"Jonathan Last has already identified a 1967 Newsweek column by liberal economist and Nobel laureate Paul Samuelson as perhaps the earliest use of the Social Security/Ponzi-scheme comparison in public argument. Samuelson was actually drawing on the Ponzi analogy to defend Social Security. His claim was that the perpetual succession of human generations establishes the conditions for a sustainable Ponzi scheme. Regardless of whether Samuelson was the first commentator to use the Ponzi analogy, he has clearly been the most influential. Policy briefs and books churned out by conservative think tanks such as Heritage and Cato have cited Samuelson’s Ponzi column for years. This is likely how the comparison made its way into public debate.
Samuelson’s idea that Social Security could best be understood as an enduring and rational Ponzi scheme grew out of his “overlapping-generations model,” introduced in a seminal 1958 paper. Samuelson’s model implied that public debt in general, and Social Security in particular, could be financed over successive generations without major tax increases. In the 1980s, Samuelson’s overlapping-generations model was seized upon by Keynesian economists to serve as a microeconomic foundation for their favored theories and plans.
The unfortunate weakness of Samuelson’s model is its assumption that a growing economy will produce continual population increase. In an April 1978 follow-up in Newsweek to his original 1967 column, Samuelson acknowledged that demographic reality was disproving this assumption. Samuelson repeated his use of the Ponzi analogy and continued to defend his hopes for Social Security as best he could. While Samuelson hung onto some slim indications in 1977 that U.S. fertility might be on the upswing, it grew increasingly clear to critics that the post–Baby Boom decline in births was not going to be reversed. Increasingly, Samuelson’s Ponzi-scheme analogy was seized upon by those who doubted Social Security’s long-term soundness."
Sooner or later you run out of other people's money to give away. While I paid into SS my whole life, it was not going into an account in my name. It was going to pay my grandmothers, aunts, uncles, and parents.
In last night’s GOP debate, frontrunner Rick Perry, who has taken flak from both sides for calling Social Security “a Ponzi scheme,” reaffirmed his view that the system is broken, adding that the entitlement “has been called a Ponzi scheme by many people long before me.”
He’s right. As Noel Sheppard points out at NewsBusters, one of the people who characterized the program that way is none other Hardball host Chris Matthews, who went Perry one better, calling Social Security a “bad Ponzi scheme.”
OK, one might say that Chris Matthews is not running for office (be thankful for small things) and is not terribly bright in any case, but he’s not the only liberal to make that observation. In 1967,liberal Nobel Prize-winning economist and Paul Samuelson wrote in a column in Newsweek titled “Something for Nothing”:
Social Security is squarely based on what has been called the eighth wonder of the world—compound interest. A growing nation is the greatest Ponzi game contrived. And that is a fact, not a paradox. [Emphasis added]
Stanley Kurtz of National Review chronicles a host of other liberals who have made the same allegation, all more distinguished than Chris Matthews.
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