The Ponzi Caper Again

TigerHawk is orchestrating a cute discussion re entitlement finance (link). TH asks:

Is it the case that our entitlements programs (such as Social Security and Medicare) require (or barring an extraordinary surge in economic growth probably will require) a constantly growing population so that each generation is in a position to pay for the generation that precedes it? If so, then is there a moral duty to choose to have children?

You could think of this as a pendant to Christopher Buckley’s new novel where it is suggested that we oldies, for the fiscal health of the community, ought all to just go die (link). I won’t bite on his second question just now, but here is a response to the first: no, it is not the case. There's a durable error in the shadows here. Republicans have been arguing for years that Social Security is a giant Ponzi scheme since it is funded out of current contributions and not out of return on capital stock. They seem to believe (or at any rate, to hope) that once they sell the Ponzi scheme part, then Social Security will all blow away like the wicked witch of the west. But this is a non seq. It is true that we should fund out of capital stock. It does not follow that we should disband Social Security.

This error survives because both Republicans and Democrats have a stake in the underlying confusion. Republicans like to talk about Social Security as an investment program so they can howl about “your money” and how the Washington pinheads abuse it. Democrats let them get away with it because they believe that once you let anything be branded as a wealth-distribution program, it loses. This means that neither side is talking about what it is really talking about and any kind of mischief can follow.

Well, I am just a simple, barefoot, country bankruptcy lawyer [with blogging issues]. I’m not running for office and so I don’t need to buy into that kind of pretense. So far as I can tell, TH has the same incentives that I do, and he is welcome to share the same candor.