The Simple Math of Obama's Ponzi Scheme

Well, 32 months into his presidency, Obama has finally released his jobs and deficit reduction plans.  Surprisingly, he is not attempting to obfuscate his true motivation this time.  As Obama said yesterday, it is “simple math.”


It’s $1.57 trillion in comprehensive tax hikes + $1.08 trillion in non-existent war spending + $430 billion in phantom savings on interest payments + $320 billion in savings from cuts to healthcare providers (the inevitable sequestration will already cut DocFix), throwing granny off the cliff with tighter rules from the death panel, and a magical willingness to cut waste and fraud + $250 billion in other mandatory savings, most of which will never materialize – the $447 billion stimulus 2.0 = $3.2 trillion.

OK, simple enough; however, there is one important detail of the ‘Obamaian formula’ that has not been advertised.  As part of the Stimulus half of the plan, Obama will cut payroll tax revenues by $240 billion, or 36%, of the entire annual revenue (projected at $685 billion) of the so-called Social Security trust fund.   Where is that money going to come from?  How will they fill the SS shortfall, which is already projected to be $50 billion?

You guessed it: general fund revenues.

Tucked inside this 155-page behemoth is a provision to transfer funds from the general Treasury to the Social Security Trust Fund.”  Here is the relevant provision (page 8 ) in section 101(e) and 102(e) of S. 1549:

(e) TRANSFERS OF FUNDS.–(1) Transfers to federal old-age and survivors insurance trust fund.—There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsections (a) and (b) to employers other than those described in (e)(2). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted. (emphasis added)


So on top of the annual $50 billion transfer to compensate for the inherent shortfall in payroll taxes, we will now be transferring an additional $240 billion in 2012.  Remember that we have already raided the general fund to pay for this year’s payroll tax cut.  According to the Social Security Administration, $105.4 billion from the general fund was transferred to the non-existent SS trust fund.

Consequently, not only are we funding current retirees with current payroll taxes of workers, we are supplementing the shortfall with other taxes and/or more debt.

This might be a good time to review the differences between a Ponzi scheme and what has become of Social Security:

1)      A Ponzi scheme is voluntary; SS is mandatory

2)      Payouts from a Ponzi scheme are funded from the monies of current investors, but lack the ability to raise taxes or service debt.  Government can do all those things to sustain Social Security.

3)      The payouts from Ponzi schemes may be collected by the investor’s heirs.  Social Security, for the most part, is not passed down in inheritance.

4)      The trustees of Ponzi schemes cannot tax the payouts to investors; government can.

5)      When Ponzi schemes fail, the perpetrators go to jail.  Those who destroyed Social Security can force us to contribute more, receive less, and/or receive it later.

6)      Ponzi schemers purposely defraud their investors by promising invisible investments.  Government-run Social Security schemers purposely defraud their victims by promising a non-existent trust fund (as proven by the general fund transfers).


You can call it a super-charged Ponzi scheme or a big-government scheme, but dare not offend anyone by calling it a plain old Ponzi scheme.  Either way, Republicans must not support the Obama scheme to transfer funds from the general fund for the purpose of his reelection bill.


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