Have you ever received a chain letter? It may have sounded something like this:

Recipient:

This letter has been circling for 16 years. Do not stop the chain! You have 96 hours to do the following: send $5 to the address at the top of the list below. Then remove the name at the top of the list and add your name to the bottom. Then send a copy to 4 friends. In a month, you will receive over $1000 in the mail.

I’m sure that you’re smart enough to throw the letter away. Chain letters are pyramid schemes: the people at the top get all the profits while those at the bottom are left holding the bag. To be successful, pyramid schemes require an ever-expanding base of participants, which is realistically impossible.

Most people are rightly suspicious of “get rich quick” schemes that demand money now and promise huge rewards in the future. However, most Americans are nevertheless current participants in a pyramid scheme of massive proportions: the Social Security System.

The setup is the same: when you enter the work force, your name gets put at the bottom of the list; you pay Social Security taxes to the people at the top of the list; when you retire, your name will appear at the top of the list, and people you don’t know will be sending you money.

At least you hope they will be sending you money.

Social Security began rather innocuously — most pyramid schemes do. There were 16 workers for every retiree. The payroll tax rate was 2 percent; the most anyone had to pay in one year was $600. The original retirees saw a return on their contribution of 7 percent. As the baby boomer generation entered the workforce and the economy grew, the system continued to function well.

Now, half a century later, the picture is not so rosy. The base of the pyramid has shrunk to three workers per retiree. Payroll taxes are now 12.4 percent, and the maximum contribution more than $10,000. The rate of return is less than 3 percent, barely outpacing inflation and falling much short of what could be earned in stocks, bonds, or mutual funds. The future returns will be even lower. As the baby boomers retire, the base of the pyramid will shrink to two and the system will not be able to meet its promised obligations.

Just as the costs of “get rich quick” schemes are borne disproportionately by the poor, so the costs of the Social Security pyramid scheme are not distributed evenly, even among members of the same generation. Since Social Security payments normally end upon the death of the recipient, the losers are those who die earlier — and this usually does not include the rich. Because of differences in life expectancy, an average low-income man actually pays more in than he gets in return.

The point is that Social Security is not just going to fail sometime in the future. It is already failing.

Some of the proposed “solutions” are to increase the retirement age, decrease benefits, raise payroll taxes or raise the maximum contribution level. None of these suggestions improve the rate of return for those in the system; they either decrease it or place even more of the burden on future generations. Their intent is to prolong the life of the pyramid, not improve the lot of the people in the pyramid.

When people suggest reforming Social Security, the common response is to say that many people depend on Social Security, or that Social Security has helped people in the past. True, pyramid schemes also benefit those at the top, but only at the expense of those at the bottom.

The real solution is more obvious than you think: Stop the chain. Anything short of that will simply perpetuate the scam.