Social Security

Rick Perry Was Right About Social Security

Perry did not succeed this time in his quest for the Republican nomination. But he did succeed in articulating a hard truth.


When Texas Gov. Rick Perry, then in the early stages of his short-lived quest for the Republican presidential nomination, referred to Social Security as "a Ponzi scheme," he was excoriated by the press, left and right, and by his fellow Republicans, as well. Earlier this week, government actuaries revealed that Perry was correct.

That revelation, which was greeted with a ho-hum by the media, basically announced that by 2033, 21 years from now, the so-called Social Security trust fund will be empty. The only reason this was even announced is because we are approaching a presidential election campaign, and in response to Perry's much-derided claim, the government's actuaries, who originally told the Obama administration and the public that the fund would be solvent until 2036, re-examined their numbers and concluded that it will be in the red three years earlier than they thought.

This revelation should come as no surprise to those who monitor the government and its deceptive ways. When he first introduced Social Security, President Franklin D. Roosevelt argued that under Social Security the federal government would be holding your money for you. He deceptively fostered the idea that Social Security would be a savings account, into which employees and employers would make contributions and out of which guaranteed monies would be paid to those who reached the age of 65. Essentially, he claimed that you'd get your money back.

The politicians believed him, but the actuaries and the judiciary understood that the government would never hold anyone's money for him—as if it were the custodian of a bank account. In the first of several challenges to the constitutionality of Social Security, the Supreme Court found that the Social Security fund did not consist of your money. It was merely tax revenue.

Did you know that?

It also held that since Congress' law-making authority is limited to the 16 discrete delegated powers granted to it in the Constitution (a truism few in Congress accept as binding) but its spending authority is open-ended (a conclusion that must torment James Madison's ghost), Congress could collect funds, claim it was holding the funds in a savings account and then spend those funds as it saw fit—for those in need after age 65 or for any other purpose.

Did you know that?

And, in a curious yet revealing one-liner in the Supreme Court opinion upholding the constitutionality of Social Security, even the court recognized that there would be no trust fund in the traditional sense when it found that the tax dollars collected and supposedly designated for Social Security were "not earmarked in any way."

Did you know that?

Eventually, the government would acknowledge that what it first called a savings account and then called old-age insurance and then said would be fortified by a trust fund did not even establish a contractual obligation to those who have paid the Social Security tax—which would be all of us. Thus, the feds have conceded and the courts have agreed that the money you have involuntarily contributed to the so-called trust fund is not yours and can be spent by the government as it pleases, just like any other revenue that the feds collect.

Did you know that?

The trust fund is not money that the government "holds" for you, as FDR promised. It is not money to which you have a lawful claim, as he claimed. It is not a guarantee for you, as he led the public to believe. The so-called trust fund is merely the difference between what is collected and what is paid out. And the feds just acknowledged that in 21 years, they are likely to pay out more than they will collect.

Perry did not succeed this time in his quest for the Republican nomination. But he did succeed in articulating a hard truth: The same federal government that prosecutes people like Bernie Madoff for paying out more than they collect does the very same thing under the color of law.

Is a Ponzi scheme—which is basically theft by deception—lawful just because the government runs it? The Supreme Court has said yes. Perry has said no.

Governor Perry is correct.

Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the senior judicial analyst at Fox News Channel. Judge Napolitano has written six books on the U.S. Constitution. The most recent is "It Is Dangerous To Be Right When the Government Is Wrong: The Case for Personal Freedom."

NEXT: Thank You, Mr. President, for the Insurance You Didn't Get Me!

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  1. Earlier this week, writes Andrew Napolitano, government actuaries revealed that Perry was correct.

    But he once drove past a sign with the N-word on it, so that cancels out everything else.

    1. I’ll be a lot of Congresscritters have attended Redskins games. Let’s throw them out of office. (Any excuse will do.)

  2. The SS Trust is solvent until 2033 because it has $2.6 trillion of non-cash interest bearing assets in it (US Treasuries).

    Of course the messy part is that taxes must be collected to back the Treasuries.

    The Ponzi part won’t hit for a generation so good luck trying to kill it. Bush tried in 2005 and he failed big.

    1. At least you admit it is a Ponzi scheme.

    2. I’m not broke. I have a IOU I wrote to myself for 7 zillion dollars.

      1. shrike, I’m so proud of you.

  3. When truth is spoken there’s litle left to be said.

    1. Unfortunately, speaking the truth and showing the truth are two different things. Napolitano does a great job of describing why SS is a Ponzi scheme, but in my blog I actually show, numerically, why SS is a Ponszi scheme.


  4. say adios to your pension mofos. good luck getting the occupy generation to pay.

    1. Seems that people like Perry are a bigger threat to your “pension” than Occupiers are.

      1. Simple math is a bigger threat to Social[ist in]Security than either.

  5. The Average life expectancy in 1935 when socail security was passed was 61.7. So they never intended most people to live long enough to collect any of it.

    Did you know that?

    1. Yup. At the time it was instituted, people only retired when they got too feeble to keep working, usually in manufacturing or other labor-intensive jobs common at the time. Retirement was never envisioned as a thirty-year vacation for people who retire at 55 and live to 85 or longer.

    2. In effect, it was socialized insurance against living to an unexpected age.

      Had it been indexed to life expectancy, and the tax kept low as it originally was, it probably would go unnoticed, generally.

      This illustrates one of the problems with laws that go beyond simple things like murder and theft: they tend to codify today’s situation, when the world is ever-changing.

    3. The combined taxation rate has more than septupled since 1935.

      Did you know that?

      1. That is true and the functions of the program expanded significantly as well.

        1. On the assumption that Washington bureaucrats know how to spend my money better than I do.

  6. Your payroll tax is actually 12.4%,not the 6.2% you think it is. Your employer pays half of it directly to the government before paying you your salary, so you don’t see it.

    Did you know that?

    1. If you are self employed you are on the hook for the entire amount.
      Did you know that?

  7. Social security is NOT a Ponzi scheme. Ponzi schemes are at least voluntarily entered into.

    1. I remember reading an op-ed piece in The Washington Post that attempted to show that Social Security is not a Ponzi scheme, and sure enough, that was the only distinction that the author could find.

      1. I once got through on Washington Journal and argued this with some high-level apparatchik from the SSA. His sole retort was that that a Ponzi scheme is defined as an illegal investment scheme, whereas Social Security was created by the government and therefore could never be illegal. The cognitive dissonance necessary to put forth such arguments with a straight face is stunning.

        1. Legal != moral

        2. He couldn’t quite wrap his mind around the concept that the investment scheme was illegal because it was a Ponzi scheme, and not a Ponzi scheme because it was illegal?

        3. What freaks me out is I’m bound by a contract I was tricked into signing (you can’t get a job without a SSN)when I was 16 years old, too young to enter into a contract. Of course, bring this up to a lefty and he’ll bloviate about what a great program it is.

          1. Try bringing it up to a current retiree. The Democrats and the Republicans both bombard them with so much bullshit about “The other party is trying to take away your (fill in the blank), that it’s impossible to have a rational discussion with them.

            1. Plus the lies that were told to sell it – your ssn will only be between you and the soc sec admin, it won’t be a national ID number, participation is voluntary, only the rich will be taxed to pay for it, etc.

              1. Is it true the rich pay a lower percent of income into this program and still get the same benefits back?

                1. Social Security benefits are calculated such that, the more you put in, the more you get back. However, this is skewed, such that lower-income people receive more benefits compared to their contribution than high-income people. Income above $110,100 is not taxed (in 2012) for social security. This means someone making $110,100 and someone making $1 million would get the same SS benefits (because the put in the same amount of money), but the $1 million earner would technically have contributed a lower percentage of his income to SS. But that’s a red herring. The point of SS (which is the lie Napolitano is addressing) is that SS is a “savings” account, so you get whatever you put in, plus whatever investment earnings. The truth is that SS payments are “earning” way more than they would have, given they are invested in T-bonds. For the average American, SS earns them approximately what the stock market would have (6-8% annual) over their lifetime, which is way more than T-bonds.

          2. Actually, you’re not bound by anything you don’t want to be bound by. The other side of the supposed contract just thinks you are. Unfortunately, they have a lot of police power and established business and employment practices helping them enforce their view.

            1. Might makes right. T o n y said so.

          3. Even sadder: Today, you almost can’t get your baby out of the hospital without filling in the paperwork for an SSN so for anyone younger than about 25, the contract was entered into by your parents — you never had an option to decline.

        4. The cognitive dissonance necessary to put forth such arguments with a straight face is stunning.


      2. So if Madoff had forced people sign up instead of asking them to, he’d be a free man?

        1. /points gun at head/

          Give me all your money! I said GIVE ME ALL YOUR MONEY!!

          Now, I’m going to invest this money and earn you way more than the stock market! You’ll thank me later, but, just so we’re clean, you had no choice in the matter, and I’m forcing you to give me your money.

          Alright? Excellent! I’ll contact you as the first returns come it.

  8. As mentioned above, the numbers tell all. I don’t expect to see any significant amount of what was taken from me, and that heavily devalued.

  9. As Joe said before jumping into the volcano, “I’m my only hope for a hero.”

    Don’t count on OBama or Romney fixing the economy for you, fix your own economy.

    1. We don’t need Obama or Romney to fix the economy. We just need them to stop breaking it. Government is like a wrench stuck in an engine: once we get government out, then the engine will run just fine.

  10. Social Security is running out of money. The 2012 Trustee’s Report details the exhaustion of trust fund reserves in 2033, three years earlier than projected last year (

    Clearly, something needs to be done and reform must take place: either by raising the wage cap, by increasing the retirement age to keep pace with longevity, by means-testing and eliminating benefits for very high income seniors, or by some combination of these proposals.

    1. Or we could take the easy way out and simply eliminate it, explain to people they must work longer or fund their own retirement. One must elplore all the possibilities

    2. You forgot giving guys my age the option to opt out.

  11. I have an article on my blog, that, while not having SS as the primary topic, does address the Amish opt-out for Social Security and I assert that denying this opt-out to the rest of us amounts to A) a law respecting an establishment of religion, and B) a violation of equal protection under the law.


    Sadly, I don’t have deep enough pockets to litigate this.

  12. The question is whether anyone has a viable solution for fixing the system.

  13. He deceptively fostered the idea that Social Security would be a savings account, into which employees and employers would make contributions and out of which guaranteed monies would be paid to those who reached the age of 65. Essentially, he claimed that you’d get your money back.

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