Program meets the only requirement

I FEEL the need to correct several bits of misinformation presented by John Edward in his attempt to argue that Social Security is not a Ponzi scheme ("Don't confuse Social Security with Ponzi scheme," Letters, Dec. 31).

Mr. Edward posits that any operation for which cash flows are known cannot be a Ponzi scheme. But this knowledge is actually irrelevant. A Ponzi scheme, by definition, needs to only meet one requirement, and that is that it pays "profits" to contributors from proceeds received by subsequent contributors, rather than from earnings generated by the original contributions. Our Social Security program clearly meets this requirement.

Mr. Edward also makes the assertion that money contributed to the system is invested. This is not true. Money received by the Social Security Administration through payroll deductions goes directly to the general budget of the federal government, with benefit levels determined not by earnings, but merely by fiat of a government agency.

Finally, Mr. Edward claims that the lack of a safety net was the cause of the Great Depression. I cannot begin to fathom from where he draws this conclusion, except perhaps an unbridled love for paternalistic big government. All of my studies of economic history make legitimate cases for blaming highly leveraged investing, the Treaty of Versailles, unwise tightening policy of the Federal Reserve Bank, and even the Smoot-Hawley Tariff, but never has anyone claimed that the lack of Social Security caused an unemployment rate of 25 percent and an 89 percent drop in the stock market.

WAYNE BOENIG
Walpole
The writer is an adjunct professor of business at Boston University.