Ponzi & SS

So far as we know Ponzi never threatened anybody. He didn't tell struggling young workers, "Give me 15 percent of your paycheck every week, so that I can make you a fantastic return — or else I'll send goons to kidnap you."
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Ever since Rick Perry derided Social Security as a Ponzi scheme, economists and other pundits have jumped into the fray. Progressive blogger Matt Yglesias says it's "nuts" for anyone to talk like this, because Social Security merely relies on future economic growth — just like a private pension plan. Free-market economist Alex Tabarrok responded to Yglesias with links to arch-Keynesians (and Nobel laureates) Paul Samuelson and Paul Krugman, both comparing Social Security to a "Ponzi game."

In the present article I have three aims: First, I will point out that the critics are right; to the extent that Social Security "worked," it was because of its resemblance to a classic Ponzi scheme. Second, I will show how private-sector retirement planning operates nothing like this. Third, I will defend the good name of Charles Ponzi from the scurrilous comparisons — what he did was nothing like the racket known as Social Security.

Social Security's "Ponzi Game Aspects"

Paul Krugman is a famous guy with a long record of strong opinions. It's to be expected that periodically these will come back to bite him. His usual tack is to deny that his old columns meant what their plain-word reading would indicate. For example, Krugman can't believe anybody thought this column (from 2002) should be construed as his endorsement of Greenspan trying to create a housing bubble.

When it comes to Social Security, here's what Krugman wrote in late 1996:

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