I kept thinking this week as Washington bureaucrats celebrated the 80th birthday of Social Security that I should point out how the whole thing is a big Ponzi scheme, as I did in 2009. Eighty years ago every retiree was supported by 40 workers, but soon that ratio will be 2 to 1.
Sen. Harry Reid says Social Security is just fine, though in 1980 he said the trust fund was being embezzled.
Stephen Moore beat me to it with today’s op-ed in Investor’s Business Daily. “From the moment Franklin Roosevelt created Social Security in 1935, the system was set up as a classic Ponzi scheme,” he writes, citing the worker to retiree ratios.
Moore not only points out the problem, but he offers a fix:
There are options to fix the program, but they’re all very bad for today’s and tomorrow’s workers. Democrats want to raise the tax — and take even more money from workers’ paychecks. Republicans, like New Jersey Gov. Chris Christie, want to cut benefits. Anyway you cut it, young workers will be asked to pay more in and get less out.
Another fix that would forever end the Ponzi scheme and provide today’s young workers with higher, not lower benefits. Give them the option of putting 10% of their 12.6% payroll tax dollars into an individual account that’s invested in an index fund of all stocks.
At historic rates of return, this would give workers a 7% return per year, which would let them retire as millionaires after 40 years of work. They’d receive two to three times more than Social Security promises.
Social Security could still be there as a backstop for those who didn’t reach a minimum benefit, and the feds could issue long-term bonds to pay existing retirees their promised benefits.