Thursday, July 29, 2010

Comparing Madoff with Social Security

Why did Bernie Madoff go to prison? To make it simple, he talked people into investing with him. The trouble was, he didn't invest their money.  As time rolled on he simply took the money from the new investors to pay off the old investors. Finally there were too many old investors and not enough money from new investors coming in to keep the payments going.

Next thing you know Madoff is one of the most hated men in America and he is off to jail. That is fairly common knowledge.

Madoff did to his investors what the government has been doing to us for over 70 years with Social Security. There is no meaningful difference between the two schemes, except that one was operated by a private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges and status
in spite of their actions.

Need a side-by-side comparison?

Bernie Madoff: Takes money from investors with the promise that the money will be invested and made available to them later.

SOCIAL SECURITY: Takes money from wage earners with the promise that the money will be invested in a "Trust Fund" and made available later.



Bernie Madoff: Instead of investing the money Madoff spends it on nice homes in the Hamptons and yachts.

SOCIAL SECURITY: Instead of depositing money in a Trust Fund the politicians use it for general spending and vote buying.



Bernie Madoff: When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors.

SOCIAL SECURITY: When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers.



Bernie Madoff: When Madoff's scheme is discovered all hell breaks loose. New investors won't give him any more cash.

SOCIAL SECURITY: When Social Security runs out of money congress simply forces the taxpayers to
send them some more.



Bernie Madoff is in jail.

Politicians remain in Washington.



"The taxpayer: That's someone who works for the federal government but doesn't have to take the civil service examination." - Ronald Reagan

"If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand." -Milton Friedman

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