Dean Baker: Ryan wrong in calling Social Security a ‘Ponzi scheme’

2011-09-22T04:45:00Z Dean Baker: Ryan wrong in calling Social Security a ‘Ponzi scheme’Dean Baker
September 22, 2011 4:45 am  • 

Dear Editor: During a recent interview, Rep. Paul Ryan, R-Janesville, made a number of remarks about Social Security, among them characterizing Social Security as a “Ponzi scheme” that would yield a negative rate of return, and saying, “(Social Security) is not working, it is going bankrupt, and that current seniors will be jeopardized the most by the status quo.” None of these statements is accurate.

Almost no one will get a negative real return on their Social Security taxes. This issue has been researched extensively and, assuming a 2 percent real discount rate, even as late as 2030 most new retirees will receive more in benefits than they paid in taxes. There is simply no basis for the claim that beneficiaries will receive negative returns on their taxes, as the value of scheduled benefits actually rises in later years since life expectancy, and therefore the expected period of retirement, will continue to increase. The only way we would see negative returns would be if Congress voted to cut benefits.

In fact, if Congress makes no changes at all to the program, the latest Congressional Budget Office projections show that Social Security will remain fully solvent through 2038 and would pay about 80 percent of full scheduled benefits from then on, indefinitely. It is quite difficult to make the case that a system that pays full benefits for the next 27 years is not working or is going bankrupt, let alone claim that it jeopardizes the retirement security of current seniors.

As chairman of the House Committee on the Budget and charged with making recommendations about our nation’s finances, I hope that Rep. Ryan will be careful to present the situation more accurately in future public statements.

Dean Baker

co-director, Center for Economic and Policy Research

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