The term "Ponzi Scheme" has come up in the news a lot lately, primarily in describing $50 billion in investment securities fraud Bernard Madoff is accused of perpetrating. Not often explained is what a Ponzi Scheme is, and how it works.

Named for Charles Ponzi, an Italian immigrant and con man around the turn of the 20th Century, the con is sometimes also referred to as a "pyramid scheme" wherein early investors are paid from the deposits of a widening base of new investors. As long as new people continue to buy into a growing ponzi scheme, money continues to flow upward to the pyramid of investors. These schemes inevitably collapse when the pool of new investors pumping new money in can’t grow fast enough to support the payments to earlier investors, because actual investment earnings, if any, are not sufficient to cover promised returns.

Even though Ponzi schemes always collapse, getting in early ("on the ground floor") can yield tremendous returns. It’s the people who come in towards the end of the scheme that lose big, since their money hasn’t actually been invested, but merely passed up to the personal accounts of the creator of the scheme and earlier investors.

One year after Charles Ponzi was released from prison for fleecing unsuspecting investors out of $7 million, President Franklin D. Roosevelt concluded that the federal government could get away with such a scheme. Social Security was signed into law as part of the "New Deal" in 1935.

Social Security is now the largest government enterprise in the entire world and combined with Medicare/Medicaid accounts for over 40% of all U. S. federal government spending.

Social Security is a mandatory retirement investment, deducted each pay period from every employee’s wages, with the promise that these investments will be repaid with interest by the federal government upon retirement, but like most Ponzi Schemes, the money isn’t actually invested in any conventional sense. In fact, current social security deposits are not only used to cover current transfers to retirees, but also part of the federal deficit. The government can get away with this for the time being because Social Security deposits are currently in excess of payments, but the number of retirees is now growing faster than the workforce. Unless changes are made in the way Social Security functions, it will collapse like all Ponzi Schemes do, when the pool of new investors isn’t contributing enough money to support payments promised to beneficiaries further up the pyramid. Eventually, a whole generation of investors into this scheme is going to get burned. Since the largest generation, the "baby boomers" are beginning to retire, with a smaller generation coming up to support them, that day of reckoning is likely coming sooner rather than later.

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Over objections of the Senate and the majority of American citizens, President Bush facilitated a $17.4 billion loan of taxpayer’s money to Detroit’s troubled automakers today. Since Congress did not approve new funding for the automakers’ bailout, the president tapped the TARP (Troubled Asset Relief Program) fund for $13.4 billion of the loan. The remaining $4 billion will still require legislative approval. Ford says it doesn’t need the loan, so GM and Chrysler will apparently split the take. To put the amount in perspective, the state of Minnesota collects about $17 billion per year from all tax and fee revenue sources. Enough tax money to run the entire state of Minnesota for a year is being doled out to two private companies that are unable to stand on their own feet. With these companies teeting on the edge of the abyss, it's entirely possible that these loans will never be repaid.

TARP was established to bailout Wall Street. A $700 billion fund of non-existent money was established to prop up failing financial corporations. Initially the president signaled that he opposed using this fund to bailout the car manufacturers. Following the defeat of the bailout bill in the Senate, the president has changed his tune, saying, "The only way to avoid a collapse of the American auto industry is for the executive branch to step in. My economic advisers believe that such a collapse would deal an unacceptable blow to hardworking Americans far beyond the auto industry."

The bailout "loan" comes with strings attached. Primarily, that the loan will be recalled if the automakers aren’t "viable" by March 31st. In essence, the president has said that the car manufacturers can not be allowed to fail, for dire consequences will ensue – unless they are still foundering this spring, in which case, it’s evidently OK to allow the collapse and ensuing economic Armageddon. Makes perfect sense.

The auto bailout is just the latest in a seemingly endless parade of corporate handouts, taking money from the pockets of hard working men and women, their children and their children’s children to cover the bad decisions of millionaires and billionaires. Current federal bailout commitments total $8.7 trillion. The entire federal budget is $3 trillion and the bailouts now represent nearly 2/3 of the nations entire GDP of $13.1 trillion.

According to the Congressional Research Service, the total value of the bailouts undertaken by the federal government exceeds inflation-adjusted spending for all American wars. The American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan combined cost $7.2 trillion in today’s dollars. Even much maligned spending on the current Iraq war has to date totaled only $648 billion, a figure that pales next to the extraordinary deficit spending for corporate welfare. Throw in all spending for the Louisiana Purchase, the New Deal, the Marshall Plan and NASA, and you still haven’t topped the bailout spending spree of 2008.

America’s present debt equals about $37,000 per person. Representative Price of Georgia said, "By bailing out automakers without real reform or long-term solutions, we are only protracting uncertainty and putting billions of tax dollars at grave risk. It is now clear that the creation of TARP was a rueful mistake which has failed to provide urgent market stability, yet has put our country perilously in debt for the foreseeable future."

Congressman Ralph M. Hall, Chairman of the Free Congress Foundation Board of Directors, and President Marion Edwyn Harrison, sadly announce the death of the Founder and National Chairman, Paul M. Weyrich. 

Paul Weyrich, 66, died this morning while briefly hospitalized near his home in Northern Virginia. A contributory cause of death was methicillin-resistant staph aureus, commonly termed MRSA. For some years Paul Weyrich had been in a wheelchair, due to a combination of illnesses and a fall many years ago on black ice.

 While hospitalized a number of times, and often in pain, Paul continued his admirable and extensive work as a leader of the cultural, political and social conservative movement. 

Paul founded not only the Free Congress Foundation but also the Heritage Foundation and was the first Heritage President. While still a student in his native Wisconsin he became a radio and MILWAUKEE SENTINEL newspaper reporter and then a CBS political reporter and newscaster in Milwaukee. In 1966 he came to Washington, initially handling press relations and other assignments for Senators Gordon L. Allot, of Colorado, and Carl T. Curtis, of Nebraska.

In 1973 Paul Weyrich created the Heritage Foundation and in 1974 he created the predecessor to Free Congress Foundation. For several years he also operated a television cable channel. He held the highest honorary position in the Council for National Policy. During the past 35 years he extensively advised, spoke and wrote on cultural and other aspects of conservatism. In and after 1989 Paul visited the formerly Communist Soviet Union, organizing training courses for the promotion of democracy and individual rights. Paul also was an expert on rail and light-rail transit, having served as an AMTRAK Director and a National Surface Transportation Policy and Revenue Study Commissioner. 

In 1990 Paul was ordained a deacon in the Melkite Greek Eparchy, a conservative Catholic Church. 

Paul Weyrich is survived by his wife of 45 years, the former Joyce Ann Smigun, their five children and 15 grandchildren.

Steadfast and courageous in causes and faith, and admirably stoic in continuing his extensive work during many years of illness, Paul Michael Weyrich will be missed by the many people with whom he worked and by his family and numerous friends.

Funeral arrangements are not yet concluded.  More information will become available through a call to the Free Congress Foundation, 703 837-0030, and on the website, www.freecongress.org.

The ill-conceived auto industry bailout bill passed in the US House last week, but was rightly rejected by the US Senate. Special interests aren’t giving up, however. Now they are looking for huge handouts from the Treasury Secretary and the White House. While this situation is being portrayed as a bailout of the auto industry, it is, in fact, a ploy designed to delay the inevitable implosion of the unsustainable United Auto Workers (UAW) union contract demands.

This bailout will only temporarily prop up UAW’s dysfunctional relationship with the auto companies. Union contracts with the manufacturers that require paying 700,000 people nearly full wages for not working plus the extraordinary legacy costs of health care and pensions have crippled US automakers’ finances. Reports indicate that GM currently looses $326 for each car that rolls-off the end of its assembly line while Toyota makes a profit of $1266 per vehicle it sells.

UAW contracts have effectively killed the “golden goose”, so now they are demanding “golden eggs” from American taxpayers. The proposed bailout would only delay the inevitable and at significant cost. Today’s US automaker business model is simply not sustainable. The only chance to rescue the US auto industry is to allow companies to enter bankruptcy, restructure and emerge leaner, stronger and more competitive.

The money demanded for the bailout doesn’t even exist. What’s being proposed is massive deficit spending. When the government creates money from thin air, everyone’s dollars are devalued. Government bailouts are stealing wealth from American families.

TAKE ACTION: Click here to send a message to President Bush and Treasury Secretary Paulson demanding that they not use money from the Troubled Asset Relief Program (TARP) to be used to bailout the auto industry.

Press Conference: Citizens Demand Election Integrity Reforms 8:30

A review of Minnesota’s voter registration rolls prior to this year’s election revealed a number of irregularities. Minnesota Majority requested the Secretary of State and officials in 30 different counties to conduct investigations into these irregularities. Authorities have thus far been largely unresponsive or dismissive, prompting Minnesota Majority to continue its independent investigation and to file a formal complaint with the US Attorney’s office. The complaint cites a number of provisions under the Help America Vote Act (HAVA) that require the Secretary of State to perform certain voter registration verifications on a regular basis. It appears that Secretary Ritchie has failed to perform these verifications.