is social security a ponzi scheme

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In a Republican primary debate, Rick Perry called Social Security a "Ponzi Scheme". His opponents, if not noncommital, or
avoiding use of the word, attacked him for calling it such. Compromise candidate Mitt Romney especially strawmanned the debate
trying to convince the audience there was danger of Perry (who I am in not supporting) removing Social Security from millions of dependent Americans. In truth,
no one is advocating that. And this is far from being limited to this one particular debate or primary. Demogoguery is everywhere.

A ponzi scheme by definition is an operation which requires an investment, and promise profits come from subsequent investors. 2 people start the pyramid. 4 people
pay $5000 each to the two people. The 2 retire with $10,000 each and the 4 people are now at the top. Then 8 people pay the 4 people. Unless the population grows exponentially,
and the earth can support an infinite amount of people, eventually there aren't enough people to recruit into the program, and the people and all the people who paid their $5000, end
up with nothing. The longer the chain, the more damage is done.

Now, this is not to say the intent of the Social Security Administration is to deceive people, but this is the consequence that will happen.

Since the beginning, people do not pay into one large account which returns to them when they age. They pay for the previous generation's pensions.

The concept of the Social Security fund is false. In the textbooks, it is written that Social Security is separate from the budget. Theoretically, it is, but at times
this nation has Social Security "surpluses", when the country takes in more money in payroll taxes than it spends on the program. Instead of it being kept in a fund for
future recipients, it is taken away to be spent on Medicare, Defense, and other government programs. Obama recently cut payroll taxes as part of his economic recovery program.
While I agree cutting taxes is important for economic growth, the payroll taxes are for Social Security - not temporary economic relief. This is the metaphoric equivalent of
tapping into emergency federal oil reserves to supplement for drilling more oil, which Obama actually did.

In 1983, payroll taxes were raised to keep Social Security afloat, but we spent all that money on other things, and right now, despite the U.S. having a deficit of $1.5 trillion yearly.
And this is WHILE Social Security is taking in more money than its spending. In 2017, it becomes nuetral, and the next 10 years, it is projected to sink into the red.

Another fundamental problem, is Social Security is based on fixed numbers rather than fixed ratios. If it were the youngest 80% supporting the 20% oldest, as Harvard economist
Mankiw said, it could last for a long time. But with increased life spans, now there are a lot more people living past 70 than there was 50 years ago.

Since Social Security is a pay it backward program, we are now about to pay for the baby boomers of an era of large population growth, so increasing the population would be a
temporary solution, but eventually there is a limit, and the shock would be painful to the large amount of people.

There is nothing wrong with calling Social Security a Ponzi scheme, especially since it functions as one.

No.

Ponzi conceived of a way that he could lie to investors and tell them that he could make a lot of money with an investment that was not actually sustainable or realistic in any way. He depended on selling this "investment" to more and more people in order to pay off the early investors. This was inherently unsustainable and deceptive.

Social Security Insurance was conceived of as a way that the working adults would donate into a system that directly pays for the care of the indigent elderly.

There has never been any deception, and unless there are wild shifts in the population it is sustainable indefinitely.

We are coming up to an uncomfortable shift in the population, but it's not such a big shift that it is unfixable.

The very definition.

They told them a lie so they could get money.


You really think its sustainable? ... Can you explain to me why you think that?

In a word: no.
Conservatives like Perry hate the idea of the elderly, disabled, or poor receiving aid from the government to live. They think such people should either pull themselves up by their bootstraps, or die.

-Bill, otherwise known as Kraichgauer

yes

the person who put in money into the system yesterday is getting back at 1.5x what they had originally put in. So what you get back, you didn't exactly pay into the system. It is not fully "earned" to be honest.

it is welfare, so it should only be for the poor.

Which most of the elderly and disabled qualify as.

-Bill, otherwise known as Kraichgauer

When SSI was proposed there was no deception made about how it works. Just because politicians have been lying to you for the last couple decades doesn't make it a deceptive system.

It is sustainable if the population of working adults remains substantially larger than the population of indigent elderly. Given normal population growth this would be indefinite. The post-WWII baby boom is uncomfortable for the system but not insurmountable.

Sure would be easier if income disparity were not at an all time high, though.

Like his make-believe Hardscrabble Cowboy image, Mr. Perry loves his favorite slogans, and Ponzi Schemes have worked so well for him, he erroneously thinks that anything that works must be a Ponzi Scheme.

There is a danger of Social Security being declared unconstitutional by a packed conservative Supreme Court, with only the potential of uncontrollable social disturbance waning this trend. (Old Mother Jones articles, including one with the then soon to be Court nominee Bork, has Bork declaring Social Security as being unconstitutonal (before he "refound" another God, still against SS)).

You left off part of the definition of a Ponzi Scheme, the most important part, namely distinguishing an investment from a fraud, and the legality of a contract between abstract entities. Since all investments depend on the "future", all contracts with promises of returns greater than the initial investment would meet the definition of a Ponzi Scheme without that important qualifier.

Current polemics have also involved the legal notions of public entities and private entities. Most governments are public entities, but polemics are exploiting an un-needed further division amongst non-governmental public entities, governmental public entities, and public entities, with mixing the "private" with this to result in confusion. A recent example would be a "private" insurance company taking "company" money, and giving it to a "what is it" charity, instead of giving the stockholders more returns, or giving customers lower rates. The "charity" may be public, private, non-profit, for-profit, and much else, but having it associated with the public government is polemically "wrong", but with a "private" church polemically "great". Change the word "charity" to "pensions" and for "investors" instead of from "donators", and then argue the same balderdash, which non-Liberals excel at much better than with any type of rationalism. The same rip-offs have been with Enron, HMOs, S&Ls, Garbage Services, military Private Contractors, etc. Soon, the Moon will be privatized and the Public will be charged for "moonlight" subject to Binding Arbitration by Private Arbitrators.

Also, if you haven't noticed, today's bread was made by yesterday's people, and sloppy definitions of Ponzi Schemes will make yesterday's people into dupes of today's people. Capitalism is the system that makes the fundamental founding proposition that $10 today is worth more than $10 tomorrow (hence, the price of "interest"), and if non-Liberals don't like the fundamental doctrines of Capitalism, why don't they quickly take the full cloak of Communism, since a a non-Liberal will never be caught cloakless with any truth not to hide???

Investment funds that are paid in (call them strictly "taxes" since propaganda has made the "tax" part of Federal Insurance Contributions Act taxes sound "bad"), are to be "invested" for "investment returns" so invest them (and go through the polemics above again over "public", "private", "profit", etc.), but add the polemic of "spent" instead of "invested", maybe with the deceptive bridge of "funding" (non-Liberals will call an Elephant a rodent if the need arises).

You confused the numbers having dimensions with the parameter numbers having no dimensions. That's not a "fundamental problem", that's your making a conceptual mistake.

The saying that Social Security is a "pay it backward program" doesn't say anything more than saying Social Security is a "pay it forward program". Citing the phrase "baby boomer", why is it that when the average number of children per couple drops from 12 to 2, it is called a "baby boom"? Using Google's ngrams helps to get another clue of propaganda slogans, and the actual origin of the phrase "Baby Boom".

If you can't think of anything wrong with calling Social Security a Ponzi Scheme, you might think a crapshoot is what hardscrabble cowboys do in the outhouse when they go off half-cocked, especially since Rick Perry plays one.

Tadzio

whats better-keeping SS or getting rid of it-putting your money into the trust of the buddies of the Republicans to take care of for you and they make mistakes and lose it all so now you have nothing after 20 years and they still go home to a very comfortable life-when they lose the money-where does the lost money go-who gets it-where does it end up? Does the investor keep it,does the government get it,does it just disappear-someone gets it and usually its the person with all the money-how do you think they got all the money. At the end of the day someone makes out and its not the little guy.

As I either understand or misunderstand things, Social Security was begun at a time when few people ever lived long enough to receive it ... and even the attorney who handled my SSDI appeal agreed it was never really intended to be paid to many people at all. So, and rather than any actual ponzi scheme, I would say it is an opportunistic milking turned sour by people who did not work themselves to death in coal mines.

Last edited by leejosepho on 07 Oct 2011, 9:45 am, edited 1 time in total.

[youtube]http://www.youtube.com/watch?v=tpMNP5v2rCk&feature=feedrec_grec_index[/youtube]

Well, I live in a country in which the public pension fund is funded on a steady state basis. Based on an actuarial assumption of 4%, there are sufficient reserves in the Canada Pension Plan fund to pay out the expected benefits to every single contributor without any increase in premiums on future contributors.

It is possible to have a sustainable, defined benefit, public pension plan. But you have to have the political will to tell people what it's going to cost, and political will seems sorely lacking in your country.

Yeah. I've heard the suggestion that low voter turnout is the best thing the US political system has going for it.

We've ratcheted up the hyperbole so much that a substantial majority of people eligible to vote are only aware of the talking points and never bother to think anything through.

Hell, the cost now is worth the benefit later. I'd be more than happy to see a Canadian model instituted in the United States.

-Bill, otherwise known as Kraichgauer

United Stateseans still believe in the Money Tree. All we need is the Right Gimmick and we will all get rich. I will tell you in three words how to beat this situation --- Buy My Book!

ruveyn

I don't think it's a matter of getting rich; rather, it's just staying in the middle class after retirement.

-Bill, otherwise known as Kraichgauer