Krugman: “Social Security Is Ponzi Scheme & Will Soon Be Over”

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It is one thing (what thing that is we are not sure, but we have heard others say it, so like all good lemmings we will say it too) for Rick Perry to call Social Security a ponzi scheme. After all he is some crazy, foaming in the mouth conservative, as uber-Keynesian liberal Paul Krugman may call him. And that’s fine. What confuses us, however, is why Social Security would be called a ponzi by the same liberal noted previously: none other than Paul Krugman himself.

Exhibit A, from a distant 1997, which perhaps one would have expected to remain buried (source):

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

This coming from the same person who a year ago said the following much anticipated truism, and has in the interim become a caricature of himself:

So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.

It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.

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Compare this 1950 United States Population Pyramid
http://tfw.cachefly.net/snm/images/nm/pyramids/us-1950.png
With the United States Population Pyramid for 2010.
http://tfw.cachefly.net/snm/images/nm/pyramids/us-2010.png

Both from here:
http://www.nationmaster.com/country/us/Age_distribution

See why Social Security cannot sustain itself?
Back in the 1950’s we had lots of workers per retired person.
Not anymore.
We have a HUGE unemployment problem and….
we’ve got a lot of “sandwich” people.
(You know, on the one hand raising their own children, on the other hand helping older parents.)

What Krugman says about this:

http://krugman.blogs.nytimes.com/2011/09/14/the-ponzi-thing/

September 14, 2011, 4:25 PM

The Ponzi Thing

Well, I gather that a lot of right-wingers are quoting selectively from a piece I wrote 15 years ago in the Boston Review, in which I said that Social Security had a “Ponzi game aspect.” As always, you should read what I actually wrote. Here’s the passage:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

Notice what I didn’t say. I didn’t say that the system was a fraud; I didn’t say that it would collapse. I said that in the past it had benefited from the fact that each generation paying in to the system was bigger than the generation that preceded it, and that this luxury would be ending in the years ahead.

So why did I use the P-word? Basically because Paul Samuelson had done the same; he was basically just being cute, and I was emulating him — which now turns out to be a mistake.

But anyway, anyone who uses my statement as some kind of defense of Rick Perry and all that is playing word games. I explained what I meant in that Boston Review article, and it was nothing at all like the claims that Social Security is a fraud, is destined to collapse, and all that. Social Security is and always has been mainly a pay-as-you-go system, which is nothing at all like a classic Ponzi scheme.

Of course, the usual suspects won’t pay any attention to what I’ve just said. But if anyone is actually listening …

@openid.aol.com/runnswim: Again, mr krugman suffers from the affliction of not enough Windex. His window (to the world) in his stomach is fogged beyond seeing out when his head is stuck up his anal orifice.