I’m not a big fan of Rick Perry, but I appreciate his identification of Social Security as a “Ponzi scheme.” However, as economist Richard Salsman points out, it is actually worse:
The facts about Social Security are these. Yes, it’s a Ponzi scheme, thus criminally fraudulent (as I’ll explain), but even worse, because it coerces us to be a part of it. Since the scheme began in 1935 the full force of the U.S. government has compelled a growing portion of citizens to suffer by it, such that we all do so by now.
Salsman notes that, in a Ponzi scheme, an investor always has the option to get out. He remains free to act on his own judgment. Try that with Social Security.
Politicians are loathe to even hint at cutting benefits, raising the retirement age, or otherwise tinker with benefits. Interestingly, Salsman provides a plan to immediately end Social Security and while also attracting political support.
A second article addresses Perry’s “Texas model” for reforming Social Security (HT:HBL):
Since 1981 and 1982, workers in Galveston, Matagorda and Brazoria Counties have seen their retirement savings grow every year, even during the Great Recession. The so-called Alternate Plan of these three counties doesn’t follow the traditional defined-benefit or defined-contribution model. Employee and employer contributions are actively managed by a financial planner—in this case, First Financial Benefits, Inc., of Houston, which originated the plan in 1980 and has managed it since its adoption.
The article demonstrates the practical benefits of private retirement accounts, and that part is good. However, the article does not question the coercive nature of the Alternative Plan.
While the Alternative Plan provides substantially better benefits than Social Security, employees are forced to “contribute” to the plan. Undoubtedly, under this program many employees save more and get better returns than they would if they were investing on their own. So? It is their money, and they should be free to do with it as they choose.
The solution to Social Security isn’t a coercive plan managed by a private company. The solution is freedom.