Thursday, January 8, 2009

Social Security, a Ponzi Scheme?

Someone please explain: Why is the Social Security system in America NOT a Ponzi Scheme?

Social Security as explained by Wikipedia:
The Act is formally cited as the Social Security Act, ch. 531, 49 Stat. 620, now codified as 42 U.S.C. ch.7. The Act provided benefits to retirees and the unemployed, and a lump-sum benefit at death. Payments to current retirees were (and continue to be) financed by a payroll tax on current workers' wages, half directly as a payroll tax and half paid by the employer.
Ponzi Scheme as explained by Wikipeida:
A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit.
Investor? Retiree? Worker? What's the difference?

An unrelated note to ponder (also from Wikipedia):
By dollars paid, the U.S. Social Security program is the largest government program in the world and the single greatest expenditure in the federal budget, with 20.9% for social security and 20.4% for Medicare/Medicaid, compared to 20.1% for military expenditure. [5] Social Security is currently the largest social insurance program in the U.S., constituting 37% of government expenditure and 7% of the gross domestic product[6]

1 comment:

  1. Go to for this post and read the interesting comment I received.


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