Social Security: A monstrous truth | The Economist

NO PONZI scheme in the history of the world has ever lasted 75 years. Ponzi schemes depend on garnering an ever-increasing pool of new investors to pay out returns to prior investors. When the potential pool of new investors runs dry, they collapse. This will occur when the scheme runs up against the natural limits of its recruitment strategy; in the ultimate case, it can’t keep going past the point where the entire population is already subscribed.

This should provide us with a hint as to why, as Kevin Drum writes (rebutting Shikha Dalmia), Social Security is not a Ponzi scheme. The entire population of working Americans has already been subscribed to Social Security for decades, yet the system continues to pay out benefits on time. That is because the actuarial calculations underlying its revenues and benefits are sound. Rick Perry may consider Social Security “a monstrous lie”, but my parents and one surviving grandparent keep getting checks in the mail, year after year. Social Security does face a shortfall in the coming decades, because of the population bulge of retiring baby boomers. Those costs are limited and, measured as a percentage of GDP, will flatten out. They can be absorbed through a modest, gradual increase in Social Security taxes and modest reductions in benefits for wealthier recipients.

via Social Security: A monstrous truth | The Economist.

It has a point: over-concerned about Social Security is not necessary.

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