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Social Security: A Monstrous Truth
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Big_Bird



Joined: 31 Jan 2003
Location: Sometimes here sometimes there...

PostPosted: Mon Sep 12, 2011 5:20 am    Post subject: Social Security: A Monstrous Truth Reply with quote

http://www.economist.com/blogs/democracyinamerica/2011/09/social-security-0

Quote:
NO PONZI scheme in the history of the world has ever lasted 75 years. Ponzi schemes depend on garnering an ever-increasing pool of new investors to pay out returns to prior investors. When the potential pool of new investors runs dry, they collapse. This will occur when the scheme runs up against the natural limits of its recruitment strategy; in the ultimate case, it can't keep going past the point where the entire population is already subscribed.

This should provide us with a hint as to why, as Kevin Drum writes (rebutting Shikha Dalmia), Social Security is not a Ponzi scheme. The entire population of working Americans has already been subscribed to Social Security for decades, yet the system continues to pay out benefits on time. That is because the actuarial calculations underlying its revenues and benefits are sound. Rick Perry may consider Social Security "a monstrous lie", but my parents and one surviving grandparent keep getting checks in the mail, year after year. Social Security does face a shortfall in the coming decades, because of the population bulge of retiring baby boomers. Those costs are limited and, measured as a percentage of GDP, will flatten out. They can be absorbed through a modest, gradual increase in Social Security taxes and modest reductions in benefits for wealthier recipients. As my colleague notes, this is what a graph of Social Security's finances looks like:



The link shows the graph, followed by that of a Ponzi scheme.

Quote:
The difference is clear.

If you wanted to call Social Security an investment, you would say it is a play on the proposition that America's GDP will continue to grow over the long term. This is the safest play one can imagine making, which is why the returns are so modest. Like any investment, it could go bad. But if it goes bad, if the economy of the United States ceases to grow over the long term, it is inconceivable that any other investment large enough to feed a pension plan covering the entire working population could do better.

My colleague's partial defence of Rick Perry's attacks on Social Security construes them not as a call to scrap the system, but as a warning about its long-term problems. "Mr Perry is targeting Social Security because the current system taxes workers under an explicit commitment to provide described benefits that, as it stands, it cannot meet," she writes. If Mr Perry were in fact calling for limited changes to ensure Social Security can meet promised benefits past 2036, that would be fine. I disagree that this is what he's doing. You don't call something a "monstrous lie" when you want to tinker with it. What Mr Perry is doing is part of a consistent decades-long habit across much of the conservative right of attacking the foundations of Social Security. Up until about 2007, the goal of such attacks was clear: conservatives wanted to replace it with a Chilean-style defined-contribution plan that would be invested in securities. Within its own assumptions, that programme did at least make sense; but since the financial crisis, and with average returns from Wall Street now sharply negative over an entire decade, both the logic and the political support for any such programme have evaporated. If Mr Perry is no longer arguing for the dubious concept of turning Social Security over to the states, then it's not clear what he proposes as an alternative to the current system. The Washington Post's Jennifer Rubin, generally a reliable voice for mainstream Republican views, has had no luck getting Mr Perry to clarify what he thinks, and warns that he "canít afford to offer half-baked ideas and allow his past, troublesome statements to float around."

Perhaps opposition to Social Security has become a runaway train, a rhetorical and intellectual commitment too strong to give up even after it has lost its connection to an actual policy programme. But the effect of continued inaccurate attacks on the foundations of Social Security is to deepen most people's confusion about the actual soundness of the concept, and to reinforce young people's scepticism that they will ever benefit from it. I've been hearing such scepticism from my own cohort for almost 20 years now. It doesn't make any sense. If my generation does in fact fail to receive our Social Security checks, it will only be because we inexplicably decided to vote ourselves out of them.



I thought I'd throw a rock in a pool....and watch the ripples...
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Kuros



Joined: 27 Apr 2004

PostPosted: Mon Sep 12, 2011 6:17 am    Post subject: Reply with quote

SS isn't going anywhere. Opposing it is a political graveyard. You can't oppose SS and hope to win Florida.

Perry quickly backed off his ponzi scheme comments ahead of tonight's debate in Florida.

Quote:
For too long, politicians have been afraid to speak honestly about Social Security. We must have the guts to talk about its financial condition if we are to fix Social Security and make it financially viable for generations to come.

Americans must come together and agree to address the problems so today's beneficiaries and tomorrow's retirees really can count on Social Security for the long haul.

We must have a frank, honest national conversation about fixing Social Security to protect benefits for those at or near retirement while keeping faith with younger generations, who are being asked to pay.
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ontheway



Joined: 24 Aug 2005
Location: Somewhere under the rainbow...

PostPosted: Mon Sep 12, 2011 9:42 am    Post subject: Reply with quote

Of course Social Security is a Ponzi Scheme. The Economist writer is an idiot and doesn't look at all the facts and just what factors have allowed this Ponzi scheme to perhaps have the longest running time of any before.

1) Most ponzi schemes fail because people quit signing up. There are not enough new people willing to enter at the base.

The difference: Social Security uses government to force everyone to sign up. Even though millions of people realize that it is a losing bet, that the returns are negative and many will never collect after it collapses, they are not allowed to opt out. Over the years, Congress has gradually expanded the law to include more and more previously exempt individuals into the conscripted base. Given the choice, most Americans would opt out.

2) Other ponzi schemes offer short term payoffs. The entire cycle of the phoney investment structure calls for a payoff in a matter of months. The exciting returns draw in people quickly.

The difference: Social Security has a time line that offers a payoff beginning 40 to more than 50 years for some of the conscripted participants. Since some retirees can expect to live up to 40 or more years after retirement, and since ponzi schemes fail at the moment when they have to make their largest yet payments and find themselves unable to pay, it is logical to expect that, from the outset of such a ponzi scheme, it would have a life of 90 years - 50 years for the base to flatten while the number of retirees expands, and 40 years for the fund to run dry.

This element of the scheme, too, requires government force so that people must enter dispite understanding that this long-delayed payoff will provide only a small return (based on age groups) for the early group, zero for mid-scheme enrollees, negative returns for later enrollees, and total losses for those forced to enroll in the final years before the total collapse. Among the public, only the firsties, those who got to sign up and begin collecting at the outset (before the end of the 1950s are winners).

(Of course, individuals may win or lose based on their actual lifespans. Everyone who dies before collecting is a loser. This is another evil, but necessary component of this fascist-socialist ponzi scheme. It robs those who die younger. As a result, numerous black ecnomists have excoriated this scheme as a racist transfer of wealth from working blacks to middle class whites.)

Expanding the time-line does not make this less of a ponzi scheme. It just makes it easier to fool idiots who write for the Economist.

Since 90 years can be predicted from a casual analysis as the failure time of this fascist-socialist scheme, let's look back and see when it began and then add 90.

Yup, that's right, we're right on schedule for the collapse - around 2030. Actuarial analysis backs up the timeline for this eventual collapse. It can only be delayed temporarily throught the application of even more draconian taxation and delay in the payout.

This ability to force an increase in the entrance cost, delay and reduction in the payout is essentially admission of an immediate partial collapse of the system, which has already happened on several occasions, and can only be accomplished throught the application of government coercion.

The level of coercion of this nationwide socialist program makes this a fascist program, the level of destruction that will come when we reach the final collapse makes it totally evil.

Social Security is an evil, fascist-socialist ponzi scheme on the road to total collapse.

The Economist should raise its standards before publishing politically motivated nonsense in the place of reasoned, logical analysis. The author is an idiot.
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Ya-ta Boy



Joined: 16 Jan 2003
Location: Established in 1994

PostPosted: Mon Sep 12, 2011 4:08 pm    Post subject: Reply with quote

Kuros wrote:
SS isn't going anywhere. Opposing it is a political graveyard. You can't oppose SS and hope to win Florida.

Perry quickly backed off his ponzi scheme comments ahead of tonight's debate in Florida.

Quote:
For too long, politicians have been afraid to speak honestly about Social Security. We must have the guts to talk about its financial condition if we are to fix Social Security and make it financially viable for generations to come.

Americans must come together and agree to address the problems so today's beneficiaries and tomorrow's retirees really can count on Social Security for the long haul.

We must have a frank, honest national conversation about fixing Social Security to protect benefits for those at or near retirement while keeping faith with younger generations, who are being asked to pay.


Gov. Perry is on record in his own book from last Nov. saying Social Security is unconstitutional, a Ponzi scheme. Now he is saying, "We must have a frank, honest national conversation about fixing Social Security to protect benefits..." Which time, in the immortal words of Senator Kyl's spokesman, are we to take it that Ďhis remark was not intended to be a factual statement'?

If nothing is done, at some point in the next few decades, benefits will shrink to 75% of present benefits. That is not a Ponzi scheme. That is a bug in the system that can be fixed at some point in the next couple of decades. The sooner the better, naturally, but it is not a crisis.

People that listen to the radical right and get frightened by their politics of fear and paranoia have a tendency to over-react. Look at the debt limit debate of this summer. Look at 9/11.

Kuros is right. Social Security is not going anywhere. In spite of the right's loathing of it, a major chunk of the GOP's base is older, and they rely on it. Their children will depend on it in their time. The public would be far better served by suggestions to improve and strengthen Social Security than by hysterial attacks on it that do little more than scare the vulnerable.
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Unposter



Joined: 04 Jun 2006

PostPosted: Mon Sep 12, 2011 9:17 pm    Post subject: Reply with quote

Finally, some sense on the Social Security debate. Thanks OP. And, if I remember correctly, you are not even American but English. Go Figure!

Sadly, Social Seciurity would be on much stornger footing if Presidents, mostly George Bush Sr., had not raided it to pay other bills.

In the words of Al Gore, what Social Security really needs is a "lock box" so the government can't rob people's future.

My distopian view of the future says that Social Security will last through the baby boomers and then the Republicans and misguided youth will end the program. Generation Xers will suffer greatly. Their suffering will be a call to action by Generation Y and Social Security will be re-established but not until about 20 years of elderly people eating dog food changes people's mind about the real social benefits.
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visitorq



Joined: 11 Jan 2008

PostPosted: Mon Sep 12, 2011 10:10 pm    Post subject: Reply with quote

Funny how Leftists like so much to throw out platitudes, but when you actually get down to the math, they just ignore it ("out of sigh, out of mind"). It's a like a child believing that if they pretend hard enough that something can be true, it really will be.

Whatever one's opinions about the "merits" of SS, the math shows it is a ponzi scheme, and unsustainable. Ya-ta comes along and calls it "a mere bug in the system", claiming that people will still be able to collect 75% of their checks Rolling Eyes Combined with inflation, it won't amount to squat. Unless you actually believe that (all other factors being equal) 75% of ~$1200 (the average monthly SS check in 2011) will be enough for the average person to live on 2-3 decades from now... Instead, the government will have to borrow more money (ballooning the debt and causing more inflation) and the younger generations will get taxed/squeezed more. It's absurd.
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Unposter



Joined: 04 Jun 2006

PostPosted: Mon Sep 12, 2011 10:40 pm    Post subject: Reply with quote

A couple of other differences between Social Security and a Ponzi Scheme.

1) In social security, there is a real investment.

2) In social security, there is a defined benefit, backed up by the U.S. government, current squabbles behind, the most trustworthy creditor in the world.
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visitorq



Joined: 11 Jan 2008

PostPosted: Mon Sep 12, 2011 11:05 pm    Post subject: Reply with quote

Unposter wrote:
In social security, there is a defined benefit, backed up by the U.S. government, current squabbles behind, the most trustworthy creditor in the world.

The US government is not a "creditor"; it is a net debtor. It is literally bankrupt and monetization of the debt (which brought such wonderful results to the Weimar Republic, and more recently Zimbabwe) is ongoing.
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Unposter



Joined: 04 Jun 2006

PostPosted: Tue Sep 13, 2011 12:10 am    Post subject: Reply with quote

Your crack on the U.S. aside, you have not said anything to bring into question how Social Security and a Ponzi scheme are the same.
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Sergio Stefanuto



Joined: 14 May 2009
Location: UK

PostPosted: Tue Sep 13, 2011 1:27 am    Post subject: Reply with quote

ontheway wrote:
1) Most ponzi schemes fail because people quit signing up. There are not enough new people willing to enter at the base.

The difference: Social Security uses government to force everyone to sign up. [...] they are not allowed to opt out.


Bingo.
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Kuros



Joined: 27 Apr 2004

PostPosted: Tue Sep 13, 2011 7:21 am    Post subject: Reply with quote

I think the gov't should allow those with a high enough income to opt out. If an individual (or married couple) is making over $106k/year, which is the upper limit on what's taxable for SS, then the individual (or couple) should be able to opt out of SS.

SS should not be a transfer of wealth program. It is a savings engine to reduce elderly poverty.

And before I get attacked by Leftists, there's already an option to opt out of SS. Its called 'living and working abroad.'
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Big_Bird



Joined: 31 Jan 2003
Location: Sometimes here sometimes there...

PostPosted: Tue Sep 13, 2011 10:46 am    Post subject: Reply with quote

People should go back to having ten or more kids, so as to make sure that they have someone to look after them in their dotage.
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Ya-ta Boy



Joined: 16 Jan 2003
Location: Established in 1994

PostPosted: Wed Sep 14, 2011 4:58 am    Post subject: Reply with quote

Back in the old days, when some nobleman killed a few foreigners in service to the king, the king handed over a plot of land and a passel of peasants to work it for him and everyone was happy (except the peasants).

Nowadays it is known that people's happiness increases with a rising income up to about $50,000 a year. (After that, they just start worrying about who will steal their money.) Louis XIV figured out that the nobles were just as happy with a colored ribbon pinned on the chest and their name proclaimed throughout the land.

I say once someone makes $50,000 a year, we start taxing them at confiscatory rates at each $50,000 increment to support one more person on Social Security and reward them by handing out colored ribbons at some public ceremony. Then everyone can be happy, even the peasants.
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visitorq



Joined: 11 Jan 2008

PostPosted: Wed Sep 14, 2011 5:04 am    Post subject: Reply with quote

This:
Ya-ta Boy wrote:
I say once someone makes $50,000 a year, we start taxing them at confiscatory rates at each $50,000 increment to support one more person on Social Security and reward them by handing out colored ribbons at some public ceremony. Then everyone can be happy, even the peasants.


follows from this?
Quote:
Back in the old days, when some nobleman killed a few foreigners in service to the king, the king handed over a plot of land and a passel of peasants to work it for him and everyone was happy (except the peasants).

Nowadays it is known that people's happiness increases with a rising income up to about $50,000 a year. (After that, they just start worrying about who will steal their money.) Louis XIV figured out that the nobles were just as happy with a colored ribbon pinned on the chest and their name proclaimed throughout the land.


Laughing

Only in the unhinged, mentally unstable dimension that is "Ya-ta Land" could such a made-up fairy tale version of reality (pulled directly from one's behind) pass as historical analysis... Unless it was intended as a joke?
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visitorq



Joined: 11 Jan 2008

PostPosted: Wed Sep 14, 2011 5:05 am    Post subject: Reply with quote

Ya-ta Boy wrote:
I say once someone makes $50,000 a year, we start taxing them at confiscatory rates at each $50,000 increment to support one more person on Social Security and reward them by handing out colored ribbons at some public ceremony. Then everyone can be happy, even the peasants.

And I say you should give me all your money, so I can be happy. Hell, I'll even throw in a ribbon, just so long as you do what I say. After all, I have the moral authority (because I say so, and if I were the government it would also be because I have guns pointed at your face). And if you disagree, too bad. I deserve your money.
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