by: Bill Stewart
MORE than one person in the NMI has opined that the Retirement Fund was structured to be nothing more than a Ponzi scheme.
For those who are interested, the term “Ponzi” has its origin in a fraudulent operation that pays returns to its investors (members) from their own money and from money provided by new investors (members).
This is only possible when there is an ever-increasing flow of money from new investors to keep the scheme going. After awhile there are not enough new investors to “feed” payments to older investors and the house of cards collapses.
The system is destined to collapse because eventually the base of a supply of new members dries up.
I do not believe it is accurate to refer to a government sponsored defined benefit retirement plan, or DBP, and specifically the NMI Retirement Fund, or even Social Security, as being patterned after a Ponzi scheme.
Here is why.
The key concept is “government.”
Unlike private business which come and go as a result of a number of adverse forces and events effecting them be it economic or natural calamities — also resulting in the demise their employee’s retirement plan — this need not be so with government as the situation is different unless self-afflicted by government ineptness as when a government commits economic suicide when incompetent leaders are elected.
Unless the world comes to an end — or unless one government is absorbed by another as by an act of war — normally governments are rightfully assumed to be perpetual (as in continuous, permanent, stable, deathless) and thus expected to exist forever. That being the case, a government will always be in need of employees and — as existing employees, leave, retire, die or are fired — they are almost always replaced by new employees. Have you ever wondered why governments cannot seem to reduce the size of their payroll?
Many are loath to do so, including the NMI.
It is a never ending process — just as the requirement to pay taxes will never end, people must render unto Caesar what is Caesar’s, namely taxes.
In the NMI taxes begets government employees which in turn generates votes — and the system repeats itself over and over. The payment of taxes is an old story — Joseph and Mary knew it was required when they traveled to Bethlehem.
If you don’t believe that governments don’t perpetuate their own existence and therefore the need for employees — I have a bunch of stuff out back in the weeds I would like to sell you.
So unlike a Ponzi scheme which eventually runs out of new members, it is highly unlikely for a government to do so as there will always be a need to replenish its staff as older employees leave.
Thus, a government’s defined benefit plan can continue to exist as long as it is maintained and supported by the sponsoring government and it will never collapse as new employees join to replace the old who leave the active rolls.
The problem with the NMI’s defined benefit plan is that the various administrations abandoned the DBP and along with it the promise to the loyal members of the DBP with the result that the retirees’ own government betrayed its own people and made a Ponzi of their retirement plan.
The NMI government has intentionally made the DBP to now resemble a Ponzi by cutting the Fund’s base of continuing monetary contributions by encouraging active members to withdraw their money and participant in an entirely inadequate defined contribution plan. (For more on this subject check out http://kixproductions.com/cnmiretiree)
It need not have happened in the first place and now look at the mess the government created and the legal chaos that currently prevails.