Analysis by Kyle A. Lohmeier
In early 1920, a guy named Charles Ponzi hit upon what he thought might be a legitimate way to make money by buying and reselling international postal reply coupons, and encouraged investors to buy into his idea. It turned out his scheme involving the re-sale of the coupons wasn’t actually workable, and certainly not at the profit rates of 50% in 45 days and 100% in 90 days that he promised investors, but, undaunted, he took their money anyway. As those 45- and 90- day thresholds came and went, Ponzi paid back those investors with money taken from new investors, and kept the surplus himself. By November 1, of 1920 the scheme had completely collapsed and Ponzi pleaded guilty to one count of fraud and was sentenced to five years in prison.
It was because Ponzi’s “Securities Exchange Company” made no effort to generate legitimate profits that the scheme eventually unraveled. New investment couldn’t be found at a rate sufficient to pay off existing investors and, at the same time allow for Ponzi’s then-lavish lifestyle. Without a source of actual profit to keep the scheme going, the only other way Ponzi could have perpetuated it would have been to have some mechanism to compel new investors to join the scheme, by force if need be. As a private individual, however, Ponzi obviously didn’t have that power.
To that end, on Wednesday, June 1, President Barak Obama called for the expansion of the federal government’s own Ponzi scheme, Social Security. Whereas Ponzi’s SEC didn’t have an armed, paramilitary wing, Obama’s IRS does, which makes all the difference in the world. How much difference? Ponzi couldn’t keep his scheme up and running for a calendar year before he was facing a judge. The current Social Security scheme is funded through 2034 because working Americans have no choice but to fund it, or go to jail. Much can be “accomplished” by an entity with a monopoly on the legal initiation of violence.
Of course, Obama’s rationale for proposing this expansion was virtually non-existent as he spoke at a high school in Elkhart, Indiana.
“We can’t afford to weaken Social Security, we should be strengthening Social Security,” Obama, was quoted as saying in a Talking Points Memo piece by Sara Jerde. “And not only do we need to strengthen its long term health, it’s time we finally made Social Security more generous and increased its benefits so today’s retirees and future generations get the dignified retirement that they have earned.”
And, everyone gets a pony. What the hell is this guy talking about?
Oh, right, I forgot, it’s the post-Bernie world, where numbers have exactly no meaning and money is infinite. The program is only solvent for the next 18 years as it is. Mathematically, if the program is made more “generous,” it will run out of money sooner, not later, thereby leaving nothing for the “future generations” he mentioned.
“And we can start paying for it by asking the wealthiest Americans to contribute a little bit more,” Obama said. “They can afford it. I can afford it.”
Oh, yes, of course, the incredible “Wealthiest Americans.” Never mind SHIELD, or The Justice League, or Professor Xavier’s School for Gifted Youngsters; America’s real superhero guild is this “The Wealthiest Americans” outfit. These guys can do anything apparently, because it’s up to them to do everything Bernie, Hillary and the President can come up with.
In reporting on this announcement, the ladies over at HuffPo made it a point to lead with the fact this announcement is a “stark reversal” of his previous position on attempting to be reasonable when it comes to the inherently doomed scheme. Forbes characterized the announcement as Obama “throwing in the towel on Social Security reform.” Bloomberg noted that Obama’s reversal is symptomatic of Bernie’s clout among the democratic electorate.
“Just five years ago, Obama called for reducing future Social Security benefits – an idea that at the time was in vogue for many Republicans and some Democrats, who treated it as a badge of fiscal responsibility,” wrote Sahil Kapur and Mike Dorning for Bloomberg this morning.
Wasn’t it about five years ago that Obama was getting ready to run for re-election against the backdrop of a still-shaky economic recovery as he negotiated with a newly-elected crop of GOP lawmakers?
It seems likely to me Obama was only feigning interest in fiscal responsibility back then, and doesn’t mind terribly being shoved further leftward by Bernie Sanders’ meteoric rise to popularity among the economically naïve. Given that Hillary too has promised to expand Social security, borrowing whatever she can rip out of Bernie’s playbook, there is exactly no risk in Obama “reversing” himself. So, rather than educate the electorate as to the inherent unsustainability of Ponzi schemes like Social Security, the president instead made the safe and easy decision to ride the tide of populist ignorance his party-mates have created. And, seeing how Obama is more popular among democrats than Hillary is, Obama echoing hers’ and Sanders’ stance on Social Security will only help secure a united democrat front against whatever the GOP might want to do to the doomed program after the inauguration of whoever wins this thing in November.
Whoever wins, only one thing is clear – Americans will have more money stolen from their paychecks and, at some point, there will be Americans that put into the system, but get exactly nothing back out of it. The scheme will collapse, the only thing government can do now is decide how messy and calamitous that collapse will be. By putting off dealing with it, they are only guaranteeing more pain when Social Security does go belly up.
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