Social Security is Not a Ponzi Scheme, Mr. Perry (It's worse)

cawacko

cawacko

Well-known member
From Reason.com's blog.


Rachel Maddow and her MSNBC guests are scandalized that Rick Perry stuck to his guns that Social Security is a Ponzi scheme during the presidential debate tonight. “This kind of rhetoric will hurt him in the general elections,” they reassured each other. They didn’t flat out say that Perry was wrong, but actually he is. Social Security is not a Ponzi scheme. It is much worse.

Here are three reasons why:

One, a Ponzi scheme collects money from new investors and uses it to pay previous investors—minus a fee. But Social Security collects money from new investors, uses some of it to pay previous investors, and spends the surplus on programs for politically favored groups—minus the cost of supporting a massive bureaucracy. Over the years, trillions of dollars have been spent on these groups and bureaucrats.

Two, participation in Ponzi schemes is voluntary. Not so with Social Security. The government automatically withholds payroll taxes and “invests” them for you.

Three: When a Ponzi scheme can’t con new investors in sufficient numbers to pay the previous investors, it collapses. But when Social Security runs low on investors—also called poor working stiffs—it raises taxes. Indeed, Cato Institute’s Michael Tanner points out,


Social Security taxes have been raised some 40 times since the program began. The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase.

And given that the worker-to-retiree ratio is expected to fall from 3-1 today to 2-1 in 2030 (down from 16-1 in 1950) these taxes will only go up unless the government decides to kick retirees in their dentures and slash benefits.

Rick Perry should stop soft-peddling the issue and tell it like it is.


http://reason.com/blog/2011/09/07/mr-perry-social-security-is-no
 
That was one of the few things Perry said that I actually agreed with.

People are too knee-jerk about SS; they can't think logically about it.
 
Onceler said:
That was one of the few things Perry said that I actually agreed with.

People are too knee-jerk about SS; they can't think logically about it.
Click to expand...

you must be one of the .000000000001% of MSNBC /Rachelle Maddow /Chris Matthews regulars that believe that.....
 
cawacko said:
From Reason.com's blog.


Rachel Maddow and her MSNBC guests are scandalized that Rick Perry stuck to his guns that Social Security is a Ponzi scheme during the presidential debate tonight. “This kind of rhetoric will hurt him in the general elections,” they reassured each other. They didn’t flat out say that Perry was wrong, but actually he is. Social Security is not a Ponzi scheme. It is much worse.

Here are three reasons why:

One, a Ponzi scheme collects money from new investors and uses it to pay previous investors—minus a fee. But Social Security collects money from new investors, uses some of it to pay previous investors, and spends the surplus on programs for politically favored groups—minus the cost of supporting a massive bureaucracy. Over the years, trillions of dollars have been spent on these groups and bureaucrats.

Two, participation in Ponzi schemes is voluntary. Not so with Social Security. The government automatically withholds payroll taxes and “invests” them for you.

Three: When a Ponzi scheme can’t con new investors in sufficient numbers to pay the previous investors, it collapses. But when Social Security runs low on investors—also called poor working stiffs—it raises taxes. Indeed, Cato Institute’s Michael Tanner points out,


Social Security taxes have been raised some 40 times since the program began. The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase.

And given that the worker-to-retiree ratio is expected to fall from 3-1 today to 2-1 in 2030 (down from 16-1 in 1950) these taxes will only go up unless the government decides to kick retirees in their dentures and slash benefits.

Rick Perry should stop soft-peddling the issue and tell it like it is.


http://reason.com/blog/2011/09/07/mr-perry-social-security-is-no
Click to expand...

Well no shit SS tax has been raised 40 times and what the OP doesn't state that the value of the dollar in 1935 was 1636 times greater then what it is today meaning that SS has NOT kept up with the decreasing value of the dollar by about half.
 
Mott the Hoople said:
Well no shit SS tax has been raised 40 times and what the OP doesn't state that the value of the dollar in 1935 was 1636 times greater then what it is today meaning that SS has NOT kept up with the decreasing value of the dollar by about half.
Click to expand...

Do please show us how you came to that conclusion. Show your math....
 
Social Security as a public program is a fatally flawed model. Figures show that it will run out of money even if things remain the same. But things won't remain the same. Average life expectancies are going to exceed 100 by mid-century, and who knows where cost of living will be. How does SS respond then?

There really isn't any downside to privatizing SS. The only objections that I keep hearing are:

1) It's not an "investment" program, to which I say, so? What if it works much better as an investment program? (it does)
2) What if the market crashes right before you retire. You lose everything. Red herring - the idea is that you're invested for close to 5 decades in the program.
 
Onceler said:
Social Security as a public program is a fatally flawed model. Figures show that it will run out of money even if things remain the same. But things won't remain the same. Average life expectancies are going to exceed 100 by mid-century, and who knows where cost of living will be. How does SS respond then?

There really isn't any downside to privatizing SS. The only objections that I keep hearing are:

1) It's not an "investment" program, to which I say, so? What if it works much better as an investment program? (it does)
2) What if the market crashes right before you retire. You lose everything. Red herring - the idea is that you're invested for close to 5 decades in the program.
Click to expand...

You also hear raise taxes. But isn't the idea of S.S. you get out of it what you put into it? So if you raise taxes that means the person paying more taxes will receive more money at retirement so all that is essentially doing is kicking the can down the road. We could raise taxes and not give more money to the people who pay more but wouldn't that be means testing which S.S. is not suppose to be?
 
cawacko said:
You also hear raise taxes. But isn't the idea of S.S. you get out of it what you put into it? So if you raise taxes that means the person paying more taxes will receive more money at retirement so all that is essentially doing is kicking the can down the road. We could raise taxes and not give more money to the people who pay more but wouldn't that be means testing which S.S. is not suppose to be?
Click to expand...

When you raise taxes just to keep payouts at a certain level, then it IS a Ponzi scheme, pretty much by definition. It's completely unsustainable.

I hate the kick the can mentality on SS. I've had people proudly tell me that there is enough funding to keep it going through 2037, like that's some kind of bragging point. So? We're cool just delaying a solution to the problem & handing it off to the next generation?
 
Social Security does not have major issues. It has a completely manageable funding gap than can easily be achieved through modest changes. Here's a chart:

blog_social_security_basic_chart.jpg


If the continued on an upward trajectory over time (as with Medicare or Medicaid) then I could perhaps buy into radical changes to the program. But that's just not the case with Social Security.
 
David St. Hubbins said:
Social Security does not have major issues. It has a completely manageable funding gap than can easily be achieved through modest changes. Here's a chart:

blog_social_security_basic_chart.jpg


If the continued on an upward trajectory over time (as with Medicare or Medicaid) then I could perhaps buy into radical changes to the program. But that's just not the case with Social Security.
Click to expand...

What constitutes modest changes?
 
cawacko said:
What constitutes modest changes?
Click to expand...


Subject income over $200 or $250k to the payroll tax. Index benefits to chained CPI. Between those two the gap would close considerably.


Edit: I'm not a huge fan of the chained-CPI thing but it is preferable to blowing the whole thing up. I'd rather just eliminate the cap on income subject to the tax entirely.
 
David St. Hubbins said:
Social Security does not have major issues. It has a completely manageable funding gap than can easily be achieved through modest changes. Here's a chart:

blog_social_security_basic_chart.jpg


If the continued on an upward trajectory over time (as with Medicare or Medicaid) then I could perhaps buy into radical changes to the program. But that's just not the case with Social Security.
Click to expand...

Hilarious. Another Mother Jones chart.
 
David St. Hubbins said:
Social Security does not have major issues. It has a completely manageable funding gap than can easily be achieved through modest changes. Here's a chart:

blog_social_security_basic_chart.jpg


If the continued on an upward trajectory over time (as with Medicare or Medicaid) then I could perhaps buy into radical changes to the program. But that's just not the case with Social Security.
Click to expand...

Social Security has huge issues. I don't know where you got that chart, but they're already talking about reducing benefit payouts, and they will surely have to do so in the next 20 years - all against higher costs of living.

And what happens when life expectancies increase exponentially over the next 50 years? Does the chart factor that in?
 
Onceler said:
Social Security has huge issues. I don't know where you got that chart, but they're already talking about reducing benefit payouts, and they will surely have to do so in the next 20 years - all against higher costs of living.
Click to expand...

The chart is excerpted from the Social Security Trustee's report. The projected long-term shortfall for Social Security is less than one percent of GDP (0.7%). This is not a program that has huge issues.

Onceler said:
And what happens when life expectancies increase exponentially over the next 50 years? Does the chart factor that in?
Click to expand...

Yes.
 
David St. Hubbins said:
The chart is excerpted from the Social Security Trustee's report. The projected long-term shortfall for Social Security is less than one percent of GDP (0.7%). This is not a program that has huge issues.



Yes.
Click to expand...

Really? That chart factors in a possible average life expectancy that exceeds 100 years a few decades down the line?

I doubt it. And I doubt that it factors in realistic cost of living increases in an accurate way. SS is broken; it's an unsustainable system.
 
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