Ida May Fuller Rakes in 92,380% ROI in Ponzi Scheme
by Chris Campbell
That was the day when one woman, Ida May Fuller, received America’s first ever Social Security check. The press surrounded her house. And everyone waited for the postman. It was quite the event. Old lady holding a check. The check was for $22.54.
“Miss Fuller,” the official Social Security website reads, “a Legal Secretary, retired in November 1939. She started collecting benefits in January 1940 at age 65 and lived to be 100 years old, dying in 1975.
“Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.”
This is, by the way, meant to be a “success story.” At least, they tout it on their own site as such. And it sure was a success… for Ida Fuller. Why, that’s like... a 92,380% return on her investment! But, as you can see, there’s a fatal flaw. It’s the same problem Charles Ponzi and Bernie Madoff ran into. Eventually, the money dries up. Not everyone can realize the gains of Ida Fuller. Someone, you know, has to lose. And here we are, 75 years later…
With 10,000 people turning 65 every day, and the quickest growing demographic in America becoming the octogenarian. The number of Social Security-eligible senior citizens is set to grow by 50% by 2030. And the Millennials, the first generation to make less than the its predecessor, is paying way less into the system.
And get this…
“A study out of Harvard and Dartmouth,” Peter Coyne writes in the Daily Reckoning, “claims the Social Security Administration has been underestimating the costs of the safety net by at least $1 trillion since 2000. Whoops. Now the trust fund is projected to be bone dry by 2031.” But the government will get the money somehow. Come hell or high water…
Maybe. Er… Probably not. But by golly, they’ll try! Never underestimate the ability of a government to squeeze water out of desert stones.
Right outside of Baltimore, for example, in Takoma Park, MD., Uncle Sam pulled one stunt on a resident, Mary Grice. We think it might be pretty indicative of things to come. Without warning, old Sammy snatched Grice’s tax refund. And instead of receiving her money, she received a letter telling her that the money was used to satisfy an old debt.
How old? Social Security claims it overpaid someone in the Grice family in 1977 -- but it’s not sure who was part of the overpaid party. So it’s her responsibility. Grice, though, was far from the only one who received such a letter.
Hundreds of thousands of taxpayers, all of whom expected refunds last year, instead received the note. Graciously informing them that they just paid off old debts for their predecessors. And some of these debts haven’t seen the fluorescent lights of a government basement in 50 years.
“The Treasury Department,” the Washington Post reported last year, “has intercepted $1.9 billion in tax refunds already this year -- $75 million of that on debts delinquent for more than 10 years", said Jeffrey Schramek, assistant commissioner of the department’s debt management service.
“The aggressive effort to collect debts started three years ago -- the result of a single sentence tucked into the farm bill, lifting the 10-year statute of limitations on old debts to Uncle Sam.”
Hope your family didn’t owe any money. Because they are digging deep.
Of course, this frenzied grab for capital isn’t uniquely American: in 2013, Poland’s government confiscated half of its people's retirement accounts.
Two years ago in Sept., while tensions were sky high in the Syrian conflict and all eyeballs were on the Mediterranean, Poland didn’t let the crisis go to waste. Instead, it got to work. It announced (more like whispered) that it was going to transfer assets owned by private pension funds into the state’s coffers. “In effect,” Tyler Durden wrote at the time in Zero Hedge, “the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul."
“And while a change to state-pension funds was long awaited,” Durden adds, “an overhaul if you will -- nobody expected that this would entail a literal pillage of private sector assets.” This may go without saying, but it was for the good of the people.
By shifting private assets into the state’s fingers, the government was then able to place those assets in the books and offset some of the public debt. This, of course, gave it a little more leeway to… wait for it… borrow and spend.
Two years prior, the Irish government did the same thing. This time, it was under the guise of a “jobs program strategy.” The strategy was to tax all private pensions for four years. That way, it could keep government job spending from piling on more debt. And another example…
In Greece, during the financial crisis, the government raised property taxes seven-fold. And those who couldn’t shell out the cashish were threatened with homelessness and jail time.
Here’s one more, from, once again, our friend the Nomad Capitalist, Andrew Henderson…“During the financial crisis,” Henderson says, “the Hungarian government told its citizens that they must either hand over their private retirement savings (their equivalent of IRAs, 401(k)s, etc.) to the state, or else they would be cut off from receiving their state pension (like Social Security). “However, even if they chose to take personal responsibility and forego government retirement benefits, they’d still have to pay for them! Unfair? Sure. But not to government.
“They can literally do whatever they want, right down to requiring by law that you pay for services you don’t receive. To that point, I believe anyone with capital deployed in the west will be hurt.
“If you’re reading this, chances are you fall into one of the classes the government fairness police will deem doesn’t need your retirement account, either because you make too much money, have too much wealth, or are too politically incorrect.
“With some $100 TRILLION in unfunded liabilities owed by the U.S. government and emerging countries like China, Russia, and Brazil getting tired of American imperialism, the idea that you can rely on Social Security 10, 20, or 30 years from now is ridiculous. “ Also ridiculous is the notion that, when the government finally realizes that it has to ration retirement benefits to those that “really need them,” that they will leave your private retirement account alone.”
“When you study the history of truly bankrupt empires,” Henderson goes on, “you’ll discover that eventually, anyone with two nickels to rub together was branded Public Enemy #1.
“After all, if much of the country is starving on rations of government cheese while taking the bus, even a guy driving a beat-up Kia becomes the object of scorn.” Entrepreneurs and investors, these days, are the biggest troublemakers. And you see it, Henderson says, in how the Western mindset has shifted over the years.
“Having started businesses since I was 19 years old, I can tell you hiring and human resources were my most dreaded role. That’s because, as the business owner, I wanted to get things done. I didn’t start a business in order to create jobs. I created a business to build freedom and become as wealthy as my efforts could carry me.
“I noticed a trend in the west that society has told employees they are being screwed by their boss. How many times have you heard an employee complain about his or her salary, only to compare it to the vast profits of the company?
“Employees rarely know the true inner workings of the company, or else they’d start their own company. Yet western society has taught them that they are victims to the evil business owner who lives in a nicer house or can afford to take a vacation every once in awhile. Rather than everyone aspiring to their own greatness, the west has become a source of class envy.”
But, he says, “I don’t see this phenomenon when I travel to the world’s new boom markets.” People he met in China, the Philippines, and Mexico, he wrote, begged him for a job. “They want the experience, the prestige of working for a westerner, and the presumably better pay and stability.” But you won’t hear about that from your politicos on the Hill. Instead, they’ll simply drive out more wealth, dissuade more people from the joys of hard, fulfilling work, and clamp down on the worker bees of America.
“Despite the realities of the world,” Henderson goes on, “they’ll gladly mandate $15-an-hour minimum wages, endless employment taxes, non-stop regulations, and any other measure they can to ensure that you, the business owner, get as little as possible. Just look at the propaganda they put out about CEOs making “too much” more than the average worker.
“Just because you don’t feel rich today doesn’t mean you won’t be rich in the future. Or, at the very least, be “rich” according to some morally bankrupt politician who will throw you under the bus for his shot at power.”
It comes down to culture. Most people in the U.S. have been taught to believe that wealth is evil. Businessmen are exploitative sharks. Money is the root of what again? Please, we didn’t hear it the first hundred thousand times. The biggest problem with this mindset, of course, is that it leads people to one conclusion: Hard work shouldn’t be rewarded. Punt the free market in the bum. Instead, hard-earned money should be distributed amongst everyone.
How’s that for incentive?
“All you need to do,” says Henderson, “is look at the 2012 US Presidential elections and see that the guy who made vague promises about “everyone getting an education” and “everyone having a chance” was the one who got elected.
“The American -- and Canadian, British, etc. -- people have spoken: they like the kind of wealth redistribution that politicians like this have to offer.”
© 2015 Laissez Faire Books, LLC