Special Report

Conscripts in a Ponzi Scheme

The upending truth about Social Security that no one -- no one -- is willing to face.

By 6.13.11

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The spit turns slowly over the Social Security roasting fire but there is no whimpering from the children being cooked. Yet.

Jonathan Swift's Modest Proposal (one of English literature's great satires) for preventing the children of poor people in Ireland from being a burden to their parents or their country, and for making them beneficial to the public was: to eat them.

Our problem is almost precisely the reverse. We have too much food, as Mrs. Obama reminds us, and we have too few children: too few to guard the gates of Western civilization, too few to pay the bills coming due for the welfare state, primarily for Social Security and Medicare.

What to do? Two facts deserve our preliminary attention.

One. In the 2004 presidential election (a more typical election than the 2008 election) only 17 percent of the 18 to 29 year olds voted, meaning 83 percent didn't bother to vote. That's called potential.

Two: The youngest voters haven't, recently, seemed to care much about even issues that directly affect them. When was the last time you heard about a student movement? Why is it, for example, that young people don't lobby and vote to make the drinking age 18, which it was in many places until 1984? Perhaps buying alcohol with a fake ID out the back door stimulates sophistication, but it tends to stultify the exercise of civic responsibility.

Grownups may think that presidential elections are about important issues, but it's not obvious that the kids care about policies at all. Oh, yes, they get caught up in the hoopla of a presidential campaign. But do they think that the policies a president will pursue will actually affect them?

If young people really cared about public policy, they would be frantic about the financial state of the country. Debts are piling up higher than the Washington Monument and they are being set up to pay them off. Yet not a single college student -- that we know of -- has let out a whimper.

But can the older folks count on the continuing civic lassitude of the young? We don't know. But we do know that the current fiscally absurd Social Security scheme might not survive the kids' discovery of democracy's power. The fact is, the kids in America are being had, even as the poor citizens of the Arab states, whom we have been watching on television in recent months, have for so many years, decades even, been had.

One thing is clear: in order to "fix" Social Security, we will have to recruit the young and assign to them the following tasks: pay more and retire later. But what's in that fix for them?

Not a lot. At least, not a lot compared to the alternative, a privatized Social Security system.

Both skeptics and Progressives (aka liberals) will vehemently oppose privatization of Social Security, the skeptics because they fear it won't work, the Progressives because they fear it will.

But of course it will work. It is working, in Chile. Workers there have been getting rich on their social security accounts since 1981.

Why don't we privatize our Social Security system? Because if today's young people were released from the bondage of Social Security, who would pay into the system the funds necessary to provide the benefits promised to today's retirees? As everyone is finally discovering, Social Security is not a lock box. The money flows out in benefits as fast as -- actually, starting last year, faster than -- it is paid in in taxes. Legislators call that a pay-as-you-go scheme.

Prosecutors call it a Ponzi scheme. The young are like Bernie Madoff's clients. Or like pigeons, a term given to investors duped into supporting a theatrical enterprise that the insiders have come to realize will flop financially. Like, say, Springtime for Obama in Balanced Budget Land.

The dirty big secret of Social Security reform is that it depends on keeping the young as conscripts in a Ponzi scheme. Where's the morality in that -- in an enlightened Western democracy?

The answer to that question may be that the government promised -- well, sort of: see the story of Ephram Nestor here -- the older folks (whom Time magazine in 1988 dubbed the "Greedy Geezers") that they would receive Social Security benefits when they retired, and it would be immoral not to honor that promise.

But that is a moral claim that may have to give way to a new democratic imperative in the coming years if the young decide that being roasted on the Social Security spit like pigeons no longer appeals.

 

Daniel Oliver is a Senior Director of White House Writers Group in Washington, D.C., and Editor of The Conservative Agenda Project. He served as Chairman of the Federal Trade Commission under President Ronald Reagan.

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About the Author

Daniel Oliver is a Senior Director of White House Writers Group in Washington, D.C. He served as Chairman of the Federal Trade Commission under President Ronald Reagan.