Bernie Madoff

Madoff actually ran a Ponzi scheme. It was NOT like Social Security

Because Rick Perry is giving it away:

The governor again called Social Security a “Ponzi scheme” Saturday during a campaign stop in Ottumwa, Iowa. It’s not a new line for Mr. Perry — he used the same description in his 2010 book, “Fed Up!” But it’s one his campaign previously told The Wall Street Journal he may avoid now that he’s running for president.

“It is a Ponzi scheme for these young people. The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie,” Mr. Perry told the crowd.

First off, this isn’t correct, in a way that suggests Rick Perry doesn’t know economics. The idea behind a Ponzi scheme is that you get people to give you a little money as an investment, give them much more back as an immediate return, and then get them to give you everything knowing that they’ll see nothing back. The key part of this is the misdirection–you play on the mark’s greed, and the only way you lose is if the mark is fine with the one-off profit. Social Security isn’t really like that–the arrangement our society came to decades ago is that you give up a bit of what you make now in order to be a bit more secure later. There’s just no intent to deceive that I can tell. This is not a new criticism, in fact, it’s so old and common that Wikipedia includes it as a common criticism, and it also includes an official rebuttal:

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end. As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system, and so it is not a pyramid or Ponzi scheme.

Under so loose a definition as Rick Perry’s, practically everything is a Ponzi scheme. Even checking accounts can be considered a Ponzi scheme under Perry’s definition. The only disappointing thing about this is that Perry’s criticism is so hackish, stale, and easily refuted. And this from someone the right considers a major intellectual.

Second, if this quote says anything, it says that Rick Perry doesn’t really know his history. It’s true that many if not most Republican elites would love to substantially scale back if not just do away with Social Security. But they know that it’s a popular program that a lot of their base loves, so they don’t really push it that hard. George W. Bush’s 2005 attempt at privatizing the program was about as real as it’s gotten, with a major push from the White House, and it went absolutely nowhere. And it’s widely known that the Republicans gained a lot of support in 2009-10 by arguing to the elderly that health care reform would mean cutbacks to their health care. Setting aside the truth of this claim–it’s largely false but there’s a kernel of truth to it–it’s an attack on the basis of the other guys taking away benefits. Perry could very easily get 30% of the GOP primary electorate to elect him on the basis of abolishing popular entitlement programs. He’d have a much harder time getting more than 27% of the country to do it in a general election. I guess it’s nice that he’s courageously saying what he thinks, since most people will recoil from this particular unvarnished stance.

Put together, this is the sort of thing that has just got to make elites–already panicky about Perry’s style and substance–that much more comfortable with Mitt Romney as their standard-bearer. In fact, if one were conspiratorial, one might think that Perry just got into the race to make Romney look more moderate and acceptable and make himself a VP frontrunner, filling in the Tea Party gaps that Romney can’t. Indeed, he’s the obvious choice for Romney, as a ‘Merikun evangelical guy. More obvious than Marco Rubio, anyway, as I simply do not see a Mormon-Catholic ticket working for a party that has never nominated anyone of either denomination for national office, and has a very powerful and mobilized Protestant wing in the religious right in their tent. (Also, I doubt that Rubio’s McCainesque hawkishness would be a good fit for the moment.) I think Perry in the #2 slot would help Romney go down much easier for the zealots. Get ready for Romney-Perry ’12, I suppose.


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