Perry's Right On Social Security

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Investors Business Daily:

Retirement: When Gov. Rick Perry called Social Security a "Ponzi scheme" and a "monstrous lie," the usual suspects complained about his irresponsible rhetoric. But why should Perry soft pedal a hard truth?

When asked about Social Security at a presidential campaign stop in Iowa this weekend, Perry said: "It is a Ponzi scheme for these young people. The idea that they're working and paying into Social Security today, that the current program is going to be there for them, is a lie. It is a monstrous lie on this generation."

You could almost hear the left's collective jaws dropping. How could anyone say this about their most-beloved New Deal program, which has rescued millions of seniors from poverty and let millions more live dignified middle-class lives?

But Perry is right. As Nobel Prize winning economist Milton Friedman once put it, Social Security is "the biggest Ponzi scheme on Earth."

In a classic Ponzi scheme, the first investors get big returns, paid for entirely by new ones. But eventually, you run out of enough new investors and the scheme collapses.

Social Security has operated in basically the same way. The first retirees got huge "returns" from their Social Security tax dollars, but those returns have dwindled with each successive generation as the ratio of workers to retirees inevitably dropped.

According to an analysis by the liberal-leaning Urban Institute, an average couple in 1960 got a 700% windfall on their Social Security taxes. By 1980, that had fallen to 180%. But most of today's retirees can expect less in benefits than they paid in taxes. Even so, the program still faces a mind-boggling long-term funding shortfall of more than $21 trillion.