Tuesday, March 08, 2005

Ponzi again

Pay-as-you-go social security is a Ponzi scheme backed by the power to tax. This makes it acceptable (even attractive) to some. The LA Times' Robert Scheer (March 8) writes that, "The problem with Social Security is that it isn't broken, which is precisely why the president is so eager to destroy it." Later in the column, Scheer embraces the idea of lifting the $90,000 payroll tax cap.

In 1947, the Bureau of the Census' P.K. Whelpton published Forecasts of the Population of the U.S., 1945-1975. He wrote, "With regard to the fiscal problems of social security, it should be realized more generally that if the 'old age and survivor insurance' program is to continue to be supported by pay-roll deductions and employers' contributions, the rising ratio of elders and producers will necessitate the accumulation of large reserves, or an increase in the withholding rate. The former means force savings by 'covered' workers and employers, deposited in the U.S. Treasury."

Whether 2005 or 1947, demography and the the Ponzi logic are iron-clad. Taxing more (and more) is the only way out. Those who, like Scheer, welcome this ask: "What's the problem"?