Santelli, Friedman duke it out over "Ponzi scheme"

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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