Social Security Is The Biggest Ponzi Scheme Ever Created And It Still Affects This Generation

by Todd Hagopian

Franklin D. Roosevelt delighted progressives around the country when he signed the Social Security Act in 1935.

According to the Social Security website, in 1944, Ida May Fuller got the very first Social Security check, valued at $22.54.  Ms. Fuller -- bless her heart -- is a critical character in my argument that Social Security is the most elaborate Ponzi scheme that the world has ever seen.

A Ponzi scheme is essentially a scheme in which the very first investors make a very high return on their investment and those who get in last lose all of their money (while their money goes toward paying the initial investors even more money).

Ms. Fuller is not a bad person; she was just an average school-teacher-turned-legal-secretary. She just happens to be caught on the wrong side of history, thanks to an easy-to-pass, albeit impossible-to-manage piece of legislation: Social Security.

To help make my point, let’s look at Ms. Fuller’s return on her investment: The Social Security website proudly exclaimed that Ida May Fuller paid a total of $24.75 into the Social Security program, yet received $22,888.92 in benefits. That equals out to be a 92,380 percent return.

The Social Security Administration believes that the funds will run out in 2033, 19 years from now. I am a successful Gen-Y businessperson and even if I ignore all of the money I have paid to this point, I will pay more than $250,000 in Social Security taxes over the next 20 years before Social Security goes belly-up.

If I had enjoyed Ms. Fuller’s rate of return, I would receive almost $250 million in Social Security benefits. However, since Social Security is an enormous Ponzi scheme, and I am one of the later investors, I will receive no money at all.

This will affect Gen-Y workers of all income levels. There are approximately 80 million Millennials, and if the average Gen-Y worker makes only $25,000 per year during this time, Millennials will pay around $2 trillion between now and 2030.

As a generation, we have not begun to voice our concerns about this program, which is using us to fund its previous investors. We have ignored what is probably the biggest financial issue of our generation and seem happy to continue electing folks who have no interest in reforming the program.

The government introduced Social Security just 13 years after Charles Ponzi was convicted for the largest Ponzi scheme that the government had ever seen (prior to Bernie Madoff’s scheme in 2008). The “New Deal,” which included many reforms, including Social Security, helped the Democratic Party win the White House in the 1930s.

The Democrats then held the White House for an unprecedented 20-year span, from 1932–1952. No party had held the White House that long since 1827, and no party has held the White House longer than that run since then, so apparently, this new Ponzi scheme was pretty successful.

But, why would the politicians want to reform Social Security, when the program itself acts as a political Ponzi scheme? The initial politicians who started the program were routinely reelected; whereas, future generation politicians will be caught holding the bag when the program finally goes bankrupt.

The biggest shame of all is that people will have known that this piece of legislation was flawed for years, despite having done nothing about it. President Carter increased funding to the program in the 1970s, and President Clinton investigated significant Social Security reform in the 1990s, which would have given individuals private accounts in which to save their money.

President Bush offered similar ideas and pushed hard for their passage from 2000 to 2008. President Obama has offered no new ideas and has taken entitlement program reform off of the table for all recent budget negotiations. Apparently, since he won’t be president in 2033, it’s not his responsibility to fix this problem.

Getting back to the point, the very first “investors” in Social Security made returns in excess of 90,000 percent. However, Gen-Y will pay $2 trillion into the program and none of us will see a dime in benefits.

How is this not a Ponzi scheme? How is this not the number one issue for Gen-Y members at the ballot box every year?

Attention Gen-Y:

Until we band together on this issue, we will never be heard. Until we demand an answer, politicians will continue to avoid the third rail of politics. Until we pool our votes together, we will never be powerful enough to force a policy change.

What Should You Do Now?

Talk about this issue at the dinner table; inform as many people as you can reach and be passionate about the issue. Send a letter to your representative, explaining that this issue your high priority and you want attention paid to it.

Demand a candidate who has ideas, one who has answers. Demand a solution now.

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