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"And ye shall know the truth, and the truth shall make you free." - John 8:32
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Author:  Michael J. Gaynor
Bio: Michael J. Gaynor
Date:  February 19, 2009
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President Ponzi

President Obama misuses words, albeit eloquently and persuasively: he describes welfare payments as tax cuts, any spending as stimulus and pork as not pork.

President Obama obviously is not the Messiah, but Americans who pay and will pay income taxes, especially future generations, may come to call him President Ponzi as a result of his massive government borrowing in order to redistribute wealth instead of really stimulate the national economy.

The ACORN President's fiscal plan to deal with the ACORN-generated fiscal crisis calls to mind the notorious Ponzi scheme.


"A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit. The term 'Ponzi scheme' is used primarily in the United States, while other English-speaking countries do not distinguish colloquially between this scheme and other pyramid schemes.

"The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.

"The system is destined to collapse because the earnings, if any, are less than the payments....

"The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi did not invent the scheme, but his operation took in so much money that it was the first to become known throughout the United States....

"Knowingly entering a Ponzi scheme, even at the last round of the scheme, can be rational in the economic sense if a government will likely bail out those participating in the Ponzi scheme."

But is it rational for government to operate a Ponzi scheme?

Who will bail out the government?

Social Security has been compared to a Ponzi scheme and with the passage of time, the comparison has become convincing.


"Criticism of Social Security as a Ponzi Scheme

"Libertarians commonly criticize Social Security's pay-as-you-go funding as being closer to an illegal Ponzi scheme where investors are paid off out of the funds collected from more investors, instead of out of profits from business activity than it is to a trust fund. Michael Kinsley has also described Social Security in this way. William G. Shipman of the Cato Institute argues: 'In common usage a trust fund is an estate of money and securities held in trust for its beneficiaries. The Social Security Trust Fund is quite different. It is an accounting of the difference between tax and benefit flows. When taxes exceed benefits, the federal government lends itself the excess in return for an interest-paying bond, an IOU that it issues to itself. The government then spends its new funds on unrelated projects such as bridge repairs, defense, or food stamps. The funds are not invested for the benefit of present or future retirees.'

"This criticism is not new. In his 1936 presidential campaign, Republican Alf Landon called the trust fund 'a cruel hoax'. The Republican platform that year stated, 'The so-called reserve fund ... is no reserve at all, because the fund will contain nothing but the government's promise to pay.' Defenders of pay-as-you-go respond that the system is a Ponzi scheme only if the United States intends to repudiate its debts. On the occasions when the Social Security Administration has needed to redeem some of those securities, they have always been honored. Although Social Security benefits to future retirees do not represent debt in the legal sense (Fleming v. Nestor, 1960), the treasuries held by the trust fund do. The Social Security Administration, while noting the 'superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs,' has described the latter as 'a simple pipeline' that 'could be sustained forever ... [i]f the demographics of the population were stable'."

But the demographics are not working out the way the Social Security Administration would like and Alf Landon now seems prescient.

To his credit, former President George W. Bush pushed for Social Security reform, but Congressional Democrats blocked it.

Now President Obama is having the United States borrow enormously and putting the burden on actual American taxpayers to cover both the interest and the principal.

Persons who don't pay any federal income tax get a so-called "tax cut" under the new law urged and approved by President Obama.

President Obama misuses words, albeit eloquently and persuasively: he describes welfare payments as tax cuts, any spending as stimulus and pork as porkless.

Charles Ponzi would be amused, but Americans should be outraged.

Michael J. Gaynor

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Biography - Michael J. Gaynor

Michael J. Gaynor has been practicing law in New York since 1973. A former partner at Fulton, Duncombe & Rowe and Gaynor & Bass, he is a solo practitioner admitted to practice in New York state and federal courts and an Association of the Bar of the City of New York member.

Gaynor graduated magna cum laude, with Honors in Social Science, from Hofstra University's New College, and received his J.D. degree from St. John's Law School, where he won the American Jurisprudence Award in Evidence and served as an editor of the Law Review and the St. Thomas More Institute for Legal Research. He wrote on the Pentagon Papers case for the Review and obscenity law for The Catholic Lawyer and edited the Law Review's commentary on significant developments in New York law.

The day after graduating, Gaynor joined the Fulton firm, where he focused on litigation and corporate law. In 1997 Gaynor and Emily Bass formed Gaynor & Bass and then conducted a general legal practice, emphasizing litigation, and represented corporations, individuals and a New York City labor union. Notably, Gaynor & Bass prevailed in the Second Circuit in a seminal copyright infringement case, Tasini v. New York Times, against newspaper and magazine publishers and Lexis-Nexis. The U.S. Supreme Court affirmed, 7 to 2, holding that the copyrights of freelance writers had been infringed when their work was put online without permission or compensation.

Gaynor currently contributes regularly to,,, and and has contributed to many other websites. He has written extensively on political and religious issues, notably the Terry Schiavo case, the Duke "no rape" case, ACORN and canon law, and appeared as a guest on television and radio. He was acknowledged in Until Proven Innocent, by Stuart Taylor and KC Johnson, and Culture of Corruption, by Michelle Malkin. He appeared on "Your World With Cavuto" to promote an eBay boycott that he initiated and "The World Over With Raymond Arroyo" (EWTN) to discuss the legal implications of the Schiavo case. On October 22, 2008, Gaynor was the first to report that The New York Times had killed an Obama/ACORN expose on which a Times reporter had been working with ACORN whistleblower Anita MonCrief.

Gaynor's email address is

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Copyright 2009 by Michael J. Gaynor
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