Response from the Social Security Administration tries to defend that the Social Security plan is never fully analogous to the Ponzi schemes and the pay-as-you-go programs of insurance. The administration however admits that there exists some rather superficial analogy that the money collected from the later contributor is directed to pay the earlier contributors their benefits.
The direction of funds to other uses is the only identifiable similarity between the Social Securities and the Ponzi scheme according to the Social Securities Administration. The administration further notes that the pay-as-you-go scheme is like a simple pipeline with both the front end and the back end. The money from the earlier contributors comes in the front end and the money to the current recipients is paid out the back end (Edward, 2006). The administration explains that as long as there is a balance between the money which come into the pipe and the money which gets out of the pipe, investors can be ensured of their money security. The investors can be assured that the system will run forever without a collapse.
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