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By David Langer,
David Langer Company, Inc.

In the past year, I noted the Social Security System has been called a Ponzi scheme by some writers. This was repeated in Orlando in early November at the annual meeting of the Conference of Consulting Actuaries in a feature talk by a prominent Florida economist, Dr. Henry Fishkink. I stood up and replied to him along the lines of the following letter I sent to the Wall Street Journal on July 3, which started me thinking about the subject:

The book review, "The Not-So-Golden-Years," June 29, succeeds in being both misleading and pejorative in referring to Social Security and Medicare as among a plethora of Ponzi-scheme entitlements siphoning huge transfers from young savers to old spenders. Ponzi fraudulently promised initial investors a quick profit, which he paid from funds obtained from later investors to encourage bigger risk taking. Social Security benefits, on the other hand, are the result of fully debated public policy. Their goal is not to enrich swindling Ponzi types, but rather a national effort to deal with the problem created by inadequate public and private retirement plans.

The destitution of the elderly in the 1930s created a burden not only for them, but for families, government, and charities. The situation is much less dire today than it was in the 1930s, because of Social Security and the proliferation of employer plans. The latter, however, are not yet sufficient by themselves, nor is personal savings a viable option for most. Employers benefit greatly from the existence of the Social Security system, which they can incorporate into their own retirement policy. The benefits are not only a bulwark against economic misery, but are also promptly recycled into the economy.

It is essential to give thought to improving the financial and benefit structure of Social Security as well as to beefing up employer plans and encouraging workers to save. However, having a clear picture of the problems is a vital step to getting there. So, too, is enhancing national productivity as your critic does well to emphasize.

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