Weekly Column - 10/02/2010

Due to a mistake which was, for once, not my own, no column was published last week. We've returned to normal, so here's this week's column:

"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." – U.S. Social Security Administration

What economist Walter Williams rightly calls "The National Ponzi Scheme" is not doing well. The system is dependent, as he says, on "expanding the pool of suckers." That pool is drying up. He wrote his article in February of 2009, noting that Social Security was expected to pay out more than it took in sometime in 2016. He was much too optimistic. It is 2010, and that point has been reached.

As David Schepp from Daily Finance reports: "The nation’s Social Security system will pay out more than it takes in this year and next, as aging baby boomers begin entering retirement." The economic recession—which has officially ended, but which unofficially remains very much in force—has reduced the base from which the government can seize funds. Proponents of the scheme point out that once the recovery gains momentum, tax receipts will increase, allowing Social Security to bounce back into the black. After all, the fund dipped into the red during the Carter administration, so we can’t argue that a spell of economic woes demonstrates the untenability of Social Security.