Do We Need 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.

Ron Paul: Hello everybody and thank you for tuning in to the Liberty Report. Today is the day we do Myth Busters and our co-host is Chris Rossini and Chris is also the editor of the Chris, good to have you today.

Chris Rossini: Good morning Dr. Paul. Great to be with you.

Ron Paul: Are we going to deal with some myths that need to be refuted? What do you have?

Chris Rossini: Yes, we are. We are going to leave 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 make Social Security more generous. So, we are going to cover the big Ponzi scheme that would make Carlo Ponzi and Bernie Madoff blush about Social Security today. We will 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 toll. So, Dr. Paul, please talk about how this all started and also why you didn’t fall for it because you are past the retirement age that government created and you are still working very hard every day.

Ron Paul: Right. It’s 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 that Obama says we want to make it more generous, that is sort of like saying we are going to make everybody rich, because we are going to mandate a higher minimum wage, even though people produce at $7 an hour, we are going to make sure they get $15 an hour and lo and behold and everybody gets surprised and the unemployment rate goes down.

This promise that Social Security will take care of everybody at an old age is a total myth, because the government has nothing, oh we will collect it. But, there was some sinister thinking going on back then because it was purely political, it was the middle of the depression in 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 will give people a substance that they can live on, but they also said they wouldn’t get it until they were 65. 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 why people get unhappy is because they have 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 job and go to another and change their jobs, I think they should and most of them are inclined to stay productive.

I often wondered about how long it would last because decade or two ago, I saw people retiring from chemical industries and big business and from government. They can 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 that the government could take care of us and provide for these benefits and if they come up short they follow the Keynesian notion, what we can 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 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 is quite willing to admit this and I think that people are going to realize that though in the next few years with the next big dip in the economy. I think it’d be recognized that the American people, the recipients will not be kept up, because when you can’t have recessions and depressions when prices continue to go up. 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.

Chris Rossini: yes, next we are going to talk about the myth of a lot of people are under the impression I paid into the system, so they owe me, so we are going to talk about how there is really no money sitting there waiting for you, kind of like the banking system that we covered a couple of episodes back. When you go to the bank you are 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.

Ron Paul: It doesn’t work because the money isn’t there and the recipients are receiving money that is coming in and that is why it is a Ponzi scheme. This is a delusion that they have that 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 and that is not going to happen, but the cut will be deliberate, as a matter of fact, it is ongoing now, because the cost of living is going up faster that they admit to.

So, therefore the cost of living increases, are not there for the retirees and people keep saying we have no inflation, but why is that people who are on relatively fixed incomes are complaining I can’t live on this and the people who are outside of the one percent who seem to do quite well, can’t live on their current income, because there is a lot more inflation, So I think this is, there is going to be an end point to this and we are fats 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 is going to continue. Even when it was started they said this is just for small amounts, it is not going to cost very much and now it’s exploded and it’s 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, it’s the backup, that they can backup any of these programs, like just further increasing the money to pay these bills. That of course has been what we have been talking about for so many months now about being prepared because there is 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 the 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, when they argue about marriage and spouses and all this 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 if you had a beneficiary in a way that we could circumvent this argument about who is 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. In 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 crisis that the Federal Reserve creates.

I think the American people are waking up, but I think there is still a lot to be learned about what actually the problem is.

Chris Rossini: 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 am going to paraphrase because I don’t have the exact quote. But, he said Americans they will get their checks, there is 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.

Ron Paul: In a way I guess we are relatively close on that one, because that has 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 given token little increase on that. Greenspan at one time was a gold standard person and he switched to Keynesian interventionism and inflationism and of course now that he is out of office, he is back to at least saying some things that make a lot more sense. But, I think he is absolutely right, the people will get their checks, because if they didn’t get their check, that would be revolutionary. But, that is good then, because that will tie things over. Yes, but it builds the bubble much bigger and there will be more people dependent and there will be more distortions and more poverty coming and the more they print and the more they send these checks out, actually all that it will do is push up prices and it will not solve the problem.

But, he is right. I think they will get checks for a long time to come, but they have people who are on the recipient end of this that have to realize that I am sure that they are concerned now about why is the cost of living so high that my check gets used up and I have no money left over. There is a reason for that, because their price inflation rate is much higher than the government admits. So, in a relative sense, I think Greenspan is saying the right thing 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.

Chris Rossini: 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 is foreign to everyone, everyone is 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 the free society would look like without Social Security.

Ron Paul: 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 will do, whether we will store sound money and get a different foreign policy and get out of economic intervention and get rid of the Fed and these kinds of things. But, I think the most important thing is to realize that 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 has been many, many generations who have been conditioned by the entitlement position, that they are entitled to, that 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 have survived because they worked hard and saved, or because they they were part of the one percent that lives off the government.

But, in a free society and you mentioned that there was a time when 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. 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 is a good case to be made, because I remember it what it was like when Social Security didn’t exist, 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 don’t follow the dictates of Obamacare and buy the insurance, you would have to go to the emergency room anyway and then you get free care and it’s a conditioning.

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 a hundred thousand dollars and it was making three or four percent, 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 will punish you and not only will we not pay you any interest, or we would make it a 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 and as a matter of fact, the general rule is that if you have sound money and a gold standard, prices gradually decrease, because there is an increase in productivity, so the value of the money and the purchasing power goes up, but the people are conditioned otherwise, don’t save money and the government will take care of it. So, it is changing this mental status to the point where yes, you can do it and you are able to do it, but it’s a major transition that we will have to go through, but we will have the opportunity to make the decision whether we are going to go to a much greater authoritarian government, which will be a much, much poorer country and then there will be a resort to say we need to distract the people from what’s going on and that is why we need these wars going on and that has been a policy that we have followed and many countries have followed for many years.

But, medical care, I remember it very clearly, I first started practicing medicine when there was no Medicaid and Medicare and people weren’t turned away, there were many charity hospitals, there are still charity hospitals. Right now there is a Shriner burn hospital in Galveston and it still treats the children with burns for free. They have no money, they don’t even get charged, so it’s out there.

But, a more prosperous nations would have a lot more of that and there would be responsibility, but believe me even with these imperfections it would be a far cry better than the government has already created for us. There is a lot of poverty, a lot of unemployment, a lot of people on the street, like 50-60,000 people who are homeless in New York City alone and this is because of this entitlement thing. Medicaid will take care of them and Social Security will take care of them and take it early and disability insurance, but it hasn’t worked, it has just 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 the sense of satisfaction of caring for themselves and being productive and they would have a much better chance and there would be less wars. So, I am still a strong believer in that free market, sound money economy and I believe that we would all be better off for it.

I do want to thank everybody for tuning in today and Chris thank you for co-hosting our program.

Chris Rossini: Thank you very much Dr. Paul.

Ron Paul: And to our viewers, please come back soon to the Liberty Report.