Monday, September 12, 2011


Big H/T to The Economist and their recent article on Social Security. Here's what they said:

" NO PONZI scheme in the history of the world has ever lasted 75 years. Ponzi schemes depend on garnering an ever-increasing pool of new investors to pay out returns to prior investors. When the potential pool of new investors runs dry, they collapse.
This should provide us with a hint as to why Social Security is not a Ponzi scheme.The entire population of working Americans has already been subscribed to Social Security for decades, yet the system continues to pay out benefits on time.That is because the actuarial calculations underlying its revenues and benefits are sound. Rick Perry may consider Social Security " a monstrous lie" , but my parents and one surviving grandparent keep getting checks in the mail, year after year. Social Security does face a shortfall in the coming decades, because of the population bulge of retiring baby boomers. Those costs are limited and, measured as a percentage of GDP, will flatten out. They can be absorbed through a modest, gradual increase in Social Security taxes and modest reductions in benefits for wealthier recipients.
If you wanted to call Social Security an investment, you would say it is a play on the proposition that America's GDP will continue to grow over the long term. This is the safest play one can imagine making, which is why the returns are so modest.
If Mr Perry were in fact calling for limited changes to ensure Social Security can meet promised benefits beyond 2036, that would be fine. But, you don't call something a " monstrous lie" when you want to tinker with it. If Mr Perry is no longer arguing for the dubious concept of turning Social Security over to the states, then it's not clear what he proposes as an alternative to the present system. The effect of continued inaccurate attacks on the foundations of Social Security will deepen most people's confusion about the actual soundness of the concept and reinforce young people's skepticism that they will ever benefit from it. If my generation does in fact fail to receive our Social Security checks, it will only be because we inexplicably decided to vote ourselves out of them.
My Grandmother cast her first presidential vote for FDR in 1936. She turns 100 in December and the checks are still coming in. She has since been joined on the rolls by her two daughters. There is every reason to believe that their children, who have been paying taxes into the system for decades now, will also enjoy its benefits when they retire.
Unless, of course, politicians succeed in convincing working Americans that the whole thing is a " monstrous lie." "

Visualize the fall 2012 campaign. It will not be pretty. If Perry is the nominee, the State of Texas will keep paying the $ 8500 monthly bill for his 4 year old temporary 5 BR, 7 bath rental with an assurance that the current tenant will soon be back.



Ohio JOE said...

"NO" PRIVATE SECTOR "PONZI scheme in the history of the world has ever lasted 75 years." Governments can make schemes work for a while by taxing the suckers.

Machtyn said...

I am a Romney supporter - but even I know that the SS tax I pay I will never see. There are many reasons for this and I will name a couple.

First: Social Security was setup to payout to the survivors. Most people were expected to be dead by the time payouts were to have occurred.

Second: Politicians have been raiding the fund for years.

Third: People today are receiving benefits for two reasons: The government can keep printing money and the current workers are paying for their parents' benefits (not their own benefits). If I remember the projections correctly, my children will be paying my parents' benefits (not mine or their own).

A ponzi scheme may not completely describe Social Security, but that's how today's current generation sees it.

Hopefully, Romney can fix the blasted thing in such a way that it is a sound investment strategy and that second and third parties will keep their grubby hands off the pile.

craigs said...

Of course you will get a SS check. The fund is solvent through 2036, even WITH the government raiding the trust fund. All it needs is a freeze on government looting and a slight demographic adjustment to compensate for longer lifespans and it'll be solvent beyond 2050.
Actually, if you are only 12.....I can't really guarantee 2065


Noelle said...

Since Machtyn is my husband, I'll vouch for him that he's not 12. :)

Anonymous said...

I feel reassured, Noelle; I'm glad to know that you didn't feel the need to marry a 12 year old! LOL!


Ohio JOE said...

"Of course you will get a SS check." Really??? When will this check come and how much will it be?