Guess the Source

Social Security is a Ponzi Game:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).

Paul Freaking Krugman, 1997.  Incredible how much his beliefs change depending on which party occupies the White House.


  1. Vilmos:

    AFAIR, in 1997, the Dems occupied the White House. :-)


  2. Artemis Fowl:

    Yeah, you're usually spot on, but Vilmos has you there.

    I think Paul Krugman, like Warren Buffet, has recently suffered some extreme change of thought. His ideals have changed in such extreme ways that he has to redefine the world to align.

  3. Jon:

    Typically, at least from what I've noticed, dems usually want to fix SS when they are in office but when they are not they say there is nothing wrong with it. Maybe they just say there is nothing wrong when the heat is on from the republicans.

  4. ed:

    I don't understand, which part of the quote do you think Krugman no longer believes?

  5. Brian Donohue:

    Put to one side the issue of Krugman's consistency, and reread that quote.

    He is saying that Social Security is no longer a Ponzi scheme. This is correct. The 1983 legislation saw to that.

    The program needs some tweaking- basically, raising the normal retirement age to 70 and indexing for life expectancy going forward.

    With this change, the program will be indefinitely sustainable based on "steady state" assumptions and, while there are still cross-subsidies among different groups, on average, people will get out about what they put in. Does that sound like a Ponzi scheme?

  6. Joseph Hertzlinger:

    Paul Krugman has been one of the biggest disappointments of the Obama administration. When Obama was elected, I figured "At least Paul Krugman will start making sense again." but nooooo...

  7. geran:

    Great post. Humor might get us through the tough times ahead. Humor that both Krugman and Brian appear to be attempting.