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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 11-26-2013, 06:09 AM   #91
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Moronic analysis.

I never said anything about a crisis, but you admit that we need to work on a "solution". That's an admission that the system as it is today is unsustainable.
No, the system today is not unsustainable.

Unsustainable means not able to fix it, it is beyond repair. Nothing we could do could stop it from collapsing. And this isn't true.

When the fact is, there is lots we can do, nothing major, just minor reworkings, like we have been doing for over 70 years.

And we have well over a decade to figure it out.

Sustainable.

Unless of course, you are an idiot who believes government = bad, then it is unsustainable because you won't want adapt the system to the current realities.
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Old 11-26-2013, 06:37 AM   #92
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Originally Posted by Loneiguana View Post
No, the system today is not unsustainable.

Unsustainable means not able to fix it, it is beyond repair. Nothing we could do could stop it from collapsing. And this isn't true.

When the fact is, there is lots we can do, nothing major, just minor reworkings, like we have been doing for over 70 years.

And we have well over a decade to figure it out.

Sustainable.

Unless of course, you are an idiot who believes government = bad, then it is unsustainable because you won't want adapt the system to the current realities.
No, unsustainable in this context means it can't continue without reform. If sustainable meant what you want it to mean, a Ponzi scheme is sustainable because you can simply change the payout terms as needed. SS is unsustainable in the same way a Ponzi scheme is unsustainable.
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Old 11-26-2013, 08:39 AM   #93
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No, unsustainable in this context means it can't continue without reform. If sustainable meant what you want it to mean, a Ponzi scheme is sustainable because you can simply change the payout terms as needed. SS is unsustainable in the same way a Ponzi scheme is unsustainable.

Ponzi schemes can't be reworked.

S.S. can, and has and like all government, should be reworked as times change.

Stop being stupid.
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Old 11-26-2013, 08:56 AM   #94
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I did not think anything it was taken from me rather I liked it or not. I would be more than thrilled if they gave it back to me with no interest~
Same here. My recent report shows almost a half million between me and my employers have been contributed. I don't appreciate anyone calling it welfare or an "entitlement program."
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Old 11-26-2013, 09:04 AM   #95
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Originally Posted by Loneiguana View Post
Ponzi schemes can't be reworked.

S.S. can, and has and like all government, should be reworked as times change.

Stop being stupid.
Fail.
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Old 11-26-2013, 09:08 AM   #96
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Same here. My recent report shows almost a half million between me and my employers have been contributed. I don't appreciate anyone calling it welfare or an "entitlement program."
It's a welfare program in the sense that it is a government-run, mandatory, redistribution of wealth from one group to another but that doesn't mean that everyone involved in it is on welfare. It's undeniable that many people receive significantly more than they contribute through SS. Those are the beneficiaries. The people who pay as much or more than they end up getting out are the taxpayers who support the program.

It's an entitlement program by definition. Entitlement programs are spending programs that don't have to be re-authorized each year.
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Old 11-26-2013, 09:13 AM   #97
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Fail.
That guy along with bambi are two of the worst posters to ever post here. The difference is I don't believe bambi is real. This clown on the other hand....... What a complete waste of time.
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Old 11-26-2013, 09:13 AM   #98
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Fail.
So it is unsustainable because you want it to be unsustainable and refuse to do anything to adapt it to current times?


I go back to the self-fulfilling prophecy.
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Old 11-26-2013, 09:19 AM   #99
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So it is unsustainable because you want it to be unsustainable and refuse to do anything to adapt it to current times?


I go back to the self-fulfilling prophecy.
No, that has nothing to do with why it's unsustainable. It's unsustainable for many of the same reasons a ponzi scheme is unsustainable. Hence, the OP article.
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Old 11-26-2013, 09:21 AM   #100
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No, that has nothing to do with why it's unsustainable.
Then why is it unsustainable?

We have over 10 years to figure it out.

It is only unsustainable if we do nothing.

You want it to be unsustainable, so you support doing nothing, so you can be correct that it is unsustainable.
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Old 11-26-2013, 09:23 AM   #101
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It's unsustainable for many of the same reasons a ponzi scheme is unsustainable. Hence, the OP article.

That is just wrong. Why do you like to post stupid?

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Old 11-26-2013, 09:28 AM   #102
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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 will occur when the scheme runs up against the natural limits of its recruitment strategy; in the ultimate case, it can't keep going past the point where the entire population is already subscribed.

This should provide us with a hint as to why, as Kevin Drum writes (rebutting Shikha Dalmia), 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. As my colleague notes, this is what a graph of Social Security's finances looks like:


Quote:
This, meanwhile, is what a graph of a Ponzi scheme's finances looks like:


Quote:
The difference is clear.

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. Like any investment, it could go bad. But if it goes bad, if the economy of the United States ceases to grow over the long term, it is inconceivable that any other investment large enough to feed a pension plan covering the entire working population could do better.

http://www.economist.com/blogs/democ...ial-security-0
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Old 11-26-2013, 09:47 AM   #103
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Then why is it unsustainable?

We have over 10 years to figure it out.

It is only unsustainable if we do nothing.

You want it to be unsustainable, so you support doing nothing, so you can be correct that it is unsustainable.
I've already explained this to you. It's unsustainable without changing the underlying agreement. Much like a ponzi scheme.
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