Don’t Make Social Security Complicated

The government will do that for you.

Don A. Bright

“Social Security is a government program with a constituency made up of the old, the near old and those who hope or fear to grow old. After 215 years of trying, we have finally discovered a special interest that includes 100 percent of the population. Now we can vote ourselves rich.” --  P. J. O’Rourke (b. 1947), U.S. journalist.  

O’Rourke may have made that statement in jest but is has turned out to be both sad and prophetic.  

Go with me, here, while I set up a hypothetical explanation of his statement. 

Let’s say an uncle of yours called you one day and said that he had found a way to “vote ourselves rich” would you accept that as possible?  Of course not.  If he said, “I have come up with a way for me to use a small portion of your money to make you rich. Would he get your attention?  Probably.  

So that uncle asks you to make deal with him; a contract for both of you to sign wherein you promise to give him one percent of your income and he promises to wisely invest that money and with the principle plus interest provide ample retirement money for you after you turn 65.  In addition he tells you that he can force another person to match your donation and double your retirement income.  Assuming that your uncle was honest you would be a fool not to go for the deal. 

So about half way to your retirement age you bump into your uncle and ask him how your retirement fund is doing.  He responds by saying he had to use your money for his needs. You needn’t worry he says because he has made the same deal with more and more people and he can use their donations to fulfill his promises to you. However, he says, “I’m going to have to double your donations.”  “OK”, you say. 

 A year later he calls you and informs you that your donations must be doubled again to keep the plan solvent. 

Two years later the same thing happens.  You again are told to double your donation to “keep the plan afloat.” When you ask your uncle why, he tells you the number of people available to invest in the plan has dwindled and the ratio of money coming in and the money going out is getting pretty close.  Reluctantly, you agree. After all you don’t want the plan to fail.                                                           

Then later that night you wake up and realize that you have gotten yourself involved in what appears to be some kind of Ponzi scheme. 

The next day you call your uncle and tell him you want out and you want everything you have accumulated to that day.  Your uncle says, “Well, I can’t give it to you now because I have used it for expenses, but don’t worry it is in a lock box in my bank”.  So you ask him to show you the lockbox and he refuses to show it to you.  “Take my word for it”, he says, “it’s there”. 

“So why do you keep all that cash in a lock box”, you ask.  “I thought you were going to invest it and accumulate interest, and all that would be doubled by donations from another person.”  “I have done that”, he says.  So you ask your uncle what is in the lock box since he has invested all the cash.  “Well, I used it to pay some of my bills…I am in debt over my head.  But it’s there.” 

By now you’re pretty confused.  “Let me try that again”, you ask.  “If I understand you correctly, there is a lock box somewhere that holds my money, but you have used the money for yourself and it’s gone, right?”  “I wouldn’t say it’s gone, exactly”, he answers.  “But you just said there is nothing in the lockbox.”   “You’re confused”, your uncle says. “I didn’t say the Lockbox was empty, I just said it had no money in it.” 

After you regain your composure you ask your uncle just what is in the lock box.  “A promissory note made out to you.”, of course, your uncle replies.  “Could I see it” you ask.  “No” he answers.  “Well”, you ask, “how do I know the promissory note is any good?”  “Trust me, nephew, it is backed up with full faith and credit.”  “Whose?” you plead. 

Yours, of course, says your uncle, Sam.