“Madoff duped a handful of well-off investors…meanwhile the Social Security program is duping generations of all classes of investors…” –Dr. Edward Forsythe
At a White House press conference Wednesday evening, President Obama announced he has issued an executive pardon to infamous Ponzi-schemer Bernie Madoff and appointed the convicted felon to manage the country’s Social Security Trust Fund.
“Look, the Social Security program is facing dire financial straits, and if there’s anyone who has the right experience, morals, and financial acumen to see this through it’s my friend, Bernie Madoff,” the President explained. “At least until I’m out of office,” he added off-microphone while sneakily winking at Jim Messina, his former campaign manager.
In March 2009, Madoff pleaded guilty to 11 felony counts related to running the largest Ponzi scheme in American history, with losses exceeding $10 billion. The scheme involved Madoff promising lavish returns to investors whose principal was ultimately being used to make good on those same lavish returns promised to his earlier investors. As the existing assets under management, which were funded by the earlier investors, deteriorated Madoff used the principal from his new investors to make good on his promises to his earlier investors.
Madoff’s unprecedented record of taking people’s money and making egregious phony promises positions him uniquely to manage the Social Security Trust Fund.
The Social Security program requires taxpayers (and their employers) to pay 6.2% of gross wages into the Social Security Trust Fund (this is that pesky “OASDI” line on your pay stub that reduces your net pay). The Trust Fund uses current period revenues (i.e., Social Security taxes from today’s workforce, or “the new investors’ principal,” and interest) to pay its expenses (i.e., Social Security benefits paid to yesterday’s workforce, or “the early investors’ return of principal and interest”). The Trust Fund is currently on pace to become insolvent by 2033, which means today’s workforce, and to a greater degree tomorrow’s workforce, can expect significant benefit reductions by the time they reach retirement age, if any benefit payment at all.
Dr. Edward N. U. Forsythe, a senior research fellow with the Institute for Opening Peoples’ Freaking Eyes, explains that the program orchestrated by Madoff is actually morally superior to the federal government’s Social Security program.
“The key distinction between a traditional Ponzi scheme and the Social Security program is that in a Ponzi scheme, the investors made a choice to invest,” Forsythe began. “The Social Security charade on the other hand, uses the force of law to require participation in what Milton Friedman called ‘the biggest Ponzi scheme on earth.’ Mechanically, the programs are largely indistinguishable: in a mature Ponzi scheme, there are no real assets under management, all new investment is simply funneled from late investors, through the asset manager’s bank account, and paid directly to the early investors; today’s Social Security Trust Fund likewise has no real assets under management and contributions received from today’s workforce are simply funneled through the Fund and paid directly to yesterday’s workforce. This seemed to work and appease the public while the demographics and economics allowed for it; in 1950 there were 16.5 workers paying Social Security taxes for every one person receiving benefits, and today there are less than 3 workers paying in for every one person receiving benefits. The wage base has simply not been able to offset that trending demographic shift.”
“Regardless of the demographics or economics,” Forsythe added, “the fact is while Washington was in front of the television cameras gesturing shame on Madoff with one hand, they were reaching their other hand into your pocket and snatching 6.2% of your income to invest into their mechanically identical plan, promising returns that it won’t be able to meet. Look, Madoff duped a handful of well-off investors who at least had a choice to participate; meanwhile the Social Security program is duping generations of all classes of investors who are compelled to participate by law. So since FDR can’t be charged with the countless felonies for his Ponzi scheme pandemic, who should we charge in his place?”
On the appointment of Madoff to manage the Social Security Trust Fund, Forsythe noted, “For once the administration has appointed someone qualified to serve in a particular role! I think Madoff will serve great in this appointment. I mean he’s the perfect guy for the job. And just think, using the law to force investment into his ‘fund’ should free up much of the creative capital he previously spent on intricate document forgeries, wire transfers, and sales pitches to entice new investment.”
Madoff will be in good company as the newly appointed asset manager of the Trust Fund. Ironically, the Trust Fund’s current Managing Trustee, U.S. Treasury Secretary Timothy Geithner, skipped paying his own Social Security taxes during tax years 2001 – 2004 (an “oversight” which he swiftly corrected after Obama expressed interest in nominating him as Treasury Secretary). Seriously, the dude in charge of the Social Security fund skipped paying his own Social Security taxes, how’s that for irony, Alanis Morissette? [♬ ...it's like a tax cheat, on the Fund's Board of Trustees... ♬]
Madoff was not available for public comment at the time of the announcement; however his attorney noted that Madoff is eager to begin his new appointment and looks forward to applying his expertise to the federal program that he attributed as the inspiration for his own record-breaking financial swindle.