Note: I try my hardest to keep politics off of Young and Frugal, but this is an issue that I think transcends political beliefs.  This is a real problem that needs to be dealt with soon and I’m trying to take a non-partisan approach to it.

Bernard Madoff is a name that you should know (unless you live in a bubble).  A simple Google news search reveals that in the last month over 33,000 news articles have been published about him, all relating to his $50 billion dollar Ponzi Scheme, the largest in History… or so they say.

As you all know by now a Ponzi Scheme is a “fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors, rather than from profit” (Wikipedia).  On the surface it seems like a decent concept, until you think about how it only works as long as there are new investors to pay off the old ones; then when new investors dry up, the whole thing crashes to the ground and the newest investors are the ones who end up with nothing.

People are baffled at the concept.  We comment on how immoral and unethical it is.  We ask how did no one realize what was happening?  How were major red flags not looked into?  Wasn’t Sarbanes-Oxley supposed to make sure this stuff didn’t happen?  How did $50 billion just disappear?

$50 billion dollars is no small sum, but in reality it’s pennies compared to the Ponzi Schemes that Gen-Y is the “new investor” in.  That’s right my friends, whether you like it or not, if you work in America, you are paying into the largest ponzi scheme in the worlds history, probably never to be overtaken.  They are known as Government Entitlement Programs, but you know them as Medicare, Medicaid, and Social Security.

These entitlement programs are underfunded to the tune almost $100 Trillion dollars.  (assuming the programs go on…) This works out well for the boomers who will most likely be the last generation to actually receive payouts from these programs, but Gen-Y is the one left holding the bag.  As a side  note, I do find it ironic that boomers complain that we are the “entitled generation,” but they are the one’s eating up all of these programs.  

In 2004 Medicare began paying out more in benefits than it receives in taxes, and Medicaid and Social Security are soon to follow.

Where is the outrage over this?  Gen-Y, where do we stand on this?  Are we just apathetic because we think there isn’t anything we can do about it?  Gen-Y is widely regarded as the reason Obama is in the White House, so where is our force regarding this issue?

Here is my proposal.  We bite the bullet, we take one for the team, and we jump on the grenade.  It sucks, but any way you put it, we are left holding the bag in this ponzi scheme.  The boomers are soon becoming unproductive members of society, and will be receiving what they are “entitled to” whether we like it or not, so let them have it and end the programs.  There is no reason why we need to leave our children and grandchildren holding the bags, and there is no reason that we should further bankrupt the country for them.

I think we should set a series of cutoff dates, that leaves Gen-Y, and possibly some young Gen-Xers holding the bag for our parents and grandparents.  We will pay into the programs until they aren’t needed anymore… and we will receive nothing in return.  We will be responsible for our own health care and funds when we retire.  Once we know there are enough people paying for the boomers entitlements (and not getting anything in return) we stop the next generation from paying in.

On top of this, we ask the boomers who don’t need the money to not take it, and in return they get massive tax breaks to compensate once they reach 65.

It sucks, but it’s what is needed, and most of us realize that we won’t be getting anything out of it anyway, so we are planning accordingly.  And if you haven’t planned?  Then you still have time.

Please share your solution and maybe we can solve this once and for all.

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