Obama in Presidential Debate: “Social Security is Structurally Sound”

Originally posted at FreedomWorks.org.

President Obama said that “Social Security is structurally sound” in the presidential debate.

He’s joking, right?

For the second straight year, Social Security paid out more in benefits than it took in through payroll taxes in 2011, according to a Congressional Budget Office report.

According to the report:

As more members of the baby-boom generation enter retirement, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy. As a result, the gap will grow larger in the 2020s and will exceed 20 percent of revenues by 2030.

The number of retirees is growing far faster than the number of new workers. The ratio of workers to retirees has grown from 42 to 1 in 1940 to just 3.3 to 1 today. Social Security is facing more than $20 trillion in unfunded future liabilities. How is that structurally sound?!

Check out this graph from the National Center for Policy Analysis showing the declining number of workers per retiree:

It is absurd to say that Social Security is structurally sound. A USA Today Gallup poll shows that 60 percent of non-retirees believe that Social Security will not be able to pay them a benefit when they retire.

Young people are the most pessimistic about the future of Social Security. And rightfully so. Three-fourths of young adults between the ages of 18 to 34 don’t expect to see a Social Security check when they retire.

The numbers don’t lie: young people shouldn’t expect to see a Social Security check in their lifetimes unless there are major changes to the program. That’s unlikely to happen anytime soon since most politicians are still afraid to touch Social Security in its current form.

This is why young people should be allowed to opt out of Social Security, if they wish. It’s cruel to force young people to pay into a terribly mismanaged government program that they don’t expect to get any benefits from when they retire. No wonder that Obama is losing youth support.

Americans should be allowed to invest in their retirement as they see fit—not be forced into a mandatory Ponzi scheme against their will.

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Social Security is a Mandatory Ponzi Scheme

Originally posted at FreedomWorks.org.

Rick Perry made headlines for calling Social Security a “Ponzi scheme” in last night’s presidential debate. Mitt Romney and statist media sources predictably attacked this position claiming that the insolvent program is A-Okay. To be fair, Rick Perry isn’t the only Republican candidate with the courage to speak truth to fiction about Social Security. Ron Paul has likely been calling the entitlement program a Ponzi scheme long before I was even born. It’s suddenly become popular to call Social Security out for what it really is: a compulsory Ponzi scheme.

Social Security is the definition of a Ponzi scheme with a few notable differences. Charles Ponzi started a money making scam that would later be known as a Ponzi scheme back in 1916. He persuaded people to allow him to invest their money but he never made one investment. He simply transferred money from his later investors to his earlier investors. The unsustainable system inevitably collapsed. Charles Ponzi was then convicted of fraud and spent years behind bars.

Social Security has many similarities to a Ponzi scheme but it’s even worse. The main difference is that Ponzi schemes are voluntary and Social Security is mandatory. Everyone is forced to pay Social Security payroll taxes whether they want to be part of the system or not. Just like Charles Ponzi’s fraudulent scheme, money from “later investors” or young workers is transferred to “earlier investors” or retirees.

Ponzi schemes are always great for earlier investors but rip off those who invest later on. The number of retirees is growing far faster than the number of new workers. The ratio of workers to retirees has grown from 42 to 1 in 1940 to just 3.3 to 1 today. Social Security is facing more than $20 trillion in unfunded future liabilities. Young people actually believe that they have a better chance of seeing UFOs than a Social Security check made out to them when they retire.

Some people especially those on the left wrongly call us “cruel.” But think about it: how cruel is it to force a young person who believes they will get nothing in return into a system? Why should young workers who are just starting out in their careers be forced to pay for the Social Security benefits of elderly millionaires and billionaires? Seniors are much wealthier than young people on average.

Individuals should be free to opt-out of Social Security if they wish. People could then stay in the insolvent Social Security system or invest on their own. If Social Security is so “great”, why is it mandatory? Private sector retirement plans can provide safer plans with higher benefits than Social Security. Unlike Social Security, the assets in the private retirement plans can be rolled over to a surviving spouse or other family member. We need more retirement choices instead of being forced into a terribly mismanaged government monopoly.

The Venn diagram above made by The Examiner’s Tim Carney shows the difference between Ponzi schemes and Social Security. Bernie Madoff, who was responsible for the largest Ponzi schemes in history, was sentenced to 150 years in prison back in 2009. But the federal government’s Social Security scheme is somehow mandatory. Politicians who criticize Social Security are indeed considered pariahs. Think Progress says that it is “nuts” to even compare Ponzi schemes and Social Security.

The Social Security scam disproportionally hurts the working class and African Americans. Tim Carney says that, “given that black men have a lower life expectancy, they get shortchanged on the benefits end.” The life expectancy for an African American male is just 69.7 years—versus 75.5 years for white men. The Social Security retirement age is 65. This means that close to half of African Americans males will die before every receiving a dime of Social Security benefits despite paying into the system all of their working life. How is that for cruel?

Social Security is a compulsory Ponzi scheme. As Cato Institute scholar Roger Pilon says, “a private company that ran such a scheme would be prosecuted in less than a New York minute.” Social Security is a hopelessly bad deal for today’s worker. Americans should be allowed to invest in their retirement as they see fit—not be forced into a mandatory Ponzi scheme against their will. We need more presidential candidates with the guts to propose allowing individuals to opt-out of Social Security.

Opt Out of Entitlement Programs

Originally posted at FreedomWorks.org.

Entitlement programs are on the fast track to bankruptcy. Social Security and Medicare—the nation’s two largest entitlement programs—will run out of funds sooner than previously expected. Social Security faces a $45 billion deficit this year and Medicare’s trust fund for hospital insurance will completely run out of funds by 2024. We must face the reality that the federal government simply won’t be able to keep its grand promises to future generations without drastic changes to our entitlement system.

Some claim that our entitlement programs suffer from a demographic problem. It’s true that people are living for a much longer period of time. When the Social Security Act of 1935 passed, the average life expectancy was only 60 years. Despite the fact that the average life expectancy has soared to 77.5 years, the Social Security retirement age of 65 has never been adjusted to meet demographic changes. This means that the number of retirees is growing faster than the number of new workers. The ratio of workers to retirees has grown from 42 to 1 in 1940 to just 3.3 to 1 today. The current demographic trends are unsustainable.

Everyone paying attention knows that entitlement programs are in trouble. The numbers prove this fact but it is more than just an accounting problem. The underlying problem is a philosophical one. The role of government is not to “take care” of Americans from cradle to grave. Our Founding Fathers warned us against an “all-knowing” nanny state that would erode our personal liberties. As the late Barry Goldwater said “remember that a government big enough to give you everything you want is also big enough to take away everything that you have.” The proper role of the government as outlined in the Constitution is solely to protect life, liberty and property.

Young people have the largest stake in our broke entitlement system. These workers are forced to pay Social Security payroll taxes knowing full well that they will likely never collect Social Security benefits in their lifetime. By the time college aged students retire, there will be only two workers for each beneficiary. Even former President Clinton said that “there are polls that say that young people in their twenties think it’s more likely that they will see UFOs than that they will ever collect Social Security.” This is the reason that the 18 to 29 year old age group is the most receptive to making changes to Social Security.

Most in Washington have chosen to kick the can down the road. Time and time again lawmakers have denied that our entitlements programs are in trouble. Cutting benefits or raising taxes is politically unpopular. Rep. Paul Ryan (R-Wis.) deserves credit for introducing bold proposals to reform Social Security and Medicare in his “Roadmap for America” plan. His Medicare plan also in his most recent “Path to Prosperity” plan, which has been endorsed by a majority of his fellow House Members, would transform Medicare form a misguided “one-size-fits-all” program into a patient-centered system that allows seniors to choose from a list of competing health plans. It may not be ideal, but it’s a step in the right direction.

Let’s take it a step further. Why aren’t we allowed to opt-out of these compulsory entitlement programs? If they are so “great”, why are they mandatory? Individuals should have the freedom to buy their own health insurance after the age of 65 or save for their own retirement without government assistance if they wish. It’s their hard earned money; it does not belong to the federal government. No one should have to fear that the government will ultimately ration their retirement savings. It would be morally inexcusable to force generations to pay into our broke entitlement system and ultimately get nothing in return.

Many Americans still believe in the ideas of personal liberty and self-sufficiency that our forefathers fought for. Let’s give them the freedom to opt of our nanny state entitlement system altogether. Would anyone actually stay in a terribly mismanaged government monopoly? It’s pretty clear: freedom works, government doesn’t.