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.

The snow gave me a chance to catch up on the last couple issues of Wired. Chris Anderson is, for me, a lot like Tina Fey. His book contains so much great stuff that when it lapses into simplemindedness, it seems inexcusable.

In any event, the last two issues exemplify how great Wired can be. In the January issue Felix Salmon and Jon Stokes write about how algorithms have taken over a large portion of the finance world. Maybe this is old news to people who work in the industry, but it knocked me flat:

On May 6, 2010, the Dow Jones Industrial Average inexplicably experienced a series of drops that came to be known as the flash crash, at one point shedding some 573 points in five minutes. Less than five months later, Progress Energy, a North Carolina utility, watched helplessly as its share price fell 90 percent. Also in late September, Apple shares dropped nearly 4 percent in just 30 seconds, before recovering a few minutes later.

These sudden drops are now routine, and it’s often impossible to determine what caused them. . . .

In late September, the Commodity Futures Trading Commission and the Securities and Exchange Commission released a 104-page report on the May 6 flash crash. The culprit, the report determined, was a “large fundamental trader” that had used an algorithm to hedge its stock market position. The trade was executed in just 20 minutes—an extremely aggressive time frame, which triggered a market plunge as other algorithms reacted, first to the sale and then to one another’s behavior. The chaos produced seemingly nonsensical trades—shares of Accenture were sold for a penny, for instance, while shares of Apple were purchased for $100,000 each. (Both trades were subsequently canceled.)

This should scare us. Not for the obvious reasons–that we’ve built a machine and we don’t really understand how it works. (After all, the stock market was a black box even before we turned it over to the computers.)

But the rise of the algorithms is yet another example of how the world of finance is no longer a business of allocating capital. It’s just a money machine, not much different from a casino, which acts almost like a closed system. Which is why you can have spectacular stock growth even while the real world remains mired in serious economic problems. Maybe this disconnect isn’t the end of the world. But it’s not obvious to me why it should be sustainable and harmless.

PS: The current issue of Wired isn’t up on the web yet, but it’s got a 5-star story on how scratch-game lotto tickets can be cracked and how organized crime may (or may not) be using this public lottery to launder money. It’s crazy, crazy good.