Just wanted to make sure that everybody caught Ben Bernanke’s description of Social Security, because it provides a pretty clear illustration of why people consider it to be a pyramid scheme.
On entitlements, you’re also correct that they’re not true insurance programs – I think many Americans think the money they put in Social Security is, or in Medicare is, “somewhere in the bank” someplace–that’s not really quite right. What’s happening mostly is that younger generations are paying for their taxes for older generations’ benefits, and that worked OK as long as the population was shaped in a (gesturing), more like a pyramid, instead of like–(gesturing) more like a rectangle as it’s becoming now, the case.
7/13/2011 Remarks of Ben Bernanke before the House Financial Services Committee, Chairman of the Federal Reserve
Here’s the video: