Trust Funds 

In the early 1980s the Social Security Trust Funds had developed short-term cash flow problems, as a result of the adverse performance of the economy during the "stagflation" of the 1970s. As a stop-gap measure, Congress passed legislation in 1981 to permit inter-fund borrowing among the three Trust Funds (the Old-Age and Survivors Trust Fund; the Disability Trust Fund; and the Medicare Trust Fund). This authority was to lapse at the end of 1982. However, the 1983 Amendments extended the inter-fund borrowing authority to the end of 1987. Under the law as amended, all loans would have to be repaid by the end of 1989. 

The inter-fund loans were required to be repaid with an amount of interest equal to that which the loaning fund would have earned had it had use of the money during this time. In other words, the borrowing fund was required to make the loaning fund whole at the end of the process.

This authority was used twice, once in November 1982 and once in December 1982. The total amount borrowed was $17.5 billion. The Old-Age and Survivors Trust Fund borrowed the money-$5.1 billion from the Disability Trust Fund and $12.4 billion from the Medicare Trust Fund. Repayment began in 1985 and the debt to the Medicare Trust Fund was paid off by January 1986 and the debt to the Disability Trust Fund was liquidated in April 1986.                  

                                        Larry DeWitt / SSA Historian's Office/12/17/98

Again, an older source, but the process has remained stable and pretty much unchanged. 

I also went looking for reliable fact-checking sites. League of Women Voters of Copper County, Michigan has a really good analysis with a pretty comprehensive guide to those websites providing fact-checking services. They're located in Houghton, a town near and dear to our hearts, I will be using PolitiFact and FactCheck.org for today's episode. Both of are highly rated by International Fact Checking Network (IFCN) and are considered dead center for bias. 

Okay...back to Social Security.

Harkening back to the original allegations made during 2011, FactCheck actually delved directly into the question when Ted Cruz called Social Security a Ponzi scheme:

FactCheck.org, Sept. 8, 2011: The [Social Security] system doesn’t meet the common definition of a “Ponzi,” which is a criminal fraud, relying on deception. The Securities and Exchange Commission, for example, says a Ponzi is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Ponzi schemes draw their name from Charles Ponzi, who in the 1920s promised his victims that he could provide a 50 percent return in 90 days by putting their money into a speculation scheme involving postage stamps. In reality, Ponzi simply paid early “investors” big returns with the money eagerly offered by others who came later — pocketing millions for himself — until the bubble inevitably collapsed. Bernard Madoff’s more recent fraud — while much larger — was another example of a Ponzi scheme. Madoff and Ponzi lied to their victims about where their money was going, while Social Security’s finances — while troubled — are an open book.

In an interview on February 28th, 2025, Elon Musk told Joe Rogan:

 Social Security is the biggest Ponzi scheme of all time.

POLITIFACT patiently explains why not:

The Social Security benefits program has crucial differences from a Ponzi scheme, which is an illegal money-making fraud. A Ponzi scheme is based on signing up more and more investors to pay off earlier members, until that becomes impossible. 

Unlike a Ponzi scheme, Social Security is transparent, has multiple layers of oversight and doesn’t promise unrealistic returns. And if there isn’t enough money to pay benefits, mechanisms exist to make it financially sustainable.

 sources: 

• Social Security Fact Sheet view 3/19/25
• Social Security Trust Fund -2024

Duh.

Is Social Security still underfunded? Yes,but that does not make it a Ponzi scheme. Are there ways to fix it? Yes. Removing the annual earnings cap would be a huge step forward. Right now, the cap is set at $176,100 which is ridiculously low. The cap should be removed altogether or set at a more reasonable number....like  $5,000,000. That would do a great deal to offset the reckless borrowing from Social Security. The pundits predict Social Security will be depleted by 2035. What this actually means is that SSA would be able to pay a percentage of the expected benefit. 

Besides, if Social Security really was a Ponzi scheme, you wouldn't know about it because being a BIG secret is sorta a main thing if you wanna have a Ponzi scheme. It's stupid, I know. 

To be sure, Social Security needs a lot of things, but shutting down offices, removing online access, cutting the number of workers answering phones is NOT the answer. Implementing insane changes like the new ID business is nothing more than a waste of taxpayer money at a time when we can least afford it. The horror stories from rural areas are beginning to come in, even for simple death benefit adjustment questions that cannot be answered by those picking up the phone. This is not re-organization; this is wholesale demolition.

Since  it began, people have depended on Social Security to provide for retirement. We pay in, we get it back. Damn near every civilized society has some form of national pension. Are these all Ponzi schemes, too?

Meanwhile, back in the olden days.....

Miss Pease, my 7th grade Cit-Ed (citizenship education for those of you who did not grow up in the rarified land of The Board of Regents) told us that the purpose of government was to provide for the good, welfare, and safety of its citizens. Whether it was a clan, a tribe, a village, or a city, the powers that ran it had a civic responsibility for its residents/citizens. Otherwise, what would be the point? Any anthropologist/sociologist will tell you the same thing. The bigger the banding together, the greater the need for a social contract. That's how society is formed. It's not always fair, or equitable, but a leader cannot remain a leader if he/she is not protecting the people and their way of life. Simple, basic, social contracts. 

What Elon Muskrat and his little elves are doing is shredding that basic social contract with the blessings of President Felon. 

As the other departments and programs are cut and suspended, other sectors of the population are beginning to understand the magnitude of the impact. On the news last night, a potato farmer whose main markets are Mexico and Canada is watching those markets being yanked out from under his farm even through he voted for the felon.. His voice was so full of pain and disbelief when he said: 

I knew people were gonna get screwed, but I didn't think he was gonna screw us. We all voted for him.

Long before election day, I wondered how people could go into the voting booth and vote against their own self-interest. I still don't understand that. I guess they figured even though he screwed every employee he ever had, they were gonna be different, that he wouldn't screw them. But he did. And  between him and the Muskrat, they've given kleptocracy a bad name.

Clearly these guys are too busy lining their pockets to understand guys like them usually end up at the end of a rope. By making the U.S. more vulnerable to outside forces, they are not endearing themselves to others. They have not learned the lessons of war and governance. Perhaps a class on French history would remind them of what happens to despots, benevolent or otherwise. 

I just don't know if we can afford to wait around for their collapse. It will happen. It has happened to every other self-aggrandizing leader since Julius Caesar. The list is endless...and they will just be two more names at the end. It won't end well for either of them.

*********************

Before I sign off, I want to take a moment to write about my friend Elissa. She left us last week. I actually knew her mom before I knew her. See, she was a Teener...a member of the family that had the only decent theatrical costume company in town. I met her when our kids were little and we were day school parents and volunteering for every organization in town. She had impeccable style. She always looked outrageously terrific. Elissa was one of the kindest people I ever knew. We laughed a lot. We would email each other late into the night...because talking might wake sleeping husbands. And when I could not stand up on my own, she told me, "Lean on me. We can be upright together." She did not want a funeral, she wanted a celebration of life. She asked us to wear colorful things and to wear bright red lipstick. I did. 

Her memory is forever a blessing for all of us lucky enough to have known her.  I will miss her forever. 

The Wifely Person's Tip o'the Week

Choose  to be happy.