Published November 21, 2010
Social Security by definition is a Ponzi scheme that even master swindler Charles Ponzi would feel badly about, Texas Gov. Rick Perry said Sunday, arguing that the federal government should turn over block grants to states to run entitlement programs.
"My children who are in their 20s know that Social Security is a Ponzi scheme," Perry, the new chief of the Republican Governors Association, told "Fox News Sunday."
"It probably is a program that even makes Mr. Ponzi feel pretty bad if he were still alive. The fact is our children know that the money that they're putting into Medicaid they'll never see. And they need to fix it.
"And it is a Ponzi scheme. I don't know how you would explain it any other way than what you just did. There are fewer people paying into it and our kids are never going to see any benefit from it," Perry said.
Charles Ponzi was an Italian immigrant who defrauded thousands of New England residents by convincing them to invest in a postage stamp speculation scheme in which he promised investors a 50 percent return in 90 days. Though he died in 1949, his name lives on as an expression that refers to any investment scheme in which new investors are required to pay off earlier investors without any of the investments ever seeing the return promised.
As a scheme, Perry, who recently published a book about decentralizing government, said Social Security, Medicaid and Medicare collectively are $106 trillion of debt because of unfunded liabilities.
If states were allowed to implement Medicaid, for instance, then the federal government could start having the discussion on how to put Social Security on "better and more solid footing," he said.
Perry, who called states "the laboratories of innovation," said a better system would allow him to take federal block grants to create a cheaper health care delivery system without the federal strings.
"This federalized Washington health care now may not work. Matter of fact, we know it won't work well in Texas," he said.
Though Texas has one of the lowest tax rates and regulatory structure, and led the states in private sector growth in the past decade, it is potentially facing a $25 billion deficit this year. The state already spends 25 percent of its budget on health care. Furthermore, 25 percent of the population in Texas doesn't have health insurance -- one of the highest rates in the nation.
But Perry said he thinks he could cut Medicaid spending in half and return $9 billion to the government and cut $6 billion of the state's spending. He said that would also mean leaving the federal government out of the state's governing.
"It's $30 billion a year between the state and the federal government for one year of Medicaid in the state of Texas. We think we can cut that substantially, help our colleagues in Washington, D.C. balance the budget up there," he said.
"Do the things that you're supposed to do like securing our border, like delivering the mail, preferably on time and on Saturdays, before you get involved in things that the Constitution doesn't say one word about, like health care," Perry added.