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Chapter 6: Down the Rabbit Hole

The High Cost of Good Intentions, 2017, by John
Cogan is a book about why entitlement programs keep
growing. In this 512 page book, he explains why
government benefits always multiply and are nearly
impossible to repeal.

Social Security (SS)

The Federal Insurance Contributions Act (FICA)
includes two separate taxes; Social Security and Medi-
care. Monthly benefits depend on past earnings and
retirement age. The Social Security Administration
estimates that in a few years, the system will begin to
withdraw money from the Social Security Trust Fund.

The money will not be there because Social
Security is an unfunded liability. Instead of letting the
funds accumulate in the Trust Fund and earn interest,
Congress used the money for general purposes and
replaced it with nonnegotiable IOUs. A nonnegotiable
IOU is an IOU that the public cannot buy and sell. The
government stores these Treasury bonds in filing
cabinets in an old warehouse in Charleston, West
Virginia.
Because social security is a pay-as-you-go system,
it is the world’s largest Ponzi scheme. In a Ponzi
scheme, participants receive returns on their
contributions from the latest contributors. Suppose that
I assure you and others that I am an excellent investor
and that I can triple your money in five years. Instead of
investing your money in the markets as I claimed, I pay
you ample returns from the money I collect from new
people I bring into the system. The plan begins to fall
apart when there are fewer new people.

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