Texas Governor and GOP presidential candidate Rick Perry called Social Security a Ponzi scheme. The Texas Governor is wrong for labeling Social Security a Ponzi scheme, and he should apologize. Perry at some point paid into the mandated program, setup were each working American contributes toward their retirement. What Perry failed to mention Social Security redistributes wealth from the lower and middle class to the wealthy?
Here are the facts. Social Security is a social program that is funded through committed payroll taxes. Each worker must pay 12.4 percent, including a 6.2 percent employer contribution, on their wages below the Social Security Wage Base ($106,800, in 2010), but no tax on income in addition of this amount.As a result, high earners pay a smaller percentage of their total income because of the income caps; from this, payroll taxes are often viewed as being “regressive.” What regressive really does, it distributes income burden on the lower and middle class than on the rich. The lower and middle class bear the burden of the tax.
An individual who dies before retirement is unlikely to receive benefits despite his years of paying Social Security tax verses an individual who lives to age 100, wealthy, receiving payments that are more than he paid into the system. This is the distribution aspect of Social Security that pinpoints thelower and middle class suffer from the program.
Social Security program is primarily funded through Federal Insurance Contributions Act known as FICA. The main part of the program is referred to as Old Age, Survivors, and Disability Insurance. President Franklin D. Roosevelt signed Social Security into law in 1935 as retirement benefit pension fund. It is the working man’s retirement fund.
The payroll taxes hurt the lower and middle classes more than any structured taxes within the federally funded system. Once the 12.4% worker’s wage is deducted that amount is forwarded to Uncle Sam, the uncle Americans have never met, to pay for Social Security. After the government receives the money, checks are printed out immediately and distributed directly to the retired.
None of the money is saved in an account for the individual. If there is anything left over, the rest of the money is spent on government programs, making it less and less available for the lower and middle classes. Vice president Al Gore during the Clinton administration suggested creating a “lock box” to prevent the payroll taxes from being used by the government for social programs. But that did not fly. Facts support that there is a problem in the Social Security system with the expected shortage of benefits to the retirement of the “baby boomer” generation.
Generally, the revenues from the payroll tax exceed the amount paid out in benefits. This was done deliberately from a payroll tax increase recommended by former Federal Reserve Chairman Alan Greenspan back during the Reagan years. Greenspan explanation for raising taxes to completely fall on “lower- and middle-income families” because Ronald Reagan had just cut the taxes that fell on the rich. The extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire. Because the government had to dip its hands to support sponsored programs any additional revenue will not be set aside to support future use.
In 2004, Social Security system paid out almost $500 billion in benefits. There’s a hidden agenda that amount could be used to pay other social programs or pay down on the national deficit. Should that be the argument of Rick Perry instead of labeling Social Security a Ponzi scheme? Because Perry can claim politicians exempted themselves from the tax. Many state and local government workers, however, are exempt from Social Security taxes because they contribute instead to alternative retirement systems set up by their employers. Or should I dare say the tax payer.
Since Rick Perry started these Ponzi shenanigans as part of his presidential campaigning speech I find this being unfair. In a Ponzi scheme, investors are swindled defrauded cheated tricked ripped off deceived hoodwinked tricked misled duped sweet talked lured take in into participating in investing for financial gains.
In Social Security, the employees are required by law to participate.In a Ponzi scheme, the “investors” invest what they can be convinced to pay. In Social Security, the employee has a set cap told how much they will pay. In a Ponzi scheme, investment is limitless and eventually decides to cut losses and stop paying into. In Social Security, you have to keep paying over and over in time but once the retirement is fully vested, retirement checks are issued until death.
Truth be told. The real Ponzi schemers are the ones that do not need social security payments. Many of the well-off reach the age of 65 invested into a retirement nest egg, receive taxpayer funded benefits?
Calling Social Security a Ponzi scheme is too much. In a Ponzi scheme, the investors can report the scam to law authorities. In Social Security, the feds are running the operation; the funds are in the account so to speak. So no, Governor Rick Perry, Social Security is not a Ponzi scheme. It’s not even a Ponzi scheme being run by the federal government, which has the power to say that you will participate and pay and it’s not illegal because you are entitled to claim and receive once you retire.
Rick Perry got it all wrong at the expense of the tax payer.