Government Economics or Ponzi Scheme?

Here’s an interesting exercise… Let’s take the first two paragraphs from Wikipedia about a Ponzi scheme…

Ponzi Scheme (from Wikipedia)

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.

The system is destined to collapse because the earnings, if any, are less than the payments to investors. The system eventually will collapse under its own weight.

Now let’s swap a couple words here…

US Budget

The US government budget is an operation that pays for [medicare, social security, pensions and funds wars] on behalf of it’s citizens, not from any actual income “earned” through taxes (or any other method), but from money paid by subsequent taxes. The US budget usually entices new citizens by offering services that other taxes cannot guarantee. The perpetuation of the liabilities that the US budget advertises and pays requires an ever-increasing flow of money from citizens to keep the scheme going.

The system is destined to collapse because the income, if any, are less than the expenses. The US budget/economy eventually will collapse under its own weight.

One thought on “Government Economics or Ponzi Scheme?”

  1. I think the difference is that tax payments are not made with the intention of making a profitable return, but because it’s a necessity in order to have public goods provided to an economy that wouldn’t be provided through private firms alone.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>