Commentary Magazine


I’m Crazy Ponzi-Man, Now Gimme That Money

In a letter to the New York Times, CPA John Carrick succinctly summarizes a governmental scheme that would send private citizens to jail if they did the same thing:

Social Security is in effect a giant Ponzi scheme. Today’s contributions are used to pay beneficiaries who contributed yesterday, and the surplus of current contributions is “lent” to the federal government and used for general spending.

The Ponzi scheme underlying the Medicare system is even more blatant. Consider the new “Medicare Contribution,” enacted as part of ObamaCare in the name of “fairness,” which extended the 3.8 percent Medicare tax to the investment income of those making more than $200,000 ($250,000 in the case of a couple). The legislation dispensed with the interim step of sending the money to the Medicare Trust Fund, to then be “lent” to the general fund and spent on non-Medicare programs. Instead, the money from the new “contribution” will go straight to the general fund; Medicare will not even get a government IOU to hold in “trust.” Privately run Ponzi schemes are generally less brazen.

Later this month, Democrats will attempt to increase the “fairness” of the most progressive income-tax system in the world (under which about half of American households pay no tax at all and the top 1 percent pay of earners pay about 40 percent of the total) by increasing taxes on the “rich” to help finance the trillion-dollar deficits Obama has made the new norm. The plan is to withdraw hundreds of billions more dollars from the private economy while assuring citizens that the economic consequences will be felt only by the targeted few. The public seems to understand that the economic effect will be somewhat broader.

It is a shame that there isn’t more money in the Social Security and Medicare trust funds to “borrow.” That is such a simpler system — and there is no pesky criminal law to prevent it, since only private Ponzi schemes are banned. But the federal government has exhausted its current Ponzi possibilities and now seems more like Adam Sandler in a tax-fairness costume.