Luke Judge

During the recent GOP presidential debate, Texas Gov. Rick Perry said that Social Security is a “monstrous lie” and a “Ponzi scheme.” more and more people are coming to see that Social Security is a Ponzi scheme, but is it a lie, as well? Let’s look at it.

Here’s what the 1936 government pamphlet on Social Security said: “After the first 3 years — that is to say, beginning in 1940 — you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. … Beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. … and finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year.” Here’s Congress’ lying promise: “That is the most you will ever pay.”

Another lie in the Social Security pamphlet is: “Beginning November 24, 1936, the United States government will set up a Social Security account for you. … the checks will come to you as a right.” Therefore, Americans were sold on the belief that Social Security is like a retirement account and money placed in it is our property. the fact of the matter is you have no property right whatsoever to your Social Security “contributions.”

You say, “Williams, you’re wrong! We have a right to Social Security payments.” In a U.S. Supreme Court case, Helvering v. Davis (1937), the court held that Social Security is not an insurance program, saying, “The proceeds of both (employee and employer) taxes are to be paid into the Treasury like internal revenue taxes generally, and are not earmarked in any way.” In a later Supreme Court case, Flemming v. Nestor (1960), the court said, “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.”

Belatedly, the Social Security Administration is trying to clean up its history of deception. its website (ssa.gov/history/nestor.html) says, “Entitlement to Social Security benefits is not (a) contractual right,” adding, “There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. … Congress clearly had no such limitation in mind when crafting the law.” That’s the SSA’s dishonesty. After all, it was the people in that administration who said, in their 1936 pamphlet, that “the checks will come to you as a right.”

There’s more deceit and dishonesty. In 1950, I was 14 years old and applied for a work permit for an after-school job. one of the requirements was to obtain a Social Security card. In bold letters on my Social Security card are the words “For Social Security Purposes — not for Identification.” according to the SSA’s website, “this legend was removed as part of the design changes for the 18th version of the card, issued beginning in 1972.” That’s a shameless, unadulterated lie. because we’re idiots, we’re asked to believe that the sole purpose for the removal of “Not for Identification” was for design purposes. the fact that our Social Security numbers were going to become a major identification tool had nothing to do with getting rid of the statement.

Aside from these lies, Social Security is a Ponzi scheme. the major difference between Social Security and Bernie Madoff’s Ponzi scheme is his was illegal. three Nobel laureate economists have testified that Social Security is a Ponzi scheme. Dr. Paul Samuelson called it “the greatest Ponzi game ever contrived.” Dr. Milton Friedman said it was “the biggest Ponzi scheme on earth.” Dr. Paul Krugman predicted that “the Ponzi game will soon be over.”

Three cheers to Gov. Rick Perry for having the guts to tell us that Social Security is a monstrous lie and a Ponzi scheme.

Walter E. Williams is a professor of economics at George Mason University. to find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at creators.com.

COPYRIGHT 2011 CREATORS.COM

economics Textbooks 1940, checks, congress, gop, government pamphlet, social security

In his new book, Freefall: America, Free Markets, and the Sinking of the World Economy, Joseph Stiglitz of Columbia University has some things to say about economics and the economics profession at the end of the book. I suppose it’s no coincidence that many of the points he makes echo what we have to say in The Economics Anti-Textbook; we make numerous references to Stiglitz’s work. After all, one of our central points is that the textbooks fail to reflect what economists know — or should know — about economic theory.
   Stiglitz writes of recent decades: “Economics had moved — more than economists would like to think — from being a scientific discipline into becoming free market capitalism’s biggest cheerleader.” (p.238). (I could quibble about it being a “scientific discipline” in the good old days, but let that pass.)
   He makes it clear that many economists start with a particular view of the world and choose a theoretical model that reflects it and ignore inconvenient theoretical results, notably those written by Stiglitz and his colleagues. In a series of papers in the 1970s and 1980s, Stiglitz and his collaborators showed that even small deviations from the restrictive assumptions of the competitive model (eg. perfect information) had big effects. Yet the belief persisted among many devotees of the ‘free market’ that the market economy was ‘almost efficient’. As Stiglitz writes: “It was a theological position, and it soon became clear that no piece of evidence or theoretical research would budge them from it.” (p.244) The case we make in The Economics Anti-Textbook is that this is, in fact, the view students are invited to accept by textbook authors.

economics Textbooks free markets, freefall, textbook authors, theoretical research, world economy

Time.com calls it “The New Frugality” and refers to the U.S. as “Thrift Nation”. Frugality has finally earned its 15 minutes of fame! As the economic downturn wiped out at least 25% of American’s wealth via recent stock market losses and foreclosures and unemployment still loom large for millions of families, frugality is in!  Secondhand, Craigslist, garage sales, thrift stores, barter exchange – you name it. The new competition is the rush to see who can pay the least!  

Of course frugality is far from being new. Many Baby Boomers like myself have had parents raised during The Great Depression. Their motto? Waste not. Want not. Not only did we hear the stories of saving string, growing victory gardens, canning food for the pantry and sewing clothes by hand and treadle sewing machine, but also many of us lived with their sometimes extreme-frugality habits. For example, up till around 2000, my now nearly 90 year old father dried his clothes on a clothes rack in the bathtub year-round even though he did not have to.  

Frugal can definitely be fun! Not unlike our hunter and gatherer ancestors, frugality (that careful management of anything valuable which expends nothing unnecessarily, and applies what is used to a profitable purpose) revives the joy of the hunt. Nothing could be much more satisfying than finding a J-Jill clothing item for $2.00 or a barely-used computer that is practically being given away. So I say, now why should I pay retail?

For mainstream media, frugality may be just another passing trend. Economic recovery is already on the lips of some forecasters. In the not too distant future we may well see a shift to short-term relief as regards jobs and the housing market. However given over 14 trillion dollars of new money recently dumped into the system (Bloomberg) and much of it loaned at interest, “the proof will be in the pudding”. Historically, when a central-bank increases the money supply the result is increased loss of purchasing power for the public via inflation. Another way of saying it is that increasing deficits decrease the value of currency. Plus, over time deficits grow exponentially (at an accelerated pace) due to compounding interest.

Frugality as a function of how we spend is here to stay if you catch my drift. That said, I’ve known people who become addicted to “penny pinching” much the same but just the opposite of the shopaholic who cannot control their overspending. The “penny pincher”, on the other hand, can be blinded (penny wise and pound foolish) to those places in their life where spending would be to their benefit and preferable. Out-of-pocket spending for preventive health care including quality vitamins and alternative health-care practitioners, for high quality meats and produce, for private health-care insurance and for investing in sound ways to increase one’s cash flow are just a few examples of how spending strategically makes sense.

Since money in a debt-based system is always worth the most today, strategic spending means you will get more for your money today than you will tomorrow, next month, next year or 5 years from now! Just for fun, here’s a couple of websites you may want to check out. Virtualdr.com – free computer troubleshootingSimpleliving.net – frugal living tipsZenhabits.net – cheapskates guideHomeeconomista.com – America’s cheapest familyFreeshipping.org – company’s that are shipping for freeFreecycle.com – everything freeFrugality measures are fantastic but just the tip of the iceberg; a great start towards a comprehensive plan to thrive in both good times and bad. 

economics Textbooks careful management, clothes rack, great depression, hunter and gatherer, stock market losses