October 31st, 2008

It’s Not Your Money: The Perpetual Ponzi Scheme of Socialism


photo credit: mario zucca

“But it’s my money—I’m just getting some of it back.”

Such is the argument proffered by those who disagree with the government’s socialist programs in general, but excuse their own participation by claiming that they are simply withdrawing the money they’ve previously been forced to give. After all, if the government has been taxing us for years to fund these programs, are we not justified in taking advantage of the offered incentives and reaping the benefits of our own taxation?

While conventional wisdom may suggest that this is the case, it’s utterly false; in wealth redistribution, you are never able to get your money back. This, of course, is a no-brainer. Few will argue that you are able to later receive the very same dollars you were coerced to give. But most people seem to think of these socialistic programs (social security, unemployment, welfare, medicare, medicaid, etc.) as some sort of savings program whereby the money you are taxed sits and waits for you to withdraw it at a later date.

In reality, socialism is a type of ponzi scheme—forcing you to surrender your money to benefit others, and later forcing others to surrender their money to benefit you. Thus, the taxes you pay are spent immediately, and the money has vanished back into the economy through the pockets of other individuals.

How, then, are you going to get your money back? I suppose you might find out to whom the money was given, contact them privately, and arrange for them to give you your money back. Far-fetched as that may seem, it’s really the only solution whereby you can get your money back.

The alternative and popular solution is to encourage “perpetuation through participation”. In plain English, this means that when person A wants to receive some of the benefits of the program he’s been funding for years, he is indirectly coercing person B and person C to surrender their own money for his benefit. Herein lies the grand ponzi scheme: whatever money person A receives through socialism (the redistribution of wealth), he can only receive it by forcing others to pay. At no time does person A get his own money back, as it was spent long ago. Instead, person A is encouraging a fundamentally broken and immoral system by taking money from others, just as money was taken from him for others. As Ezra Taft Benson said:

The price you pay for “something for nothing” may be more than you can afford. Do not rationalize your acceptance of government gratuities by saying, “I am a contributing taxpayer too.” By doing this you contribute to the problem which is leading this nation to financial insolvency.

Whatever the program may be, and whatever its intended purpose or proclaimed benefit, if it relies on taking money from one individual to give it to another, then it’s socialism, a ponzi scheme, and confiscatory. Thinking that an individual is simply getting his own money back is tantamount to suggesting that since person A was wrongfully jailed for a crime he did not commit, that person B and person C should likewise suffer. By passively allowing a ponzi scheme to continue, the individual who participates in the socialistic program in an effort to personally benefit is authorizing the government to plunder others’ pockets on his behalf, just as his were plundered before.

Who can stop this cycle? How many people are needed to cause the ponzi scheme to come crashing down? Where are the individuals with the moral courage to say no to the perpetuation of legalized robbery?

In summary: once an individual has been taxed for the purpose of helping others who are allegedly less fortunate, that money is immediately spent. (The government is broke; it spends what it gets within days, and borrows and prints the rest.) Thus, for that individual to benefit from the same programs he has been contributing to, the government must continually and increasingly tax others.

I submit that this is an immoral and invasive act of government, and one that should be stopped immediately. Whenever the government condones and encourages an action that would, in the hands of private citizens, be decried and prosecuted, we may conclude that the action is wrong.

As for me and my house, we will not participate in any such programs. I cannot in good conscience take any money from another person through the force of government and immorality of wealth distribution.

40 Responses to “It’s Not Your Money: The Perpetual Ponzi Scheme of Socialism”

  1. David
    October 31, 2008 at 11:22 am #

    It’s not simply that “most people seem to think of these socialistic programs as some sort of savings program.” The truth is that our government actively tries to convince us that that is the case – that’s why they spend time trying to convince us that they will not lay there hands on the contents of the “social security lockbox.”

    Honestly I’m amazed that the ponzi scheme has survived as long as it has already.

    How many people, like Connor, are willing to refuse to participate in such programs? How many have actually refused to participate when they met the qualifications of one of those programs?

    I am (I have).

  2. Mark N.
    October 31, 2008 at 11:25 am #

    Do you purchase automobile, health or life insurance?

    Why is doing so not classified as a form of socialism? A lot of people put money in a big pot. If the system is to work, only a few will get anything back out of it.

    Obviously, it’s not a government entity running the show (in most cases, although recent events seem to find us more and more willing to put the government in charge of some insurance agencies), but there is a “society” of people who have banded together, using their funds collectively to benefit the unfortunate few among them who will need to have access to a larger amount of money (most likely) than they contributed to the pot.

    Why aren’t insurance companies routinely criticised for their socialist ideals? Because it works?

  3. Carissa
    October 31, 2008 at 11:30 am #

    Why aren’t insurance companies routinely criticised for their socialist ideals?

    Because it is completely voluntary?

  4. David
    October 31, 2008 at 11:33 am #

    One major difference is that insurance companies do not operate by force – participation is voluntary (beyond the amount of coercion in which the government mandates our participation – such as basic car insurance).

    The other major difference is that when you purchase auto insurance you really do hope not to need your money back – that’s how it survives. That attitude related to social security, medicare, etc, is that we each want to get our money out. It’s not put it in and get it out only as necessary – it’s put it in and then game the system if necessary to get “your fair share.”

  5. Carissa
    October 31, 2008 at 11:40 am #

    Only government has legal means to coerce.

  6. Bill
    October 31, 2008 at 12:14 pm #

    The only government assistance I have ever accepted personally is Pell Grants to attend college. I did that before I knew anything about government/politics, I saw it more as a blessing from God than anything else. A few years later, when I realized what I had done, I felt bad and wanted to pay it back. But then I thought, “if I pay it back government is just going to give it to someone else, so I might as well just move on and not worry about it. But I wonder if enough people did something like paying back Pell Grants or food stamps or Medicare payments if that would cause people to realize that we can survive without government’s aid? I don’t know, should I pay it back?

  7. David
    October 31, 2008 at 12:31 pm #

    Bill,

    I’m like you. I received Pell grants for school before I had really looked into the dysfunction we accept as government. I don’t see any benefit to paying those back. Instead I choose that I will not participate in those programs in the future and I will encourage my children to not depend on any federal programs.

  8. Connor
    October 31, 2008 at 12:50 pm #

    I don’t know, should I pay it back?

    Instead of putting the money back into the system (“perpetuation through participation”), I’d recommend instead giving it privately to people who truly cannot afford an education. Might I suggest a donation through Mothers Without Borders?

  9. Kyle
    October 31, 2008 at 1:17 pm #

    Connor, I think we can generally agree here… Generally. However (and I’m sure this will get me in A LOT of trouble), by your statements, one is to conclude that tithing is also a Ponzi Scheme, and that the LDS church thereby promotes socialism.

  10. Connor
    October 31, 2008 at 1:23 pm #

    …one is to conclude that tithing is also a Ponzi Scheme, and that the LDS church thereby promotes socialism.

    Who has ever been incarcerated by the state for not paying tithing?

    Tithing, financial contributions to churches in general, and any other private contribution of wealth (even if it’s “required” by the organization to maintain active and full membership) is voluntary. You are not punished in any way by the government for failing to comply, and are not forced in any way to contribute.

    Sorry, but your argument fails for the same reason that Mark N.’s fails above. Any redistribution of wealth done through voluntary association is not, by definition, socialism. (And besides, tithing isn’t given back to members of the Church—that’s what fast offerings are for).

  11. Sean
    October 31, 2008 at 1:30 pm #

    Kyle,

    A ponzi scheme doesn’t necessarily equal socialism. I believe socialism is a ponzi scheme, but there are ponzi schemes (ever gotten those old chain letters asking you to send a dollar to someone, and eventually you’ll get a dollar from 4 people?) that are not socialism. So your logic that ponzi scheme = socialism is false.

    The key difference between the LDS Church and government socialist programs, such as Social Security, is the voluntary nature of tithing others have mentioned above. If you don’t pay tithing, no punishment is given to you; you just won’t receive certain privileges. If you don’t pay your taxes, punishment occurs.

  12. Kyle
    October 31, 2008 at 1:33 pm #

    Tithing funds are (was?) used to offset the costs of missions, so that all young, worthy men and women could afford to go on a mission, despite their financial position, or their calling.

    Its still voluntary with the government, you just get thrown in jail if you don’t. But you still have the choice to make. Tithing is voluntary, but you can’t go to the Temple and get sealed (a requirement for the Celestial Kingdom) if you don’t. One if a commandment of people, the other is a commandment of God. In either case, the result is the same. Funds you “contribute” to the welfare of others.

  13. Clumpy
    October 31, 2008 at 1:33 pm #

    Insurance can be a win-win situation for people because it provides cushions against sudden horrific events. You pay insurance for years understanding that if you don’t have any major accidents or problems you will lose money, but that you are helped in the case of a major calamity. These types of arrangements have existed for centuries.

    That’s why the purpose of insurance falls apart when 1) People use it for trivial things or ordinary expenses or 2) The insurance companies do not pay in the event of a legitimate demonstrable need. Ordinarily, there will be a “good” outcome either way (you don’t have any major disasters in your life, or you don’t get financially ruined by a disaster, and get the care you might not be able to afford at the moment).

    Since the burden on each person in the same risk group is even (ideally) it isn’t an unfair system even though some people who don’t have problems will lose money, because everybody agreed in advance.

    Connor: Redistribution of wealth may not always be Socialism under a voluntary construct but it could still be a Ponzi scheme. Tricking people is functionally equivalent to forcing them. Tithing doesn’t fall under either category for completely different reasons that should be apparent to any Church member (it hinges on no temporal rationalization).

  14. Connor
    October 31, 2008 at 1:36 pm #

    Its still voluntary with the government, you just get thrown in jail if you don’t.

    Are you serious? How is that voluntary? You’re beginning to sound like Harry Reid

  15. Sean
    October 31, 2008 at 1:49 pm #

    Kyle:

    Aside from the spiritual dimension of the issue, the difference is in the type of consequence.

    If you don’t pay your tithing, nothing is done to you. You just may not have certain privleges you might have otherwise had.

    If you don’t pay your taxes, something is done to you. You are sent to jail.

    I agree with you that we always have a choice; taking the definition of “voluntary” in a strict, literal manner, everything everyone does is voluntary. In this case, the difference is the type of consequence.

  16. David
    October 31, 2008 at 1:54 pm #

    Kyle,

    When was tithing used to “offset the costs of missions, so that all young, worthy men and women could afford to go”?

    The only thing I am aware of similar to that is that the cost of missions were equalized so that one mission would cost the same as another. The funds to help worthy missionaries who could not otherwise afford to go were a missionary fund that is independent of the tithing money just as fast offerings are independent of tithing.

  17. Mark N.
    October 31, 2008 at 2:08 pm #

    Because it is completely voluntary?

    Auto insurance in the state of California is not voluntary.

  18. Connor
    October 31, 2008 at 2:10 pm #

    Auto insurance in the state of California is not voluntary.

    It is if you choose not to drive on the state’s roads or obtain a drivers license.

  19. Sean
    October 31, 2008 at 2:14 pm #

    Mark N.,

    Socialism is connected to a government entity. Even in your example, that auto insurance is not voluntary in California, that’s due to the government there, not the insurance company.

  20. jtanium
    October 31, 2008 at 2:29 pm #

    @David, I was offered tithing money from my ward to go on a mission.

  21. Connor
    October 31, 2008 at 2:30 pm #

    I was offered tithing money from my ward to go on a mission.

    Tithing funds are not handled by the ward, nor am I aware of their ever having been.

    There is a ward missionary fund to which people can contribute, and those are the funds that Bishops are able to use to assist missionaries.

  22. jtanium
    October 31, 2008 at 2:30 pm #

    It is if you choose not to drive on the state’s roads or obtain a drivers license.

    Well, then paying taxes is voluntary if you choose not to live/particpate with the rest of society.

  23. jtanium
    October 31, 2008 at 2:31 pm #

    (psst, that means go to jail)

  24. jtanium
    October 31, 2008 at 2:33 pm #

    There is a ward missionary fund to which people can contribute, and those are the funds that Bishops are able to use to assist missionaries.

    Connor, this was well over ten years ago… I guess things have changed.

    Now you know who hasn’t been going to church lately!

  25. David
    October 31, 2008 at 2:41 pm #

    I’d like to know how long ago it actually was because I got home from my mission over 10 years ago and when I left the church was already using missionary funds – if you were really offered tithing money then I’m quite surprised.

    Also, my mom works for the church finance department and I can confirm that as long as she has worked there the wards have never handled tithing funds (outside of counting and depositing them, obviously).

  26. jtanium
    October 31, 2008 at 2:47 pm #

    Maybe I was confused, it was a long time ago. Point taken, tithing doesn’t pay for missionaries.

  27. David
    October 31, 2008 at 3:03 pm #

    It’s easy to forget – especially after a long time.

  28. Josh Williams
    October 31, 2008 at 8:10 pm #

    Tithing, financial contributions to churches in general, and any other private contribution of wealth (even if it’s “required” by the organization to maintain active and full membership) is voluntary. You are not punished in any way by the government for failing to comply, and are not forced in any way to contribute.

    In fairness, Charles Ponzi never forced anyone to contribute to his scheme either.

    Rather, he relied on persuasion and flattery, (and the ability of his earlier “investors” to persuade their friends, etc.) The basic pitch was, invest- get a return on your investment. How is this different, then, from tithing? Church leaders use persuasion to get members to pay tithing, usually implying that they’ll “reap rewards in heaven…” or somesuch.

    Note that the difference between tithing, and a Ponzi scheme or social security, isn’t whether it’s voluntary; rather it’s never implied that tithe paying members will get their money back….

    Also, insurance differs from P.S.’s in a similar fashion, insurance buyers don’t generally expect a return on their investment; what they pay for is to be partially protected from risks and liabilities, should they occur. In other words, the only way you’re going to get a “return” on your insurance premium is if something equally expensive happens to you.

    Secondly, a well managed insurance program won’t collapse if it can’t attract new “investors” (as opposed to AIG, for example.)

  29. joe
    November 1, 2008 at 4:41 am #

    Does tithing in any way pay for BYU?

  30. RoAnn
    November 1, 2008 at 12:12 pm #

    “As for me and my house, we will not participate in any such programs.” Connor, do you mean only that you will not accept Social Security payments if they are still available when you are eligible for them; or do you also mean you will find a way to earn money that will not require you to make contributions to Social Security?

  31. Don Johnson
    November 1, 2008 at 3:22 pm #

    I hope you are also not going to fly on any airline governed by the FAA!

  32. Connor
    November 1, 2008 at 3:24 pm #

    Connor, do you mean only that you will not accept Social Security payments if they are still available when you are eligible for them; or do you also mean you will find a way to earn money that will not require you to make contributions to Social Security?

    What I meant by the statement was that I will not accept social security payments from the government (or any other form of wealth redistribution), though I also advocate dismantling the socialist system and support candidates who would act accordingly. So I guess “yes” is the appropriate answer to your question. :)

  33. Bill
    November 1, 2008 at 5:19 pm #

    It is interesting that comment #6 was made by a different “Bill” than I. But I would have said a very similar statement.

    I had a similar knee-jerk reaction to Kyle’s comment #9 (voluntary). But I believe he made a point worth pondering in comment #12.

    Although it seems a bit of a stretch to think along these lines, it does have some logic to it. So if the question of “voluntary” is not the issue (or at least not the whole issue) then what else is there?

    “Can a man rob God? Yet ye have robbed me.”

    We need to remember that ALL things are the Lord’s, including our money. We are merely stewards over that portion that the Lord has blessed us with. Tithing is the Lord’s law of finance. All the payment of Church expenses is to be paid out of that money. So, yes, He has the right to demand by commandment that we give a portion to His cause.

    The Lord has given no statement I’m aware of regarding taxes or giving any of our money to other sources except that we need to obey the law of the land and “give unto Ceasar that which is Ceasar’s”. What BELONGS to the government?

    In the end, ANY other entity to whom we give money needs to be done in such a way that we, as stewards of God’s money, can stand before him with a clear conscience at the last day.

    My father-in-law has just become eligible to receive social security. But he refuses, for the same reason Connor and others have mentioned here. I’m not sure what decision I will make should the choice be made available to me. I’m not really going to sweat it since I believe the choice will never BE made available to me.

    I have for the sake of debate created some arguments that can apply here.

    1) As Carissa mentioned, the government has a monopoly on the legal use of force. As such, they are also the earthly authority which defines who’s property is who’s. So, is it possible for the government to “steal”? Don’t they merely “redefine” who is the legal owner of the property? Perhaps they define the “legal” owner, but cannot define the “rightful” owner. There’s another thread.

    2) I think the Ponzi Scheme argument has little weight if you file tax returns. The government takes money away from you, spends it, then gives you an opportunity to get some money from them that probably isn’t the actual dollar bill that you gave them.

    So, just how far are you going to take this? My father-in-law actually took it so far that he preferred to be unemployed most of the time. He was so “injured” by having to pay taxes that he decided not to make any money. Then he had to worry about providing for his family (which he couldn’t do on his own).

  34. John C.
    November 4, 2008 at 3:26 pm #

    Does what you are describing describe every government that collects taxes?

  35. carborendum
    November 4, 2008 at 6:41 pm #

    John,

    At whom is your question directed?

  36. Carborendum
    December 16, 2008 at 11:23 am #

    If we are waging war against an enemy, it is a wise tactic to forage off the enemy than to maintain supply lines for our own troops. By doing so, we would encourage the enemy to be even more oppressive on its own people.

    Should we then abandon this wise tactic and maintain our own supply lines?

    Since Congress is incapable of doing basic math, they do not decide to raise SS tax to pay for all those taking out. Their behavior doesn’t change because more or less money is being taken out of the system.

    By refusing to take social security, we are actually helping them to prolong their socialist policies. By taking their money, we are helping to bring about the demise of the system perpetrated by these domestic enemies of the Constitution.

  37. Connor
    December 18, 2008 at 9:49 am #

    This article from the wonderful Peter Schiff is spot on. A highlight:

    Unfortunately, the Ponzi economy doesn’t stop there. A chain letter is no more viable when run by governments than when run by private citizens. However, government orchestrated pyramids have the advantage of required participation. As a result, they can maintain the illusion of viability for several generations. But the longer such schemes operate the larger will be the losses when they ultimately collapse.

    The main difference is that while Madoff took elaborate steps to conceal his scheme, the U.S. government operates in broad daylight. It truly is amazing how faith in government is so pervasive that many can believe that politicians will succeed where private individuals fail, and that governments are somehow immune to the economic laws that govern the rest of society. Like those unfortunate to have been duped by Madoff and Ponzi, the world is in for a rude awakening.

  38. Jimmy Davis
    July 27, 2009 at 5:30 pm #

    I’m sensing that some people have a guilt complex based on a few comments I’ve read. I understand. Had I ignorantly been involved in indirect, legal plunder I would have felt bad about my involvement too. The point is to recognize the unethical nature of government welfare schemes and our involvement and do everything we can to not participate in the future.

    Every member of my family at one point has taken money that wasn’t theirs through one government program or another. I don’t judge them for that. I love them sill the same but the choices I make and that I encourage them to make are to understand the principles outlined in this article and to follow them.

  39. Steve
    October 9, 2010 at 4:26 pm #

    Yeah for being pronounced “utterly false”!

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