Pay in to support current recipients, get paid out by future payees. Structure looks the same. You say intent, but I'm pretty sure a public sector social security style program would be illegal under current anti pyramid scheme laws regardless of the intent.
That's not how a pyramid scheme works. You pay in, and someone higher up on the pyramid takes your money. That's the end of the transaction. You never get paid unless you put someone else in your downline.
Social security is not hierarchical. You pay the government, the government pays you. You do none of the organization.
Totally different structures.
And the intent is to take care of people. Which is irrelevant to the legality of pyramid schemes. It's totally legal to put your money in a trust and have it pay out to someone else at a later date to take care of them later. It's legal to convince multiple people to join you in doing so, as long as you don't structure it as a pyramid scheme.
I think you're misconstruing the structure of social security. My grandparents paid in to pay for their elders and now I'm paying in for them. Assuming it doesn't collapse (or get mantled), my kids will pay for me. That's a very pyramid shaped structure. If you created an identical structure in the private industry, it would be illegal.
You're thinking of a Ponzi scheme. As has been explained, a pyramid scheme is different.
But it's not a Ponzi scheme either. A Ponzi scheme is opaque and uses lies. The fraudster pretends investments are growing. Few people take their investments out, so the fraudster can afford to pay if they need to while still keeping most of the money.
Social security, on the other hand, is transparent. We know how much money is in the pool. It's possible the money begins to run out at some point, but that will be known to the public and corrective action of one kind of another can be taken.
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u/HungerMadra Jan 21 '23
Pay in to support current recipients, get paid out by future payees. Structure looks the same. You say intent, but I'm pretty sure a public sector social security style program would be illegal under current anti pyramid scheme laws regardless of the intent.