Posted on 09/16/2011 4:28:54 AM PDT by MontaniSemperLiberi
The Great Social Security Debate,
Proposition 1: Of course it’s a Ponzi scheme.
In a Ponzi scheme, the people who invest early get their money out with dividends. But these dividends don’t come from any profitable or productive activity — they consist entirely of money paid in by later participants.
This cannot go on forever because at some point there just aren’t enough new investors to support the earlier entrants. Word gets around that there are no profits, just money transferred from new to old. The merry-go-round stops, the scheme collapses and the remaining investors lose everything.
Now, Social Security is a pay-as-you-go program. A current beneficiary isn’t receiving the money she paid in years ago. That money is gone. It went to her parents’ Social Security check. The money in her check is coming from her son’s FICA tax today — i.e., her “investment” was paid out years ago to earlier entrants in the system and her current benefits are coming from the “investment” of the new entrants into the system. Pay-as-you-go is the definition of a Ponzi scheme.
So what’s the difference? Ponzi schemes are illegal, suggested one of my colleagues on “Inside Washington.”
But this is perfectly irrelevant. Imagine that Charles Ponzi had lived not in Boston but in the lesser parts of Papua New Guinea where the securities and fraud laws were, shall we say, less developed. He runs his same scheme among the locals — give me (“invest”) one goat today, I’ll give (“return”) you two after six full moons — but escapes any legal sanction. Is his legal enterprise any less a Ponzi scheme? Of course not.
So what is the difference?
(Excerpt) Read more at washingtonpost.com ...
Proposition 3: Even a mandatory Ponzi scheme such as Social Security can fail if it cannot rustle up enough new entrants.
Did anyone suggest that Bernie Madoff be allowed to “fix” his scheme?
“Three easy steps: Change the cost-of-living measure, means-test for richer recipients and, most important, raise the retirement age. The current retirement age is an absurd anachronism. Bismarck arbitrarily chose 70 when he created social insurance in 1889. Clever guy: Life expectancy at the time was under 50.
When Franklin Roosevelt created Social Security, choosing 65 as the eligibility age, life expectancy was 62. Today it is almost 80. FDR wanted to prevent the aged few from suffering destitution in their last remaining years. Social Security was not meant to provide two decades of greens fees for baby boomers.
Of course it’s a Ponzi scheme. So what? It’s also the most vital, humane and fixable of all social programs. The question for the candidates is: Forget Ponzi — are you going to fix Social Security?”
As soon as you “means test it” then just call it what it is, welfare for poor seniors. Because that’s the truth of the matter.
“Even a mandatory Ponzi scheme such as Social Security can fail if it cannot rustle up enough new entrants.”
AND if money is paid out indiscriminately to people demonstrating NO affiliation with the ‘scheme’
As long as SS (or ANYTHING like it) is administered by people who are held to NO accountability, it is by definition fraudulent and illicit. Period.
“It’s also the most vital, humane and fixable of all social programs.”
Well its obvious... The ends justify the means...
My primary issue, stop calling it social security and start calling senior welfare. Because as soon as what you get back is no longer based on what you put in, it becomes a wealth redistribution system, from the “wealthy” to the “poor”. You plan your future, you don’t get back what you paid in. You spend your future now, you get it back and then some... What could possibly be wrong with that...
A Ponzi scheme is a least voluntary.
Please stop defaming the good name of Charles Ponzi. Calling SS a Ponzi scheme is to attribute a scheme that Ponzi could never have conceived. Charles Ponzi could never compel investors, continue to pay early investors high returns, wrap up the scheme in fraudulent yet legal accounting, make the scheme progressive, and use the scheme for decades to buy votes. In short, Ponzi could never have conceived of financially unstable yet politically unstoppable scheme.
Ponzi has been somewhat unfairly targeted as the inventor of unsustainable investment schemes. Many others came before Ponzi. Ponzi actually had an investment idea (arbitrage of postal coupons) but he became overwhelmed with investments. Ponzi invested much of the money that he received in banks and other businesses but the investments were not capable of paying the promised returns. To his credit, Ponzi never ran when the heat was turned on his scheme. He faced the consequences and was convicted. Many others would have fled. Of course, Ponzi committed a crime but he does not deserve the infamy that he has received.
You don’t ‘fix’ a Ponzi scheme. OK so it will just be a slightly better ponzi scheme?
We need a system of private accounts where each person has his own account invested in CD’s and bonds. We have tried to argue for this before. But I would NOT however do the whole stocks thing because 1) we have 401k’s for that and 2) Democrats will not be able to demonize CD’s, bonds and money markets.
Once that ‘risky stock’ argument goes away, how can they argue against a fully funded system that still makes more money than SS and can be passed down to your heirs?
“What’s wrong with taking care of America’s seniors?”
there shouldn’t be welfare for non-poor seniors.
People should be given back what they paid in. This still is a loss because they were deprived the use of their wealth and the benefits of interest or investment it could have earned for them. It doesn’t seem ok to take money from people just because they are well off.
It is a welfare program. It is not him but the .gov who would take your money and give it to someone else. Why give the .gov your money to begin with??????
“HTF is SS welfare? So you’re the kind of guy who would take someone’s money their entire working life and then if they were successful, stiff them? Well done - comrade.”
You want to take MY money and give it to you for YOUR retirement. That’s welfare. I say leave everyone alone and have everyone contribute to their own private accounts as outlined in post 10.
“People should be given back what they paid in.”
Nobody paid ‘in’ to anything. There is no account with your name on it to put anything into it. You were taxed to pay for someone’s SS check and you’ll need to get the govt to tax someone else to pay for your SS check.
Ok. Then people should be refunded the taxes that were collected from them and yes, there is a record of that. There are ways to give this money back, For example, exempt people from inheritance taxes. At retirement age, or maybe even at 55 years old allow them to earn money without paying income tax on it. This would not be money taken away from anything because under normal conditions the retired person would be collecting SS and paying no income tax. So if they could work and keep every penny (no income tax) that would help them to recoup some of the previously collected taxes which were misrepresented. Some creative thinking is called for.
“HTF is SS welfare?”
Because SS money was never saved. SS checks printed today are printed based upon taxes or borrowing.
If excess SS taxes from the past were used to buy gold or foreign bonds, they could be traded for foreign goods and services. They weren’t though. It was spent.
Who’s going to give it back? Where is that money?
If elderly people don’t pay taxes so they can get their money back then we have to run a deficit or tax other people.
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