Whenever the subject of Social Security comes up in a political debate or campaign, you are likely to hear a candidate lament that the Social Security System is really the National Ponzi System. Is that an accurate description of America’s retirement system? Here are the facts. You decide.

The name Ponzi Scheme comes from the illegal actions of Charles Ponzi who duped thousands of people in the New England area. He encouraged them to invest in postage stamp speculation. Originally the first investors did well with the scheme, as did Charles Ponzi. But it was nothing more than the typical “rob-Peter-to-pay-Paul” deception. The money from the new investors was used to pay off the earlier investors. Eventually the whole scheme collapses.

Does that look like what we have in Social Security? Many people see some alarming similarities. Social Security is a “pay-as-you-go” system. Current recipients receive benefits from working Americans who are now paying into the system. From the start, there was a potential problem. But it got worse due to demographics.

In 1935, there were 40 workers for every recipient. By 1950, the ratio was 5-to-1 and has now dropped to below 3-to-1. Also, people are living longer. Fewer people lived past age 65 in the 1930s than they do today.

And there is another problem. Congress doesn’t save Social Security taxes. They spend them. Each year Congress collects about $200 billion more in Social Security taxes than it pays out to the 50 million Social Security recipients. It doesn’t put that money in the bank. It spends it on government programs. Supposedly there is a Social Security Trust Fund. Actually, all the Treasury Department does is produce “special issue government securities” which are essentially government IOUs.

You don’t need an accounting degree to see that Social Security has a problem. It would need more people paying into the system in order to make it solvent. That sounds to me like a Ponzi Scheme.