Myth-Busters: A "More Generous" Social Security Ponzi Scheme?
Leave it to a bankrupt government to promise more money to the people it owes. Just yesterday, President Obama declared that "It is time we finally made Social Security more generous." Ron Paul shreds the most popular myths surrounding government's humungous Ponzi scheme. Don't miss today's Myth-Busters!
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Leave it to a bankrupt government to promise more money to the people it owes. Just yesterday, President Obama declared that "It is time we finally made Social Security more generous." Ron Paul shreds the most popular myths surrounding government's humungous Ponzi scheme. Don't miss today's Myth-Busters!
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Everybody, thank you for tuning in to the Liberty Report.
Today is the day we do MythBusters, and our co-host is Chris Rossini, and Chris is also the editor of the Ron Paul LibertyReport.com.
Chris, good to have you today.
Hey, good morning, Dr. Paul.
Great to be with you.
Well, are we going to deal with some myths that need to be refuted?
What do you have?
Yes, we are.
And we're going to leave it to a bankrupt government to make even more promises and to promise even more money to the people that it owes.
Just yesterday, President Obama was out and about talking about how it's time that we finally made Social Security more generous.
So we're going to cover the big Ponzi scheme that would make Carlo Ponzi and Bernie Madoff blush Social Security today.
And we'll start with the myth of retirement itself.
Actually, this is something the government made up itself.
And arbitrarily, they picked an age where people can stop working and then go on the government doll.
So Dr. Paul, please talk about how this all started and also why you didn't fall for it because you're past the retirement age that government created and you're still working very hard every day.
Right.
Well, it happened to start.
I remember it very well because I was born that same year in 1935.
So I came about at the same time Social Security has come about.
But this idea, you know, that Obama says, well, we want to make it more generous, that's sort of like saying we're going to make everybody rich because we're going to mandate a higher minimum wage.
Even though people produce at $7 an hour, we're going to make sure they get $15 an hour and lo and behold, and everybody gets surprised.
Oh, unemployment's the employment rate goes down.
So this promise that Social Security will take care of everybody in our old age is a total myth because the government has nothing.
Oh, well, we'll collect it.
But there was some sinister thinking going on back then because it was purely political.
It was the middle of the depression, 1935.
People were hurting as a consequence of the government as a consequence of the depression that the government caused with both inflation and all the mischief that they did.
So this was a good political tool.
We'll give people a substance that they can live on.
But they also said they wouldn't get it until they were 65.
Well, it just happened that back then, not as many people lived past 65 as they do today.
So the numbers have completely changed.
So our population is getting much bigger.
And the young people getting jobs are not as plentiful.
So it turns out that it is a Ponzi scheme.
But this idea that the government can take care of us and make us feel good about our retirement, I think retirement is very important, but I think people have to feel productive.
I think one of the reasons people get unhappy is because they've been conditioned, even as young people, that they deserve something, free education, entitlements, and they have no sense of satisfaction by doing something.
So even people who leave one job and go to another and change their jobs, I think they should, and most of them are inclined to, to stay productive.
But I've often wondered about how long it would last because a decade or two ago, I saw people retiring from chemical industries and big business and from government.
You know, they could work 20 years or 25 years and in their 50s, retire with full benefits and medical care.
It just didn't add up.
The retirement is something that people should have to plan for and not the government.
So it was an illusion to think the government could take care of us and provide for these benefits.
And if they come up short, they follow the Keynesian notion, well, what we could do is just produce more money, print more money, and hand it out, and this will make everybody happy.
But right now, there are articles coming up in the regular media.
The numbers aren't there.
There are not enough workers to take care of the growing number of retirees, and the economy is weaker.
So people are getting a little bit frightened about getting real income from Social Security because it is indeed a Ponzi scheme, and nobody's quite willing to admit this.
And I think people are going to realize it, though, in the next few years.
With the next big dip in the economy, I think it'll be recognized that the American people, the recipients will not be kept up because you can have recessions and depressions when prices continue to go up.
And that is a real tragedy.
That is what I anticipate to happen.
And that will be the day Social Security should close their doors and develop a new system.
Yes, next we're going to talk about the myth of, you know, a lot of people are under the impression, well, I paid into the system, so they owe me.
So we're going to talk about how there's really not your money sitting there waiting for you.
Kind of like with the banking system that we covered a couple episodes back.
When you go to the bank, you're really getting someone else's money.
So the Social Security system is very similar.
So please talk about how there is no, when you put money into the system, they don't wrap a rubber band around it and say this is Joe America's money.
So please explain how it actually works and why it's trouble.
Well, it doesn't work because the money isn't there and the recipients are receiving money that's coming in.
That's why it's a Ponzi scheme.
So this is a delusion that they have.
They believe that the money is there.
It really isn't there.
And that it will continue to deteriorate and the benefits will go down.
But I believe the government is going to keep sending out checks until the whole thing collapses because this will be diminishing the amount of money they get.
But the government isn't, no politician would vote to cut Social Security benefits.
That's not going to happen.
But the cut will be deliberate.
Matter of fact, it's ongoing now because the cost of living is going up faster than they admit to.
So therefore, the cost of living increases are not there for the retirees.
And people keep saying, well, we have no inflation.
Why is it that people who are on relatively fixed incomes are complaining?
Well, I can't live on this.
And the people who are outside of the 1% who seem to do quite well can't live on their current income because there's a lot more inflation.
So I think this is, you know, there's going to be an end point to this, and we're fast approaching this.
So we need to get the people to be prepared for this.
The whole thing is that this has been around for so long, people have this confidence that it's going to continue.
But, you know, even when it was started, it said, well, this is just for a small amount.
It's not going to cost very much.
And now it's exploded.
It's a third rail politics.
Everybody gets what they want.
Nobody can vote against it like they can't vote against the military industrial complex.
So it was compounded, of course, with the whole idea of the Federal Reserve that's the backup, you know, that they can always back up any of these programs by just further increasing the money to pay these bills.
That, of course, is what we've been talking about for so many months now: about being prepared because there's an end point to this.
And I think if the American people get worried, they ought to be, but they should be worried by questioning whether it's a good idea or not, or whether it's a workable idea that government has this responsibility and has the ability to take care of individuals.
I often think of one thing that comes up always arguing about, you know, when they argue about marriage and spouses and all this, that even, and this is to make the point that your money isn't there because you don't have a beneficiary, you can't design it.
But, you know, if you had a beneficiary, in a way, it could circumvent this argument about who's married to whom.
Just name your beneficiary.
But now they have to argue over marriage and who can be married and who can't because the government needs to know.
But an insurance company, you can name your beneficiary, and under the law, they have to have some money there for you.
And for the most part, they do, except on times of economic crises that the Federal Reserve creates.
So I think the American people are waking up, but I think there's still a lot to be learned about exactly what the problem is.
Yes, next, Dr. Paul, let's talk about your old friend, former Fed chairman Alan Greenspan, who you had many debates with, and it was always exciting to watch.
He once made a comment about Social Security, and it always stuck with me.
And I'm going to paraphrase because I don't have the exact quote.
But he said, yeah, Americans, they'll get their checks.
There's no worries about that.
He said, however, what those checks will be able to buy is a totally different story.
So please explain that, Dr. Paul.
Well, you know, in a way, I guess we're relatively close on that one because that's been my point: that the checks will come until the whole thing collapses and they have to do something.
But right now, the checks keep coming, and they give token little increase on that.
And of course, Greenspan at one time was a gold standard person, and then he switched to a Keynesian interventionist inflationist.
And of course, now that he's out of office, he's back to at least saying some things that make a lot more sense.
But I think he's absolutely right.
The people will get checks because if they didn't get their check, that would be revolutionary.
But to say, well, that's good then, because that'll tie things over.
Yes, but it builds the bubble much bigger.
There will be more people dependent, and there will be more distortions and more inflation, more poverty coming.
And just the more they print and the more they send these checks out, actually, all it'll do is push up prices, and it will not solve the problem.
But he is right.
I think they're going to get checks for a long time to come.
But people who are on the recipient end of this have to realize that I'm sure they're concerned now about why is the cost of living so high that my check gets used up and I have no money left over.
And there's a reason for that because their inflation rate, their price inflation rate, is much higher than the government admits.
So in a relative sense, I think Greenspan is saying the right thing.
Sound Money Maintains Value00:06:06
And hopefully he has returned to his more Austrian economic position and goes back to advocating the gold standard as he once did in the 1960s.
Yeah, let's hope so.
Finally, let's talk about the other side of the coin now because we have to now give an alternative that's foreign to everyone.
Everyone's so used to this government system, this dependency, that what would life be like without it?
What choices would people make in a free society?
How would they make their decisions on how to save and think about their retirement?
Obviously, people lived before Social Security existed.
People weren't just dying in the streets without it.
So please explain what a free society would look like without Social Security.
Of course, we may have the opportunity to present that case.
We don't know what will happen with the economic collapse and what we'll do, whether we'll restore sound money and get a different foreign policy and get out of economic intervention and get rid of the Fed and these kind of things.
But I think the most important thing is to realize the system today is based on immorality.
And if people don't accept that, then they can't accept the moral responsibility of taking care of themselves.
Because today, there's been many, many generations who have been conditioned by the entitlement position that they are entitled to it, they have a right to it, and therefore they will dwell on this whole thing of taking it from those who have survived and whether they've survived because they worked hard and saved or whether they survived because they were part of the 1% that lives off the government.
But in a free society, and you mentioned that there was a time that we didn't have Social Security, but it was a response to this bad economic policy and the depression that the government brought on, and it looked like a panacea.
So it is something that has been with us for a long time.
So nothing is going to work in the free market unless people change their minds and assume responsibility.
But there's a good case to be made because I remember it, what it was like, you know, when Social Security existed, but it was very, very small.
But I was raised in a home where there was not a whole lot of wealth and parents and grandparents were taken care of by the family.
I remember my grandfather being ill and he had physicians, but the nursing care came at home and things were just done differently.
The responsibility was on the family.
But today, no, the responsibility is that if you go, if you don't follow the dictates of Obamacare and buy the insurance, well, you go to the emergency room anyway, and then you get free care.
And it's a conditioning.
So the free society, though, would have a mechanism that people would save.
People did in the old days.
They did save a lot of money.
In a free society, you wouldn't have inflation.
You wouldn't have your savings being eaten up.
In a free society, you would have sound money.
So if you saved up $100,000 and it was making 3% or 4%, you actually had a little bit of income to buffer you over.
But today, the government teaches you don't save money.
It's wrong to save money.
And if you do, we're going to punish you.
Not only will we not pay you any interest, we may make it negative interest.
Or if it was making more, they might charge you taxes on your interest.
So in a free society, you have sound money, maintains its value.
Matter of fact, the general rule is if you have sound money and a gold standard, prices gradually decrease because there's an increase in productivity.
So the value of the money and the purchasing power goes up.
But people are conditioned otherwise.
Don't save money and the government will take care of it.
So it's changing this mental status to the point where, yes, you can do it and you're able to do it.
But it's a major, major transition that we will have to go through.
But we will have the opportunity to make the decision whether we're going to go to much greater authoritarian government, which will be a much, much poorer country.
And then there will be a resort to say, well, we need to distract the people from what's going on.
And that's why we need these wars going on.
And that's been a policy that we have followed.
Many countries have followed for many years.
But medical care, I remember it very clearly.
First, I started practicing medicine when there was no Medicaid or Medicare and people weren't turned away.
There were many charity hospitals.
There's still charity hospitals right now.
There's a Shriner Burn Hospital in Galveston that still treats the children with burns for free.
You know, if they have no money, they don't even get charged.
So it's out there.
But a more prosperous nation would have a lot more of that.
And there would be responsibility, but believe me, even with its imperfections, it would be a far cry better than the terrible conditions that the government has already created for us.
I mean, there's a lot of poverty, a lot of unemployment, a lot of people out in the street, like 50,000, 60,000 people that are homeless in New York City alone.
And this is because of this entitlement thing.
Well, Medicaid will take care of them.
And, you know, Social Security, take them, take it early, and disability insurance.
But it hasn't worked.
It just has encouraged it.
So, yes, the people will devise a way of taking care of themselves.
It would be a much happier society.
People would at least have, you know, the sense of satisfaction of caring for themselves and being productive.
They would have a much better chance.
There would be less wars.
So I'm still a strong believer in that free market, sound money economy, and I believe we would all be better off for it.