In a televised debate on taxes, Sen. Ted Cruz denied that he ever called Social Security a “Ponzi scheme.” But in a 2011 interview, Cruz gave the definition of a “Ponzi scheme” and said it fits Social Security.
“That is exactly how Social Security operates,” Cruz said in 2011.
The issue of Social Security came up during a CNN debate between Cruz and Sen. Bernie Sanders. A Vermont independent who unsuccessfully ran for the Democratic presidential nomination in 2016, Sanders said Cruz was “quoted as saying Social Security is a Ponzi scheme.” Cruz denied doing so.
Sanders, Oct. 19: Senator Cruz, I think you were quoted as saying Social Security is a Ponzi scheme.
Cruz: I’ve never said that. That’s false.
Sanders: OK, then I — you were quoted as that. If you tell me it’s false, then I accept that. OK.
Cruz: It’s false.
Later in the show, Sanders returned to the topic and said he had proof that Cruz did indeed call Social Security a Ponzi scheme, and, again, Cruz denied it.
Sanders: You said a little while ago that you never said that Social Security was a Ponzi scheme. Go to my Twitter page, and you will hear Ted Cruz say Social Security is a Ponzi scheme. …
Cruz: I can’t let what Bernie said go by without responding to. He’s referring to an interview where I was asked about another Republican who made the comment about Ponzi scheme. It wasn’t my comment. It was somebody else’s.
Sanders’ staff tweeted a clip of Cruz talking about Social Security in a Sept. 9, 2011, interview with Evan Smith of the Texas Tribune. Smith asked Cruz: “Yes or no. Is Social Security a Ponzi scheme?” In response, Cruz jokingly asked Smith if NBC’s Brian Williams had written his questions — referring to a question Rick Perry was asked during a Republican debate co-hosted by Williams two days earlier.
In that Sept. 7, 2011, debate, as we wrote at the time, Perry called Social Security a Ponzi scheme. That’s what Cruz meant when he said that Sanders was “referring to an interview where I was asked about another Republican who made the comment about Ponzi scheme. It wasn’t my comment. It was somebody else’s.”
Cruz is right that it was Perry’s comment, but the 2011 interview shows that Cruz clearly agreed with it.
Cruz, Sept. 9, 2011: There is a level at which words have meaning. What does the word Ponzi scheme mean? A Ponzi scheme is a system — if you and I cooked up a Ponzi scheme, we would have current people pay into it. We would take the money and we would pay it out to other recipients. That’s the definition of a Ponzi scheme. In the English language, that is exactly how Social Security operates.
Smith: So, I’m going to take that as a “yes.” That you believe that Social Security is a Ponzi scheme.
Cruz: I think there is an effort to treat that as rhetoric, but there’s no doubt that’s what it is.
The full video of the back-and-forth between Smith and Cruz shows that the Texas senator studiously avoided using the term “Ponzi scheme,” saying that Smith was asking a “loaded question.” Smith tried several times to get a yes or no answer, but instead got — as we show above — Cruz’s definition of a “Ponzi scheme” and his opinion that “that is exactly how Social Security operates.”
For the record, we said in 2011 that Perry’s description of Social Security as a “Ponzi scheme” is a gross exaggeration.
FactCheck.org, Sept. 8, 2011: The [Social Security] system doesn’t meet the common definition of a “Ponzi,” which is a criminal fraud, relying on deception. The Securities and Exchange Commission, for example, says a Ponzi is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Ponzi schemes draw their name from Charles Ponzi, who in the 1920s promised his victims that he could provide a 50 percent return in 90 days by putting their money into a speculation scheme involving postage stamps. In reality, Ponzi simply paid early “investors” big returns with the money eagerly offered by others who came later — pocketing millions for himself — until the bubble inevitably collapsed. Bernard Madoff’s more recent fraud — while much larger — was another example of a Ponzi scheme. Madoff and Ponzi lied to their victims about where their money was going, while Social Security’s finances — while troubled — are an open book.
We should also note that Cruz in 2011 and again this year described Social Security as an essential part of the security net for Americans. In the CNN debate with Sanders, Cruz described Social Security as a “fundamental bulwark of our society” and criticized “politicians in Washington” for “letting it careen towards insolvency.”
In a 2017 report, the Trustees of the Social Security and Medicare trust funds project that the Social Security trust funds will be depleted by 2034. Once the trust funds are gone, Social Security can still pay benefits — but not more benefits than it takes in from revenue. The trustees say tax income would be “sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2091.”