Posted on 10/24/2015 5:32:28 PM PDT by SeekAndFind
Another Government Ponzi Scheme Starts to Crack - Do You Depend on It?
Government employees get to do a lot of things that would land an ordinary citizen in prison.
For example, it’s legal for them to threaten and commit offensive, rather than defensive, violence. They can take property from others without their consent. They spy on anyone’s email and bank accounts whenever they please. They go into trillions of dollars in debt and then stick the unborn with the bill. They counterfeit the currency. They lie with misleading statistics and use accounting wizardry no business could get away. And this just scratches the surface…
The U.S. government also gets to run a special type of Ponzi scheme.
According to the Merriam-Webster dictionary a Ponzi scheme is:
[A]n investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.
In the private sector, people who run Ponzi schemes are rightly punished for their fraud. But when the government runs a Ponzi scheme, something very different happens.
It’s no secret that the Social Security system is effectively one giant Ponzi scheme.
Actually, I think it’s worse. That’s because the government uses force and the threat of force to coerce people into it. People don’t have the option to opt out. They either pay the tax for Social Security or someone with a gun will show up sooner or later. I imagine Bernie Madoff’s firm would have lasted a lot longer had he been able to operate this way.
This whole practice is particularly egregious for young people. They have no chance at collecting the future benefits the government has promised to them. But they’re hardly the only people that are going to be disappointed in the system, which will eventually break down.
There are simply too many people cashing out at the top and not enough people paying in… even with the government’s coercion. That’s a function of demographics, but also the economic reality in which there are fewer people with quality jobs for the government to sink its fangs into. I expect both of those trends to increase and strain the system.
Actually, it’s already starting to happen.
Recently, the government announced that there would be no Social Security benefit increase next year. That’s only happened twice before in the past 40 years.
You see, the government links Social Security benefit increases to their own measure of inflation. If the government says “no inflation” then there are no benefit increases. It’s like letting a student grade his own paper.
So it’s no surprise that the official definition of inflation is not reflective of the real increases in the costs of living most people feel.
Medical care costs are skyrocketing. Rent and food prices are reaching record highs in many areas. Electricity and utility costs are soaring. Taxes, of course, are going nowhere but up.
But the government says there’s no shred of inflation. In actuality, it amounts to a stealth decrease in benefits.
One reason for this is that they constantly change the way they calculate inflation so as to understate it. Free market analysts have long documented this sham. If you take a global view, it’s easy to see that fudging official inflation statistics is standard operating procedure for most governments.
Incidentally, governments and the financial media don’t even understand what inflation is in the first place.
To them, inflation means an increase in prices. But that is not at all how the word was originally used. Inflation initially meant an increase in the supply of money and nothing else. Rising prices were a consequent of inflation, not inflation itself.
It’s not being overly fussy to insist on the word’s proper usage. It’s actually an important distinction. The perversion of its usage has only helped proponents of big government. To use “inflation” to mean a rise in prices confuses cause and effect. More importantly, it also deflects attention away from the real source of the problem…central bank money printing.
And that problem shows no signs of abating. In fact, I think the opposite is the case. The money printing is just getting started.
At least this is what we should prudently expect as long as the U.S. government needs to finance its astronomical spending, fueled by welfare and warfare policies.
As long as the government spends money, it will find some way to make you pay for it - either through direct taxation, money printing, or debt (which represents deferred taxation/money printing).
It’s as simple as that.
As the younger people and those coming behind them become the majority of society, they can change to SS laws to suit themselves. It is a democracy after all. In the meantime, keep sending me those checks. I’m mighty grateful.
I thought Our Country was a Republic!
So, the government takes care of people in their old age, promotes abortion and birth control to limit population growth, and then wonders why there aren’t enough young people to support the old people.
Typical parasite mentality.
Sorry, dear. If anything, the US is a nation-state.
Although there are changes that occurred before Gonzales v. Raich, the interpretation of the Commerce Clause that allows federal government to regulate anything it chooses down to the level, as Justice Thomas wrote in dissent, of church suppers, that Supreme Court decision blew down remaining barriers to federal reach.
There is no longer a notion of enumerated powers to which the feds are restricted, and the states are no longer individual laboratories of democracy.
We do not live in a republic, but it was nice while it lasted.
I thought so also, but now I know we are not, the best thing that could happen for the free spirited individual is for the country to break up into regional nations and hopefully one would become a Constitutional Republic like the original thirteen colonies.
We are NOT a Democracy—We are a Republic.
Democracy is mob rule.
I pledge allegiance to the flag, and to the REPUBLIC for which it stands, etc.
What makes you think they will make changes that only affect them?
I hate to burst this bubble: the only obligation to keep sending you checks is political. You have no contractual right to it.
Don't believe it? FLEMMING V. NESTOR 363 U.S. 603
Short version: Congress changed the law to revoke the Social Security benefits of certain people. Nestor sued, claiming he has a contract. US Supreme Court said: no, Congress reserved the power to change Social Security to themselves. Period.
The only way you will keep getting Social Security checks in your current amount is a huge increase in the payroll tax immediately, and again in 2057. All total, the payroll tax increase would be about 50%
Social Security has no choice. The Trust Fund will be exhausted, and the SSA can't borrow money. And, save me the usual bluster about "stealing from Social Security". The Trust Fund was INVESTED in the equivalent of long-term Treasury bonds, and the SSA is now redeeming the bonds. They'll all be gone in 2034.
Lots of proposals have been floated. You can read the comments at the link, and the usual discredited ones are promoted as the "way to save SS". They don't. The Social Security evaluated dozens of proposals on their website, and tells you the long-term effect. The only one that works is the massive tax increase.
I always get flamed about this. But, I'll tell you right now: save your breath. The Social Security Administration has been telling you this in your annual letter for at least a decade, but people scream so loudly, they won't touch it. So, the situation keeps getting worse, and we are well past the point of being able to fix it without a lot of pain.
You really want to know what happened to all the taxes you paid to Social Security? They were paid to your parents and grandparents (or someone else's). Your contributions are long-gone, and all you have in return is a promise that the federal government will do the same to your children and grandchildren so you can get a check.
When it comes to government taking, as this piece proves, Kelo is nothing.
The reason there aren't enough young people is: the "old people" no longer saw a need to have lots of kids.
For most of this country's history, people had lots of kids. They did so in the hope that at least one of them would survive disease and accidents and succeed well enough to take care of their parents when they were too old to work. You still see this behavior in third-world countries.
Thanks to better health care, and income transfer schemes like Social Security, it's no longer necessary for a couple to have lots of kids. So, our fertility rate has actually dropped BELOW replacement. I think it's about 1.9 now, and replacement is 2.1, after accounting for early mortality.
Back in the 80's, the Social Security administration did three projections of economic and demographic trends: pessimistic, intermediate, and optimistic. They used the intermediate projections to determine the tax rate needed to make Social Security solvent for 75 years.
The problem? The PESSIMISTIC projection turned out to be closer to the truth. In some factors, even that was too optimistic. So, almost every year -- the year of reckoning (when the Trust Fund is exhausted) gets closer and closer.
And hardly anyone is paying attention.
Outside the box, my man, the only place to be is outside the box. Perhaps it will be an Indian reservation for me.
One thing that you are not taking into account is the huge sums that are given to non citizens from the social security funds in the form of SSI payments. All a Cuban has to do is set foot on US soil and his income is paid for by your social security money. Haitians and Jews from Russia get paid too and there is potential that people from Syria will be on the dole before too long as well.
There is a way to avoid the tax increases needed. We’ve all seen (or heard of) “Logan’s Run” and “Soylent Green” versions of the future. The eldest are “taken care of”. No elderly; no payments. AND THEY STILL COLLECT THE TAXES.
The process is well underway. Billions upon billions have been taken out of SS and Medicare. Retirement housing is sorely needed for the elderly. The death panels will be used against the elderly. And the Ponzi scheme will continue.
The government savings scheme is losing its value, little by little every year. So being good self reliant people, we save our own money for later years. And what interest rate do we get for our troubles - ZERO.
Recently, the government announced that there would be no Social Security benefit increase next year. That’s only happened twice before in the past 40 years.
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All three under Obama.
In 2034, the Social Security benefits might get cut. In the meantime, Medicare will be bankrupt in 2016 unless the program is reformed. And it will be reformed, but in a way for which there is already precedent. Medicare premiums will shortly escalate sharply for all but the poorest of retirees. They will eventually consume the entire social security benefit for affluent retirees. Affluent retirees won’t get any cash payout on Social Security but, of course, they’ll have to pay income taxes on the “benefit”. Boomers are screwed, but if they were paying attention, they knew this was going to happen when they started their careers. Even Barry Goldwater warned that it was a Ponzi scheme.
SSI payments are funded out of general revenue. They do not affect the balance of the Social Security trust fund.
The Social Security Administration only administrates the program.
I'd rather my money go to my children and my grandchildren...
I'm 62 and not on SS yet...thinking about it ....
but we younger boomers really got the screw job....we have paid in a greater percentage of our income for SS/Medicare than any previous generations and yet still have to wait if we want "full" SS at a later time....
Nothing has been taken out of Social Security.
It was used to buy votes from your parents and grandparents, and possibly you.
Any intergenerational income transfer scheme is doomed by demographics to fail. The only way to keep them going is to keep raising taxes.
That’s why countries like Australia, New Zealand, and Singapore have switched to asset-based plans.
You silly peasant./sarc
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