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Old 11-22-2013, 09:53 AM  
Lzen Lzen is offline
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Social Security: The Most Successful Ponzi Scheme in History

Social Security: The Most Successful Ponzi Scheme in History

Mises Daily: Friday, November 22, 2013 by Gary Galles

“We paid our Social Security and Medicare taxes; we earned our benefits.” It is that belief among senior citizens that President Obama was pandering to when, in his second inaugural address, he claimed that those programs “strengthen us. They do not make us a nation of takers.”



If Social Security and Medicare both involved people voluntarily financing their own benefits, an argument could be made for seniors’ “earned benefits” view. But they have not. They have redistributed tens of trillions of dollars of wealth to themselves from those younger.



Social Security and Medicare have transferred those trillions because they have been partial Ponzi schemes.



After Social Security’s creation, those in or near retirement got benefits far exceeding their costs (Ida Mae Fuller, the first Social Security recipient, got 462 times what she and her employer together paid in “contributions”). Those benefits in excess of their taxes paid inherently forced future Americans to pick up the tab for the difference. And the program’s almost unthinkable unfunded liabilities are no less a burden on later generations because earlier generations financed some of their own benefits, or because the government has consistently lied that they have paid their own way.



Since its creation, Social Security has been expanded multiple times. Each expansion meant those already retired paid no added taxes, and those near retirement paid more for only a few years. But both groups received increased benefits throughout retirement, increasing the unfunded benefits whose burdens had to be borne by later generations. Thus, each such expansion started another Ponzi cycle benefiting older Americans at others’ expense.



Social Security benefits have been dramatically increased. They doubled between 1950 and 1952. They were raised 15 percent in 1970, 10 percent in 1971, and 20 percent in 1972, in a heated competition to buy the elderly vote. Benefits were tied to a measure that effectively double-counted inflation and even now, benefits are over-indexed to inflation, raising real benefit levels over time.



Disability and dependents’ benefits were added by 1960. Medicare was added in 1966, and benefits have been expanded (e.g., Medicare Part B, only one-quarter funded by recipients, and Part D’s prescription drug benefit, only one-eighth funded by recipients).



The massive expansion of Social Security is evident from the growing tax burden since its $60 per year initial maximum (for employees and employers combined). Tax rates have risen and been applied to more earnings, with Social Security now taking a combined 12.4 percent of earnings up to $113,700 (and Medicare’s 2.9 percent combined rate applies to all earnings, plus a 0.9 percent surtax beyond $200,000 of earnings).
Those multiple Ponzi giveaways to earlier recipients created Social Security’s 13-digit unfunded liability and Medicare’s far larger hole. And despite politicians’ repeated, heated denials, many studies have confirmed the results.



One recent study of lifetime payroll taxes and benefits comes from the Urban Institute. For Medicare, they calculated that (in 2012 dollars) an average-wage-earning male would get $180,000 in benefits, but pay only $61,000 in taxes — “earning” only about one-third of benefits received. A similarly situated female does even better. The cumulative “excess” benefits equal $105 trillion, with net benefits increasing over time.
The Urban Institute’s calculations revealed a different situation for Social Security. An average-earning male who retired in 2010 will receive $277,000 in lifetime benefits, $23,000 less than his lifetime taxes, while for females, their $302,000 in lifetime benefits approximates their lifetime taxes. And things are getting worse. By 2030, that man will be “shorted” 16 cents (10 cents for women) of every lifetime tax dollar paid.
While those results resoundingly reject “we earned it” rhetoric for Medicare, the Social Security results, with new retirees getting less than they paid in, could be spun as “proving” Social Security is not a Ponzi scheme. However, that would be false. The reason is that Medicare is still in its expansion phase, as with Medicare Part D, piling up still bigger future IOUs. However, Social Security has essentially run out of new expansion tricks, although liberal groups are pushing to apply Social Security taxes to far more income as one last means of robbing those younger to delay the day of reckoning. That simply means that we are being forced to start facing the full consequences of the redistribution that was started in 1935. That is, the current bad deal Social Security offers retirees is just the result of the fact that it has been a Ponzi scheme for generations, and someone must get stuck “holding the bag.”



In fact, perhaps the best description of the current Social Security and Medicare situation comes from Henry Hazlitt, long ago, in Economics in One Lesson:
Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.
Social Security and Medicare’s generational high-jacking has become “the third rail of politics” in large part because seniors want to believe that they paid their own way. But they have not. They have only paid for part of what they have gotten. The rest has indeed been a Ponzi scheme. And as Social Security is already revealing, the future cannot be put off forever, however much wishful thinking is involved. Some are already being forced to confront the exploding pot of IOUs involved, and it will get much worse.
The supposedly “most successful government program in the history of the world,” according to Harry Reid, has turned seniors into serious takers. The fact that some of them are now starting to share the pain caused by those programs does not contradict that fact. It just shows the dark side of the most successful Ponzi scheme in the history of the world.



http://mises.org/daily/6594/Social-S...eme-in-History
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Old 11-22-2013, 09:54 AM   #2
Lzen Lzen is offline
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Doh, I don't know how I did that but I put this in the wrong forum. Mods, can you move this to DC?
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Old 11-22-2013, 09:54 AM   #3
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wtf does this have to do with MEDIA CENTER
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Old 11-22-2013, 10:02 AM   #4
Lzen Lzen is offline
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wtf does this have to do with MEDIA CENTER
Yeah, already addressed that. My bad.
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Old 11-22-2013, 10:41 AM   #5
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Social security isn't a ponzi scheme.
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Old 11-22-2013, 11:13 AM   #6
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Social security isn't a ponzi scheme.


/thread
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Old 11-22-2013, 12:27 PM   #7
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I don't get it. Why is that so funny. SS is a ponzi scheme. Did either of you actually read the article?
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Old 11-22-2013, 12:29 PM   #8
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Old 11-22-2013, 12:37 PM   #9
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Eh, it kind of is...

Pon·zi scheme
/ˈpänzē/
noun

noun: Ponzi scheme; plural noun: Ponzi schemes
1. a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
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Old 11-22-2013, 12:47 PM   #10
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Eh, it kind of is...

Pon·zi scheme
/ˈpänzē/
noun

noun: Ponzi scheme; plural noun: Ponzi schemes
1. a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
It can't be, the government does no wrong. I've yet to see anything conclusive that the government has ever done wrong, why they know what's best.
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Old 11-22-2013, 12:53 PM   #11
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I don't get it. Why is that so funny. SS is a ponzi scheme. Did either of you actually read the article?
Nope, I stopped at Mises Daily.

Social Security doesn't fit the definition of a Ponzi. Not worth investing time into reading useless tripe from the Miserableans.
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Old 11-22-2013, 12:56 PM   #12
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It's not the standard, original form of Ponzi. But it's a "related cousin" version of it based on the fact that the original "investors" do benefit before the later investors get the house of cards tumbling down on them. For the purposes of the typical American, the term Ponzi isn't that far from what SS is.


One could argue it's worse than a Ponzi in that many folks - survivors - participate in it without paying jack squat to begin with. (Even Ponzis require initial investment)
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Old 11-22-2013, 02:18 PM   #13
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It's not the standard, original form of Ponzi. But it's a "related cousin" version of it based on the fact that the original "investors" do benefit before the later investors get the house of cards tumbling down on them. For the purposes of the typical American, the term Ponzi isn't that far from what SS is.


One could argue it's worse than a Ponzi in that many folks - survivors - participate in it without paying jack squat to begin with. (Even Ponzis require initial investment)
Social security is not an investment vehicle. It is social insurance.

Social security is also backed by the taxing power of the US government not a nonexistent enterprise.

Social Security is no where close to being a "cousin" of a ponzi scheme.
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Old 11-22-2013, 02:21 PM   #14
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Its a classic Pyramid Scheme. Those at the top of the Pyramid(seniors) continue to get pushed out as long as you have new investors(young workers) at the bottom to keep pushing.


http://en.wikipedia.org/wiki/Pyramid_scheme

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A pyramid scheme is an unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
The younger generation is getting screwed royally. They not only have to support the elderly in Social Security and Medicare. But now we are asking them to cough up a bunch of cash to support the sick and elderly in Obama Care. Throw in the mountain of National debt we are saddling them with and you have to wonder how they will manage.
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Old 11-22-2013, 03:02 PM   #15
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Social security is also backed by the taxing power of the US government not a nonexistent enterprise.
True. But you have to also note that it's entirely at the discretion of the US Congress. Should the Congress decide to eliminate the program there would be no backing. I don't believe the voters will ever get rid of the program but they can certainly alter the terms. Countries have altered all sorts of social insurance plans over the years. Which is what the debate is centered on now.
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