During his State of the Union address, and in the weeks since, President Joe Biden has called out Republicans, saying they are endangering Medicare and Social Security.

One of those Republicans — U.S. Sen. Ron Johnson of Wisconsin — has suggested the programs be eliminated as entitlement spending, which would see the U.S. Congress instead consider appropriations for them on an annual basis.

In an April 24 Milwaukee Press Club Newsmaker Luncheon, Johnson made a claim that sounded familiar: Social Security is a "legal Ponzi scheme."

That’s pretty close to a statement he made in February on the Jay Weber Show on WISN-AM and also way back in 2010, when he was first seeking office.

Even Johnson later admitted he was off on that, when in 2016 he said this to a local Americans for Prosperity group: "We’ve got to convince more of our fellow citizens that Social Security really is — and by the way, I was wrong when I said this in 2010, I said it’s a Ponzi scheme. Ponzi schemes are illegal. So, Social Security is — it’s a legal Ponzi scheme."

We took a look in 2010 and examined different iterations of the claim over the years, but decided to take a fresh look now. Is Social Security a legal Ponzi scheme? 

Before we jump in, let’s start with the dictionary definition.

Merriam-Webster defines a Ponzi scheme as "an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks." 

The scheme was made (in)famous by Charles Ponzi in 1920.

By persuading thousands of Bostonians that they could become wealthy by investing in international postal reply coupons, Ponzi made an estimated $15 million in eight months, according to a December 1998 report on Ponzi schemes in Smithsonian Magazine. 

When we asked Johnson’s office for backup, spokesperson Kiersten Pels basically reiterated what we have heard before, noting of Social Security: "It collects money from working taxpayers (new investors) — doesn’t invest it, but spends it on current retirees (existing investors)."

Johnson has reiterated his stance

Johnson has frequently used the idea of a Ponzi scheme to characterize Social Security, though the phrasing often varies.

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In his 2010 campaign, Johnson put it this way: Washington politicians "run Social Security like a Ponzi scheme." We rated the claim  Mostly False. 

In that item, we noted:

On a superficial level, (the comparison) is true -- money is taken in from current workers (new participants) and used to pay off obligations to retirees (old participants). The operative word is "superficial."

Unlike a Ponzi, Social Security is obligated to pay benefits, a commitment the shysters who run Ponzi schemes do not share. As for those IOUs, the government is required to make good on the money borrowed from the fund — and to pay it back with interest.

What’s more, participants are aware of how the system is operating. It’s all public. In a Ponzi, investors have no clue where their money is going and are told lies by the promoters.

An expert’s take on the comparison

In an earlier factcheck, Mitchell Zuckoff, who wrote the book "Ponzi's Scheme: The True Story of a Financial Legend," told us he doesn’t buy the comparison:

            "The important difference and the fundamental difference is that there is no secret to how Social Security is run,"                     said Zuckoff, who researched the question for a 2009 article in Fortune Magazine. "No one is being misled, no one                 is taking the money and running,  which are fundamental aspects of a true Ponzi schemes."

Comparing the two "is a common, and I think deeply misleading suggestion, that is openly used more as scare tactic than to truly illuminate the real issues," Zuckoff said in an interview.

In his Fortune piece, Zuckoff wrote:  "Social Security is morally the polar opposite of a Ponzi scheme and fundamentally different from what Madoff ... did."

In an interview, Johnson claimed Social Security is a "legal Ponzi scheme."

As we have noted before, on a superficial level, the comparison may be somewhat on target. However, unlike a Ponzi scheme, Social Security is obligated to pay benefits, the government is also required to return money borrowed from the fund with interest, and its operation is run publicly.

Our definition of Mostly False is "the statement contains an element of truth but ignores critical facts that would give a different impression."

That fits here.