I’d argue that it is (I’ve got a whole section of the America’s One-Child book on this). But reasonable people can certainly debate the sentiment. What has amazed me over the last week or so is the silliness of those who treat the argument as if it’s somehow out of bounds just because Rick Perry is making it. Believe it or not, Rick Perry is not the first person to view Social Security as a “Ponzi scheme.”
The first person I’ve found drawing the parallel is economist Paul A. Samuelson. In the November 13, 1967 Newsweek Samuelson defended Social Security by pointing out that it was linked to population growth and that “A growing nation is the greatest Ponzi scheme ever devised. And that is a fact, not a paradox.” (I found this quote in Phillip Longman’s excellent essay “Missing Children,” in the latest issue of the journal The Family in America. I can’t find the original Newsweek cite to provide full context, but Longman says that Samuelson was defending Social Security and I’m happy to trust him because Phillip Longman is stone-cold awesome.)
Now, Samuelson is not a crank. He won the Nobel Prize for economics in 1970. The New York Times calls him ”the foremost academic economist of the 20th century.” If you majored in econ during the last 30 years, there’s a good chance that you used his textbook, Economics.
Nor is Samuelson a conservative. Remember, his likening of the underpinnings of Social Security to a Ponzi scheme were meant as a defense of the institution. And in 2003 he was one of a group of economists to sign a letter inveighing against the Bush tax cuts.
You might argue that the Samuelson/Perry view of Social Security is ultimately incorrect–but you cannot argue that it is troglodytic and beyond the pale. Anyone who does so either misunderstands economics and demography, or is playing an angle.
Update: Ed Driscoll pulls the full original Samuelson quote. As expected, Longman’s characterization was completely accurate:
The beauty of social insurance is that it is actuarially unsound. [italics in original] Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. And exceed his payments by more than ten times (or five times counting employer payments)!
How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired…
Social Security is squarely based on what has been called the eight wonder of the world — compound interest. A growing nation is the greatest Ponzi game ever contrived. And that is a fact, not a paradox.