Guest Column by Travis Crowe

Social Security is perhaps the most contentious issue among the 2012 GOP hopefuls, but I’m a bit confused as to why. Most recently, Texan cowboy Rick “HPVVaccine” Perry has spent his time running around the country calling Social Security a Ponzi scheme. Now, I would hate to take the esteemed governor down a peg, but Social Security is not, nor has it ever been, nor will it ever be anything akin to an actual Ponzi scheme.

In a Ponzi scheme, the schemer offers unrealistic return rates to investors, hoarding their money, and then using reserve from newly-coerced investors to pay those who wish to buy out. Eventually the entire scheme falls apart when someone traces the illegitimate paper trail and realizes the entire thing is a fraud. Another possibility is investors creating a run on buyouts, in which case there isn’t enough reserve to pay principal plus guaranteed interest. There is no actual investment, and investors, fully understanding the way the scheme is operating, can be certain about realizing a return on their initial principal.

The Ponzi scheme is named after infamous con-artist Charles Ponzi. In 1920, Ponzi guaranteed investors a 50 percent profit within 45 days and a 100 percent profit within 90 days, to be accomplished through a separate scheme of buying discounted international reply coupons in other countries and then shipping them to the U.S. for sale at a higher rate.

However, this practice eventually became unsustainable, yet investors kept investing, and thus developed what we now know as a Ponzi scheme. The whole ordeal actually lasted less than 200 days and by the end, the run on Ponzi’s reserves eventually collapsed six Boston banks and Ponzi was sentenced to five years in federal prison after pleading guilty to one of the 86 counts of mail fraud he was originally charged with.

Now let’s compare our understanding of a Ponzi scheme to the actuality of Social Security. While Ponzi schemes rely on falsified financial reports in order to conceal the actual flow of money, Social Security’s finances are completely transparent and available online at either www.ssa.gov or www.nasi.org.

The money is invested in U.S. government treasury bonds (considered free of default risk) in order to maintain nearly risk-free and to provide a modest interest payout. That’s right; the stories about Nancy Pelosi sending her staffers into the Social Security vault with wheel barrows to steal billions of dollars and replace the enormous piles of cash with a sticky note that reads, “IOU” are also false.

Social Security can also be altered by our elected representatives in Congress and has operated with great success since 1935, whereas a Ponzi scheme is purely at the discretion of the schemer, and when the original Ponzi scheme lasted a mere 200 days. In fact, the only thing that Social Security and a Ponzi scheme have in common is that Rick Perry thinks they are the same thing.

But you may be thinking, “No silly, Social Security is a Ponzi scheme because we are paying now and the Fox News said it’s not going to be there when we retire!” Well first, I think you should turn the channel. Second, just know that without altering tax rates at all and assuming semi-regular employment, Social Security will be able to maintain full payouts to recipients until 2038, and even after that time will be able to pay 70 percent of maximum benefits to recipients indefinitely – without altering any sort of tax rate.

I think it’s shameful when our political discourse has devolved enough to begin serious consideration into ending the only safety from market volatility American citizens have. It’s especially frightening just three years removed from a cataclysmic event brought about by unregulated self-interested brokers and bankers. The entire idea behind Social Security is to insure the protection of retired citizens from the world of collateralized debt obligations, housing bubbles and billion-dollar bets.

The private sector has proven that it cannot and has no intention of taking care of the most vulnerable citizens among us. How dare Rick Perry call perhaps the greatest social program passed in the last 100 years an illegal fraudulent scam. Have fun explaining that one in Florida.