There’s no shortage of news about Bernie Madoff’s astounding Ponzi scheme through which he (allegedly) bilked a great many investors and charitable foundations out of billions of dollars. The fact that he is out on reduced bail and has used that freedom to send millions in jewelry to his children and write checks for a few billion more to friends and family is even more astounding. But what amazes me is how Congressional leaders are posturing about it. They’re appalled, they say. Something must be done, they promise. But wait. Isn’t that the pot calling the kettle black?
For those few of you unfamiliar with how the Ponzi scheme works, it’s where a shyster takes in money from marks investors to “invest” for them, pockets it, produces spurious reports illustrating the stellar performance of the “fund’s” portfolio, gets more investors and uses some of the newly invested money to pay a few of the earlier investors, then continues the practice until he has a ton of money in his pocket. The portfolio, of course, is essentially worthless and he has all the money squirreled away in off shore accounts. Then he moves to an island somewhere in the Pacific or to a country without an extradition treaty with the U.S. and lives large. The trick is to keep the investors believing their investments are earning astounding returns while he collects more and more money from new investors. You’ve probably heard of Ponzi schemes, but Madoff’s may be one of the largest such frauds (ahem…alleged frauds) in history.
Or is it? Isn’t that exactly how our government has been operating our Social Security system? They take money from us for our retirement, then use it for other purposes, knowing full well that, with more going out than coming in, our retirement money will eventually be depleted. And how are they trying to delay the inevitable? By increasing our Social Security taxes, reducing our benefits and telling us that it’s all the fault of a burgeoning baby boomer generation. Come on! It’s Ponzi, pure and simple, but on an infinitely larger scale.
They’re doing the same thing with other special purpose taxes. To make the scheme work, they first adopted the practice of transferring all tax revenue into the General Fund, then tapping that fund to pay for pet programs of their choosing—social welfare has been a major sinkhole—and promising to “pay it back” during robust years that never seem to materialize.
Highway and gasoline taxes are also examples of Ponzi. They’re supposed to help pay for the repair and maintenance of our infrastructure. But as we’ve discovered, our bridges and highways are in terrible disrepair from neglect because the money, once transferred into the General Fund, was allocated elsewhere. And once again, Congress is “appalled”.
So President-Elect Obama has pledged to hire three million more government workers to repair our dilapidated bridges and highways, thereby solving the both the infrastructure and unemployment problems with one ingenious, albeit astronomically expensive, program. Brilliant. Except taxpayers will be expected to pay the wages of all those new government employees, along with the accompanying bureaucracy needed to manage them, in order to pay a second time for work we already paid for with taxes!
Obama fancies himself the FDR of our time and wants to give us another “New Deal”. But those of you familiar with history know that FDR’s “New Deal” was a dismal failure. And as we all know, those who refuse to learn from history are doomed to repeat it. We’re being Ponzied. Again.