like a Ponzi scheme, Social Security does not actually save or invest any of a participant's payments. When a worker pays taxes into the system, that money is used to pay current beneficiaries. Therefore, participants receive payments, not from returns on their own investments, but directly from inflows from subsequent participants.A highlight from the paper is a graph comparing return on capital to return on labor. Over the last 40 years, capital has outperformed labor consistently with only one exception (c.a. 1982).
Sunday, December 25, 2011
The Social Security Ponzi Scheme
The Cato Institute published a Policy Analysis paper by Michael D. Tanner in November, which compared social security to a ponzi scheme: