Santelli, Friedman duke it out over “Ponzi scheme”

posted at 3:25 pm on September 8, 2011 by Ed Morrissey

My friend Jazz Shaw worries that Rick Perry’s argument that Social Security in its present form is a “Ponzi scheme” leaves him vulnerable in a general election. Rick Santelli gave it a workout on CNBC today against the New York Times’ Thomas Friedman, who ends up sputtering into ad hominems when he can’t counter Santelli’s arguments about the nature of a collective that can’t pay out on its promises — and Santelli responds in kind. The Daily Caller provides the transcript and Greg Hengler provides the clip:

FRIEDMAN: No, I don’t think it’s a Ponzi scheme.

SANTELLI: Earlier in the show you said that we’re putting the burden on our kids that’s unsustainable. What’s the definition of a Ponzi scheme?

FRIEDMAN: It’s a program that made promises that it cannot keep in full and it needs to be fixed and reformed.

SANTELLI: Isn’t that exactly what a Ponzi pyramid is?

FRIEDMAN: I don’t think it is a Ponzi scheme as a criminal endeavor.

SANTELLI: No, no – forget the criminal side. You need more people to perpetuate a myth because if the people stop the myth is known to all. That’s my definition of a Ponzi scheme. Let’s call at it chain letter, a pyramid scheme. Isn’t that by definition what Social Security is? Take the legalities and fraud out.

STEVE LIESMAN: Why is it a Ponzi scheme, Rick?

FRIEDMAN: It is pay as we go. Ronald Reagan fixed it. Why can’t we fix it?

SANTELLI: What does Ronald Reagan have to do with my question?

FRIEDMAN: What does your question have to do with reality?


SANTELLI: You can’t decide that more people is the only thing made Social Security work. We have a real issue because many people in government seem to like to read your work.

FRIEDMAN: What makes Social Security work is fixing Social Security in terms of the population demands.

SANTELLI: I didn’t ask if we should fix it or not. I asked if it’s a pyramid scheme.

FRIEDMAN: Your question is idiotic. That’s what you asked.

SANTELLI: You’re idiotic. I’m done. I feel good.


This gets to the larger point about using blunt language to describe an obvious problem. People appreciate that in leadership, although to be fair, they also want to hear about solutions or at least the framework of a solution. Perry provided that in his answer to the Ponzi-scheme question last night, specifically saying that seniors and those close to retirement would not be affected by Social Security reform, and that younger workers would not have their funds directed to a system that won’t survive for their own retirement. That’s not exactly a novel position for Social Security reform, and it’s about as specific as we saw from Ron Johnson and Marco Rubio when they won Senate races in Wisconsin and Florida in part by talking plainly about the need for entitlement reform, including Social Security.

Besides, contrary to Friedman’s point, Ronald Reagan did not “fix” Social Security. If it was “fixed,” we wouldn’t be subjecting younger generations to an unsustainable economic model now, as Friedman himself conceded. The reforms enacted during his administration — which were bitterly opposed at the time and necessarily politically limited — put off the eventual day of fiscal reckoning by a few decades but did nothing to address the internal flaws of a system that was designed for a 16:1 worker-to-retiree ratio in a 3:1 or 2:1 reality. We need to actually fix the problem this time in order to prevent a tsunami of debt from entitlement programs, and we’re not going to solve the problem by pretending it’s only a tweak away from long-term resolution.

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What Happened to the $2.6 Trillion Social Security Trust Fund?

Its gone, spent! That’s a ponzi scheme.

Speakup on September 8, 2011 at 6:31 PM

Speakup on September 8, 2011 at 6:31 PM

The money was stolen from SS for other purposes. As some other person commented on another thread, SS is not the ponzi scheme, the US Government is.

Really Right on September 8, 2011 at 6:35 PM

Really Fat.

WordsMatter on September 8, 2011 at 6:57 PM


Elchasebo on September 8, 2011 at 7:30 PM

From Wikipedia:

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. 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.

Sounds like Social Security to me.

single stack on September 8, 2011 at 8:20 PM

Love Santelli.

Why does Tom Friedman look like Matt Millen circa 2005? How’d Matt Millen work out for the Lions?

Dr.Cwac.Cwac on September 8, 2011 at 8:54 PM

if by “retirement accounts” you mean Kickboxing, it would still be a ponzi. But if RA meant putting the money to work via capital investments then yeah. Beware of politicians spouting “investments” in infrastructure or government programs, whither the return on investment.

AH_C on September 8, 2011 at 5:05 PM

Personal retirement accounts seem to be doing well in other parts of the world. It would be expensive and my generation (gen x) wouldn’t get much in return, but doing nothing, or raising taxes, would be worse. In any case, IMHO we’re just reaping what we’ve sown. 50 million abortion deaths and counting…..

quiz1 on September 8, 2011 at 10:04 PM

Exactly how the hell can SS not be a ponzi scheme when the funds can be spent at will?

Speakup on September 8, 2011 at 6:07 PM

I’ve long wished we could get a Congress with enough spine to “fix” the budget. Remove SS from the general fund (as it should be). For decades, Dems (and later, Repubicans) have disguised how unsustainable the situation is by putting SS into the general fund. Seriously, if a company included employee contributions to their 401Ks in the company’s profits (like Congress includes SS payments in the general fund), those accountants would be calculating their jail terms instead of profits.

For additional fun, they should go back and recalculate all the budgets going back to 1968. That would show us our REAL debt (because it would include promised outlays in our deficits) and would dwarf the little $15 trillion they bandy about right now.

CJ on September 9, 2011 at 12:12 AM

When the congress voted to put the SS fund into the general fund, all the fun began. G-d I sure would like a forensic audit of the federal government. I bet we would be surprised at how much money ended up in the pockets of 535 elected officials and their friends, and families. But then again even the best CPA might not be able to follow all the money. How many trillions of dollars has past through the hands of the government? It all stinks, and stinks bad. How is it the federal Reserve board can loan out 2.5 trillion dollars to someone or country and not have to even tell us who they gave it to?

jainphx on September 9, 2011 at 1:11 AM

Apparently, to Democrats and Obama a$$-lickers like Friedman it’s not a Ponzi scheme as long as you don’t call it a Ponzi scheme. Nothing to see here. Move along. Mind that puddle of blood now.

Extrafishy on September 9, 2011 at 5:25 AM