It's unfair to call Social Security a Ponzi scheme

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The Washington Post
By: Michelle Singletary
August 29, 2010

Perhaps nothing gets some people madder than if you trash their mama or dare to talk about Social Security.

I frequently get mail from folks who think Social Security is just a government-sanctioned Ponzi scheme, a con game in which money from new investors is used to pay earlier investors. Eventually, the con collapses when not enough new money comes in to settle with existing participants.

Critics of Social Security say the explanation fits because as the U.S. population grows older, the cost of running the entitlement program will outpace revenue coming in. Under current law, dedicated resources are projected to become insufficient to pay full benefits in 2039, the Congressional Budget Office says.

The discussion about what to do with Social Security not only is divisive but at times can get very ugly. Former Sen. Alan Simpson, the co-chairman of President Obama's bipartisan debt commission, got in trouble recently for saying this about Social Security: "We've reached a point now where it's like a milk cow with 310 million tits!"

Although Simpson has apologized for his colorful language, the sentiment he expressed is still felt by many.

President Franklin Roosevelt signed the Social Security Act on Aug. 14, 1935. Since then, it has unquestionably kept millions of people -- most importantly, the elderly and disabled -- from the depths of poverty.

Social Security is not a Ponzi scheme. Nor are people milking the program to live the high life. How many people could live richly off $1,000 a month, which is the current average monthly benefit for all beneficiaries?

If we decrease Social Security's financial impact, what do we say to the people who have worked hard all their lives but still don't have enough saved to take care of themselves in their old age? What do you say to someone who has become disabled and can't work? What about the children left behind by the death of a parent?

Should we say, "Sorry, bud, you're just trying to milk America"?

Look at some facts from the AARP Public Policy Institute:

-- Twenty-three percent of older Americans live in families that depend on Social Security for 90 percent or more of their family income.

-- Social Security provides crucial income support to women and minorities. Twenty-nine percent of older African Americans and 26 percent of Hispanics rely on Social Security for 90 percent or more of their family income.

-- Fifty-three percent of women 65 and older count on Social Security to provide 50 percent or more of family income.

-- As people get older, they rely more on Social Security. For example, among those 65 to 69, almost 16 percent count on Social Security to provide 90 percent or more of their family income. For those 75 to 79, the figure rises to 25 percent.

If you have any doubt how important this program is, read the personal stories the Social Security Administration has been collecting in honor of the program's 75th anniversary. You can find the stories on the agency's Web site, but here are just a few:

-- "Back in the 1970s, my father became disabled. I drew a check on him until I turned 18. $125 per month. But then that was a lot of money and we lived okay. I don't remember feeling poor."

-- "When our parents died nine months apart in 1959, they left behind me and my five brothers. Then along came Social Security from both of our parents being workers. What a blessing; we got $60 a month for each of the three boys . . . This afforded us the extras such as food to eat. We really felt blessed by this plan."

-- "My husband of eight years died of heart disease at the age of 42. I was 37 with one young son. Jeff was the one who supported our family, and in the blink of an eye he was gone. I want to thank Social Security for helping me financially get through the months and years after losing Jeff."

-- A retired nurse, diagnosed with ovarian cancer, wrote: "If it had not been for my Social Security benefits, I don't know how I would have paid my utilities or bought my food. . . . I will forever be grateful to President Roosevelt. . . . The world needs to know how many people Social Security has saved."

Social Security has some major funding issues, but it's not a con. It is a social insurance program that was never intended to be any individual's personal savings or investment account. This remarkable social safety net is the cost we bear as a civilized society.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

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This page contains a single entry by CFED published on September 1, 2010 3:19 PM.

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