But even so - SS is worthy of being saved. It is actually a very smart system. Consider the founding fathers of SS in 1935, faced with old-age poverty and no money saved to address it. They managed to invent a system that worked from day one right up to now (76 years later) and has provided inestimable value to millions.
Sure - major tweaks are required to save it for the future, but the basic idea (take from your paycheck today; give back to you tomorrow) allows for a system that doesn't need savings, provides the minimal assurance of food and cheap shelter to all retirees, provides a nice supplement to us all, is fair, is not that bad a return, self-adjusts for inflation, and - this is important - cannot go broke. By definition, the system will always have income, and never have debt. It is scheduled to result in lower payments in the future (down actually as low as 68%, I think the article misstates it as 74%) but it doesn't go to zero. It can't. It can't go totally broke until the last American worker is laid off.
I will try to respond every so often. Pls be kind - I'm not trying to rip you off or praise socialism; I'm defending a 76-yr-old American institution that all of us will benefit from, and all of us with parents or grandparents already benefit from.
Yes... so wise. You can stop reading right there- it doesn't get any better.
I agree the idea is good.
However, I despise SS because,
1. It’s a Ponzi scheme.
2. Congresscritters have stolen from it in order to finance whatever “keep-’em-in-office” scheme is popular for that term.
3. It’s a Ponzi scheme.
4. The “lock box” ain’t got nuttin’ in it.
and finally,
5. IT’S A PONZI SCHEME.
Social Security is a criminal abuse of property. None of my money should be taken to pay for anyone’s retirement unless they are a public servant - military, police, etc. Moreover, the money put into SS does NOT go directly to recipients, Most of the time it’s funneled into other sectors of government and never paid back.
Factually incorrect. It can, and will, go broke because the recipients are drawing out more then they paid in while the ratio of payers to payess is falling. From a high of 16 to 1 the ratio will fall to 2 to 1 by 2030.
*** The money streams into Washington, but it doesn’t stay there. It quickly goes to those over the age of 65 in proportion to how much they contributed from their paychecks over their working lives.***
Which means that for every retiree it requires three workers paying into the system.
10 million retirees require 30 million workers to support them.
When those 30 million retire it will require 90 million workers to support them.
When those 90 million workers retire it will require 270 million workers to support them.
When those 270 million retire it will require, 810 million to support them.
When those 810 million retire it will require 2 billion, 430 million workers to support them.
By the way, just what is the population of the US right now?
Here is an essay I wrote in 2004 about Social Security, as part of my application to appear as a “presidential candidate” on Showtime’s “American Candidate” show which aired in the summer of 2004 with Montel Williams as the host. Hope it helps:
* * * * *
In August 1919, a man named Charles Ponzi hit upon a great idea for making money. He came up with a plausible sounding investment vehicle that he promised would double investors’ money in 45 days. As his scheme attracted more and more participants, he would pay off his obligations to earlier investors with the money provided by later investors. Naturally, the fact that the early investors received all the money they were promised served as a major enticement to later investors.
Of course, this scheme could not go on indefinitely. Eventually, there were not enough new investors to pay off the older ones, and the whole thing collapsed. Within a year, some 40,000 investors had been taken by Ponzi for some $15 million (about $140 million in current US dollars), and by August 1920 he had filed for bankruptcy and was sent to prison. But during the year his scheme was operating, Ponzi enjoyed a very luxurious lifestyle.
In 1934, a man named Franklin Delano Roosevelt hit upon a great idea for getting votes. He came up with a plausible sounding plan that he promised would bring economic security to Americans by “providing social insurance for the citizen and his family.“ As the power of law was used to force almost four generations of Americans into “contributing” to this program, the United States government was able to pay off the obligations to the earlier generation of contributors with the money provided by later generations.
Of course, this scheme could not go on indefinitely. Eventually – as the core of the enormous “baby boomer” generation enters retirement in about 15 years – there will not be enough new contributors to pay off all the outstanding obligations to the older contributors, and the system will collapse. In less than 100 years of operation, Social Security – the largest government program in the world with current obligations accounting for more than one-fifth of the federal budget – will essentially be bankrupt. But during the four generations that the scheme was operating, US presidents, senators and congressional representatives have enjoyed a lot of votes, especially when they expanded the scope and obligations of the system to cover ever wider constituencies.
Well folks, the Social Security party is very nearly over. For those who haven’t been paying attention these last 70 years, here is what is really going on. You pay your “contributions” into the Social Security “Trust Fund.” The US Government “borrows” the money from that fund to pay current government expenses, including obligations to current Social Security recipients. It replaces the money in the “trust fund” with federal IOUs.
You know that “Social Security Lock Box” that Al Gore was always talking about during the 2000 election? Well, guess what? There’s no money in it — just a big pile of IOUs from Uncle Sam.
Now, if you or I were sitting on a large pile of federal promissory notes, we would have a solid asset worth a lot of money, because the whole world assumes that the US government will always make good on its debt. That assumption is the basis of our financial system.
But when the federal government finally has to start cashing in those IOUs in the “Lockbox” to meet its Social Security obligations, what do you think will happen? What would happen to you if you tried to pay your mortgage by writing an IOU to yourself and then endorsing it over to your bank?
Well, that’s exactly the position that the federal government will be in when the current level of social security “contributions” is no longer enough to cover the government’s obligations to a new generation of retiring baby boomers. And that day is coming soon.
Do you know who will pay the shortfall then? You will – either in the form of increased Social Security “contributions” or higher income taxes. Or maybe both. But pay you will, and it will hurt.
The fact is that if Social Security was a private insurance program, everybody connected with it would be in jail by now. Of course, the federal government is different, which is why this scheme has been able to go on for so long. But while the federal government is able to exempt itself from criminal sanction, it does not have the power to exempt itself from financial reality.
I used to work in the commercial finance business, and I am going to share with you a lesson that I had to learn in a very hard and personal way. If financial institutions do not pursue sound policies, they are susceptible to what I call “financial cancer.”
A good example of “financial cancer” is what has happened in Japan. The large Japanese banks loaned money on real estate, and carried the loans on their books as assets. The more assets they had, the more loans they could make. And since loans are what banks use to make profits, the more profitable these institutions became. Unfortunately for the banks, however, the Japanese real estate bubble eventually burst, prices plummeted, the underlying real estate collateral turned out to be worth less than the loans, and the borrowers were no longer able to pay off their obligations to the banks. Thus performing assets became non-performing assets, and profitability went out the window.
The problem for the banks in this situation is that they cannot afford to write off these “assets” as worthless (or worth less, at any rate), which is what they are. If the banks do take this step, they will automatically become insolvent and fail.
But in some cases, the banks are too big to be allowed to fail, because if they do, the entire financial system will collapse with them. So the government has to keep figuring out new accounting gimmicks to keep the banks apparently solvent, and to delay the inevitable outcome. When it finally arrives, the delay in writing off the bad assets will only cause the problem to be that much larger, because the banks will have been operating in the red for that much longer and the losses will be that much bigger. The result is that the toll on real people’s lives and fortunes will be that much more catastrophic.
The progressive deterioration of the banks’ financial position in this tragic scenario is why I use the term “financial cancer.”
Our Social Security system is also riddled with “financial cancer.” The system’s inevitable insolvency can no longer be honestly denied. We can no longer kick the can down the road to be dealt with in future election cycles by future generations. Politicians who glibly and vaguely talk about “saving,” “preserving,” or “fixing ” Social Security are only demonstrating either their ignorance or their cynical capacity for deceit.
The financial laws of nature cannot be repealed or ignored. Eventually, the day of reckoning must come, and the longer we wait to openly acknowledge this reality, the worse it will be for our people and our society. There is no way to “fix” a Ponzi scheme. The only thing you can do is shut it down before the guaranteed losses get bigger and a new tier of sucker investors loses their money.
In its heyday, the Social Security system was sold to the American public as a “contract between the generations.” (Actually, they used the term “compact,” but it amounts to the same thing.) Apparently, nobody stopped to consider that contracts with minors are not valid, to say nothing of contracts with those who have not yet been born.
In 1950, there were 16 workers paying taxes to support one Social Security retiree. By 1996 there were only 3.3 workers supporting each retiree, and by 2030 there will be only 2 workers per retiree. For those in Generation X and younger, the “compact between the generations” turns out to have been a major shafting. Taking candy from babies, you might say.
Given this reality, to continue the Ponzi scheme of Social Security into the future will mean imposing an intolerable tax burden on those who themselves cannot possibly benefit from the system in their own old age.
Even today, the burden is difficult for many to bear. For more than 80% of us, our Social Security taxes are even higher than our income tax liability.
That burden is even heavier for those who lose their jobs and, as so many have done, seek work as independent consultants. For those people to discover, at the time of their greatest financial vulnerability and uncertainty, that their Social Security taxes have doubled because they no longer have an employer to pick up half the tab, is an outrage. Is this right? Is this fair? Does it make sense?
I believe that the American people must stop listening to the glib lies of self-serving politicians and face the facts about Social Security now.
The problem you have is apparently you don’t understand numbers.
You have accepted some fundemental points from which to start your analysis - some “base assumptions”. These base assumptions are wrong - and thus - the remainder of your analysis is wrong.
To see it - since you really seem interested - why not make a chart of cash flows into and out of the “Soc Security” system, since its inception. Then - look at rate of return, and inflation adjustments.
After that - you can look into the effects of the government controlling MY money - and the social costs of that over a lifetime. For instance - for what I’ve paid in - WITHOUT correcting for inflation, and a return of 0% - I could either own a very nice vacation house (and been living in it for 15 years) - or my own house paid off - and be ready to retire 10 years early.
Instead - I have a “promise” from a financially out of control government - to allow me to get some of my money back at a rate they decide is OK - starting at age 67.
If it were such a good idea - why has the free market not developed similar products? Imagine a free market retirement fund - with a return of zero, that you can’t touch till 67. Yeah - great product. Where is it?
Do you know what a ponzi scheme is?
Okay, give this some thought.
Would any corporation be allowed start a pension fund that operated in the same fashion as social security?
If not, the why should the Federales be operating something like Social Security?
And, if it so good, why doesn’t Congress use it, instead of its private pension system?
if SS needs “major tweaks” to save it for the future, it doesn’t need tweaking. SS needs to operate on a sustainable business model, or it needs to be put down.
SS was a Ponzi scheme from the very beginning (see Ida May Fuller’s $22K payout for only a $24 investment as proof).
Those five kids now have eleven kids among them, most gainfully employed but three still in college. The worker/recipient ratio from my parents day has gone from 5/2 to 8/5 perhaps one day to be 11/5. In most families the ratio is closer to 2.4/2. The very supportable ratio of 5/2 ( especially where the two die before collecting) is a workable ratio for long term solvency. The insane ratio of 2.4/2 will never last long if those 2.4 are expected to generate something like $40K annually for the two recipients. ThTs why it's called a ponzi scheme.
You do know that most of the people on SSI ARE NOT old people do you NOT?....
Taking care of old people is one thing.. all the hangers on that SSI PAYS are another thing..
Besides that way back when FDR proposed SSI private capitalist ways of handling this was proposed.. AND REJECTED..
With you SSI deduction operating like an investment controlled by YOU..
The so-called government trust fund was JUST BEGGING to be stolen by the democrats.. as it was..
Government controlled SSI WAS NEVER A GOOD IDEA... from day one..
Wow, it beat the Soviet Union by 2 years!
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations are doing that Gen-X and Y will end up paying for.
Freep mail me to be added or dropped. See my home page for details and previous articles.
TC, I have to say, I haven't seen an @ss-whipping this good on FR in quite a while, so I'll take a different approach to point out another "chink" in the SS armor.
You mentioned inflation. IIRC, social security recipients haven't received a COLA for the past two years. Why not? The government says that inflation is flat. Say what?
Yes, another financial accounting gimmick. Those government bean-counters only look at prices of certain goods and services when they calculate the Consumer Price Index. Unfortunately, many energy and food costs are left out of the equation, which leaves inflation "flat."
Have you filled up your tank lately, or bought food from a grocery store? Remember how much that cost a couple of years ago? No? It was significantly lower in 2008, than it is today.
Let me ask you something else, TC. What did people who reached retirement age do, prior to 1935? Did all of them suddenly drop dead? Did they all live in the street, and pick through garbage cans? I suspect they did not. I also suspect that people who became eligible for SS back in 1935, weren't suddenly "living the high life," with all their basic needs met by SS.
Dude, how old are you? I'm 36, and I know *exactly* what's going to happen.
Baby Boomers expect Gen X and Millenials to pay for their retirement. Yeah, Boomers paid in $30 dollars a month and saw movies for a nickel. Now they want hundreds of dollars a month forever because *they earned it*. Uh huh.
Gen X will pay for Baby Boomer retirements and we'll get nothing in return. We're already planning around it. When I retire, it'll be without Social Security. There's zero chance I'll see a dime, and we're getting off lucky compared to our kids.
Millenials will get nothing but a gargantuan bill for people that are either already dead or living in unearned luxury. You'll be lucky if they don't bolt your doors and burn your retirement home down once they get done counting the zeros. Their retirement will be spent paying the interest off on yours.
It has worked all these years because only 1 of 4 was expected to live to be 75. Raise the “retirement age” I don’t plan on retiring and depending on social security anytime soon and I am one of those 61 year old boomers.
But I am getting tired of the 30 somethings complaining about all the boomers who created their nightmare. Their solution is slip us the needle and get rid of us all. There wasn’t one of the 78,000,000 “boomers” alive in 1935, the first one was born in 1946, so blame your great grandparents for the whole mess. Oh, guess they are mostly dead, so aim your hatred at those now eligible to draw from it. At least $3 trillion of that fund was paid for by those same boomers who also paid trillions in income tax that was wasted on all those snot nosed punk’s education. Once they have paid their share, then they may have earned the right to complain. Until then stuff a sock in it.
You're defending socialism!