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House GOP leader John Boehner proposes raising age to collect Social Security. Social Security Just Another Government Ponzi Scheme

July 4, 2010

The Government is Inept At Managing Their Own Money.  The Government Is Even More Inept At Managing OPM.

Instead of Providing for American’s Old Age Security, Congress Has Raided The Fund and Taxpayers Are Paying Interest For the Loans the Government Leveraged Off Of Social Security Rather Than Receiving Interest On the Deposit.

Social Security

House Minority Leader John Boehner, R-Ohio, told the Pittsburgh Tribune-Review today that he would support raising the Social Security retirement age to 70 to help pay for the war in Afghanistan.

“If you have substantial non-Social Security income while you’re retired, why are we paying you at a time when we’re broke?” he said to the paper in an interview.

Democrats are pouncing on Boehner’s remarks, arguing that they foreshadow the approach to government Republicans would take if they win control of Congress in the 2010 midterm elections.

Boehner’s comments come as lawmakers in both parties, but especially Republicans, have expressed concern with the growing national debt. Boehner said in the interview that entitlement programs such as Social Security and Medicare will need to be reformed to address the problem.

Boehner also criticized President Obama’s proposal to revamp Wall Street, which is working its way through Congress. Boehner compared the measure to “killing an ant with a nuclear weapon.”

Maryland Rep. Chris Van Hollen, who chairs the campaign arm of House Democrats, said the comments are a “wake-up call to the American people about the dangers of turning back the clock to a Republican Congress.”

The Boehner interview is available here.

Updated at 6:01 p.m. ET. Boehner spokesman Michael Steel notes that House Majority Leader Steny Hoyer, D-Md., discussed a similar idea during a speech this month. “On the spending side, we could and should consider a higher retirement age, or one pegged to lifespan; more progressive Social Security and Medicare benefits; and a stronger safety net for the Americans who need it most.,” Hoyer said in the speech

Discussions of Social Security remind me of the joke about a man who jumps from the top of a fifty-story building and after falling half-way is asked, “How are you doing?” He answers, “Fine, so far.” The issue of Social Security has long been considered the “third rail” of politics – as on the electrified subway: “touch it and you die.” But like the falling man, Social Security is not really “fine.”

There are many reasons for the popularity of Social Security. It is the only part of the welfare state which promises benefits to nearly every person. It is also seen to relieve adult children of the responsibility of supporting their elderly parents, and it helps the elderly poor for whom there is a great deal of sympathy.

There is only one problem: the system is a fraud. In theory, Social Security is a form of “insurance.” In practice, it is a “Ponzi scheme.” Historian Mark Knutson, writes that in the summer of 1920, [Charles K.] Ponzi claimed he was giving investors just a portion of the 400% profit he was earning through trade in postal reply coupons. As Ponzi paid the matured notes held by early investors, word of enormous profits spread through the community, whipping greedy and credulous investors into a frenzy. Investigation later revealed that there were no coupons or profits – earlier notes were paid at maturity from the proceeds of later ones. The simplicity and grand scale of his scheme linked Ponzi’s name with a particular form of fraud.

The Social Security “Trust Fund” Myth

Republican and Democrat politicians tell us that the money each employee “contributes” to Social Security goes into a “trust fund.” The money from this fund is “invested” in federal government bonds. Upon retirement, the “reserve” made up of “contributions” and the interest on the bonds would be used to pay benefits to the retiree.

From the beginning, in spite of the claims that it was an old-age insurance program, Social Security paid its benefits from current cash flow, rather than paying benefits out of interest accrued on a reserve fund as a private pension plan would do. As Social Security taxes were paid into the system, the funds were immediately doled out to beneficiaries. As more taxpayers retired, they would be paid from the money taken from younger taxpayers – just like Ponzi’s investors.

Preserve The System: Ruin The People

Typical proposals to “reform” Social Security have been built around increasing taxes. The 1983 Social Security tax increase was supposed to create a reserve fund of $10 trillion by the year 2030. However, since 1967 Congress has been raiding up to $70 billion each year from the Social Security fund to hide part of their massive deficit spending. Thus the Social Security trust fund is filled with IOUs in the form of Treasury Bonds. The interest on these bonds must be paid by you, the taxpayer.

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