Governor Perry generated quite a stir during a recent Republican debate when he referred to Social Security as a Ponzi scheme. According to Governor Perry, Social Security is a “monstrous lie…a Ponzi scheme to tell our kids that are 25 or 30 years old today you’re paying into a program that’s going to be there.”
We can debate how long Social Security can remain solvent, but it is not a Ponzi scheme. In fact, this article in the New York Times offers details on just how Social Security differs from a Ponzi scheme.
That said, we all know there’s plenty about Social Security that needs fixing. Simply, last year Social Security began paying out more in benefits than it received in taxes. And as more Boomers retire, that shortfall is expected to grow, especially given high unemployment rates. The New York Times article points to the nonpartisan Congressional Budget Office’s estimate that the combined Social Security trust funds would be exhausted in 2038. However, a number of steps could keep the program afloat. Washington could choose to increase taxes, reduce benefits by raising the retirement age, or reduce cost-of-living increases. Of course, none of these options will be popular with voters, so it remains to see what our elected officials who often are more concerned with keeping their jobs than with attacking our nation’s most serious problems will do. If the debt ceiling debates are any indication, we could be in for a rough ride on the way to Social Security reform.