Brookfield7

All content, of both the original Brookfield7.com and this blog, is written from my point of view and is my opinion. I believe it to be accurate at the time it is written. ~ Kyle Prast, Brookfield resident since 1986

Monday, March 16, 2009

Madoff: Ponzi scheme=jail, U.S.: Ultimate Ponzi scheme=biz as usual

Bernard Madoff headed to jail, on March 12, for his Ponzi scheme (think pyramid scheme) of taking investors money, not investing it, and using it for whatever he pleased. People were outraged, and rightly so.

Yet the United States government does the same thing every day. Just look at your paycheck statement. They take a deduction for Social Security (a.k.a. FICA) and Medicare every working day but don't invest it into your Social Security or Medicare fund. They use it for whatever they please. They not only take it from you, but they take it from your employer too.

Madoff went to jail for doing it, but when the U.S. government does it, it is OK?

I recently met with a banker and we talked about retirement. (That is seeming more and more like a fantasy.) I mentioned that Social Security was the ultimate Ponzi scheme: dependent on an ever increasing pool of contributors to make it work. He thought a moment and then said, you are right, it is!

Our working population will be shrinking in proportion to retired persons. Pretty soon, Social Security will be bankrupt--it is facing "a $4.6 Trillion deficit over the next 75 years ([that equals]... 1/3 the size of the entire US economy)". Bet Uncle Sam isn't going to go to jail over it though.

From time to time some brave Republican tries to sound the alarm over Social Security business as usual. Privatizing a tiny portion of S.S. was one idea. Personally, I would prefer that there be no Social Security, but that some sort of mandatory personal investment be required instead. Workers could retire as millionaires if that were the case.

Think that isn't true? Just look at your payroll deduction for Social Security. (Ours was around $5,000 for last year. Add the employer's matching portion and that makes $10,000.) Imagine your portfolio if you had your and your employer's SS contribution money compounding interest ever since you got your first W2?

Author Richard Maybury* gives a glimpse of that portfolio. If a worker, starting at age 19 contributed $4,000 a year for their first 10 years, and their account earned 8% interest, they would not need to contribute anything more to retire with $1,079,285 at age 65! And that is just with an investment of $40,000. How much have you and your employer put into Social Security over the years? Think you will get those millions back?

Congressman Paul Ryan has the guts to say we have to change our ways! Look at his solutions and his Roadmap for America's Future. If you like Paul Ryan's ideas, let him know: CongressmanPaul.Ryan@mail.house.gov

Uncle Sam cannot continue his business as usual Ponzi scheme!

* Taken from A Bluestocking Guide: Economics, by Jane Williams, a book based on Richard Maybury's book, Whatever Happened to Penny Candy?, pp69-71, The value of a head start.

Links:
Practically Speaking, Fairly Conservative, Betterbrookfield, RandyMelchert, CNS News, Jay Weber, Mark Levin, Vicki McKenna Jay Weber, The Right View Wisconsin, The Heritage Foundation

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