Golden promise, leaden result
I’m a lucky man. Two wonderful messages appeared in my inbox. First, an obscure relative of mine, “Craig Milliken,” has shuffled off his mortal coil, and I am his sole heir. All I have to do is respond to the email. Next came an email from “Mackenzie Bezos,” giving away $2.5 million to 50 lucky recipients. All I have to do is get back to her to claim my $50,000 share.
Does anyone fall for these obvious scams? I guess so, or else they wouldn’t be populating our inboxes. There are many other, far less obvious, scams which succeed a distressingly high percentage of the time. There are two traits of human nature enabling cons and scams to succeed. One, we all want something for nothing — or if not nothing, then low cost. Two, most of us have a thought that this time the promise will come true, despite overwhelming evidence to the contrary. Why else do so many buy lottery tickets? After all, someone has to win — and why not me?
Scams come in many flavors. The classic is the Ponzi scheme, named after one Charles Ponzi who pulled off an iconic version — Ponzi didn’t invent it — and fleeced investors of millions in the early 1920s. Such frauds always promise outsize gains from some plausible sounding investment method and pay early contributors with money paid in by later victims who hear of the great returns already being earned.
Perhaps the largest Ponzi scheme in the world today is the American Social Security system. The concept was invented by Otto von Bismark, the “Iron Chancellor'' of Germany, in the late 19th century. Wishing to stave off communist agitation and possible revolution, he brilliantly thought a dose of socialism, somewhat like a vaccine, would stave off the much worse disease of communism. He promised German workers, for their required contribution, a guaranteed pension when they reached 65. Not many lived to 65, but hope springs eternal. It worked fine.
Fast forward 50 years to the Great Depression, and the Roosevelt administration thought this idea was, as so much else we were importing from Germany back then, just the ticket to cement the New Deal. Early retirees under this scheme made out like bandits. My grandparents on my mother’s side were perfect examples. “Pop” paid in about $90 in the late ’30s before health issues caused him to quit work. Fortunately they had enough savings to tide them over until they turned 65. The very first check they received was for more than they had ever paid in. Pop lived to 70, so only collected 60 of those checks. Grandmom lived to 97, picking up 384 payments. A fabulous return on investment!
Obviously, such returns to today’s contributors to Social Security are long gone. Most contributors would do far better by investing the money themselves. So why don’t they? Because this Ponzi scheme, unlike Mr. Ponzi's scheme, is not voluntary. You cannot opt out. Before long, the Fund’s trustees tell us, Social Security will go broke, unless something is done. That something could be raising the retirement age, raising Social Security taxes faster than currently, or cutting benefits or some combination. Good luck with the politics of those choices. More borrowing and bigger deficits seems the more likely outcome.
Some scams promise not golden gains, but avoidance of disaster. That’s the essence of the Green New Deal. Unless we give up our hydrocarbon lifestyles, we are doomed. Human civilization, maybe even human life itself, will come to a halt in the not-too-distant, but ever receding, future. Although the climate tsar himself, John Kerry, has said America can go to zero emissions and it won’t make any difference, nevertheless we must do our part, spending trillions on sheer futility. The people who pocket those trillions, however, don’t think it is a futile effort at all.
To paraphrase an old saying: No one ever went broke underestimating the gullibility of the American people.
Charles Milliken is a professor emeritus after 22 years of teaching economics and related subjects at Siena Heights University. He can be reached at milliken.charles@gmail.com.
This article originally appeared on The Daily Telegram: Charles Milliken: Golden promise, leaden result
