A Scheme With No Off Button

Ever wonder why the New York Times can report on a Ponzi scheme in the private sector and be totally oblivious to the Ponzi scheme that the U.S. Government has been running right under the Gray Lady's nose for seventy-five years? This hustle is called "Social Security."

In an article about the Bernie Madoff scandal and Ponzi schemes in general, Catherine Rampell makes it clear that she understands the basics. Her article is entitled "A Scheme With No Off Button":

"Mathematically speaking, Ponzi schemes are doomed. They work by bringing in new investors to pay off old ones. In pure form, there's never any actual business activity; the money just rolls backward from ever-increasing numbers of investors to keep up the appearance of profits. This means the scheme requires an infinite supply of new suckers."

This is also an accurate description of Social Security -- though no one at the Times seems to be aware of that fact.

Here is the same paragraph translated to reflect the big government version of Franklin Delano Roosevelt's Ponzi scheme -- which happens to be collected with the threat of imprisonment. (Words in bold italics are my reinterpretation throughout this article.):

"Mathematically speaking, Ponzi schemes are doomed. They work by bringing in new FICA payers to pay off old ones. In pure form, there's never any actual business activity; the money just rolls backward from ever-increasing numbers of new workers to keep up the appearance of being solvent. This means the scheme requires an infinite supply of new suckers -- for example you and me."

The N.Y. Times version continues:

CUT AND RUN These Ponzi schemers, a subset of the "Music Man" breed of professional swindler, are the small-time crooks, the snake-oil salesmen. They plan to rip off everyone in River City, hop on a train, change identity, and then start over, from the top, in the next town.

The socialist scheme works like this:

"CUT AND RUN These Ponzi schemers, a subset of the "Music Man" breed of professional politician, are the small-time crooks, the snake-oil salesmen. They plan to rip off everyone in River City, hop to the house, change to the senate, and then start over again in the presidency."

The N.Y. Times:

TURN (OR RETURN) THE BUSINESS INTO SOMETHING LEGITIMATE This group is likely to have started out with some hope for legitimacy. They solicit seed money for a brilliant investment idea, but the idea falls through. Rather than declare failure, they recruit new investors to pay off the old ones.

The fraud is just temporary, the swindlers tell themselves. They delude themselves into thinking they'll come up with another, better idea some day.

The socialist scheme:

"TURN (OR RETURN) THE BUSINESS INTO SOMETHING LEGITIMATE This group is likely to have started out with some hope for legitimacy. They solicit more money for a brilliant new tax scheme, but the idea falls through. Rather than declare failure, they invent new taxes or raise the old ones to pay off the shortfall.

The fraud is just temporary, the liberal politicians tell themselves. They delude themselves into thinking they'll come up with another, better idea some day."

The N.Y. Times version continues:

NO EXIT These schemers, usually from relatively humble backgrounds, are deeply insecure. They have felt like impostors their whole lives, whether in the country club or on the trading floor, says James Walsh, author of "You Can't Cheat an Honest Man." Expecting exposure for something, sometime, somewhere, they rationalize their fraudulent behavior. They delay the inevitable as long as they can - and live well until they get caught.

The socialist scheme is exactly the same:

"NO EXIT These professional politicians, usually from relatively humble backgrounds, are deeply insecure. They have been impostors their whole lives, whether in the country club or on the floor of congress. Expecting exposure for something, sometime, somewhere, they rationalize their fraudulent behavior. They delay the inevitable as long as they can -- and live well until they get caught." Then they retire with a taxpayer-funded lucrative pension and healthcare.

The N.Y. Times:

GET ELECTED TO PARLIAMENT After scamming millions of Russians in the 1990s, Sergei Mavrodi promised his investors a taxpayer bailout if they elected him to the Duma.

The socialist scheme:

GET ELECTED TO THE PRESIDENCY After scamming millions of Americans in 2008, Barack Obama promised his naïve constituents a taxpayer-funded  economic bailout if they elected him to the Presidency.

The N.Y. Times version ends:

In other words, Ponzi schemers don't necessarily start out as such, and as sophisticated as they are, they may not consciously recognize that they have created one. They delude themselves into thinking the ploy is just a stopgap measure, an attempt to hide a loss until they can -- once again -- dream up something brilliant.

Meanwhile for the last seventy-five years the Ponzi scheme called social security has rolled on unnoticed by the Times:

In other words, socialist schemers don't necessarily start out as such, and as sophisticated as they are, they may not consciously recognize that they have created one. They delude themselves into thinking the ploy is just a stopgap measure, an attempt to hide a loss until they can -- once again -- dream up something brilliant.

See how easy this is, when it is translated from the politically oblivious world of the New York Times to the one the rest of us inhabit?
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