Health Care Reform: Making Madoff Look Like An Amateur

This thought occurred to me some weeks back when the left in this country was making the case that the failure to socialize the health care industry is bankrupting this country. My immediate thought was that the current state of Social Security, and its unfunded liabilities, is doing much more to damage this country's financial position. It was then it occurred to me that they view these two issues as one and the same, inextricably joined at the hip (or wallet as the case may be).

By now nearly everyone is familiar with the name Bernie Madoff. He was the architect behind a Ponzi scheme that defrauded investors out of an estimated $65 billion dollars. By definition, a Ponzi scheme refers to an investment that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering, or guaranteeing, returns that are either abnormally high or the security of unusually consistent payments. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. Although the intention of the Social Security System is for the most part altruistic, it is unfortunately structured and has been operated no different than any other Ponzi scheme. The only difference being the size of the scheme, as Social Security had unfunded obligations in excess of $41 Trillion in 2008 according to the Government Accountability Office.

There are those who claim that Social Security is not a Ponzi scheme simply because it:
1) Social Security does not propose high returns
As stated, Social Security does offer the security of unusually consistent payments because it is backed by the full taxing power of the United States Government.
2) Social Security is not destined to end.
Ponzi schemes end when there is a population bubble where the influx of new investors’ money exceeds the population of those drawing benefits or returns. With the Baby Boomer Generation drawing benefits, we are experiencing that right now.
3) Social Security is altruistic in its intent.
Touche’. However, if it is structured and operated like any other fraudulent scheme, does it really matter whether or not a fraud is intended to be so?

This is where the current Health Care Reform comes into play. Without admitting yet another government program failure, Social Security is cash negative and can only be salvaged by:
1) reducing promised payments and/or increasing the tax withholding of those paying into the system
Reducing payments, or increasing the tax withholding, would be a de facto admission that the program is fatally flawed.

or,

2) increasing the number of people paying into the system.
With unemployment currently over 9%, encouraging further immigration of working age people is not an option.

The only realistic option to perpetuate this program without admitting it is no different than any other Ponzi scheme, is to legislate additional dollars from another source. With health care making up between 15% and 20% of the US economy, this is the magic elixir for those who seek to expand the role of government. What Health Care Reform amounts to is an ass-backwards attempt to float the Social Security System through the life expectancy of the Baby Boomers in the hopes that it will once again reach a point where those paying into the system outnumber those drawing benefits.

Of course this comes at the price of liberty. Unfortunately this is a price that about 50% of the US population appears willing to pay. With that ratio, as with the Ponzi scheme, it is doomed to failure. The salvation will be the natural ebb and flow of ideology between government and individual responsibility, and government dependence and liberty.