Government Ponzi Scheme

When I was 17 and taking a civics class in high school, my teacher - Mr. Lindfors - asked the class how many of us thought Social Security would still be solvent when we retired.  The majority didn't think so.  Imagine, 30 young and dumb teenagers in 1984 had concluded that Social Security wasn't going to be around in 2036.  And the current numbers show that to be a perfectly rational assumption.  If those teenagers from 1984 get Social Security, it will be nowhere near as generous as it has been for current and past beneficiaries.

The first person to get a Social Security check was Ida May Fuller.  Ida retired in 1940 after having paid $24.75 into her 'lockbox.'  Her first benefit check was for $22.54, more than 90% of her contributions!  Then she lived to the ripe old age of 100, collecting $22,888.92, more than 900 times the amount she had paid into the system.  This was perhaps the greatest investment in the history of investments.  I can think of nothing else that had that kind of return.  Of course, Ida was an early investor in a Ponzi scheme.  Early investors do quite well.

Prior to Social Security and even after it for at least a generation, couples had children in order to support them in their old age.  But as Social Security seeped into the collective consciousness, many figured out that the government would force other people's children to take care of them in their old age.  Oh, it isn't sold that way.  "You paid into the system and now that you're old you get to take out."  Like Ida?  No, the returns are no longer quite that impressive but with longer life expectancy, people are taking out all they paid and then some.  This is possible because of the Baby Boomers, a huge cohort from the post-war years but, as noted, fertility rates have since dropped.  No one expects their kids to take care of them anymore.

Social Security is currently paying out more than it collects.  This means that rather than being a pool of money that Congress can spend (while slipping an IOU in a cabinet), it is now required to allocate current revenues to pay liabilities.  It will get worse as more Baby Boomers retire.  The same thing has happened in Europe.  They stopped having children and the governments responded by allowing more immigration (sound familiar) to make up the coming shortfall.  And it is still going to pot.

I freely admit that I was pretty dumb as a teenager but somehow on this issue, my classmates and I were wiser than we had any right to be.  In fact, we weren't any wiser, we were just honest.  The coming collapse of Social Security, Medicare, Obamacare, and all the other unfunded entitlements is the most predictable crisis in American history.  If government had to follow the same rules they impose on business, all of the listed programs would be subject to criminal prosecution.