Persuasion is clearly a sort of demonstration,
since we are most fully persuaded when we
consider a thing to have been demonstrated

Of the modes of persuasion furnished
by the spoken word there are three kinds.

Ethos: Persuasion is achieved by the speaker’s personal character
when the speech is so spoken as to make us think him credible.

Pathos: Secondly, persuasion may come through the hearers,
when the speech stirs their emotions.

Logos: Thirdly, persuasion is effected through the speech itself
when we have proved a truth or an apparent truth by means
of the persuasive arguments suitable to the case in question. (Logic)

-ARISTOTLE, “Rhetoric“, 350 BCE


It has been several 1000 years since Aristotle wrote those words about Rhetoric and the Art of Persuasion. The debate about whether Social Security is a Ponzi scheme reminded me that the internet has not advanced the art of persuasion very much, and indeed, may be setting it back.

Why is this? Regardless of whether you studied Epistemology in college or not, Words have meaning. When we misuse the specific meaning of words to to argue for or against something, we are engaging in the form of rhetoric Aristotle termed “Pathos” — appeals to base emotion.

For example, demonizing Social Security as a Ponzi scheme is a form of Pathos. It is not an appeal to higher or better nature, nor is it an appeal to logic and reasoning. Rather, it is designed to generate a negative, unthinking emotion.  So too, is calling that form of argument “demonizing,” but at least I am demonizing ideas, and not people, as is so commonly done online.

If I disagree with someone, that does not make them a criminal or a Nazi or a racist or homosexual or a slave-owner. But those terms are commonly bandied about in internet debate, substituting for what otherwise should be intelligent discourse. It is a rhetorical technique used to demonize opponents. In my opinion, it is intellectually lazy, often reflecting a weak argument.

Which brings me to our debate:

What is a Ponzi scheme? It is a fraudulent criminal enterprise designed to scam unsuspecting and naive suckers out of their money.

Is that what Social Security is? Hardly.

In my book, that form of rhetoric is weak. It reflects an intellectual laziness and lack of gravity. It appeals to the emotions. Lastly, it betrays the weakness of the argument.

Once again I find myself shaking my head. America, we can do better . . .

Category: Philosophy, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

76 Responses to “On Rhetoric and the Art of Persuasion”

  1. There is an old legal joke: “If the Law is against you stress the facts; when the facts are against your client, emphasize the law. And if the law and facts go against you, call the other Attorney a schmuck.”

  2. Molesworth says:

    Hear, hear Barry.

    The Reps have mastered the art of Pathos. Death panels, death taxes, job creators, entitlements and now Ponzi.
    There is an absence of evidence in the discussion of government.

  3. Molesworth says:

    There is an absence of evidence in the discussion of government, i.e., Logos.

  4. bbrobert says:

    I’ve been reading your blog since 2006 or so and have never before bothered to register or reply but – thank you – for enlightening me and for so often, with these kinds of posts, saying it all for me. Don’t know how you find the time to read so much, think, research, & post, but I am grateful.

  5. dougc says:

    “You ain’t seen anything yet” I dread the upcoming election season, everyone seems to be more superfical than the last.

  6. drewburn says:

    Very nice discussion of this, Barry. And I agree. And I agree that Medicare, etc. is a much larger topic (which can similarly be contained, with that addition of full socialization to subvert gouging.)

  7. smedleyb says:

    Social security exists in order to mitigate the deleterious effects of capitalism. In fact, most forms of “social welfare” exist in order to render less harsh the inherent dislocations and/or inequities which free-market capitalism engenders. Thus while we live in an age of unprecedented economic output, we also live in an age of unprecedented economic disparity between the haves and have-nots, rich and poor, etc.

    Social security, welfare, etc. are not — historically speaking — Marxist inventions, but neo-liberal constructions designed to pacify the underclass. The self-described purists of capitalism pride themselves on eliminating the state from our everyday lives, never once acknowledging to what extent the “state” in its current, modern form exists solely to perpetuate the desires of a small cabal of corporate elites. There’s only so much support you can cut until the vast majority of Americans wake up and realize they own nothing. This realization leads directly to social upheaval and possibly to political revolution.

    Thus, social security is not anathema to free-market capitalism, but rather essential to it’s survival.

    Remove the welfare opium at your own risk. I’m look at you, the Koch brothers!

  8. Tarkus says:

    Only listen to those who can appeal to the reptile part of your brain.

    Pander to me baby!!! :D

  9. Rick Caird says:

    A Ponzi scheme is not required to be fraudulent. It is not required that it be illegal. All that is required is that early investors be paid off with the money received from new investors rather than with the money the early investors put in and anything earned from their original investment. If, for any reason, the new money dries up, the last investors will get nothing since all their contributions went to earlier investors.


    BR: No, you are precisely wrong

    Your attempt to change the accepted meaning of a word in order to further your own belief id transparent.

    A Ponzi scheme is fraudulent, it IS illegal, it IS based on a scam — that those terms do not apply to social security — regardless of your dislike of it — does not change the plain definition of the word.

    Cognitive Dissonance perhaps?


  10. DeDude says:

    I agree that all these rhetorical tricks often reflects an inability to make a strong argument for the case. I actually use it as a kind of screen both of people and the case they appear to support. If you have to use cheep tricks to “win” your arguments you are probably not that trustworthy and your case must be pretty weak.

  11. Molesworth says:

    not certain what you mean by neo-liberal. Prompted by BR post, I pulled out Aristotles Politics and was thumbing through.
    Book VI, Democracies and their contruction:
    “It is the duty of a genuine democrat to see to it that the masses are not excessively poor. Poverty is the cause of the defects of democracy. That is the reason why measures should be taken to ensure a permanent level of prosperity. This is in the interest of all classes, including the prosperous themselves; and therefore the proper policy is to accumulate any surplus revenue into a fund, and then to distribute this fund in block grants to the poor. The ideal method of distribution, if a sufficient fund can be accumulated, is to make such grants sufficient for the purchase of a plot of land. Failing that, they should be large enough to start men in commerce or agriculture.”

    And he also writes, as you suggest, that a disproportion of the poor will lead to discord. Just can’t find that right now. I haven’t looked at Aristotle in years.

    Thanks, Barry.

  12. DeDude says:

    Rick; as much as you can try to redefine “Ponzi scheme” for your own political purposes until everything in the world is a “Ponzi scheme”, you cannot redefine social security or its functions. It will remain a slightly underfunded and highly successful government program.

  13. franklin411 says:

    Aristotle is not the premier work on persuasion. Mein Kampf is:

    “All propaganda must be presented in a popular form and must fix its intellectual level so as not to be above the heads of the least intellectual of those to whom it is directed. Thus its purely intellectual level will have to be that of the lowest mental common denominator among the public it is desired to reach. When there is question of bringing a whole nation within the circle of its influence, as happens in the case of war propaganda, then too much attention cannot be paid to the necessity of avoiding a high level, which presupposes a relatively high degree of intelligence among the public.”

  14. machinehead says:

    ‘Demonizing Social Security as a Ponzi scheme is a form of Pathos.”

    Denigrating carefully considered and explicated objections to a social program as ‘demonizing’ is itself a form of Pathos.

    Nothing is beyond question and criticism — nothing. To quote Galileo: eppur si muove.

  15. smedleyb says:


    Rhetoric and propaganda are not the same thing. The later uses the former, but only the master of rhetoric possess the tools to see through propaganda in all it’s forms. Aristotle is the antidote to state propaganda, and Hilter is merely the most base, vile practitioner of the the art of the dumbed-down state lie.

  16. Molesworth says:

    Your scenario would require USA citizens to stop having babies.
    From Buttonwood:
    Pensions, Ponzis and pyramids
    The retired are always supported by their children
    “The American fertility rate is around the replacement rate of 2.1…”

  17. MayorQuimby says:

    Guys – it is a pyramid scheme *extraordinaire*. That is a no-bullshit, non-persuasive truth. There is no debate about this here. Everyone gets more out of the system than they put in same as with any chain letter or pyramid scheme. It is no different than Madoff. As long as Bernie was increasing membership to his fund everything was fine. Then one day he ran out of suckers.

    One day America will (hopefully) run out of suckers too.

  18. MSM says:

    Amusingly, Social Security at its heart stands as something of an anti-ponzi.

    Without a Social Security like insurance, there can be strong incentives for parents to have a bunch of children to ensure that enough of them will be successful enough to support the parents in old age. Eventually, the reality of the exponential function on a finite planet implies this always blows up. Always.

  19. I’m most persuaded by something that is presented in a win/win/win style…I ask myself, “Is it good for me…is it good for the presenter…and is it good for everyone else?” In other words, does what’s being presented have equal value/benefit for all three parties. If not, then my view is that the presenter has failed. That’s my general philosophy.

  20. Conan says:

    The basic problem besides civil or logical discourse is that you have to get peoples attention. So this is a logical reason to use these tactics. Most people are so distracted with all the forms of media and other things in their life, you just can’t get their attention for long. Just look at how sex is used in advertising, for anything, to do what? Get your attention. So a savvy speaker may just use this type of pugnacious speech to their advantage.

    America is probably one of the the least intellectual societies there is. It is mostly looked down upon. If you want to speak to the masses, you have to do it on a level that will work. These debates won’t be held like some Ivy League University Debating Team, this will be rough and tumble street fighting. By the way there are no rules in street fighting other than to win and not get thrown in jail.

    So in the world of Rap Music, Reality TV and Internet Porn, do you really think that an intellectual debate will really play out for the mass public, hardly. We can discuss such maters on this forum as it caters to a non mass media audience, but don’t kid yourself in believing that it will play to the general audience, sorry.

  21. smedleyb says:


    ‘Neoliberalism’ is a pretty standard term that critics of laissez-faire capitalism use to describe economic theories which prioritize the role of free market behavior over anything else in determining our economic lives.

    Of course, the meaning of the concept of “liberal” in our current society renders obscure that more primordial definition.

    That said, I like your quote from Aristotle, as he does echo the ideas I’m trying to express. It’s also clear that Buffet reads Aristotle, and that the Austrians don’t.

  22. BusSchDean says:

    MQ: Still can’t get off the dime I see. Thinking it so doesn’t make it so; saying it doesn’t make it so. Your characterization of it over time is factually incorrect, ignores the role of demographics and the insurance aspect, and none your previously stated arguments (i.e., no opt out makes it a Ponzi scheme, more benefit than contribution makes it a Ponzi scheme, a larger # of contributors supporting a smaller # of beneficiaries makes it a Ponzi scheme) make it a Ponzi scheme. You don’t have to like it but it does not fit the definition of a Ponzi scheme or pyramid scheme (and yes, I have been paid multiple times to provide legal evidence in pyramid scheme cases). Sorry to disappoint.

  23. GetReal1 says:

    Social security may have initially come out of good intentions but it is a legalized ponzi scheme as people retiring today will get more in benefits paid out versus what they paid in.

    Key points to consider:
    1) Who benefits with social security? Retirees & Baby Boomers of course, but how about the pols who voted this in and wish to continue this in its current form? Anyone protecting SS will probably get the votes of anyone retired or is close to retiring.
    2) Isn’t there a social security lock box? Hah, money spent.

    Our government overspends today with promises to reign in spending tomorrow. People are benefiting from this today while our kids will be saddled with the burdens tomorrow. Not sure if by definition you can call this a ponzi scheme or not, but end result is the same in that someone down the line gets screwed.

  24. CitizenWhy says:

    When Communism/the USSR was a threat even the American right was part of a social contract to prove that capitalism/democracy (they were equated) could provide much better material prosperity for its workers than could communism/the USSR. Hence we had institutions and public policies devoted to increasing the US middle class and the income of middle class Americans.

    Since the collapse of Communism/the USSR, and the rise of China’s unjust but successful (for the elites) state capitalism, the right in America has reverted to a campaign to restore the absolute rights of big property owners (this term does not include homeowners) to control the government and to govern as they please. Nothing is easier than to buy off the right number of politicians, even allowing some to retain their public personas as liberals.

  25. BusSchDean says:

    MQ: Sorry, I did want to disagree on one more point. America will not, nor will any other society, ever run out of suckers. Won’t happen, not ever.

  26. wunsacon says:

    Barry, all, you might enjoy reading this:

    “Those who shout loudest for fiscal sanity—an end to so-called federal handouts. Stop this nonsense about Federal Aid to education, federal housing, aid to cities. These are the gentlemen who watched us throw two billion dollars to help prop up the French Colonial Government whose good offices are indistinguishable from the North Vietnamese.”

    You might also find inspiration reading his Wikipedia page:

  27. Irwin Fletcher says:

    A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation.

  28. Greg0658 says:

    CitizenWhy @8:13pm .. I think you latched onto something there .. and why the MSM rhetoric seems so WOW .. the time period, minds and finances are aligned for the final battle (well not final – another 1000 years)

    the capitalism system/mind needs that 3rd millenium mechanical makeover … everybody is stuck playing with old world rules

  29. philipat says:

    We call it a Fox moment………………………………………………

  30. Thomaspin says:

    Fine writing. Thanks.

  31. Molesworth says:

    Barry wrote:
    Logos: Thirdly, persuasion is effected through the speech itself
    when we have proved a truth or an apparent truth by means
    of the persuasive arguments suitable to the case in question. (Logic)

    There is a lack of evidence in your assertion. It is apparent that you have strong feelings but the point of Barry’s post is that a good persuasive argument uses facts, not just opinion. I believe you’d be more persuasive with this audience if you included links to facts.

    Just as a heads up, to me, you come across as an angry middle aged white man huddled in the den of his ranch house in Tulsa pounding on his keyboard trying to get through to us idiots by reiterating your opinions over and over again and getting nowhere. You’re obviously an intelligent person, but I believe your efforts would improve with statistics, facts and links to said statistics and facts.

  32. Raleighwood says:

    Who benefits?

    I was under the impression that an insurance policy was only available if actually needed. And since “we” can’t guarantee that “you” will grow old responsibly and without unforeseen tragedy “you” may actually “need” social security to keep from living on the streets and eating dog food.

    But then again – how many people look to SS as the defined benefit that was undefined years ago?

    Are social contracts that uncivilized?

  33. Robespierre says:

    @MayorQuimby Says:

    ” Everyone gets more out of the system than they put in same as with any chain letter or pyramid scheme. It is no different than Madoff. As long as Bernie was increasing membership to his fund everything was fine. Then one day he ran out of suckers.”

    I’m very sure that I can prove mathematically that you are wrong… but I won’t. However, what I know is that to “fix” the system the time that “Everyone can get benefits may be lower (aka increase retirement age), or if the “membership” is too low then increase it (immigration) or increase the limit for contributions of current “membership”. Your argument is intellectually dishonest. Madoff’s “membership” was always finite and voluntary where as the one for SS is everyone born (and imported) and compulsory. So SS will never run out of funds (in practical terms) as long as the variables in the equation are appropriately managed. As the faster than light particle may have shown, nothing is a permanent “fix” everything is always a work in progress.

  34. wunsacon says:

    The government can continue in perpetuity to levy a tax to pay out to old people and to sick people. Not so with a private party selling shares, losing money, and paying off exiting investors with money from new investors.

    Can the contract change? Yes. But, this fate is in our hands. This has nothing to do with balance sheets and cash flow (unless you want to talk about concepts like Peak Oil/Water/Food — which I’m open to — in which case your Exxon’s and Ford’s are Ponzi’s too!). It has to do with politics. The only way SS becomes a “Ponzi” is if the tools in the Far Right succeed in convincing the country to either privatize it (to the ultimate Ponzi’s on Wall Street!) or dismantle it (in which case many who contributed see nothing). In other words, it’s the Far Right’s own fears that might turn SS into the Ponzi scheme they claim it is. Just like with their foreign policy preferences, they are their own worst enemy.

  35. jaymaster says:

    Are there no economists here?

    In Economics, “Ponzi” has a different meaning than you are using. Not that eiether is right or wrong. Just different.

    Specifically, Ponzi as defined by Minsky.

    From wikedpedia:

    “Understanding Minsky’s financial instability hypothesis
    Hyman Minsky’s theories about debt accumulation received revived attention in the media during the subprime mortgage crisis of the late 2000s.[10]
    Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt by the non-government sector. He identified three types of borrowers that contribute to the accumulation of insolvent debt: hedge borrowers, speculative borrowers, and Ponzi borrowers.
    The “hedge borrower” can make debt payments (covering interest and principal) from current cash flows from investments. For the “speculative borrower”, the cash flow from investments can service the debt, i.e., cover the interest due, but the borrower must regularly roll over, or re-borrow, the principal. The “Ponzi borrower” (named for Charles Ponzi, see also Ponzi scheme) borrows based on the belief that the appreciation of the value of the asset will be sufficient to refinance the debt but could not make sufficient payments on interest or principal with the cash flow from investments; only the appreciating asset value can keep the Ponzi borrower afloat. Because of the unlikelihood of most investments’ capital gains being enough to pay interest and principal, much of this type of finance is fraudulent.

    If the use of Ponzi finance is general enough in the financial system, then the inevitable disillusionment of the Ponzi borrower can cause the system to seize up: when the bubble pops, i.e., when the asset prices stop increasing, the speculative borrower can no longer refinance (roll over) the principal even if able to cover interest payments. As with a line of dominoes, collapse of the speculative borrowers can then bring down even hedge borrowers, who are unable to find loans despite the apparent soundness of the underlying investments.[5]

    It’s still a bit of a stretch to call Social Secutiy Ponzi by the economic definition, but it’s close.

    For the record, as a believer in MMT, I have no doubt the SS system can remain solvent in perpetuity. But if enough folks lose confidence in it (via Ponzi dynamics), I also have no doubt it can be wrecked through political choice.

  36. jaymaster says:

    Ooops, I forgot the end quote. The wiki words end at the [5] notation.

  37. putertm says:

    Don’t always agree with you, Barry, but have great respect for your application of intelligent discourse. Bravo on ‘Rhetoric & the Art of Persuasion’. Good to know there are adults in the room.

  38. wunsacon says:

    The whole financial system is a fiction, at times a joke. The real limits on delivering care to the sick and elderly are determined by:
    (a) our natural resources
    (b) the technology we continually develop to leverage our natural resources
    (c) how many people share in the output from applying (b) to (a).

    Sovereign finances are different than personal finances. Bernanke can print a zillion quatloos to make SS work nominally, if he has to. But, the standard of living of SS recipients will not depend on it. It will depend on how well we work on factors “b” and “c”.

    Worrying about SS and Medicare staying solvent in 2050 is a joke. I’m predicting AI in about 20 years and machines running everything soon afterwards. We won’t be collecting taxes from anyone because no one will be employed. We won’t be paying large Medicare payments to anyone because $1,000 computers will replace doctors and their old $300,000 med school tuition bills. People wringing their hands over this entire “problem” of future entitlement program solvency are going to look back and realize they missed the big picture. What they should really be worried about is ensuring that governments become far more open and less sinister, so that we leverage the AI to create a utopian rather than dystopian future.

  39. Robespierre says:

    @jaymaster Says:

    “The “Ponzi borrower” borrows based on the belief that the appreciation of the value of the asset will be sufficient to refinance the debt but could not make sufficient payments on interest or principal with the cash flow from investments; only the appreciating asset value can keep the Ponzi borrower afloat.”

    The difference here is that SS does not borrow any money (it collects it-tax) so there is no refinance of any thing since there is no debt. The system is a pay as you go so there is no borrowing. like I said in my previous post the when the collection is insufficient to pay the “investors” the you adjust any of the variables accordingly to bring it into balance.

  40. jaymaster says:


    I would argue that the Ponzi element here is the assumption that wages will increase at a faster rate than payouts (which raise through the government controlled CPI).

    If wages don’t increase (or in fact, fall), then SS is most definitely in Ponzi. Unless benefits are cut accordingly.

  41. Petey Wheatstraw says:

    At its foundation, SS is about wealth redistribution — not necessarily from one class or individual to another, but from the present to the future. From a different perspective (one which takes a much larger view, aka, the Big(ger) Picture), SS can be viewed as forced savings (the lock box would work, if not for the real problem that plagues us).

    The real problem, IMO (and relevant to the earlier posts on gold), is this:

    Many have pointed out that recipients of SS benefits will take more (units) from the system than they contributed. No shit.

    In a fiat currency system, the money supply MUST inflate (devaluing each unit, in the process), if there is to be any growth. By the same token, the saver MUST receive a greater number of units than they contributed if their purchasing power is to remain constant.

    In an economy based on a currency with static value, this fact would indeed make the recipient of benefits reliant on a Ponzi scheme, and would bankrupt the system in short order. But that’s not what we have.

    We have a baseless and continuously devaluing unit of value — one which manifestly works against the saver (self-disciplined, or forced), and which, as a mater of politics and nothing more, distributes the lion’s share of the whole (regardless of the number or value of units), to those who, by incomprehensible law, perpetuate the scam for their own interests and those of their cronies.

    Of course, we do have SS COLAs that, ostensibly, make up for the continuous devaluation of our currency.


    Anyone see anything wrong, here:

    Perhaps the most galling aspect of this entire charade is that “investment” by the individual has been touted as the only viable alternative to saving for the future.

    “If you give your money to the corporations, it will grow in quantity!”


    It will be handed out in salaries and “compensation” to those who we are told will husband it for us, as they are upstanding men, not motivated by greed, and who, in case you are the untrusting sort, have a fiduciary DUTY to you, the investor.

    Just another trickle-up fraud.

  42. Concerned Neighbour says:

    A young conservative watched the latest GOP debate and wrote to William Kristol, saying the debaters “made us look like crazy people!”. That concerned viewer was wrong. They ARE crazy people.

    Cut taxes to balance a massive budget deficit. Ending tax loopholes is class warfare. Oaths for no new taxes – ever. Massive tax cuts and new domestic programs during wartime. Global warming is a conspiracy. Offshore oil will make us energy independent. Intelligent design. The list goes on.

    When you can’t appeal to reason, your only option is to appeal to emotion. And given the state of our education system, amount of misplaced anger, and general level of fear out there, the Republicans can and have done quite well with that approach. To the rest of the world’s dismay.

    Pretty soon the candidates will be firing off machine guns during their speeches like in Idiocracy.

  43. Schnormal says:

    To the people who believe you’re among the lucky ones: do you really think you’re going to give yourself a pat on the back after running into an old friend who’s living on cat food? Give me a break already.

    Some people work really hard their whole life and then drop dead of a heart attack in their 50s. Some people are housewives, who never held an office job but will live decades longer than the bunch of stupid alcoholics they spent their lives cleaning up after. none of this is fair. none of this has anything to do with fair on an individual, case-by-case basis. This is about a highly successful social program meant FOR ALL, including those ugly mofos you see at the dmv, and a small number of people who’ve figured out a way to make a lot of money by taking it down.

    “Without Social Security benefits, 46.8 percent of Americans aged 65 and older would have incomes below the poverty line, all else being equal. With Social Security benefits, only 8.7 percent of the elderly do” (source:

    My grandmother lived into her 90s. She and my grandfather both worked all their lives and saved their money and had only one kid, so she was ok. Her sister, who married an alcoholic and had four kids, not so much. Her other sister, who never married, also not so much. If it weren’t for social security, their children would have had to divert more of their savings to support them — but at least they wouldn’t have had to shell out for that payroll tax, right? lol.

    I can’t help but notice that people who want to destroy social security (and yes, changing it from a defined benefit program to a defined contribution program counts as destroying it, not saving it) are people who have stopped thinking beyond their own little familial tribe. I believe this is due to a combination of the usual amounts of greed and fear you find in stressed out people, exacerbated by the river of toxic propaganda the mass media sewer pipe brings us every day. People’s worst instincts are played on, and even noble intentions (“I want to take care of my family”) are transformed into anti-social reactions (“Screw everyone except me and my own”).

    You want a defined contribution program? You don’t need the gov’t for that, you’re welcome to start one anytime. why is it always presented as either/or? social security was meant to be just one part of planning for retirement, the other parts being personal savings and pensions. And since so many pension plans have already been changed over to 401ks, social security is more important than ever.

    Back in ’05 Josh Marshall did a bunch of fantastic posts about what social security means for the middle class, back when BushCo tried and failed to privatize it. Here’s a good one, and there are many more in the TPM archives —

    And one more thing — raise the retirement age to 72? lmao. what jobs will these people get? some new magic jobs that people in their 50s are currently not finding? These people can only cut into the teenage job market so much.

    i read this damn blog every day and i love all of you people, and for those of you who are retired i want you to know that i happen to get GREAT JOY at the thought of 7.5% of my paycheck going to your wrinkly old asses ;)

  44. colfaxcapital says:

    so how do we pursuade the politicians to simply all resign?

  45. leveut says:

    “…but at least I am demonizing ideas, and not people, as is so commonly done online….It is a rhetorical technique used to demonize opponents. In my opinion, it is intellectually lazy, often reflecting a weak argument.”

    Would that be along the lines of saying Mauldin is in Texas so he has to support Perry’s characterization of Social Security as a Ponzi scheme?

    Social Security isn’t a Ponzi Scheme, because Ponzi Schemes are illegal and Social Security is a government program. Is that “in-depth analysis” according to “logos”?

    Are there no similarities at all between the economic functioning of Social Security and the economic functioning of Ponzi Schemes?

    In the Madoff Ponzi Scheme, the investors thought they had their own accounts with their own investment money in them. They didn’t. In Social Security, the …”investors”…also think they have their onw investment accounts with their own money in them. Do they? Did their respective operators, Madoff and the Federal Government including both Executive and Legislative branchs going back decades, ever attempt to disabuse their respective “investors” of their misconception?

    The Madoff Ponzi Scheme, as with all Ponzi Schemes, was a pay as you go program. Current “investment returns” were paid with “current income” from “investors.” In Social Security, current benefits to retired “investors” are paid by current “investors.”

    While it has been true that until now, “current investments by current investors” has exceeded current benefits, the entity running the Social Security program, which is to say the Federal government, has spent the excess on “other things. ” In the Madoff Ponzi Scheme, the excess of current “investments” over current demands for payment from “investors” were spent on “other things”, things the trustee is attempting to recover by litigation. The Federal Government will have to repay the socalled Social Security Trust for the money it, the Federal Government, spent on “other things” on the SS Trusts demand for payment. It will “recover” those amounts by, taxing then current “investors” again, or borrowing the money from the Chinese, or reducing benefits, something Madoff could not do.

    To keep a Ponzi Scheme going, more and more “new investors” are required to support increasing numbers of “old investors”–the Scheme starts collapsing when there are too many “old investors” and not enough “new investors” to pay the promised returns. Part of the actuarial problem of Social Security is that, there are insufficient “new investors” to pay “investment benefits” promised to “old investors” at the rate the “old investors” were promised.

    If I remember correctly, the SS Trustee’s most recent annual report said SS will not have sufficient current FICA receipts to pay current benefits…this year. The Federal Government will have to ante up the difference.

    Madoff’s Ponze Scheme promised consistent annual returns of ~12%. His “investors” ended up not getting is. The Social Security System promises “annual returns” according to a current formula. Does anyone believe the SS formulas and conditions will remain in their current state such that all “investors” get “benefits” according to the current formulas?

    Is the Social Security program insurance? I say it is not, if only because it is not means tested and never has been. Insurance is intended to compensate for a loss, such as, a loss of income at retirement or in old age that would leave the person in appalling poverty. Under an insurance program, Ritholtz and John MeCain would never receive SS. While Ritholtz might not in the future, John MeCain does now. Check MeCain’s financial disclosure statements as to sources of income. SS was sold as an insuranceprogram, but it is not and never has been designed or operated as an insurance program.

    Is it “demonizing” Social Security to refer to it as a Ponzi Scheme, or is it demonizing those who refer to SS as a Ponzi Scheme because there are similarities that hit a little too closely to home?

    Social Security isn’t a Ponzi Scheme, because Ponzi Schemes are illegal and Social Security is a government program.

    As “death dealing” issues for the Presidential campaign in terms of economic destruction of the US, I would rate Social Security no higher than 4th.

    3. The medicare medicaid impending disaster

    2. Baseline budgeting

    1. Obamacare

    But of course, this post is just an exercise in Pathos.

  46. realgm says:

    Social security is definitely not a ponzi scheme, but the current form of social security is unsustainable in the long run. It promises too much with not enough fundings.

    Eventually, they would have reform social security to encourage people to be more productive and start taking care of themselves instead of waiting for the gov’t to take care of them. The US gov’t has too much debt that the only way it can repay the debt would be by printing money.

    Social security needs reform, but the most important thing is to get the banks’ act together so there won’t be more bailout for the riches, so that honest business people can bring productivity instead of letting those bankers playing games with other people’s money (and the gov’t money).

    End the wars around the war and stop wasting money to create more enermies oversea.

    I like most of what Ron Paul is looking to do and I hope he will be the next president of the US.

  47. smedleyb says:

    It’s obvious to this observer that the crisis in social security is a direct result of government meddling in our God-given right to smoke. If the government would simply stop taxing cigarettes, while making them marketable to children (bring back Joe Camel!), we wouldn’t live nearly as long. Ergo, no crisis.

    Once again, the “unintended consequences” of government meddling in our lives has brought us to the precipice of economic armageddon.

    And don’t even get me started on meth and heroin.

  48. louis says:

    Careful the Fed is listening.

  49. I don’t think your argument of illegality has merit Barry. After all, it is a government program. By definition it is legal since it is government that defines the laws.

    The question I have is if the SS were a trust fund run by a non government entity, would the government shut it down for failing to provide adequate long term funding? If this entity were to borrow the funds out and put IOUs in for future promises to pay would the beneficiaries have legal grounds to sue for failing to meet their fiduciary obligations?

    Also, if the SS continues on its path will it eventually go bankrupt?

    If you can answer yes to those questions then I think it is safe to assume the fund is a Ponzi scheme. If you counter argue that the government only needs to print up more money in order to make it solvent, well, that seems to be functioning like a Ponzi scheme to me. The source of greater and greater funds just gets pushed to taxpayers (either the current ones by the devaluing the purchasing power of their dollars or by stealing it from the next generation)

  50. kaleberg says:

    I heard that legal joke as: If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you don’t have the facts or the law, pound the table.

  51. slowkarma says:

    “Social Security is a Ponzi scheme” is that well-recognized and frequently used literary device called the “metaphor” – here’s a definition snatched off the web: “a figure of speech in which a term or phrase is applied to something to which it is not literally applicable in order to suggest a resemblance.” However bright or stupid Gov. Perry is, I doubt that he thinks that Charles Ponzi is still out there somewhere, pulling the strings on a government retirement program.

    What this whole Ponzi debate most reminds me of is Michele Bachman’s use of the word “theory.” While the liberals refer us to the dictionary to look up the word “Ponzi Scheme,” Michele refers us to the dictionary to lok up the word “theory,” and points to the definition “An assumption based on limited information or knowledge; a conjecture.” So, the “Theory of Evolution” becomes nothing more than a guess. This is silliness, of course; it’s not even relevant enough to be called incorrect. So’s the Ponzi argument. It’s a ******’ metaphor.

  52. BigD173 says:

    According to Zero Hedge, Paul Krugman called Social Security a “Ponzi game” in 1997. Was the Nobel Prize-winning economist guilty of “intellectual laziness and lack of gravity”? Or is some narrow distinction to be drawn between a “Ponzi scheme” (Rick Perry) and a “Ponzi game” (Paul Krugman)?

    * The Zero Hedge link:

    The quote attributed to Krugman:

    “Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

  53. jaysan says:

    Rick Caird’s definition of a Ponzi scheme is correct and it is Barry who is wrong and who fails.

    Barry’s DESCRIPTION of a Ponzi scheme is correct in our society but it may not be correct in other societies and it is certainly not a correct DEFINITION, because not every “fraudulent criminal enterprise designed to scam unsuspecting and naive suckers out of their money” is a Ponzi scheme.

    You surely can think of other such enterprises.

    One can think of an unsophisticated society that has not outlawed Ponzi schemes. Therefore “criminal” in the sense of “illegal” cannot be part of its definition.

    Social Security is not a Ponzi scheme but it is obviously similar in important ways to a Ponzi scheme. So by incorrectly calling S.S. a Ponzi scheme, Rick Perry was not merely trying to persuade by Pathos, but using that shocking name to awaken people to the defects of S.S. It is the same with Robert Tracinski who wrote about the “evils” of social security. See

    The Pathos itself doesn’t persuade (it actually dissuades people like Barry), but it awakens some people to possible further persuasion by Logos.

  54. kenny powers says:

    Austerity is certainly another dirty word these days. On this blog, it seems some view this as evil. Is it always? Is austerity doomed to failure, for sure? It seems that depends on where it is enforced. Again, perhaps a more nuanced debate is overdue. Enough with the for/against, ideologically based arguments.

  55. BusSchDean says:

    Like many words/terms, multiple meanings or references doesn’t make each right. Take the word “rape.” How many times have we heard the term used in non-sexual situation “like being raped,” “essentially, it was rape,” etc. but that doesn’t make it rape. And, imo, such uses diminish the true and awful meaning of the word. In the Krugman quote, notice how he includes demographics as causing the “Ponzi game aspect.” When the demographics change this aspect changes.

    RC’s definition could actually fit many situations where junior $$ covers senior investors. As we know a run on a bank is when the bank cannot pay back investor money, typically the money they have on hand would be from recent investors (i.e., deposits) because the money from earlier investors has been loaned out and not accessible. If the bank paid out based on seniority it would strongly resembled what he describes. There are many such comparison. The scheme ran by Charles Ponzi has specific characteristics (large and FALSE returns on investment, unlimited expansion even to the point where a person could rejoin as an investor, etc.) guaranteeing collapse and where recent investors where sure to lose. It was an investment opportunity that claimed to perform in a way it could not. That does not fit SS, which is transparent and the viability of which over time has been pretty good (if the politicians would keep their hands out of it). SS over time is strong shaped by demographics, which does not apply to the Ponzi scheme.

  56. mathman says:

    i don’t understand why SS is called an “entitlement” (in a negative rather than descriptive way) when i’ve paid into it my entire working life and now have to HOPE it’s there for me when i “retire” (in actuality i cannot retire – stop working – until i actually can’t physically get up). It’s been “borrowed” from way too many times and never paid back, but suddenly it’s on the verge of disappearing. That government sleight of hand doesn’t warm my heart for what was once democracy (but has become democrazy).

    Like everything else, this issue will cease to be a problem due to the (bottleneck caused) crash landing the global economy will suffer in the near future due to environmental factors becoming continually worse impacting food production, fishing etc., economic collapse, and resource scarcity issues. The survivors will be concerned with growing food, protecting themselves from each other and living in the harsh and deteriorating conditions.

  57. ToNYC says:

    The central theme of Charles Ponzi’s scheme involved all the cash collected being routed through an individual apex, Charles Ponzi, and then distributed to the most impatient investors first. The fact that the inflection point occurs in our peculiar social insurance stop-gap to F.I.C.A. payers as well is agnostic to the intent. The devils are in the accounting and transparency it possible with understanding.
    The new media is only interested in finding the right word-bullets to stop the wagons from circling.
    ZIRP is the petard on which history will hoist the scholar Bernank for playing dice with life’s labor-accumulated Capital for an extended period, and clusterfcuking individual initiative and reward structure.

  58. Greg0658 says:

    couple LOLs up there
    I blame the internet .. we got edumucated .. now the tide is flowing out and the rotting gunk is in plain site .. what ever will bring needs & desires back in the money :-|

  59. bbt says:

    met·a·phor – a figure of speech in which a term or phrase is applied to something to which it is not literally applicable in order to suggest a resemblance.

  60. rd says:

    The Democrats should be taking the Republicans’ own words on things like Social Security and then using them to bash them over the head.

    IMO, Rick Perry announcing that Social Security is a Ponzi scheme means that he has given up on America as a country and it is simply every man for himself in a xenophobic “Mad Max” scenario.

    The concept of Social Security assume that the country will continue to grow and function so that the children and grandchildren can support the elders and immigration can be used to fill in population gaps. I believes that this fits the American model very well as it developed from the early 1800s “Manifest Destiny” period into the modern “Great Society” structure.

    It appears that Rick Perry, Michelle Bachmann et al are loaded with pessimism and believe that the US is doomed to regress to some point in the past and therefore will be unable to keep its basic promises. This premise means that it is not possible to have a discussion on tweaks that will maintain the fundamental Social Security mechanism functioning for a long time. The Democrats should be able to make a strong case that these Republicans do not believe in America as a great country with a great future.

    Medicare/Medicaid on the other hand is merely a symptom of the massive heart attack that the entire US health care system is undergoing. The sad truth is that the private sector has been unable to crack the nut of costs to date as anybody watcing company health insurance costs sky-rocket can attest to. Unfortunately, for the Rick Perry’s et al, probably the best examples of efficient medical care in the country include single-payer government programs like the VA as well as a handful of private models like the Mayo Clinic system that virtually operate outside the mainstream health care insurance structure..

  61. frodo1314 says:

    Wasn’t he (Perry) just trying to make a point in terms people can relate easily to (given Madoff is still fresh on everyone’s mind)? – that SS in its current state cannot continue – that something must be done? I for one did not take it as a Conservative vs Liberal swing but rather a call for us ostriches to pull our heads out of the ground….

  62. Don Levit says:

    In order to be persuasive, you must be willing to be persuaded – and that’s a risk.
    The risk is that I could be wrong, and look foolish in the process.
    First, let’s see if we can agree on this fact: the surplus FICA taxes and “interest” were loaned to the Treasury and spent for current expenses.
    There is no way those dollars can be in the Treasury and spent, and in the trust fund, at the same time.
    The trust fund is merely an accounting mechanism which indicates how much can be paid from general revenues, without an authorization.
    It’s the same way we pay for all government expenses, whether in a trust fund or not.

    It is paid by new monies AS IF THE TRUST FUND DID NOT EXIST!
    And, therein lies the dosconnect between what Americans (and even Roosevelt) understood SS to be, and what it is.
    SS, according to Roosevelt, was to be self-supporting, with no use of general revenues.
    The $40 billion cash shortfall in 2010 (and the shortfall this year), was paid by redeeming interest.
    If this was a real reserve, like an insurer has, the interest would be liquidated without using new monies, for it is prefunded, and maintained in the reserve.
    Instead, the interest was paid with general revenues, so the trust fund provided zero help in financing the interest redemption.
    The same process, of course, will occur when the principal is redeemed.
    For a plan that was supposed to be self-supporting, with no use of general revenues as Roosevelt intended, it evolved into this financing scheme.
    Don Levit

  63. Defining Quality says:

    We are living in the age of Unreason. Arguing for one purpose and one purpose only – to win. Governments world wide are only listening to the corporate persons. Spinning observed reality to control the masses. Control fraud permeates all institutions who artfully and fraudulently use the fiction of accounting to steal from the consumer / taxpayers – who blindly and ignorantly “TRUST” a global racketeering scheme to use the people to gain personal wealth and power.
    Social Security is not the problem – the real problem is control fraud – and Joe Six Pack could give a damn – and the fraudsters know that to be a fact.
    The real job creators were the consumers – and their ability to consume has been destroyed by the greed and corruption of the government’s sponsored and unregulated – criminal activity – in the global market place. Stealing from and taxing the poor to gain power and money.
    What’s wrong could be fixed but those with the money and the power are just like Joe Six Pack – they really don’t care. The system of corruption and control fraud is working for them -why would they care?

  64. Defining Quality says:

    The Trust of the Ignorant is the Liar’s most Powerful Tool!

  65. JET55118 says:

    It isn’t epistemology, but metaphysics. Words DON’T have any consistent, defined meaning anymore because of nominalism, which has permeated virtually ever aspect of modern culture. The lack of any consistent, coherent set of language values or meaning has debased our language and its use to its current state. Incidentally, Aristotle implicitly rejected nominalism.

    Also, with a soundbite political culture that can’t pay attention to anything longer that 140 characters, what do you expect?

  66. caractacus says:

    Barry, it may be that modern political theater requires politicians to “dumb-down” their arguments to fit them within the 60 second debate format. We have come a long way down from the Lincoln Douglas debates. But I think you do a disservice to Rick Perry and to your readers when you discount Perry’s reference to Social Security as a Ponzi scheme simply because it is a legal, government-sponsored enterprise.

    Perry could have tried quoting Paul Krugman’s now famous description of Social Security: “Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

    But of course, if Perry had done that the audience would have fallen asleep. This isn’t a problem of just the right or just the left wing of American politics; it is a problem stemming from our voters’ short attention spans encouraging politicians to, even rewarding politicians who, fit answers within easy sound bites.
    But summarily dismissing a point that has some elements of truth does nothing to further the conversation. If you don’t like the shallowness of American politics, use your forum to more deeply examine the issues.


    BR: I don’t care who — Krugman on the Left or Perry on the Right — calls it ma Ponzi scheme. Doing so paints the speaker as using lowest common denominator (LCD) appeal to fools and lizard brains.

  67. kaleberg says:

    Too many arguments being made these days assume that the entire human race is going into liquidation some time in our life times. Social Security going broke requires that people stop having children and/or we achieve immortality. Who expects that? Fundamentalist Christians do. It’s right out of the Left Behind books and the other eschatological Christian pornography out there. The rest of us who expect mankind to continue being born, growing up, having children, then getting old and dying can envision Social Security lasting forever on an actuarial basis with a bit of tweaking here and there to adjust benefits to fit the scale of the economy with respect to the population. Read one of Dean Baker’s flames, a CBO report or just set up a spreadsheet.

    While I like to be persuaded by appeals to my powers of reason, such as they are, I know how important it is to appeal as well to my baser feelings e.g. my desire for justice, my spirit of generosity, and my wish to make things better. (That’s blood lust, avarice and vanity right there.) Calling Social Security a Ponzi scheme is calling it a fraud, but every proposed alternative is simply starving the elderly, denying them medical care, a clean, safe place to live and so on. That’s a slippery slope. If we don’t mind starving them, mistreating them or denying them shelter, how far are we from putting them out to die of exposure. Perhaps a bullet in the brain at 65 – or why not 55 – is more merciful?

    They can call Social Security a taxi for all I care, but unless they can come up with something better than putting the elderly out on an ice floe, I call BS. Besides, with global warming we’ll be hard pressed to find enough ice floes.

  68. riley says:

    The problem with political discourse today is too few speakers use Logos as their method of persuasion. Or is it that too few audiences are willing to stop and think about the argument(s) being presented in the speech? The method of persuasion usually fits the audience.

  69. BusSchDean says:

    riley: Agree

    We need to demand meaningful communications from our leaders (political and otherwise). We do not need metaphors, framing, short-cuts for the masses, emotionally-charged rhetoric, or carefully crafted sound bites. We need honest communications that might even include candor and the speaker admitting to not to know everything. How refreshing that would be! (We know they obviously do not know everything so let’s skip that part.)

    Clearly the media in general does not help.

  70. frodo1314 says:


    My point exactly. Thanks.

  71. DeDude says:

    Let me end by calling cr@p on this right wing meme about people “taking more out than they put in”. There is an investment of the social security surplus (in special treasuries) and that yields an interest which naturally is distributed to the beneficiaries (because this is non-profit). I sure hope my retirement fund will allow me to take more out than I put in, but I guess that makes it a Ponzi scheme? Furthermore, the structure where you pay 15% of your salary now and someone else 30 years from now will pay 15% of their salary to compensate you, has a natural “inflation+” mechanism, as salaries increase even more than inflation. The system is completely soundly paying most of the people more out later than they paid into it through their lifetime. Otherwise huge surpluses of profit would accumulate.

  72. BusSchDean says:

    Nothing “requires” a politician to dumb-down his/her argument. Do we want to accept that our political leaders are helpless — have not choice — given their audience. The Gettysburg Address was 272 words and rang out though decades — elegant, clear, emotion-laden. Words matter and expediency or laziness causes harm. I guarantee that if you have employees you expect accurate communications. Why should we expect less from someone who wants to work for us?

    Perry could just as easily have said that his analysis of Social Security causes him to be concerned about its long term viability and that, in principle, he is opposed to government-created safety nets.

    Clearly many on the SS thread did not think Perry’s Ponzi scheme simply a metaphor or the dumbing down of something more complex, they stuck by their position that it IS an actual Ponzi scheme even though it is not, hence the problem with dumbing down and metaphors.

  73. tomoeDave says:

    As my first post ever to Big Picture, let me help Barry’s case a little. All of you who think that SS is a Ponzi scheme, please note that the one of the main differences is that a Ponzi scheme is deliberate, deceptive theft, theft that continues until the scheme is discovered. With SS, there is no deception and no theft! We are supporting older people who can’t work with our payroll contributions, and, ever since a decade after SS started, those old people paid into it themselves. You know what that’s called? It’s called a community caring for its old people. The old people are not stealing the money, nor is the government. Whether or not inflows will cover outflows in 5 or 10 or 20 years is a question of dwindling resources. Clearly, what is at issue is how many retirees can be compensated and how well, not how good we’ll be at “stealing” from the young to give to the old. Critically, this issue of dwindling resources is not a surprise foisted upon us at too late a date; we’ve been talking about it for years and it is furthermore not settled fact exactly what sort of trouble there will be. And there is some transparency – something curiously absent from Ponzi schemes until after they break.

    To get at the root of it: SS is not fraud, because it’s not the technical illegality that’s at issue, but the intent of a con-man to enrich themselves with deception and your money. For Social Security, there is no con-man getting rich. There’s only a government-managed apparatus, and payouts to all the elderly that originally paid in. It’s not as if, when you pay into it, you’re told that your cash is placed in a savings account where you can watch it accrue interest, and then, surprise! it’s not alll there when you retire. Instead, you build up benefits in the system based on your contributions and the CPI. Now if there were a buildup of SS funds allocated in the government, and those have been, ahem, misallocated, SS itself wouldn’t be the fraud per se, but the raiding of the funds would be.

    In the same way, we don’t say that safe deposit box services are Ponzi schemes just because there’s a risk of a bank robbery or because we need more stuff out of them than is actually stored there. Note it. Important. Difference.

  74. Greg0658 says:

    tomoeDave welcome to TBP .. logged in to mention 1 oversight > that SS holds an umbrella over more than just elderly people, primarily the disabled of mental & physical categories .. maybe more (probably a few more) I’m not that up on how to get a pre65 SS check (it’s 6_? now)

  75. Don Levit says:

    Dedude (and others):
    When these special Treasuries earn interest, where do you think it comes from? Do you think this interest is like interest paid on debt held by the public, with general revenues and an immediate impact on the budget?
    When this special Trteasury interest is redeemed, as it was the last 2 years, do you think it is redeemed like interest in your retirement plan, simply by liquidating to its cash equivalent, without the use of new monies, because it was prefunded and maintained?
    Don Levit

  76. [...] Social Security is not a Ponzi scheme. [...]