By now we have heard about Bernie Madoff’s $50 billion Ponzi scheme, where the life savings of at least hundreds of people – perhaps thousands – went up in smoke. We are all being told that this represents the biggest Ponzi scheme of all time, by a wide margin. Right?
Wrong. Madoff’s Ponzi scheme isn’t even close to the biggest one ever, by far. The biggest Ponzi scheme is one in which we are all victims, to the tune of close to $50 trillion – not billion. It’s the unfunded liabilities of the US Federal Government, particularly Medicare and Social Security.
How does it add up to $50 trillion? In a classical Ponzi scheme, the government has promised pay-outs of monies under the guise of “Social Security” and “Medicare” (among the two largest schemes) for whom taxpayers will be on the hook in the future. What about the Social Security “trust fund?” It consists primarily of IOUs denominated in government bonds, to be paid for by future taxpayers. Madoff would only have been so proud to be in charge of this giant scheme.
There are just over 100 million households in the US, although only approximately half of Americans are significant Federal income taxpayers. What that means is that some 50 million Federal income taxpayers could be the ones carrying the burden of funding this $50 trillion Ponzi scheme. That’s $1 million per taxpayer, folks. If the government expands the tax base to 100 million people, it’s $500,000 per person. That’s the average net worth of all Americans. Everything we own is spoken for in the government’s $50 trillion Ponzi scheme.
What’s the bottom line? Sure Bernie Madoff is a giant crook, but even this giant pales in comparison to the Ponzi scheme in which we are all victims to the tune of anywhere from $500,000 to $1m each. One can also suspect that this number will increase further, because the government may be expanding its activities into further areas of society, including health care, the banking system, industries such as automobiles, and so forth. Are you enjoying the service you receive at The Post Office? At your airport’s TSA station? Then you will increasingly love the world of entitlement socialism, built on these giant Ponzi schemes.
There are many things of which we can be critical of President George W. Bush, such as the new Medicare Ponzi scheme, the bailout mania, the general insane increase in government spending (all with massive Democrat support in Congress). However, for what it’s worth, President Bush warned against, and tried to do something about, two of the biggest problems of all time: He tried to (1) Put the lid on the corrupt Fannie Mae and Freddie Mac that led to the mortgage crisis, and (2) Convert Social Security from a Ponzi scheme to a private 401(k)-style savings account. In future years, historians will look back at those who opposed President Bush’s reform proposals in those two areas, in the same way we are now looking at Bernie Madoff, except this Ponzi scheme is 1000x larger.