Is social security a ponzi scheme Essay Example | Topics and Well Written Essays - 1250 words

Is social security a ponzi scheme - Essay Example Simply put, in the Social Security program funds are contributed by the working people and are used by people who have retired. The kitty, so to say, is being constantly replenished as is also being used. Thus Social Security is largely a pay-as-you-go program. To take the discussion further it is essential to know what a ponzi scheme is. (meaning of a) Literally speaking, a ponzi scheme is a fraud or a con. The element of deception prevalent in the scheme makes it illegal. In a ponzi scheme the participants or investors are told that their money is being invested in high return yielding real or financial investments. In reality, their money is not invested but is pocketed by the conman running the Ponzi scheme. The ponzi scheme promises returns that are far higher than the market rate. This high rate, which is too good to be true, in itself, should put doubts in the minds of the customer. However gullible investors do fall prey to such ponzi schemes. The earlier investors are paid off by the money contributed by fresh or new investors which keeps the scheme going (MacEwan 2009). In order to remain viable, a Ponzi scheme has to grow rapidly. In fact, the scheme would require double the number of investors/participants after every round of payouts. Let us now shift focus on Social Security. (description of the relevant properties of x) The Social Security program has a mode of financing and functioning and functioning which is pretty much similar to that of a ponzi scheme. However, the distinguishing factor is the intent. The purpose of Social Security is to give at least a subsistence income to the disabled, retirees, their dependents and underage survivors of deceased workers. (any member x of a must have the property p) Social Security consists of four separate trust funds namely the Old Age and Survivors Insurance (OASI) Trust Fund, the Disability Insurance (DI) Trust Fund, the Hospital