Grading PolitiFact (Texas): Rick Perry and Ponzi schemes

This again?  It's illuminating to find PolitiFact so unrepentant regarding its failures.  PolitiFact has found the comparison between Social Security financing and Ponzi schemes "Barely True," "False" and now "False" again.

Just one problem:  It's true.  A reasonable effort by PolitiFact should find it "Half True" or better.

On with the grading of PolitiFact Texas:


The issue:

The fact checkers:

W. Gardner Selby:  writer, researcher
Brenda Bell:  editor


Analysis:

This fact check is little different than the one I flunked PolitiFact Rhode Island over a few weeks ago.

Perhaps the key difference is PolitiFact Texas' reliance on "Michell Zuckoff."  Earlier PolitiFact efforts used Mitchell Zukoff as a key source instead.

All kidding aside, Michell and Mitchell are evidently the same person.

The key PolitiFact finding is that the "Ponzi scheme" is fraudulent by definition.  And if you can get journalist and non-economist Michell/Mitchell Zuckoff to proclaim that as a fact in his role as expert source then it's mission accomplished, in a manner of speaking.

Michell (sic) Zuckoff, a Boston University journalism professor who has written a book on Ponzi, noted critical dissimilarities between Social Security and a Ponzi scheme, which by definition is both fraudulent and unsustainable.

"First, in the case of Social Security, no one is being misled," Zuckoff's January 2009 article in Fortune magazine says. "...Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns."
(bold emphasis added)

The problem for Zuckoff and PolitiFact is that economists don't see it that way:

A Ponzi scheme is a strategy of rolling over a debt forever and thereby never paying it back.

Kevin X. Huang and Jan Werner are not alone:

To Kindelberger and other writers on financial scams, the essential feature of Ponzi's activities was 'misrepresentation or the violation of an implicit or explicit trust' (1978: 79-80).  In economic theory, however, the label 'Ponzi' survives largely stripped of its connotation of fraud.

(The New Palgrave Dictionary of Money & Finance)

What gives Mitchell Zuckoff (and PolitiFact) the right to discount the definition of "Ponzi scheme" as understood by economists?

Nothing.  Nothing at all.

Zuckoff and PolitiFact make the claim of exclusive definition out of apparent ignorance, though I have evidence that staffers at the Providence Journal (source of PolitiFact Rhode Island) took note of the criticism and didn't care enough to change the story.

When three teams of journalists successively flub a similar fact check it starts to resemble a pattern.

The grades:

W. Gardner Selby:  F
Brenda Bell:  F

Perhaps there's a tendency to trust their colleagues at PolitiFact.  Regardless, it's unacceptable and appalling that PolitiFact got this fact check wrong on three consecutive tries.


Afters:

While doing additional research on this item I stumbled across a helpful blog post at scrivener.net, which made me aware of the following bit from economist and lefty darling Paul Krugman:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).