This Week’s Challenge

What is a Ponzi scheme? Most of us can recall a certain Bernie Madoff who, after about 4 decades, cheated thousands of wealthy investors out of what ultimately amounted to billions of dollars. He did this by using a Ponzi scheme which ultimately landed him a 100 year+ prison sentence. The term "Ponzi" was coined after an Italian immigrant named Charles Ponzi, who was sentenced to 5 years in federal prison after having been found guilty of defrauding investors out of millions of dollars on November 1st, 1920. At the time, it was the largest financial crime ever committed in U.S. history. A Ponzi scheme works like this: New investors invest their money with whoever is running the scheme, when the guy running the scheme finds more investors to do the same; he immediately pays back his first investors with the funds from the newer investors. Ultimately the entire entity is insolvent (or unable to pay back every one of its investors at any given time) and when the influx of new investors ceases to exist, the scheme ends and collapses as all the newer investors are left empty handed.

That said, allow me to introduce the largest Ponzi scheme in U.S. history: Social Security. Now, if you ever log onto the Social Security Administration's website, you will most likely find that everything about social security isn't very far off from a "happy joy" theme of a Disney movie. And to tell you the truth, I personally wouldn't be surprised if Bambi and Thumper themselves hopped right off the monitor and started singing to you.

Their press releases boast about the decrease in hearing backlogs, President Obama's divinity for showering it with a 12.5 billion dollar increase, and my personal favorite: the cast of The Patty Duke Show.

The truth of matter is that the new investors of social security, the younger generations of tax payers, will never see the money they put in until they are old or disabled. And even though everyone has a Social Security account that does not make those accounts payable.

Theoretically, if Social Security were required to pay every social security account today, it would go bankrupt and cease to exist. And I don't know about you, but when I see a Ponzi scheme requesting billions more from the government to keep it afloat, I'm inclined to start thinking that the scheme most likely collapsed a long time ago and that Social Security is now nothing more than a free hand out from the government to citizens of the United States. In which case, why are we still even paying a tax on it when the government's willing to subsidize it no matter what? Socialism! (Woops, you'll have to excuse that last claim, as my jittery caffeine ridden fingers accidentally slipped on the keyboard there for a moment.)

For those actually interested in this subject, I encourage you to check out more on it through the following link at businessweek.com: www.businessweek.com.

Is Social Security nothing more than a dead Ponzi scheme turned into a government handout? You make the call.