Social Security IS a Pyramid Scheme
Is the Social Security system a Ponzi scheme? Texas Governor Rick Perry says Yes, and calls it a "monstrous lie for younger people." Cato Institute's Michael Tanner says Perry was being too kind, and writes: "As with Ponzi’s scheme, when the number of new contributors dries up, it will become impossible to continue to pay the promised benefits." Boston Globe columnist Jeff Jacoby says that's not the point, and points out that "Ponzi schemes are intended to defraud; Social Security was designed to be a social safety net for the old."
The debate will continue, but the facts in the graph above are crystal clear: the number of active workers per Social Security recipient is declining, and will continue to decline, and the Social Security system is clearly unsustainable. Whether Social Security technically meets the technical definition of being a Ponzi scheme is less important than the fact that the current system has become a Pyramid scheme as the population ages. We will eventually run out of money from active workers, and money from the "trust fund," to pay for the unfunded liabilities due to Social Security recipients.
303 Comments:
I wouldn't call this news, as it's been apparent to anyone with half a brain since the 1970s.
It's only now that people are listening?
Yes, there are fewer workers now than in 2007.
The employment situation is worse now than at the 2009 recession trough, because job growth hasn't kept up with population growth and many people dropped out of the labor market.
So, even with strong job growth, the unemployment rate will remain high, for a while.
a pyramid, maybe...a ponzi scheme implies fraud...
"the current system, as designed, is a Pyramid scheme"
at the time it was designed, no one expected declining birth rates; if population growth & life expectancy continued as they were in the 50s, there would be no shortfall after 2037...
http://www.ssa.gov/cgi-bin/investheld.cgi
How bad is the jobs market?
(125,000 to 150,000 jobs are still needed each month just for population growth):
Unemployed face tough competition
September 4, 2011
America's 14 million unemployed aren't competing just with each other. They must also contend with 8.8 million other people not counted as unemployed -- part-timers who want full-time work.
And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work.
There's no recovery in the jobs market.
It's less than an L-shaped recovery.
"a pyramid, maybe...a ponzi scheme implies fraud..."...
It is a fraud rjs, it was designed that way...
If you don't think so try setting one up in your neighborhood...
BTW take a look at Tim Carney's (Washington Examiner) informative Venn diagram of the scheme...
a pyramid, maybe...a ponzi scheme implies fraud...
It is fraud. There is no Social Security Trust Fund but the politicians are not saying anything about it. The unfunded liabilities are at least as large as the national deficit and several times GDP. Those liabilities are still growing. But the media, bureaucrats, and most politicians have not said a word.
at the time it was designed, no one expected declining birth rates; if population growth & life expectancy continued as they were in the 50s, there would be no shortfall after 2037...
Nonsense. At the time SS was designed recipients were not expected to live long enough to collect much more than they contributed. But the SS system that you have now is not the one that was designed by FDR. It has been modified by a succession of politicians all along the way and what you have is an absolute fraud.
Social Security works pretty much EXACTLY as it was designed and it works like a lot of private annuities work as well as many other countries including Singapore work.
recognizing what it was explicitly designed to be verses calling it a ponzi take the debate away from facts and realities.
The formal name of SS is Old-Age, Survivors, and Disability Insurance (OASDI) program.
"Insurance"....
sometimes I wonder if those who think SS is wrong ... have the same issues with the concept of "insurance" which is not pre-funded and operates pretty much on a pay-as-you-go financial model.
SS has changed about a dozen times since it's inception to keep it on a solvent path - and it has worked because in it's 65 year history, it has, unlike the federal budget ..has generated a surplus...
There are current more than 30 options to reform SS to keep it solvent in the future.
the facts show this - that SS is sustainable.
Even on a worst case basis - it will pay out at 75% of original scheduled pay-outs.. and that's if nothing is done which is unlikely and that in 2037... more than two decades from now.
How many insurance plans or annuities look ahead at 75-year horizons anyhow?
No private insurance or annuity would be expected to not change in terms of premiums or benefits over a 75 year time line..right?
so would you call those pay-as-you-go plans "ponzi" if they could not continue without changes?
would you say, for instance, that if your car insurance company was not going to be able to hold premiums fixed with no increases and payouts the same - over a 75 year horizon that it would be a "ponzi" scheme?
Leave it to Mark Perry to keep the SS pot well-stirred here on CP.
:-)
SS, is in fact, the textbook example of a ponzi scheme. Ever increasing contributors needed at the bottom to fulfill the promises made to those at the top. With no underlying assets or investments to make up the difference. The truly amazing thing is how many Americans believe there are actually hard assets in the "trust fund", just peruse your favorite left leaning blog where Perry's comments are painted as ridiculous.
No private insurance or annuity would be expected to not change in terms of premiums or benefits over a 75 year time line..right?
Wrong. I pay for both life and diability insurance, as does my wife, and we fully expect to collect 100% of the our policy value, if necessary, not 75%.
how about your auto, fire and life insurance?
your private annuity would not change for the time period specified but those after you would not get the same price/coverage.. as it gets adjusted to keep it solvent.
but home, auto, and even term life insurance all change in price and coverage - to keep them solvent.
if you could buy a permanent life insurance contract rather than one that renews - the price will be different.
the one that renews will cost you more the older you get.....
your auto insurance.. you cannot buy for "life" - why?
can you buy home or auto insurance that is guaranteed never to increase in cost or change in coverage over your life?
why?
The GAO did a legitimate data-based analysis, as opposed to verbal gymnastics, and was kind enough to compute what tax rate would sustain the retirement program. The required increase was quite modest. They also concluded that the medical components were unsustainable.
The summary document was 'a crisis of stewardship', iirc. I do not recall if they made their full computer code available.
"Leave it to Mark Perry to keep the SS pot well-stirred here on CP"...
Leave it to Larry G to show us he neither understands insurance (a bettor's game) or what a Ponzi scheme is...
" They also concluded that the medical components were unsustainable."
and you won't find me defending their current model...
but I'd point out that ALL health insurance, including private, MedicAid, Tricare, etc is "not sustainable" without changes.
but as with other insurance...
private insurance is "sustainable" because they keep increasing the cost of premiums and reducing coverage... and you can't do that with Medicare A & B - as easily as private insurance does.
It literally takes an act of Congress to change those plans...
if they could operate like private insurance, they'd become technically as "sustainable" as private health insurance - but increasingly unaffordable for more and more people.
In other words, the "unsustainability" of Medicare is a symptom of a bigger problem.
and yes.. I'd agree the govt has created an insurance model that is not sustainable...
...unlike Social Security which is.
how about your auto, fire and life insurance?
1. I bought life insurance for a specific term(my kids through college). The terms of that policy never change.
2. I buy homeowners to cover the replacement of my existing dwelling. Premiums go up as the cost of replacement goes up. The ratios have been consistent for as long as I've been a homeowner.
3. I pay less for auto insurance now than I ever have (as an older, safer driver). Again, I pick the amount of liability coverage I want as well as collision coverage and my rates have actually decreased.
4. I am not compelled to buy either life or homeowners insurance (although I must have auto in my state).
can you buy home or auto insurance that is guaranteed never to increase in cost or change in coverage over your life?
why?
Because, I age, my car ages, my driving history changes, my home value changes...etc.
Are you serious with these questions?
Mark J. Perry: Whether Social Security technically meets the technical definition of being a Ponzi scheme is less important than the fact that the current system, as designed, is a Pyramid scheme.
As small changes to the program can guarantee 100% of benefit in pertuity, it is not a Pyramid scheme either. Social Security is a pay-as-you-go system (though the baby boomers have overpaid Social Security for decades to make sure there was a sufficient cushion to account for the demographic bulge).
The ratio of workers to retired persons will be the same whether or not retirement is paid by a government or private insurance. If the ratio is unsustainable, it means old people must necessarily starve in the world's richest economy, even as other peoples manage to take care of their own elderly.
rjs: at the time it was designed, no one expected declining birth rates;
The administrators who designed the original Social Security system were quite aware that life expectancy could be expected to increase. However, life expectancy at age 65 has increased less than five years since 1940.
http://www.ssa.gov/history/lifeexpect.html
"Are you serious with these questions?"
yes.
Social Security was explicitly designed as a 75-year horizon pay-as-you-go system.
most all private sector insurance is pay-as-you-go but not over 75-year horizons.
and they do change.. and as you get older they get more costly...
SS was designed to CHANGE and has about a dozen times... but it's method of changing is different from the private sector.
What I'm interested in is the facts.. here.. not misinformation.
we can disagree on the purpose and concept of SS ..I understand that many people disagree with the concept of SS but arguing that it's not sustainable is not a valid argument unless you feel that SS should be held to a different standard than other insurance and annuities that do change - and must - if they are to remain solvent.
SS, at it's core is not that different than a private annuity with two important distinctions.
1. it's mandatory (and that's a concept issue not a finance issue)
2. private annuities have a history of being risky because you're dealing with a long-term contract in an era where companies themselves change..get bought..go broke.. etc..
SS has never defaulted on a single recipient. Private annuities cannot make that claim as an industry.
I am surprised by Jacoby's (who I respect) response. It is irrelevant what the 'purpose' of SS was or is.
The SS system is illegal in private practice for a few reasons. The first is that it is a Ponzi scheme, pure and simple.
It also contravenes every finance rule of jurisprudence, and by not returning an ROI, structurally precludes hundreds of millions of contributors from the principal method that the rich get richer; compounding and investment return.
If ever there was evidence of a regressive, illegal, class system with one rule for the rich and another for the rubes, it is SS.
The numbers in the chart are somewhat optimistic. In addition to supporting retirees, private sector workers are also supporting government workers. When there are 21 million government workers compared to 138 million total workers, this is another drag on the private sector. When taking into account government workers, we are already down to about a 2.1 ratio of private sector workers to those receiving SS and paychecks checks from the government.
You are wasting your time. Larry is very ignorant when it comes to insurance and even more ignorant when it comes to SS. The fact that total unfunded liabilities for SS and Medicare are over $100 trillion does not seem to be an issue for him.
The GAO did a legitimate data-based analysis, as opposed to verbal gymnastics, and was kind enough to compute what tax rate would sustain the retirement program. The required increase was quite modest. They also concluded that the medical components were unsustainable.
The GAO assumes that the non-marketable securities in the trust fund have value. But they do not because they are just IOUs that promise recipients that individuals will be taxed more so that the funds that were used for general revenues can be replaced. The tax increases that you are talking about are in addition to the taxes that will be needed to replace the stolen contributions.
Social Security is a pay-as-you-go system (though the baby boomers have overpaid Social Security for decades to make sure there was a sufficient cushion to account for the demographic bulge).
But that surplus has already been spent and there is nothing in the Trust Fund that can be sold to raise funds. That makes it a Ponzi scheme.
"I understand that many people disagree with the concept of SS but arguing that it's not sustainable is not a valid argument unless you feel that SS should be held to a different standard than other insurance and annuities that do change..."...
Larry! Larry! Larry! SS is different because the federal government extorts the money from the person working which unlike all forms of free, market based, insurance that are voluntary...
No one has to buy insurance for anything...
Don't want to buy auto insurance? The solution is easy, don't buy a car and don't drive...
Don't want to buy health insurance? Again the solution is easy, either don't get sick or have some sort of health savings account...
According to Social Security:
The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011.
We can expect the real value of that benefit to decrease, while the Social Security tax rate and tax limit increase.
"pay-as-you-go" is a COMMON insurance model.. nothing exotic about it at all....
and "ponzi" scheme implies that at some point there is no more money to pay out and that's just not the truth with SS.
FICA will continue to generate about a trillion dollars a year (almost as much as individual income taxes generate)...
and it will continue to pay out - but if not changes are made - at a 75% rate... year, after year...for quite a while - and during that time will not use a penny of general revenues.
a ponzi scheme goes broke - FICA will never go "broke" unless the law for payroll taxes changes.
Innovation rules: The SS system is illegal in private practice for a few reasons. The first is that it is a Ponzi scheme, pure and simple.
No. It's a pay-as-you-go system, a straight-forward income transfer from young to old.
VangelV: But that surplus has already been spent and there is nothing in the Trust Fund that can be sold to raise funds.
That's right. Income tax payers have been getting a break, and used those funds for general expenses. Presumably, they invested the money so that the economy would grow. Oh. No? Too bad.
VangelV: That makes it a Ponzi scheme.
Um, no. It still doesn't make it a Ponzi scheme. It just means that the income tax payers have to make up the difference. In any case, that only concerns the demographic bulge of the baby boomers. Once the demographics even out, the system returns to stasis.
Pyramid schemes are inherently unsustainable, but Social Security is quite sustainable. It can pay 100% for the next 25 years, then 75% after that; or with small changes, it can pay 100% in perpetuity.
" But that surplus has already been spent and there is nothing in the Trust Fund that can be sold to raise funds"
and this shows the fundamental misconception.
The "surplus" is not the primary funding for SS - FICA is. The "surplus" is the EXCESS of FICA revenues over payouts.
the other misconception is that the 'surplus' consists of "worthless" IOUs.
every penny of FICA goes into the trust fund - thousands of transactions every week.. and SS draws money out of it every day to pay benefits.
what is left is called the "surplus".
that "surplus" varies from day to day... some days it's up and some days it's down and at the end of each year they reconcile the accounts by essentially taking a "snapshot" much the same way you would when you "balance" your checkbook to make sure the balance shown in your check book matches what is on your checking account statement.
If anyone's interested, you can estimate what your "investment" rate of return from Social Security will be here.
No. It's a pay-as-you-go system, a straight-forward income transfer from young to old. -- Zachriel
Yes, and Ponzi's scheme was a straight-forward transfer from new investors to old. Can you really be this dense?
Um, no. It still doesn't make it a Ponzi scheme. It just means that the income tax payers have to make up the difference. -- Zachriel
Um, genius, the "income tax payers" and the SS recipients are the same people. Your arguments suggest that we should all be grateful for having been required to pay for our government retirement checks twice - once in the form of payroll taxes and then again in the form of income taxes. And let's not forget that the non-market interest rates paid on the nonexistent "trust fund" assets is far below the market based interest rates that we will have to pay on the debt incurred to sustain the system. Or, that when we die our savings are confiscated instead of left to our children.
Please, take a few moments and explain to us all how any individual citizen is better off financially for having his retirement money forcibly invested in this socialist con-job as opposed to investing the same money themselves in individual accounts through the private sector.
In any case, that only concerns the demographic bulge of the baby boomers. Once the demographics even out, the system returns to stasis. -- Zachriel
Wrong. The system will be in deficit.
Pyramid schemes are inherently unsustainable, but Social Security is quite sustainable. -- Zachriel
That pre-supposes that the U.S. government can continue to meet it's financial obligations. Perhaps, you should to pick up a newspaper every now and then.
"It's a pay-as-you-go system, a straight-forward income transfer from young to old"...
Well its actually more of an extorts from the young to pay for the old as it goes now a days and it seems to running off the rails...
Social Security 2011 Trustees Report Shows Permanent Deficits
"Yes, and Ponzi's scheme was a straight-forward transfer from new investors to old. Can you really be this dense?"
not any more than home or auto insurance is....
this is no pre-paid funding approach to most insurance. Almost all of it is pay-as-you-go....
and SS was EXPLICITLY DESIGNED from the get go NOT as a pre-paid funding model but as a pay-as-you-go model and it is functioning as designed and over 65 years of operating pay-as-you-go - it generated a surplus - i.e. paid out less than it too in...
"Social Security 2011 Trustees Report Shows Permanent Deficits "
if changes are not made - changes that have been made over the year to keep it on track.. and no less than 30 options right now to implement.
ya'll would not call auto or homeowners insurance "in deficit" if they have to make changes in premiums and benefits to remain solvent... why hold SS to that standard?
If you took ANY homeowners insurance company and said they had to hold their rates and payouts constant, without change for 75 years or be categorized as "bankrupt"... it would make no sense....
but that's the standard being advocated for SS - and it makes no sense...
changing demographics cause changes to MANY kinds of funding paradigms - public and private...
... if not changes are made - at a 75% rate... year, after year...for quite a while - and during that time will not use a penny of general revenues. -- Larry G
This is just disingenuous bullshit, get back to us when you've found the politician that argues that we should all expect and accept a 25% reduction in our SS benefits.
I am surprised by the mildness of the criticism of the financing of Social Security.
Larry G has pointed out the formal name is "Old-Age, Survivors and Disability Insurance Program.
The Disability Insurance Program has had applications grow fifty percent in the last decade.
Social Security Commissioner Michael Astrue stated recently: "People on the margins who get bad news in terms of a layoff and have no other place to go and they take a shot at disability."
This probably means that by 2017 Social Security Disability will be insolvent.
What are the people trustees that run Social Security going to do about isolvency by 2017?
They reportedly are asking Congress to re-allocate funds from Retirement to Disability!
A Ponzi overlaying another Ponzi or a Pyramid over a Ponzi or Pyramid over a Pyramid? Take your pick. How can it be sustained very much longer?
not any more than home or auto insurance is.... -- Larry G
Private insurance companies accumulate assets, investing them at a market rate of return, in surplus of potential obligations. They do not pass through current premiums to claimants. Nor, do they ask claimants to pony up an additional fee, in excess of their regular premium, to cover the cost of the loss that they have just incurred.
"ya'll would not call auto or homeowners insurance "in deficit" if they have to make changes in premiums and benefits to remain solvent... why hold SS to that standard?"...
Who here in this discussion is holding SS to some different standard?
Now your average politico in Congress (that whole 3rd rail thingie) might be guilty of that sort of behavior and couldn't be said that people who keep voting in these people time and again are also guilty of it if they buy into the politico's promises regarding SS?
Thanks ironman for that bit of info on SS...
Much appreciated amigo...
Che is dead: Yes, and Ponzi's scheme was a straight-forward transfer from new investors to old.
Yes, but the supply of investors in a Ponzi scheme is necessarily limited, but generational transfer IS sustainable. Indeed, it has to be, or the old will starve.
Che is dead: the "income tax payers" and the SS recipients are the same people.
Not exactly. Low income people pay more in payroll taxes, high income people pay more in income taxes. Using payroll taxes to fund income tax cuts is inherently regressive.
Che is dead: And let's not forget that the non-market interest rates paid on the nonexistent "trust fund" assets is far below the market based interest rates that we will have to pay on the debt incurred to sustain the system.
U.S. bonds are actually in very high demand by investors.
Che is dead: Please, take a few moments and explain to us all how any individual citizen is better off financially for having his retirement money forcibly invested in this socialist con-job as opposed to investing the same money themselves in individual accounts through the private sector.
The question at issue is whether Social Security is a Pyramid scheme. It is not. As for your new topic, most people consider a minimum safety net for the elderly to be a positive good.
Che is dead: The system will be in deficit.
No. The Social Security system can never be in deficit. If there are no changes to the system, then benefits will be automatically reduced starting in about 2036.
Che is dead: That pre-supposes that the U.S. government can continue to meet it's financial obligations.
There are serious issues with the rest of the budget, but Social Security is quite sustainable.
juandos: Well its actually more of an extorts from the young to pay for the old as it goes now a days and it seems to running off the rails...
They call those "taxes". It's in your Constitution.
Che is dead: This is just disingenuous bullshit, get back to us when you've found the politician that argues that we should all expect and accept a 25% reduction in our SS benefits.
That's right! Most people think Social Security is an important program. But the original contention was that it was a Pyramid scheme, and inherently unsustainable. That is not correct.
"Private insurance companies accumulate assets, investing them at a market rate of return, in surplus of potential obligations."
Social security built up a surplus , right?
" They do not pass through current premiums to claimants. Nor, do they ask claimants to pony up an additional fee, in excess of their regular premium, to cover the cost of the loss that they have just incurred."
in what world guy?
if you live in a hurricane-prone area do they sell you guaranteed rate/coverage for more than a year?
we're confusing insurance with pension funding..
insurance is not a pre-paid-fund...
it's most often a year-to-year fee for service...
and they do pay claims from premiums.
WHERE would they get additional funds to build up a "surplus" fund anyhow?
As small changes to the program can guarantee 100% of benefit in pertuity, it is not a Pyramid scheme either.-Zachriel
I'm guessing those "small changes" are increases in the SS wage cap, the percentage of income paid to SS and a raising of the retirement age.
In essence my children and grandchildren will be required to pay a higher percentage of their income and wait until an older age and collect an even smaller return on their SS investment. And this is somehow legal let alone moral?
As far as SS solvency goes, it began operating in the red last year (not in 2017) as the trustees had previously predicted, and as others have already pointed out the so called "trust fund" is made up entirely of IOU's. These IOU's of course will be paid by the highest earners in the form of income tax by the same generation(s) that are getting shafted by their parents and grandparents.
Brilliant!
Zach says: "They call those "taxes". It's in your Constitution"...
Yes, that's what the leftist liberal cult of big government calls it but can you find anywhere in the Constitution that its the federal government's job to be in the retirement game?
Article One, Section Eight pretty much defines the powers of the federal government...
Zach also says: "Most people think Social Security is an important program"...
Then why don't those, 'most people' take on the whole burden of the Ponzi scheme so they can be the recipients of its largesse?
SS is also unlike insurance as there is no defined benefit.
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.-Wikipedia
If it walks like a duck...
Juandos, remember the Supreme Court initially balked at the concept of SS. That's when FDR famously came up with the idea of a 15 member Court.
... but generational transfer IS sustainable. Indeed, it has to be, or the old will starve. -- Zachriel
The elderly are actually the WEALTHIEST segment of our society precisely because they have had their entire lives to accumulate assets. The young on the other hand - lacking wealth, newly employed and no where near their peak earning years - find themselves supporting the elderly during a time when they should be focused on household/family formation. You've got societal wealth distribution exactly 180 degrees backward.
Low income people pay more in payroll taxes, high income people pay more in income taxes. -- Zachriel
There are not enough "high income" people to sustain SS and the myriad other bullshit socialist program that "progressives" have imposed upon this country. So, if your argument is that SS is sustainable because we can always steal more money form the most productive segments of our society, and there will be no knock-on economic effect, then you are delusional.
U.S. bonds are actually in very high demand by investors. -- Zachriel
Yeah, and so were Greek, Irish, Spanish and Italian bonds a few years ago.
The question at issue is whether Social Security is a Pyramid scheme. -- Zachriel
So, your answer is that you cannot make the case. I didn't think that you could.
There are serious issues with the rest of the budget, but Social Security is quite sustainable. -- Zachriel
As SS becomes increasingly dependent on general revenue to sustain it's promises there will be no distinction between issues with SS and "the rest of the budget". Get a clue.
mike k: I'm guessing those "small changes" are increases in the SS wage cap, the percentage of income paid to SS and a raising of the retirement age.
It could be any or all of those or many other options.
mike k: In essence my children and grandchildren will be required to pay a higher percentage of their income and wait until an older age and collect an even smaller return on their SS investment.
Possibly. With a bit of hard work and luck, though, they should still be better off than their parents, while still helping to maintain the social safety net. Social Security enjoys strong support among the young, by the way.
mike k: And this is somehow legal let alone moral?
Something to do with representative government, people voting, etc.
mike k: As far as SS solvency goes, it began operating in the red last year (not in 2017) as the trustees had previously predicted, and as others have already pointed out the so called "trust fund" is made up entirely of IOU's.
Yes, U.S. bonds. AA+ rated!
mike k: These IOU's of course will be paid by the highest earners in the form of income tax by the same generation(s) that are getting shafted by their parents and grandparents.
Well, actually, mike k, if taxes are raised sooner rather than later, then your own generation can help bring fiscal house to order, which will take much of the burden off the next generation.
juandos: Yes, that's what the leftist liberal cult of big government calls it but can you find anywhere in the Constitution that its the federal government's job to be in the retirement game?
Whether to do so or not is a decision of your representative government, that is, Article I of your Constitution.
juandos: Article One, Section Eight pretty much defines the powers of the federal government...
You already knew the answer!
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States."
Che is dead: The elderly are actually the WEALTHIEST segment of our society precisely because they have had their entire lives to accumulate assets.
Yet millions would be in poverty without Social Security.
http://www.nber.org/aginghealth/summer04/w10466.html
Che is dead: There are not enough "high income" people to sustain SS and the myriad other bullshit socialist program that "progressives" have imposed upon this country.
The U.S. is a $15 trillion economy, and is more than capable of meeting any likely financial challenge.
We can expect the real value of that benefit to decrease, while the Social Security tax rate and tax limit increase.
I agree with the claim that the real value of benefits will decrease. But I doubt that future workers will agree to be taxed more heavily. Those workers were not responsible for the theft of surplus contributions by Congress or their use to buy election votes. They also know that their own future SS benefits will be far less than what they will be asked to pay.
What I see is a collapse that takes down the two main parties and the rise of an independent third party that is a lot more interested in fiscal responsibility and social justice.
Um, no. It still doesn't make it a Ponzi scheme. It just means that the income tax payers have to make up the difference.
But that is the point. They can't make up the difference because the unfunded liabilities are too high. Any increase in SS taxes simply throws more businesses into bankruptcy and reduces the number of workers. The hole is too deep already. Digging faster won't solve anything.
There is no surplus. Surpluses have been siphoned away by politicians for a very long time and the money was spent. There are no marketable securities that can be used to make up the shortfalls. All those IOUs represent is a promise to tax future taxpayers to make up the shortfalls. But that horse left the barn a long time ago. Capital is already sitting abroad because of fears of confiscatory taxation regimes at home. Investments are mainly made abroad and creating jobs for foreign workers even as employment levels in the US are falling.
Yes, and Ponzi's scheme was a straight-forward transfer from new investors to old. Can you really be this dense?
The objective evidence makes it clear that he is as dense as you think he is. Perhaps even more.
U.S. bonds are actually in very high demand by investors.
But the Trust Fund has no marketable US bonds. It holds IOUs that have no market. And even if US bonds are in demand now because of the Euro fears it does not mean that anyone who holds them will see a positive real return over the long term. What amazes me it the fact that even though the EU is on the brink of falling apart the USD is still going for around 1.40 to the Euro. I would have expected parity by Christmas but that does not seem to be in the cards.
VangelV: They can't make up the difference because the unfunded liabilities are too high.
The U.S. is more than capable of meeting its obligations, including Social Security.
VangelV: Any increase in SS taxes simply throws more businesses into bankruptcy and reduces the number of workers.
Any significant tax increases should wait until the U.S. economy is on more sure footing.
VangelV: There is no surplus. Surpluses have been siphoned away by politicians for a very long time and the money was spent.
You're right! The Clinton Administration had left structural surpluses, but the Bush Administration not only cut income taxes, but presided over the direst financial meltdown since the Great Depression. That was only a decade ago. Nevertheless, there is no reason why the U.S. can't implement reasonable policies that addresses the deficit while maintaining the social safety net.
VangelV: There are no marketable securities that can be used to make up the shortfalls.
Again, the surpluses are just a temporary measure to help with the demographic bulge as the baby boomers retire. The system is primarily a pay-as-you-go system. And yes, if the U.S. taxpayers decided to use the Social Security surpluses to fund income tax breaks, then that leaves them short when the bonds come due. Surely, the tax cuts led to massive increases in GDP so that they paid for themselves. No? Well.
VangelV: Capital is already sitting abroad because of fears of confiscatory taxation regimes at home.
Levels of taxation are as low as they have been in 60 years. Capital is sitting because of lack of aggregate demand.
"The Clinton Administration had left structural surpluses.."
Oh, please. The "structural surpluses" were a figment of every Liberal's imagination. The roof was already caving in as Clinton left office, but the mythy remains because the CBO had assumed that late-1990s economic growth and the stock-market bubble (which had already peaked) would continue forever and generate record-high tax revenues. It assumed no recessions, no terrorist attacks, no wars, no natural disasters, and that all discretionary spending would fall to 1930s levels
"..but the Bush Administration not only cut income taxes.."
Yeah, he also spent alot of money on yet more failed liberal programs. You forgot to mention that.
you do such a great job making data visual - keep up the great work!
Social Security enjoys strong support among the young, by the way.
I don't think this is true. Most young people would opt out if given the choice because they know that they will be cheated.
mike k: And this is somehow legal let alone moral?
Something to do with representative government, people voting, etc.
I am with Mike K on this one. A tyranny of the masses is no more legitimate or moral than the tyranny of a single tyrant.
mike k: As far as SS solvency goes, it began operating in the red last year (not in 2017) as the trustees had previously predicted, and as others have already pointed out the so called "trust fund" is made up entirely of IOU's.
Yes, U.S. bonds. AA+ rated!
The Trust Fund has no rated treasury bonds. It has non-marketable securities that are noting more than IOUs.
mike k: These IOU's of course will be paid by the highest earners in the form of income tax by the same generation(s) that are getting shafted by their parents and grandparents.
Well, actually, mike k, if taxes are raised sooner rather than later, then your own generation can help bring fiscal house to order, which will take much of the burden off the next generation.
Why? Mikes generation already paid the taxes. It seems to me that the solution is not higher general taxes but compensating the victims. That can be done by confiscating the assets from the politicians who stole the money, the lobbyists who cheered them on, and government employees who carried out the thefts.
juandos: Yes, that's what the leftist liberal cult of big government calls it but can you find anywhere in the Constitution that its the federal government's job to be in the retirement game?
Whether to do so or not is a decision of your representative government, that is, Article I of your Constitution.
Article I does not authorize Congress to do 90% of the things that it now does. That includes regulating health care, creating national pension schemes, and other follies that you support.
Yet millions would be in poverty without Social Security.
The SS program will collapse along with the currency. Everyone will get paid but what they get will not be worth much. That is what happens when you ignore reality.
Che is dead: There are not enough "high income" people to sustain SS and the myriad other bullshit socialist program that "progressives" have imposed upon this country.
The U.S. is a $15 trillion economy, and is more than capable of meeting any likely financial challenge.
Revenues are not the same as income and public sector income is a drain on the real economy. The best way to deal with the problem is to fire 90% of the federal government workers, not to tax productive individuals.
Clearly trying to tax 'the rich' will not work because they are not stupid and have plenty of ways to reduce their earned income within the rules. Corporations have certainly shown that higher tax rates will not work. While the small players get killed by the 35% corporate tax rates most of the larger players have ways to reduce their effective tax rate to around 20% or so.
The left's attempt to tax people who work and are productive will not work any better this time around than all of the previous periods. Taxes as a percentage of GDP will stay low but the high rates will keep revenue small because they will kill growth.
Paul: The "structural surpluses" were a figment of every Liberal's imagination.
In fact, the U.S. was running surpluses, and would have continued to run surpluses even during normal market fluctuations.
VangelV: Most young people would opt out if given the choice because they know that they will be cheated.
"Nine in ten adults under age 30 believe Social Security is an important government program, and over nine in ten want to know it is there when they retire just in case they need it."
http://www.aarp.org/work/social-security/info-08-2010/social_security_75th.html
VangelV: A tyranny of the masses is no more legitimate or moral than the tyranny of a single tyrant.
http://en.wikipedia.org/wiki/Whiskey_Rebellion
VangelV: The Trust Fund has no rated treasury bonds.
That's right. They're special issue securities which are backed by the full, faith and credit of the United States (AA+).
VangelV: Mikes generation already paid the taxes.
Mike's generation paid less than they spent. As he expressed concern about the next generation, that means bringing his fiscal house in order. That will inevitably mean taxes, as well as restructuring of entitlements.
VangelV: Article I does not authorize Congress to do 90% of the things that it now does. That includes regulating health care, creating national pension schemes, and other follies that you support.
That the American people support, as pointed out above. Article I gives Congress the power to provide for the general welfare. It's a matter for your representative government to decide.
VangelV: The SS program will collapse along with the currency.
That's hardly a necessity, but it could happen if the U.S. runs deficits over the long run.
VangelV: The best way to deal with the problem is to fire 90% of the federal government workers, not to tax productive individuals.
If you end Social Security and Medicare, it would resolve most of the budget problems. But most people want these programs. Having decided that, then they have to be paid for.
"In fact, the U.S. was running surpluses, and would have continued to run surpluses even during normal market fluctuations."
Nonsense. The 90's bubbles burst, and with them the future projections, just as Clinton was preparing to skeedaddle.
"Article I gives Congress the power to provide for the general welfare. It's a matter for your representative government to decide. "
Where does one even begin with a statement like that? The founders were extremely clear in what they meant by the term "general welfare." The enumerated powers should be your first clue. A thousand men before me have pointed this out, yet it cannot penetrate the dense fog of the liberal mind.
"Nine in ten adults under age 30 believe Social Security is an important government program, and over nine in ten want to know it is there when they retire just in case they need it."
An overwhelming majority also backed Bush's plans for partial privatization of Social Security.
Paul: The 90's bubbles burst, and with them the future projections, just as Clinton was preparing to skeedaddle.
Not sure where you get your numbers, but the CBO projected that not only wouldn't the early 2000's recession not have led to deficits, but surpluses would have continued to whittle down the public debt.
That the American people support, as pointed out above. Article I gives Congress the power to provide for the general welfare. It's a matter for your representative government to decide. -- Zachriel
"With respect to the words general welfare, I have always regarded them as qualified by the detail of powers (enumerated in the Constitution) connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators." -- James Madison
"Nine in ten adults under age 30 believe Social Security is an important government program, and over nine in ten want to know it is there when they retire just in case they need it." -- Zachriel, quoting the AARP
A USA TODAY/Gallup Poll finds that a majority of retirees say they expect their current benefits to be cut, a dramatic increase in the number who hold that view. And a record six of 10 non-retirees predict Social Security won't be able to pay them benefits when they stop working ... Skepticism is highest among the youngest workers: Three-fourths of those 18 to 34 don't expect to get a Social Security check when they retire. -- USAToday
Younger voters overwhelmingly favor moving to a new system in which they can invest a portion of their payroll tax in a personal account that they can own and control. -- NCPA, 2000 poll
A USA TODAY/CNN/Gallup Poll taken Friday through Sunday found that most young voters support private accounts even if that means cuts to guaranteed benefits. By 55%-42%, those under 30 call it a "good idea." -- USAToday, 2005
"Not sure where you get your numbers, but the CBO projected that not only wouldn't the early 2000's recession not have led to deficits, but surpluses would have continued to whittle down the public debt"...
What surpluses Zach?
You're not talking about the Clinton surplus fairy tale are you?
rjs,
the first person to object to the social security scheme was FDR. Even he understood that it's an unsustainable pyramid scheme.
Zach,
That's right. Income tax payers have been getting a break, and used those funds for general expenses.
Given that you have a twisted understanding of what socialism is, I'm not surprised by this statement. However, this statement is the thinking of a thief and not a very bright one.
You're basically saying that the mafia has eased up on robbing people at gunpoint from one pocket because it was taking enough from them from the other pocket.
It's still theft and it's worse than a Ponzi scheme. Investing in any private scheme is voluntary. The government's Ponzi scheme is forced on everyone at gunpoint.
And such Ponzi schemes are bankrupting the Utopias of Europe at the moment. Later, they'll bankrupt us.
Why bother working when you have a right to a comfortable life at the expense of some other sucker?
"Juandos, remember the Supreme Court initially balked at the concept of SS. That's when FDR famously came up with the idea of a 15 member Court"...
I'm glad some folks remember FDR's machinations with regards to socialist security mike k...
Pray tell Zach where in the rest of Article One, Section Eight that allows the federal government to interfer in the retirement business?
a pyramid scheme runs completely out of money.... and everyone goes away with empty pockets, right?
pretend for a moment that there is no trust fund... what would happen?
well... almost a trillion dollars in FICA taxes would be collected.
this year..then next year..then the year after and so on...
and that trillion would be paid out every year to recipients....
and not a penny would come from the general fund.....
does't sound at all like a pyramid scheme...
what about the 75% of "scheduled" benefits...
think about that term - "scheduled benefits".
do you think from day one the "scheduled benefits" were the same on day one as they are now?
Nope.
how much SS you receive over the years - has varied... with the changes made to the program.
how much you pay in FICA has changed over the years.
right now the FICA tax has been lowered by 2%...
by pyramid schemes don't pay benefits for 65 years and won't continue to pay (reduced benefits if no changes made) for another 65 years.
Some folks vehemently disagree with the CONCEPT of SS..many of these same folks believe that ANY taxes are confiscatory... and SS is just one example.
but attacking the concept of SS by claiming it is a ponzi scheme that is bankrupt is simply not the truth.
It's demonstrably false.
but I give the propagandist credit..they've done a damn good job of brainwashing people who are basically too lazy to learn the facts.
If someone REALLY wanted to worry about a Ponzi scheme... consider Medicare Part B and DOD - both of which have doubled their costs in 10 years and both of which are funded from income taxes.
Medicare Part B consumes 210 billion dollars a year in taxpayer monies....
and the comprehensive DOD budget spends more than we take in in individual income taxes.
if you want to worry about "bankrupt" - look no further than the 1.5 trillion MORE than we spend every year that we are taking in - and it has precious little to do with FICA/SS.
this is the problem with us now days...
we're not truly interested in dealing with the real issues.
we're using the deficit and debt as an illicit proxy to attack SS.
and that does no one any good at all...
because at the end of the day, you could wipe out SS completely - and you'd STILL have a 1.5T ANNUAL DEFICIT.
juandos: What surpluses?
Right here:
http://www.cbo.gov/budget/data/historical.pdf
Methinks: Given that you have a twisted understanding of what socialism is, I'm not surprised by this statement.
Merriam-Webster: socialism, any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
Oxford Dictionary: socialism, economic system in which the means of production are publicly or commonly owned and controlled cooperatively; or a political philosophy advocating such a system.
Methinks: You're basically saying that the mafia has eased up on robbing people at gunpoint from one pocket because it was taking enough from them from the other pocket.
It's called taxation with representation.
http://en.wikipedia.org/wiki/Whiskey_Rebellion
In any case, the American legislature has implemented for various programs, they have been approved by your court system, and they have periodically reviewed those programs and renewed them. Now, you balk at paying for them.
juandos: What surpluses?
Right here:
http://www.cbo.gov/budget/data/historical.pdf
Methinks: Given that you have a twisted understanding of what socialism is, I'm not surprised by this statement.
Merriam-Webster: socialism, any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
Oxford Dictionary: socialism, economic system in which the means of production are publicly or commonly owned and controlled cooperatively; or a political philosophy advocating such a system.
Methinks: You're basically saying that the mafia has eased up on robbing people at gunpoint from one pocket because it was taking enough from them from the other pocket.
It's called taxation with representation.
http://en.wikipedia.org/wiki/Whiskey_Rebellion
In any case, the American legislature has implemented for various programs, they have been approved by your court system, and they have periodically reviewed those programs and renewed them. Now, you balk at paying for them.
This site is not consistent with its interpretation of data. When it comes to charts showing the declining number of farm or factory workers, the analysis comes to the conclusion that fewer workers are needed to be more productive as efficiencies arise.
Is our farm output unsustainable? Yet in this example, where the American worker (citing these examples) is much more productive than in decades past, fewer workers per SS recipient is "unsustainable."
Its not about the financials of bogus "trust fund" or the unnecessary FICA taxes. Our nation has the capacity and resources to more than care for our aging population. Unfortunately the whole SS system has been sold to us with the facade of a Ponzi scheme, and everyone believes it must operate like that.
Its not about the financials of bogus "trust fund" or the unnecessary FICA taxes. Our nation has the capacity and resources to more than care for our aging population. Unfortunately the whole SS system has been sold to us with the facade of a Ponzi scheme, and everyone believes it must operate like that.
Actually, the 'nation' has no capacity and resources. Individuals do. The issue is how you are going to get working people who have no hope of getting SS benefits to support current retirees who expect their full benefits. SS is a Ponzi scheme and cannot really be seen in any other way than a Ponzi Scheme.
Re: Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public, 1968 to 2007, in Billions of Dollars...
Sorry Zach excuse me for being cynical about a collection of federal parasites...
Besides Paul provided yet another excellent link and what is really obvious is that you apprently didn't bother to read the contents of the link presented you or that Paul put up because it might screw up your narrative...
Zach if you still insist that the government is the font of untainted information then tool on over to the Treasury and get a month by month story of the 'Clinton miracle' from '93 to '01...
"Nine in ten adults under age 30 believe Social Security is an important government program, and over nine in ten want to know it is there when they retire just in case they need it."
http://www.aarp.org/work/social-security/info-08-2010/social_security_75th.html
AARP did a poll and found that people liked to fund AARP members? How unexpected.
Well, there are other results:
A recent USA Today/Gallup Poll found that 56 percent of current retirees expect their benefits to be cut — a dramatic rise compared with 32 percent who felt the same way in 2005. A record-high percentage of working Americans — 60 percent — told Gallup that Social Security won’t be able to pay benefits when they stop working. Skepticism was highest among workers between the ages of 18 and 34. Overall, 77 percent said Social Security is either in a state of crisis or has "major problems."
That's right. They're special issue securities which are backed by the full, faith and credit of the United States (AA+).
But those securities can't be used to make payments because they are not marketable. All they are is a promise to tax workers so that more revenue can be diverted to cover the shortfalls. And IOUs have never been rated.
Mike's generation paid less than they spent. As he expressed concern about the next generation, that means bringing his fiscal house in order. That will inevitably mean taxes, as well as restructuring of entitlements.
That is probably not true. If Mike is not getting SS payments then he has overpaid. And if some people paid too little why should current workers be taxed to pay for their benefits?
That the American people support, as pointed out above. Article I gives Congress the power to provide for the general welfare. It's a matter for your representative government to decide.
I think that you have no idea what was meant by 'general welfare'. Under your interpretation Congress can do anything it wishes. But that is not what the Federalist Papers and Anti-Federalist Papers authors claimed when the Constitution was debated.
That's hardly a necessity, but it could happen if the U.S. runs deficits over the long run.
Unfunded liabilities are over $100 trillion. You don't need to even consider the long run to see that the game is nearly over.
If you end Social Security and Medicare, it would resolve most of the budget problems. But most people want these programs. Having decided that, then they have to be paid for.
Most people believed the lies that the government told. As the man said, they can ignore the reality but cannot escape the consequences of that reality. To see what happens in the US take a look at the Russia after the fall of the USSR.
@VangelV - The government does not spend the FICA taxes it collects from workers back to SS recipients. It is laundered and obfuscated through the bogus "trust fund" and intergovernmental special issue bonds and IOUs to hide the true nature and relationship between taxing and spending. There is NONE. Our FICA tax dollars tallied on a spreadsheet somewhere, and then forgotten about.
How come we can predict, to the hour, a moment 20 years from now when the SS "fund" will run dry... a "fund" that unlike any other Federal spending program has ITS OWN UNIQUE TAX?? Yet if we are in a war 20 years from now, Congress will vote to fund the war. If there is a natural disaster 20 years from now, it will vote to fund the disaster relief. We don't have special, unique taxes for these things, nor do we sock away funds ear marked for these items to be spent at a later date.
If war is sufficiently important, the people will believe in its funding. If the public views that rescuing people caught in a flood is the right thing to do, it gets funded. Why then must we all believe in this fallacy of a ponzi scheme that we must pay into and hope there's some left over for us at the back end?
Eliminate FICA and establish a Federal mandate to pay a seniors a specified dividend on behalf of the nation, direct from keystrokes of a Treasury Dept computer terminal into their bank accounts. That's all ANY OTHER Federal spending is.
What about inflation you may ask? I hardly think seniors will inflate prices out of control with the meager spending they'll be able to afford (based on current benefit rates). Nor will the FICA taxes left in the paychecks of the workers contribute to inflation. Rather it will lead to increased demand and employment, which will increase production. Cut SS or at minimum continue to believe in the lie of the SS "fund" and we'll deny ourselves current real wages as austerity will rot our future.
"a pyramid, maybe...a ponzi scheme implies fraud...
"the current system, as designed, is a Pyramid scheme""
What, exactly, is the difference? Everyone knows a pyramid scheme can only continue as long as there is a constant supply of new suckers starting to contribute at the bottom. Such schemes aren't "sustainable", as they say. Mr. Ponzi did well with this method.
Current representations of this system amount to fraud. If a private business ran this scheme and used this type of accounting, all the principles would be in prison.
What do you see at the page you linked to?
Mike K asks:
"Are you serious with these questions?"
Yes, he is Mike.
"As small changes to the program can guarantee 100% of benefit in pertuity, it is not a Pyramid scheme either. Social Security is a pay-as-you-go system (though the baby boomers have overpaid Social Security for decades to make sure there was a sufficient cushion to account for the demographic bulge). "
You're funny. Are you and Larry G. roommates? It seems you have both been drinking the same Kool-aid.
Explain that "sufficient cushion, Zach. Where is it?
And what about these unfunded liabilities of $16.1tn?
"The average monthly Social Security benefit for a retired worker was about $1,177 at the beginning of 2011."
Interesting. As the maximum for a worker retiring at age 66 this year is $2366, there must be a lot of retirees getting tiny amounts.
"We can expect the real value of that benefit to decrease, while the Social Security tax rate and tax limit increase."
You're assuming that CPI will remain low for a long time, so no COLA increases occur?
" The issue is how you are going to get working people who have no hope of getting SS benefits "
no it's not.
when a trillion dollars a year is going to paid to people as SS benefits... they ARE getting SS.
and as long as the FICA tax remains in force, they will ALWAYS get SS benefits.
it's just plain disingenuous to say otherwise.
I say again. If you disagree with the CONCEPT of SS - then make your argument on that basis but arguing that the program will cease to pay benefits at all is just propaganda.
"The government does not spend the FICA taxes it collects from workers back to SS recipients. It is laundered and obfuscated through the bogus "trust fund" and intergovernmental special issue bonds and IOUs to hide the true nature and relationship between taxing and spending. There is NONE. Our FICA tax dollars tallied on a spreadsheet somewhere, and then forgotten about."
there are about 10 trust funds.
SS actually has 3.
Medicare Part B has a trust fund and it has nothing to do with SS or FICA.
The gas tax has a trust fund.
when you buy your fuel - the Federal gas tax goes into a trust fund no matter whether you bought gas in Kansas of Florida.
When someone pays their Medicare Part B premium, it goes into a trust fund.
there is ignorance with respect to trust funds and how they work.
If the gas tax trust fund paid out less than it took in - it too would have a surplus and yes they would be represented by "securities".
The Medicare Part B trust fund receives premium payments from every subscriber across the country and then it receives general revenues to pay for the other 75% of Medicare Part B that the subscribers premiums do not cover.
When a senior goes to the doctor and the doctor get his reimbursement - it ultimately comes from the Medicare Part B trust fund.
this is how ALL of the trust funds - INCLUDING SS works but some of you guys try to make it sound like SS is unique and operates in a very different way and that is Grade A horse manure... either illustrating abject willful ignorance OR piling on with propaganda and misinformation to obfuscate the simple truths in an effect to convince others that SS is "unsustainable".
If one wants to see the OPTIONS to change SS to bring in back to balance:
http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf
from the report:
" The options fall into five categories:
* Increases in the Social Security payroll tax,
* Reductions in people’s initial benefits,
* Increases in benefits for low earners,
* Increases in the full retirement age, and
* Reductions in the costofliving adjustments that are
applied to continuing benefits.
Each option is analyzed in isolation, although most proposed changes to Social Security combine several provisions. Many options would interact with one another, so combining them might cause
changes to the overall finances of the system that are larger or smaller than would be produced by a simple
sum of the effects of several discrete options"
this is not a unique process. It has been done about a dozen times before.
Social Security benefits have NEVER been advertised as a certain fixed benefit but rather what is actuarially sustainable - as demographic conditions change.
obviously life expectancy and whether or not the population is increasing or decreasing are two that have big impacts.
but anyone who thinks the pay-as-you-go - periodically actuarially-adjusted to keep it solvent
anyhow who thinks that is a ponzi scheme or an unsustainable approach is basically questioning the same process that most private annuities and other kinds of insurance use.
"American Academy of Actuaries"
social security reform options
http://www.actuary.org/pdf/socialsecurity/reform_07.pdf
this is worth reading.... for those who want to cut through the propaganda and misinformation being promoted.
unless of course one want to label the American Academy of Actuaries as yet another "liberal front group"
and of course.. there will be those here who will just use the report to cherry pick .... out of context... excerpts from which to continue their propagandizing behaviors....
"You already knew the answer!
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.""
Well, go on, finish quoting section 8. It doesn't stop there. That's a semicolon after "United States", not a period.
You failed to mention that this preamble applies top, and is limited by, the enumerated powers listed below it. As you were able to produce the quote you did so quickly, I assume you are fimiliar with the entire Constitution, and you must already know that. So, to take the snippet you did, out of context, is dishonest.
You would like, no doubt, to claim that the General Welfare clause covers Social Security, and just about anything the federal government does, but it just ain't so.
Allow me to quote one of the founders, the primary author of this section:
"With respect to the words general welfare, I have always regarded them as qualified by the detail of powers (enumerated in the Constitution) connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators."
- James Madison, the fourth U.S. president and the "Father of the Constitution
You can object to my characterization of you as dishonest if you wish, but you must then admit that you are ignorant of the meaning and intent of the Constitution. It's your choice. You can be one or the other.
"Social Security enjoys strong support among the young, by the way."Zachreil
Is that right? Do you have a reference for that remarkable claim?
"Not sure where you get your numbers, but the CBO projected that not only wouldn't the early 2000's recession not have led to deficits, but surpluses would have continued to whittle down the public debt."
Whittle down? The debt has increased every year since 1950, including during both Clinton terms.
The smoke-and-mirrors "surpluses" were a result of accounting gimmicks involving inter-agency transfers including the Social security trust fund.
For a better explanation, see here.
You appear to be getting further off the rails as time goes on. You can't just parrot the liberal wisdom about Clinton surpluses if you want to be taken seriously.
Rash, unsupported claims won't go unchallenged here, so do your homework before you post. Just sayin'.
re: Clinton/CBO accounting gimmicks
are we saying that ONLY during Clintons term that different accounting was done to show a surplus when there was none?
are or we saying that the way the CBO calculates deficits/debt for ALL Presidencies is bogus?
In other words the CBO lies just when Clinton was President or it lies all the time?
If it lies all the time, why do believe ANY of it's numbers anyhow?
how do we know it's deficit/debt numbers are not lies?
Broll The American: Our nation has the capacity and resources to more than care for our aging population.
Yes, it would be very odd to think that a poor peasant village can take care of their elders, while the richest nation on Earth is helpless.
VangelV: The issue is how you are going to get working people who have no hope of getting SS benefits to support current retirees who expect their full benefits.
Why won't working people get Social Security?
juandos: Sorry Zach{riel} excuse me for being cynical about a collection of federal parasites...
Sorry, juandos excuse us for referring to data.
VangelV: AARP did a poll and found that people liked to fund AARP members?
The poll was by GfK Roper, a national survey research firm.
VangelV: Well, there are other results: "A recent USA Today/Gallup Poll found that 56 percent of current retirees expect their benefits to be cut — a dramatic rise compared with 32 percent who felt the same way in 2005."
So? People recognize that to keep the program may require cuts or additional taxes.
VangelV: But those securities can't be used to make payments because they are not marketable.
No. They're just a promise.
VangelV: Unfunded liabilities are over $100 trillion.
Over what period?
Ron H: Everyone knows a pyramid scheme can only continue as long as there is a constant supply of new suckers starting to contribute at the bottom.
It's an income transfer from young to old. It's completely sustainable as long as there are new generations, and people don't live forever.
Ron H: Explain that "sufficient cushion, Zach{riel}. Where is it?
It's in securities. They will last until about 2035 (unless the program is changed), then benefits will be 75% of projected levels.
Of course, people during the Bush Administration said that if they cut taxes rather than setting the money aside (lock box), it would spur so much additional economic activity that it the tax cuts would pay for themselves. How did that work out?
Larry G: and as long as the FICA tax remains in force, they will ALWAYS get SS benefits.
That is correct.
Ron H: You can object to my characterization of you as dishonest if you wish, but you must then admit that you are ignorant of the meaning and intent of the Constitution.
Well, you may disagree with the courts, but it is certainly not a position based on ignorance.
Zachriel: Social Security enjoys strong support among the young, by the way.
Ron H: Is that right? Do you have a reference for that remarkable claim?
"Nine in ten adults under age 30 believe Social Security is an important government program, and over nine in ten want to know it is there when they retire just in case they need it."
http://www.aarp.org/work/social-security/info-08-2010/social_security_75th.html
Ron H: The debt has increased every year since 1950, including during both Clinton terms.
The end of the Clinton Administration was marked by budget surpluses, and structural surpluses left to the next administration.
Ron H: For a better explanation, see ...
Public debt decreased. That's the definition of a budget surplus. More particularly, the unified budget dates to the 1960's.
Ron H: You can't just parrot the liberal wisdom about Clinton surpluses if you want to be taken seriously.
We didn't cite "liberal wisdom," but CBO.
http://www.cbo.gov/budget/data/historical.pdf
"Sorry, juandos excuse us for referring to data"...
That's just it zach old son, you didn't refer to data, you refered to a list of numbers on a page...
Hence the reason for the Treasury link so you could work it out for yourself and see if the CBO had a clue (which they might well have)...
The problem is that CBO tends to be a political tool for Congress as does the Treasury...
@VangelV - The government does not spend the FICA taxes it collects from workers back to SS recipients. It is laundered and obfuscated through the bogus "trust fund" and intergovernmental special issue bonds and IOUs to hide the true nature and relationship between taxing and spending. There is NONE. Our FICA tax dollars tallied on a spreadsheet somewhere, and then forgotten about.
I think that is what I said. The government used the surplus SS contributions to finance its operations and to reduce the deficit. That is what made the Clinton era 'surpluses' were a fraud and a joke.
How come we can predict, to the hour, a moment 20 years from now when the SS "fund" will run dry... a "fund" that unlike any other Federal spending program has ITS OWN UNIQUE TAX?? Yet if we are in a war 20 years from now, Congress will vote to fund the war. If there is a natural disaster 20 years from now, it will vote to fund the disaster relief. We don't have special, unique taxes for these things, nor do we sock away funds ear marked for these items to be spent at a later date.
They can't predict anything 20 years from now. The claims made about SS and other programs are bogus. They depend on assumptions. As for the wars, it is clear that many Americans fell for the lies told by the neocons and had their buttons pushed. I know of few politicians who had the courage to stand up and vote NO to giving Bush the power to invade Iraq without a formal declaration. If you see the way that both sides attack Ron Paul on the issue of Iran you will see the same thing playing out again.
Eliminate FICA and establish a Federal mandate to pay a seniors a specified dividend on behalf of the nation, direct from keystrokes of a Treasury Dept computer terminal into their bank accounts. That's all ANY OTHER Federal spending is.
Why not just let people keep more of their money and save for their own retirement? There is no moral argument for robbing savers of purchasing power by devaluing the currency any more than there is a moral argument for tax support for redistribution programs.
What about inflation you may ask? I hardly think seniors will inflate prices out of control with the meager spending they'll be able to afford (based on current benefit rates). Nor will the FICA taxes left in the paychecks of the workers contribute to inflation. Rather it will lead to increased demand and employment, which will increase production. Cut SS or at minimum continue to believe in the lie of the SS "fund" and we'll deny ourselves current real wages as austerity will rot our future.
When you create purchasing power out of thin air you create inflation. End of story. The fact that we have seen a crash in the stock and housing markets does not mean that inflation is not a problem. We are seeing a major problem because the Basel Agreement made banks hold their reserves in the form of sovereign debt. But with the sovereign debt markets under pressure the applications of mark-to-market accounting rules would push many of the so-called 'good banks' into insolvency. While this may be a positive for the value of the USD over the short term due to a relative flight to safety, it would signal the end of all fiat currencies. What will seniors do when their 'payments' can't be used to purchase real goods and services?
are we saying that ONLY during Clintons term that different accounting was done to show a surplus when there was none?
are or we saying that the way the CBO calculates deficits/debt for ALL Presidencies is bogus?
Absolutely. The accrued liabilities are not really handled properly and the contributions surpluses are counted as revenues. The government needs to move away from cash based accounting and start using the same rules that businesses have to file.
Yes, it would be very odd to think that a poor peasant village can take care of their elders, while the richest nation on Earth is helpless.
A poor peasant village does not not look after their elders. The individuals do. What you are suggesting is that we get rid of the traditional roles played by the family, community, and church and replace them with a huge bureaucracy that will try to replicate them. But we know that way lies to ruin. There is no moral argument for it and certainly there is no consequentialist argument either.
Why won't working people get Social Security?
Because the SS unfunded liabilities stand at $16 trillion and the US is bankrupt. A young worker today will not see the day when his SS benefits have much purchasing power even if the program continues to exist.
The poll was by GfK Roper, a national survey research firm.
For its client, the AARP. The poll results contradict most polls, including the one that I referenced.
So? People recognize that to keep the program may require cuts or additional taxes.
But current workers and employers do not want to pay more in taxes just because Congress robbed the 'Trust Fund' and replaced the cash it took with unmarketable IOUs. And recipients do not want their benefits cut. This all ends in disaster because Ponzi schemes cannot go on forever.
VangelV: Unfunded liabilities are over $100 trillion.
Over what period?
BINGO. We now know that you don't even understand the concept. What this means is that you need to put aside $100 trillion now in order to keep the SS and Medicare programs going. But there is no $100 trillion sitting around that can be used to make the programs whole. And for every year that we wait the numbers grows larger. That means that default is inevitable.
It's in securities. They will last until about 2035 (unless the program is changed), then benefits will be 75% of projected levels.
There are no securities. There are only IOUs that have no purchasing power. It may have escaped your notice but IOUs are not money. They can't be sold for money. All they are is a promise to increase taxes that will be used to replace the money that was stolen by Congress.
VangelV: Unfunded liabilities are over $100 trillion.
Over what period?
Let me correct my response above to make it clearer.
First, you have just shown that you don't understand what we are talking about. So let me clarify it.
What this means is that you need to put aside $100 trillion now in order to ensure that the SS and Medicare programs remain solvent. If the government were a company that had made the same promises to its employees regulators would demand that the shortfall was eliminated over the next few years. If the company did not, its managers would wind up in jail and the company would go bankrupt.
But the US government does not have $100 trillion sitting around. It is actually still running huge deficits and is planning to run deficits for decades. That means that some type of default is inevitable.
Like I wrote before, if you want to see how things will work out look to Russia after the fall of the USSR.
juandos: That's just it zach{riel} old son, you didn't refer to data, you refered to a list of numbers on a page...
Heh. Alright. What were revenues and expenditures of the U.S. government in 2000, and how did you derived your figures?
VangelV: Because the SS unfunded liabilities stand at $16 trillion and the US is bankrupt.
The U.S. is hardly bankrupt. Not sure where you got that idea. As for $16 trillion in liabilities, assuming modest 2% growth, the U.S. will produce $2500 trillion over the next 75 years. What you really mean is that you want no responsibility for others.
VangelV: A poor peasant village does not not look after their elders.
Sure they do.
VangelV: What you are suggesting is that we get rid of the traditional roles played by the family, community, and church and replace them with a huge bureaucracy that will try to replicate them.
Social Security has been around for generations. It has only a 1% overhead.
VangelV: For its client, the AARP.
Handwaving.
VangelV: The poll results contradict most polls, including the one that I referenced.
Again. Your link did not address the question of support, but confidence.
VangelV: But current workers and employers do not want to pay more in taxes just because Congress robbed the 'Trust Fund' and replaced the cash it took with unmarketable IOUs. And recipients do not want their benefits cut.
Yes, that's the crux.
VangelV: This all ends in disaster because Ponzi schemes cannot go on forever.
It's not a Ponzi scheme. People don't like to pay taxes, and they were convinced that cutting taxes would lead to such increases in productivity that the tax cuts would pay for themselves. How did that work out?
VangelV: BINGO. We now know that you don't even understand the concept. What this means is that you need to put aside $100 trillion now in order to keep the SS and Medicare programs going.
Or continue to make payments. You didn't provide the information requested.
VangelV: That means that default is inevitable.
After all the numbers of times it's been pointed out to you, you still ignore the facts. If there were no changes whatsoever to the program, then Social Security will pay 100% of benefits until 2035, then 75% of benefits in perpetuity.
VangelV: There are no securities. There are only IOUs that have no purchasing power.
They are special-issue securities. If you prefer, think of them as promises made by the American people. If you renege on this promise, Social Security still won't default. Payroll taxes will continue to fund retirement payments, though at lower levels.
VangelV: What this means is that you need to put aside $100 trillion now in order to ensure that the SS and Medicare programs remain solvent.
No, it doesn't. Again, it's a pay-as-you-go system. The government collects payroll taxes, then sends them back out. It's an income transfer from young to old. According to law, if the payroll taxes don't meet current benefits, then benefits are automatically cut.
VangelV: It is actually still running huge deficits and is planning to run deficits for decades. That means that some type of default is inevitable.
That isn't due to Social Security, but the rest of the budget, which is way out of line. However, just a decade ago, the U.S. had budget surpluses. There is nothing preventing the U.S. from meeting their current challenges.
"So, People recognize that to keep the program may require cuts or additional taxes."-Zachriel
Then we are in agreement, SS meets the wikipedia definition of a Ponzi scheme. No? That was the point.
"but attacking the concept of SS by claiming it is a ponzi scheme that is bankrupt is simply not the truth."-Larry
Larry, this really isn't that difficult to understand. SS won't go bankrupt (run out of revenue) as long as the government holds a gun to our heads and threatens us with prison if we skip on FICA taxes. That makes SS an even more insidious form of Ponzi, as I am compelled to participate. In the private sector, once contributors realize they won't see promised returns they flee en masse causing collapse. As long as the threat of force hangs over us it's not possible with SS.
" Over what period?
Let me correct my response above to make it clearer.
First, you have just shown that you don't understand what we are talking about. So let me clarify it.
What this means is that you need to put aside $100 trillion now in order to ensure that the SS and Medicare programs remain solvent. If the government were a company that had made the same promises to its employees regulators would demand that the shortfall was eliminated over the next few years. If the company did not, its managers would wind up in jail and the company would go bankrupt. "
ha ha ha
tell me what other govt agencies that spend tax dollars use a 75-year horizon to compute "unfunded liabilities"
tell me what private insurance companies use a 75-year horizion to compute unfunded liabilities.
this such a lame excuse of an explanation.
how do you think private insurance handles unfunded liabilities?
do you think they go out and steal a bunch of money to make up the loss...
or do you think JUST MAYBE they might INCREASE their premiums and/or change their benefits so as to keep their plans solvent?
the "unfunded liabilities" blather is 100% GRADE A HORSE MANURE.
ANY insurance/annuity public or private has to continually actuarially analyze future potential shortfalls AND THEN use THAT analysis to make changes such as premium increases or benefit changes or both..
Why is it not okay for SS to do this?
It MUST be done to keep the program solvent - and it is doing what ANY private annuity/insurance would do also.
no insurance is "pre-funded".
Virtually ALL of it pay-as-you-go.
pay-as-you-go means that you DO increase premiums or reduce benefits if the program cannot remain solvent.
You're looking at the same thing for Medicare Part B - which has nothing at all do with FICA but also has unfunded liabilities - (as do most ANY tax-funded program for future budgets.
" Larry, this really isn't that difficult to understand. SS won't go bankrupt (run out of revenue) as long as the government holds a gun to our heads and threatens us with prison if we skip on FICA taxes. That makes SS an even more insidious form of Ponzi, as I am compelled to participate. In the private sector, once contributors realize they won't see promised returns they flee en masse causing collapse. As long as the threat of force hangs over us it's not possible with SS"
they hold a gun to your head on ALL TAXES fella..
so what?
are you arguing against ALL Taxes or just picking on SS?
"promised returns" have changed many times over the 65 year history of SS.
taxes have increased, benefits have been reduced because the most important "promise" is to keep the program solvent. That's why there is a 75 year look-ahead.
How about you tell me what other got agencies and private companies that sell insurance PUBLISH their 75-year horizons?
they don't , do they?
HEY - do you think EMTALA is holding a gun to your head?
the alternative to getting rid of SS will be an EMTALA-like program for the elderly...
what would you prefer - mandatory savings from the person who will get the benefits or no savings and when they get old you pay their bills?
you worry about the govt "subsidizing" SS.. well hells bells.. if you get rid of SS - what are you going to do with seniors who did not save?
you're going to pay for them with your taxes.....
how's that for a "promise"?
is that a better "promise" that one about how much benefits they get from their own payroll taxes?
"Heh. Alright. What were revenues and expenditures of the U.S. government in 2000, and how did you derived your figures?"...
Zach do you know how to use links?
If the answer is yes then use the Treasury link I gave you...
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Zachriel: So, People recognize that to keep the program may require cuts or additional taxes.
mike k: Then we are in agreement, SS meets the wikipedia definition of a Ponzi scheme. No? That was the point.
Um, no. A Ponzi scheme is inherently unsustainable. Social Security is easily sustainable. Or it could just pay 75% of benefits in perpetuity.
(Are you confused because they both transfer money from new to old? A Ponzi scheme uses new *capital* to pay profits on old *capital*, while pretending that the old *capital* is safely invested. It scheme collapses when there are no new investors, and people begin to demand their original *capital* back. In the case of Social Security, there is no capital. It is an explicit income transfer from young to old.)
mike k: SS won't go bankrupt (run out of revenue) as long as the government holds a gun to our heads and threatens us with prison if we skip on FICA taxes.
All taxes have a compulsory element, by definition.
http://en.wikipedia.org/wiki/Whiskey_rebellion
mike k: That makes SS an even more insidious form of Ponzi, as I am compelled to participate. In the private sector, once contributors realize they won't see promised returns they flee en masse causing collapse.
juandos: If the answer is yes then use the Treasury link I gave you...
It's not returning public debt. Are you confused on what is meant by a budget surplus? If the government takes in more than it spends, then it is a surplus.
"Um, no. A Ponzi scheme is inherently unsustainable. Social Security is easily sustainable. Or it could just pay 75% of benefits in perpetuity"-Zachriel
If given the option, most would likely flee SS upon finding out they would only recieve 75% of promised benefits. However, none of us are given that option. So the point remains that the only thing keeping SS from becoming a Madoff like ponzi scheme is that those taxes are compulsory.
The return on investment that our grandparents and parents enjoyed is certainly not sustainable. Unless of course, we are willing to tax future generations to the hilt. That is why SS is most definitely a ponzi scheme.
If it isn't such a scheme, my children and grandchildren should expect to pay no higher a percentage of their income than did previous generations and should logically expect a similar rate of return.
If it is such a scheme future generations must pay an ever increasing portion of their income, while being willing to accept a lower rate of return.
If it's the latter than, by definition, it's a pyramid or ponzi scheme.
" If given the option, most would likely flee SS upon finding out they would only recieve 75% of promised benefits."
"promised benefits" change over time.
the "promised benefits" in 1980 were not the same in 1990 or even now because SS has continuously changed taxes and benefits over it's 65 year history. this is no different.
most folks cannot even compute how much SS they will receive much less 75% of it - because they don't know their future income and these days - not even a minimum because not even a job is guaranteed...from which to pay into it.
so the "they will flee" is just more anti-SS blather.
No industrialized country in the world INCLUDING Singapore does not have payroll taxes...
Name the top 3 'best' countries in the world who don't have payroll taxes?
ya'll are living in a dream world.
if you want a 3rd world country - that's fine - but it won't be this one.
mike k: If given the option, most would likely flee SS upon finding out they would only recieve 75% of promised benefits.
Fact is most Americans support Social Security. All major developed nations have similar programs.
mike k: So the point remains that the only thing keeping SS from becoming a Madoff like ponzi scheme is that those taxes are compulsory.
Um, no. It still wouldn't be a Ponzi scheme. Again, Ponzi pays supposed profits with the capital of new investors. It is inherently unsustainable, whether or not it is mandatory. That's because when people go back for their principal, it's not there. There is no principal with Social Security. It's an income transfer.
mike k: The return on investment that our grandparents and parents enjoyed is certainly not sustainable.
There is no return on investment. There is no investment. There is no principal. It's an income transfer.
mike k: If it is such a scheme future generations must pay an ever increasing portion of their income, while being willing to accept a lower rate of return.
Even with no changes, Social Security is good for the next quarter century. With small changes, it can be sustainable indefinitely.
" The return on investment that our grandparents and parents enjoyed is certainly not sustainable. Unless of course, we are willing to tax future generations to the hilt. That is why SS is most definitely a ponzi scheme."
do you think EMTALA is a ponzi scheme?
how about Medicare Part B?
both of them have huge future unfunded liabilities and neither one has anything to do with FICA.
and both of them are what happens when people don't pay ahead of time for their future needs ...
so if people don't pay into SS - you're going to end up with even more entitlements like EMTALA and MedicAid....
ALL that SS really accomplishes is that it forces people to put aside money that they will need - and every single industrialized country in the world does exactly the same thing for exactly the same reason and they have the same problems if they have declining populations and higher life expectancies (and they do).
are you opposed to any/all payroll tax systems everywhere in the world?
so first you attack SS to say it's not sustainable and a ponzi scheme but then we find out that what you really are opposed to is payroll taxes in general.. no matter where and for no matter what purpose.
so the "ponzi" scheme attack is just a disguise... just a proxy... because what you REALLY disagree with the CONCEPT of payroll taxes across-the-board but won't argue it on that basis.....
right? fess up here...
"so the "ponzi" scheme attack is just a disguise... just a proxy... because what you REALLY disagree with the CONCEPT of payroll taxes across-the-board but won't argue it on that basis.....
right? fess up here..."
OK Larry, I admit it. I'm against Medicare just as vehemently as I'm against Social Security. But I thought the point of the post was that SS was a pyramid/ponzi scheme not whether or not people are for or against payroll taxes.
"Um, no. It still wouldn't be a Ponzi scheme. Again, Ponzi pays supposed profits with the capital of new investors. It is inherently unsustainable, whether or not it is mandatory. That's because when people go back for their principal, it's not there. There is no principal with Social Security. It's an income transfer."
So in a ponzi scheme the principal is not there, and in SS the principal is also not there, so what am I missing? Is not a Madoff like ponzi scheme also an income transfer? You seem to be arguing my point quite well.
mike k: So in a ponzi scheme the principal is not there, and in SS the principal is also not there, so what am I missing?
Ponzi promises that the principal is invested and that everyone will reap profits while still having access to their capital. This is a lie.
mike k: Is not a Madoff like ponzi scheme also an income transfer?
Nope. Ponzi fraudulently claims a profit in order to attract more investors. Social Security merely transfers money from young to old. You may not like this, but it's not a Ponzi scheme.
unless you want to classify ALL pay-as-you-go insurance as a Ponzi Scheme - you need to explain why SS is and they are not.
Let's break it down even more.
Ponzi says he has a special offer, and you can make 10%. You invest. He comes back and says you made 10%, and if you leave your money with him, he can promise you another 10% later. He also says he has room in his investments for one other person, maybe you could recommend someone. That person then invests their money. Meanwhile, Ponzi spends all the money on gold watches in order to show everyone how successful he is, and some of it he invests in speculative ventures that typically fail. The supposed pot of money is promised to be much bigger than what the investors originally handed over to Ponzi. Yet, people keep investing because Ponzi has a gold watch, and everyone keeps getting statements showing how much money they have. If someone wants to withdraw their money, he tells them they may not be able to get back in, there is so much demand. And so on. Eventually, someone asks for their money back, and a run starts. As there is no big pot of money, Ponzi disappears. That's a Ponzi scheme.
Social Security is merely an income transfer. They tax the young at a certain rate, then distribute it to the elderly. There is no principal. There is no investment. The Trust Fund is just a short term fund to control cash flow. There is no promise of riches or profits or anything.
the funny thing about this right now is that the young(er) are transferring money to the old ...some 210 billion dollars worth right now as opposed to the fact that it will happen in the future to SS.
If nothing is done about Medicare Part B - the amount the young are paying the old will DOUBLE in 10 years while SS will still be putting along without a deficit at all.
no talk that Medicare Part B is a "ponzi" scheme.
no talk of Medicare Part B going "bankrupt"
and in terms of being "forced" - Medicare Part B is totally voluntary.. they'll sell it to anyone who wants it if they are 65.
and yet SS is a "ponzi scheme" and Medicare Part B is apparently in comparison a gnat on a dogs butt in comparison.
this is a big problem.
If you want to talk about entitlements - you need to compare and contrast them in terms of current costs and future costs - those nasty 75-year horizons.
and what we will do about it.
The unfunded liabilities of Medicare Part B are 8 times bigger than SS in the same time frame.
Hell.. EVEN Medicare Part D (prescription drugs) has bigger unfunded liabilities than SS
but because Part B and D do not have payroll taxes for funding, they are ignored - even though they are far far bigger than SS in terms of current and long term costs to taxpayers - you know - the young guys paying for the old guys.
so why the focus on the smallest of the entitlements?
the answer is simple - it's an attack on the CONCEPT of payroll taxes....
that's why I say - fess up.
if you are truly opposed to transfers from the young to the old - there is a lot more fertile ground to plow than SS - RIGHT NOW.
unless of course you're really opposed to payroll taxes and then it's all about SS (and Medicare Part A) no matter how much the other entitlements cost.
Let's break it down even more.
Ponzi(social security) says he has a special offer, and you can make 10%(safe in retirement). You(are forced to) invest. He comes back and says you made 10%(recieve annual statement from SS with expected distribution), and if you leave your money with him, he can promise you another 10% later.(see same statement) He also says he has room in his investments for one other person, maybe you could recommend someone(He actually picks them for me). That person then invests their money. Meanwhile, Ponzi spends all the money on gold watches(general government obligations) in order to show everyone how successful he is, and some of it he invests in speculative ventures(name you favorite government program here-I believe Clinton referred to those as investments) that typically fail(war on poverty or public housing for example). The supposed pot of money is promised to be much bigger than what the investors originally handed over to Ponzi(Ah yes the "lock box"). Yet, people keep investing because Ponzi has a gold watch(they are forced to), and everyone keeps getting statements showing how much money they have(I get one every year). If someone wants to withdraw their money, he tells them they may not be able to get back in, there is so much demand(they aren't allowed to). And so on. Eventually, someone asks for their money back, and a run starts. As there is no big pot of money(trust fund), Ponzi disappears. That's a Ponzi scheme.
We agree...hallelujiah!
" Eventually, someone asks for their money back, and a run starts. As there is no big pot of money(trust fund)"
ha ha ha
but there never was - it's the big LIE that either the ignorant or disingenuous believe and promote.
the system was explicitly designed as a pay-as-you-go system like most all insurance is.
besides.. how would that happen?
one would presume that there would be a national movement against the payroll tax - right?
we need about 80 more million to sign on to that idea (50+% of registered voters).
sounds like a seriously uphill battle....
the biggest problem here is abject, willful ignorance of the design of the SS program.
it's common, easily accessible knowledge that SS was originally designed as a pay-as-you-go system and never as a fund-based system.
the only reason this anti-SS idea has any "legs" at all is the fact that people don't know and as a result are susceptible to the propaganda and disinformation that is rampant.
what the right wing and GOP has discovered is that the electorate appears to be dumb as a stump - especially those in the middle who often can be sold a lie... if it is said often enough and appears to be widespread even if it is your basic parroting ....
Americans are not dumb but they are slow to figure out the facts sometimes...but eventually they do.
In this case the latest polls show about 80% want to keep SS even though many of them think it really does have money problems.
in other words, they LIKE THE CONCEPT of payroll taxes and a guaranteed retired income even if it is reduced...which is turning out to be a lot better than 401Ks these days.
mike k: Ponzi(social security) says he has a special offer, and you can make 10%(safe in retirement).
Except Social Security doesn't make that promise. It's a generational transfer.
"Except Social Security doesn't make that promise. It's a generational transfer."
If it is a generational transfer then it is one in reverse. What about younger workers that receive SS Disability payment until death (a huge and growing problem I noted above)?
Zach, if what you say is true, why does my benefit statement from SS rely on my current earnings? If returns are not the issue, why isn't everyone receiving the same amount each month? SS does in fact make promises, and it promises me more than someone who earns minimum wage their entire lifetime, but there is something funny about that as well. The person who pays on a lower lifetime wage actually earns a better return than someone who works their entire life at or about the SS wage cap. So to argue, that SS makes no such promises or that there are no returns seems ludicrous.
Buddy R Pacifico: If it is a generational transfer then it is one in reverse. What about younger workers that receive SS Disability payment until death (a huge and growing problem I noted above)?
Yes, Social Security also transfers between able and disabled. It's still pay-as-you-go.
mike k: if what you say is true, why does my benefit statement from SS rely on my current earnings?
Because that's the way the program is structured. Those that pay more in, get a higher amount later. It's still pay-as-you-go. If Social Security runs short, then benefits are cut. This will occur in about 2036, when benefits will be reduced by 25%, that is, unless there are changes to the program.
mike k: So to argue, that SS makes no such promises or that there are no returns seems ludicrous.
It's not a return on investment, because your money isn't invested. The money you pay in goes to your parents.
Now, you could consider it abstractly as an investment and determine a rate of return, but you have to keep in mind that if you could, let's say, opt out of Social Security, that would mean that the benefits being paid to the previous generation would stop. You will have abandoned the previous generation in your zeal to cushion your own retirement. Perhaps you don't have parents relying on Social Security.
Most people use Social Security as a base, and also save in a 401k or other retirement fund, for retirement. In other words, a mixed strategy is best. If your 401k tanks, or there is an emergency that depletes your savings, at least you will have Social Security.
The U.S. is hardly bankrupt. Not sure where you got that idea. As for $16 trillion in liabilities, assuming modest 2% growth, the U.S. will produce $2500 trillion over the next 75 years. What you really mean is that you want no responsibility for others.
You are confusing the United States with the United States government, which runs the Ponzi schemes. The United States government is bankrupt. As I write this the federal debt stands at $131,000 per taxpayer. At more than $1.3 trillion the annual deficit is huge. Unfunded liabilities stand at more than $100 trillion. Add it all up and there is no way for the US government to meet its obligations without resorting to the printing presses.
Sure they do.
You are living in a world of fantasy. In most villages that I have been to, and I have been to many all around the world it was families and social organizations that looked after the elderly. That is the way it used to be in North America as well as families looked after each other and fraternal organizations and mutual societies were formed to meet their needs.
Fraternal societies were responsible for creating social networks in which the poor participated. They provided cheap life insurance and health insurance for their members and built old age homes and hospitals. They were actually good at what they did but were squeezed out by government programs and regulations.
Social Security has been around for generations. It has only a 1% overhead.
A Ponzi scheme is a Ponzi scheme no matter how low the overhead. (You need a citation for your claim of 1%.) The fact is that the unfunded liabilities stand at $16 trillion and growing. If every cent earned by the US economy this year were to be stolen and given to SS it would still be underfunded.
Again. Your link did not address the question of support, but confidence.
But anyone would support a program that gives them stuff if they are not told how much they will have to pay for it. That is the problem with the AARP polls. They ignore the costs. And they pretend that SS is not a Ponzi scheme.
It's not a Ponzi scheme. People don't like to pay taxes, and they were convinced that cutting taxes would lead to such increases in productivity that the tax cuts would pay for themselves. How did that work out?
It usually works fine if taxes are really cut and if the government is not running massive deficits by funding programs that discourage work. But that is not what you have today. At this time US businesses are sitting on a great deal of money overseas because they do not want to pay the taxes when their profits are repatriated. This means more jobs abroad and fewer jobs at home as the Bush/Obama regimes replay the same errors that were made by Hoover/FDR.
But your comments and my response are a diversion from the issue. The fact is the $16 trillion in unfunded liabilities show that SS is a Ponzi scheme.
Or continue to make payments. You didn't provide the information requested.
Actually, I did. You just don't understand what unfunded liabilities mean. I realized that this would be a problem for you so I wrote a longer response to this particular point.
After all the numbers of times it's been pointed out to you, you still ignore the facts. If there were no changes whatsoever to the program, then Social Security will pay 100% of benefits until 2035, then 75% of benefits in perpetuity.
No. SS is already in deficit as contributions trail benefits paid out. There are no securities that can be sold to pay 100% of benefits today, which means that the government has to top up the program by borrowing or printing the money.
To allow the program to continue and guarantee its solvency the government needs to put $16 trillion in the trust fund TODAY!!! But it has no money to do that given that it is running a deficit of more than $1.3 trillion.
They are special-issue securities. If you prefer, think of them as promises made by the American people. If you renege on this promise, Social Security still won't default. Payroll taxes will continue to fund retirement payments, though at lower levels.
Actually, they are just IOUs. The American people did not know that the money was stolen and replaced with IOUs. They were told that there was a 'trust fund' and that they had nothing to worry about. They certainly were not told that their contributions were in danger of being cut. With $16 trillion of unfunded liabilities and no marketable assets the SS scheme is technically insolvent. If it were a privately run plan its managers would be in jail for fraud and theft.
No, it doesn't. Again, it's a pay-as-you-go system. The government collects payroll taxes, then sends them back out. It's an income transfer from young to old. According to law, if the payroll taxes don't meet current benefits, then benefits are automatically cut.
I suggest that you look up what the term UNFUNDED LIABILITY means. You can calculate the present value of the promised payouts to current SS members. You take subtract this number from the current the market value of the assets in the 'trust funds'. If the number is positive you have a surplus. If it is negative you have unfunded liabilities that have to be funded to make the plan whole. In the case of SS you need $16 trillion today to guarantee all future payments in perpetuity.
Now you could argue that we can keep kicking the can down the road by playing the pay-as-you-go angle. You keep using contributions from workers who will collect some time in the future to keep payments coming to people who are collecting today. But the problem is that you are also accruing liabilities for those workers and unless you have a huge spike of very young people in the workforce there comes a point where the system is under stress and begins to show its weak spots.
We are already there. Sadly there are too many people who are ignorant of pension economics to understand what they are witnessing so they ignore the reality. But as I said, while you can ignore the reality the consequences of that reality will come to bite you on the arse and cannot be ignored.
"It's not returning public debt. Are you confused on what is meant by a budget surplus? If the government takes in more than it spends, then it is a surplus."
The only one confused here is you. Do you call government borrowing in excess of expenditures a surplus? Does borrowing from other sources mean your total debt decreased even though your income from taxes was less than your obligations?
You might want to learn some accounting as well as the economics I recommended earlier.
You could also benefit from following links others provide for you so you wouldn't keep embarrassing yourself.
VangelV: The United States government is bankrupt.
That is simply incorrect. The U.S. government is more than capable of meeting its current obligations, and its long term fiscal problems have ready solutions.
VangelV: Unfunded liabilities stand at more than $100 trillion. Add it all up and there is no way for the US government to meet its obligations without resorting to the printing presses.
In an economy that will produce ~$2500 trillion over the period in question, the U.S. can easily find the resources to deal with the problem. However, dealing with the long term deficits is essential.
VangelV: A Ponzi scheme is a Ponzi scheme no matter how low the overhead.
"In contrast to a Ponzi scheme, dependent upon an unsustainable progression, a common financial arrangement is the so-called "pay-as-you-go" system. Some private pension systems, as well as Social Security, have used this design."
http://www.ssa.gov/history/ponzi.htm
VangelV: (You need a citation for your claim of 1%.)
"Since 1989, such expenses have totaled one percent or less of combined expenditures from the trust funds."
http://www.ssa.gov/oact/STATS/admin.html
VangelV: SS is already in deficit as contributions trail benefits paid out.
Yes, if the Americans decide not to honor its promises, then benefits will be cut accordingly.
VangelV: To allow the program to continue and guarantee its solvency the government needs to put $16 trillion in the trust fund TODAY!!!
No. That's silly. It's a pay-as-you-go system. We provided the citation, but here it is again.
"Social Security is and always has been either a "pay-as-you-go" system or one that was partially advance-funded. Its structure, logic, and mode of operation have nothing in common with Ponzi schemes or chain letters or pyramid schemes."
http://www.ssa.gov/history/ponzi.htm
VangelV: The American people did not know that the money was stolen and replaced with IOUs.
They should have. It was an important component of the Bush-Gore debates. Bush wanted to give the surplus back in tax cuts. Gore wanted to put it in a rainy day fund, a "lock box." Bush said the tax cuts would generate enough additional revenues to make up the difference. What's to worry. How did that work out?
VangelV: You keep using contributions from workers who will collect some time in the future to keep payments coming to people who are collecting today.
Now you got it! That's exactly how the system is structured, and has been for generations.
Ron H: You might want to learn some accounting as well as the economics I recommended earlier.
And yet, economists nearly all agree that Clinton left a surplus. Here's a couple of conservatives.
Martin Feldstein, Don't Waste the Budget Surplus, WSJ 1997.
Richard W. Rahn, Who gave us the surplus?, Cato 2000.
Gee whiz, a review of the literature has tons of stuff on the "Clinton surplus."
"VangelV: SS is already in deficit as contributions trail benefits paid out.
Yes, if the Americans decide not to honor its promises, then benefits will be cut accordingly. "
SS is in deficit right now because of the temporary 2% FICA Tax cut.
that deficit is on the order of 40 billion when we are 1.5T in deficit.
the real "ponzi" scheme is spending 1.5T more than you are taking in... and then running away from that reality by saying SS has a problem.
all the unfunded liability blather is hilarious.
I've asked him and others here to say what the unfunded liabilities are for Medicare Part B and how you'd compute them.
In other words, Medicare Part B already consumes 210 billion in taxes and is projected to double in 10 years and so I ask.. how do you compute the unfunded liabilities if each year more and more tax dollars are used to fund it.
for that matter - how about a year by year accounting of SS's unfunded liabilities?
and what happens to those gawd-awful unfunded liabilities if SS pushes the retirement age and changes the COLA ?
do they go away?
isn't that the entire purpose of calculated unfunded liabilities ?
but I still find it funny that SS is barely in deficit while other entitlements are running amok but SS is THE BIG problem - when it's obvious that straight forward changes to it are easy.
UNLIKE the problems with Medicare Part B of which there are no easy solutions.
That is simply incorrect. The U.S. government is more than capable of meeting its current obligations, and its long term fiscal problems have ready solutions.
No it isn't. Total unfunded liabilities plus debt stand at more than $100 trillion. With tax revenues less than $3 trillion and spending over $3 trillion there is no way to pay back the debt or keep the programs solvent.
You really need to learn some finance, accounting, and economics because with the exception of Larry you have to be the dumbest person that I have encountered on this topic.
In an economy that will produce ~$2500 trillion over the period in question, the U.S. can easily find the resources to deal with the problem. However, dealing with the long term deficits is essential.
Spending is $1 trillion more than what the government takes in. Unfunded SS and Medicare liabilities are growing at more than $3 trillion per year. There is no way to pay off the debt and to fully fund the programs. The interesting part is that falling rates will make the unfunded liabilities higher while rising rates will make the interest payments unmanageable.
There is little doubt that the US is trailing the European PIIG countries and is nearly over the abyss. Since it can print its own money and the debt is in USDs the way out is simple; inflate until the currency dies and after all debts are forgiven and all savers are wiped out introduce another currency. At that time all obligations will be worthless and the burden on future generations will lifted.
"In contrast to a Ponzi scheme, dependent upon an unsustainable progression, a common financial arrangement is the so-called "pay-as-you-go" system. Some private pension systems, as well as Social Security, have used this design."
http://www.ssa.gov/history/ponzi.htm
SS has a $16 trillion unfunded liability and no way to get the funding back to where the system is solvent. The fact that you do not understand what unfunded liability means is your problem, not mine. And pay as you go contributions may delay the default by a bit but they do not change the math because you still have to account for the accrued liabilities for the contributors. This is a point lost on the ignorant who try to argue that SS is just the same as private pension plans and that it operates by the same rules as private pension plans.
(You need a citation for your claim of 1%.)
"Since 1989, such expenses have totaled one percent or less of combined expenditures from the trust funds."
http://www.ssa.gov/oact/STATS/admin.html
First, these costs do not count all of the compliance costs by employers. Second, the total is 2.3%. Third, the $6 billion tab is way too high given the fact that the administrators let Congress steal the excess contributions and replace them with IOUs.
"SS has a $16 trillion unfunded liability and no way to get the funding back to where the system is solvent"
more ignorant horse manure:
http://www.actuary.org/pdf/socialsecurity/reform_07.pdf
http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf
http://voices.washingtonpost.com/ezra-klein/2010/09/30_options_for_reforming_socia.html
in terms of learning - Van is clearly from the school of "Don't confuse me with the facts".
stubborn and stupid are truly deadly combinations.
eh?
Yes, if the Americans decide not to honor its promises, then benefits will be cut accordingly.
They can't honour the promises so the benefits will be cut. Given how fast everything is getting out of control the program may be toast a lot sooner than you think.
No. That's silly. It's a pay-as-you-go system. We provided the citation, but here it is again.
"Social Security is and always has been either a "pay-as-you-go" system or one that was partially advance-funded. Its structure, logic, and mode of operation have nothing in common with Ponzi schemes or chain letters or pyramid schemes."
It has unfunded liabilities of $16 trillion. That makes it one of the biggest Ponzi schemes ever devised.
They should have. It was an important component of the Bush-Gore debates. Bush wanted to give the surplus back in tax cuts. Gore wanted to put it in a rainy day fund, a "lock box." Bush said the tax cuts would generate enough additional revenues to make up the difference. What's to worry. How did that work out?
Clinton and Gore took the SS surpluses and spent them. So did Bush. That is why the unfunded liabilities are as high as they are. Without the thefts there would be no need to inject new cash into SS today.
Now you got it! That's exactly how the system is structured, and has been for generations.
Which is why the system is now bankrupt and there is no way to make it whole without destroying the currency.
"They can't honour the promises so the benefits will be cut. Given how fast everything is getting out of control the program may be toast a lot sooner than you think."
if nothing is done FICA will continue to generate about a trillion a year.
how does that translate to "toast"
If the Govt can't screw up the courage to cut Medicare Part B which is consuming 210 billion and MedicAid which is consuming 500 billion a year what makes you think they'd do anything about SS anyhow?
you keep blathering about SS's unfunded liability - how about Medicare Part B and MedicAid unfunded liability?
got numbers?
you also don't understand how the trust fund actually works.
Every penny of FICA - every day.. every week goes into the trust fund as treasury securities and at the same time SS cashes in their oldest treasury securities and sends that money to recipients.
the trust fund is your basic checking account... and no where in there does it signal when SS is actually pulling on the 2.1 trillion... because the 2.1 trillion is just a balance that can be drawn on to start with.
the only way that SS would not get the money is if Congress essentially defaults on the debt but even if that actually happened the FICA tax would continue to generate dedicated funding for SS.
not understanding this simple concept does not bode well...for you..
more ignorant horse manure:...
Really? OK. Let's play. We take it one at a time.
http://www.actuary.org/pdf/socialsecurity/reform_07.pdf
Here we have a report which makes it clear that the SS program failed the tests of 'long-range close actu- arial balance'. The actuaries warned Congress that, "changes are necessary to preserve the long-term financing of the program."
It is now four years since the report was released and five years since the tests were applied. Nothing has happened except that the SS program declined faster than the actuaries could have imagined thanks to fewer workers, lower contributions thanks to lower paying jobs, and more SS recepients thanks to a weak job market.
http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf
Let me point out to you this little gem.
The Treasury uses the cash to finance the government’s ongoing activities. If the trust funds’ cash receipts are less than their outlays, the Treasury securities they hold are redeemed for cash as needed. The Treasury obtains that cash from other revenues or by borrowing from the public.
Great. The IOUs are not worth anything in the markets so the Treasury has to borrow to make up for the shortfall. The CBO assumes that the borrowing can continue until the IOUs are paid back. But how does that happen when there are massive deficits planned for the next decade or more?
The bottom line is that the CBO conclusions are only sound if the assumptions about the IOUs are valid.
Let us go on to, "CBO projects that, in 2010, for the first time since the Social Security reforms of the early 1980s, benefit payments from the trust funds will exceed trust fund receipts from the public."
But weren't we told that this would not happen until 2017? That is a huge error. And a huge added burden on taxpayers.
So what you have is a program that spends more money than it takes in without any marketable assets to make up the shortfall. This continues forever. To make the program sustainable you need $16 trillion in the funds and not in the form of IOUs. No, you need real money.
http://voices.washingtonpost.com/ezra-klein/2010/09/30_options_for_reforming_socia.html
Klein agrees that the program is not sustainable and that reforms are needed. How you get enough to cut the $16 trillion down to zero is not explained.
if nothing is done FICA will continue to generate about a trillion a year.
The programs are running in the red. You need to be able to sell the IOUs but they have no market value. This means that you have to start increasing taxes, cut benefits, and print or borrow the money to make up the shortfalls. The first two have been off the table for a long time and are still off the table. The last two depend on the USD being strong and the US treasury market bubble not popping.
If the Govt can't screw up the courage to cut Medicare Part B which is consuming 210 billion and MedicAid which is consuming 500 billion a year what makes you think they'd do anything about SS anyhow?
In a way Medicare is easy because there are no regular payments going out each month to people who count on the exact amount to be there.
you keep blathering about SS's unfunded liability - how about Medicare Part B and MedicAid unfunded liability?
They are much worse. And much more difficult to deal with. As I said, the US is looking a lot like the PIIG countries. Sadly, few Americans have noticed.
the securities that SS holds ...rotate....
when they get new receipts they convert them to treasury notes and at the same time they redeem their oldest ones.
ALL the trust funds - like gas tax trust fund works this way.
the actuarial reports are unvarnished hard data that tell the truth about the finances but also about the options for solvency..
this process has gone on for 65 years... the cycle begins with an actuarial analysis with recommendations followed eventually by changes.
the actuarial reports key to the unfunded liabilities but for a 75year horizon which is much longer than many others used in govt and industry.
but you have to want to know how things actually do work or else remain blissfully but willfully ignorant...and continuing to spout horse manure...
" The programs are running in the red. You need to be able to sell the IOUs but they have no market value. This means that you have to start increasing taxes, cut benefits, and print or borrow the money to make up the shortfalls. The first two have been off the table for a long time and are still off the table. The last two depend on the USD being strong and the US treasury market bubble not popping. "
more GRADE A horse manure.
clearly benefit cuts are REQUIRED if changes are not made.
" you keep blathering about SS's unfunded liability - how about Medicare Part B and MedicAid unfunded liability?
They are much worse. And much more difficult to deal with. As I said, the US is looking a lot like the PIIG countries. Sadly, few Americans have noticed"
if they are worse and more immediate then why do you spout misinformation about SS?
how about more equal sharing of that misinformation and propaganda with other programs like Medicare Part B?
SS is a gnat on a dogs butt compared to Part B and MedicAid.
Even Part D's unfunded liability is more than SS.
if they are worse and more immediate then why do you spout misinformation about SS?
I do not spout misinformation. The SS program is unsustainable. So are Medicare Part B and MedicAid. As I pointed out, add the government debt and the unfunded liabilities and you are looking at more than $100 trillion. Given the tax base of less than $3 trillion and continued deficits as far as the eye can see that means bankruptcy for the US government and all of its schemes.
From where I stand, the troops will be forced to come home and the programs will be forced to severely cut benefits as the empire collapses and foreign lenders turn their back on funding American deficits. Some time over the next few years gold will go well over $5,000 and silver will be in the high triple digits as the US loses its purchasing power and the transfer programs are starved of real purchasing power.
You want to see your future?
Reinventing Collapse: The Soviet Example and American Prospects
Or if you like German writers:
Wolf Among Wolves
when they get new receipts they convert them to treasury notes and at the same time they redeem their oldest ones.
No notes are redeemed. The program is running in the red because contributions are lower than benefits.
It actually may help if you actually read the references that you provided links to. Or to understand what was written.
"And yet, economists nearly all agree that Clinton left a surplus. Here's a couple of conservatives. "
And, as I explained already, this so called surplus resulted from accounting slight of hand involving intragovernmental transfers. The discussions of surpluses referred to optimistic projections that didn't materialize due to a recession in 2001.
The CBO link you keep coughing up only shows public debt, not total national debt. National debt increased each year during Clinton's 2 terms, and forever after that, at ever increasing rates.
The table at the Steiner link I gave you, also sourced from the CBO, shows that, as well as the excess in spending over revenue that caused it.
The Treasury link juandos provided tells the same story in greater detail if you need more.
Clinton spent, or more precisely Congress allowed him to spend, more from his left pocket than he earned. He then borrowed from his right pocket to make up the difference, and declared a surplus because he now owed his back pocket less than the year before.
Nonetheless, he owed more to both pockets than he had the previous year.
"No notes are redeemed. The program is running in the red because contributions are lower than benefits"
notes are bought and redeemed almost daily.
http://www.ssa.gov/oact/progdata/transactions.html
sometimes hard to tell if you are just willfully ignorant or prefer propaganda.
VangelV: You really need to learn some finance, accounting, and economics
This from someone who "the US is bankrupt" even while it continues to sell bonds at near zero interest rates and has a AAA/AAA/AA+ credit rating.
VangelV: Spending is $1 trillion more than what the government takes in.
That's called a deficit, and will eventually have to be brought under control, or it could lead to a serious cash crunch at some future date.
VangelV: SS has a $16 trillion unfunded liability and no way to get the funding back to where the system is solvent.
Sure there are. A simple way is to simply cut benefits by 25% in 2036, which is already current law. Or, if you want to maintain benefits, they could raise the cap and increase the retirement age somewhat. Or increase payroll taxes a bit. Or all of the above.
VangelV: the total is 2.3%.
"Since 1989, such expenses have totaled one percent or less of combined expenditures from the trust funds."
http://www.ssa.gov/oact/STATS/admin.html
One percent is considered excellent for administering such a large fund. Check the overhead for your investment accounts.
VangelV: the $6 billion tab is way too high given the fact that the administrators let Congress steal the excess contributions and replace them with IOUs.
That's not their responsibility, but that of the American people and their elected representatives. Don't you remember? America was at a crossroads. One candidate said to use the surpluses for tax cuts. The other said to keep it in a lock box. The first candidate said the tax cuts would pay for themselves, so the cinched the deal. How did that work out for you?
VangelV: Clinton and Gore took the SS surpluses and spent them.
That is incorrect. They used the surpluses to fully funded the Social Security Trust Fund in the last years. Gore said that if elected President, he would continue to do so. If we include intragovernmental transfers, they not only set money aside for Social Security, but had a bit left over, to boot.
On-Budget
1999, $1.9 billion
2000, $86.4 billion
http://www.cbo.gov/budget/data/historical.pdf
VangelV: But weren't we told that this would not happen until 2017? That is a huge error.
No. It wasn't an error. The payroll tax was purposefully cut temporarily due to the recession.
VangelV: The SS program is unsustainable.
Of course it's sustainable. Payroll taxes continue to be collected, and those can be used to pay current benefits. In 2036 or so, benefits will be automatically cut, unless the laws are changed. As very few Americans want to cut benefits, much less end the program, that will mean changes to the program, with a number of workable proposals on the table.
Ron H: And, as I explained already, this so called surplus resulted from accounting slight of hand involving intragovernmental transfers.
It's not slight of hand. The government calculates both total debt and public debt. By both measures, the Clinton Administration had a surplus. The paying down of public debt was highly beneficial, and would have insulated the U.S. from the most dire effects of the financial meltdown, and by cooling the economy would have slowed the growth of the bubble and perhaps have mitigated the entire problem.
Ron H: The CBO link you keep coughing up only shows public debt, not total national debt.
That is incorrect.
On-Budget
1999, $1.9 billion
2000, $86.4 billion
http://www.cbo.gov/budget/data/historical.pdf
But even if they had only reached balance after setting aside money for Social Security, it still would have been very beneficial to the United States and its financial condition.
Larry G: notes are bought and redeemed almost daily.
http://www.ssa.gov/oact/progdata/transactions.html
Of course they are.
notes are bought and redeemed almost daily.
http://www.ssa.gov/oact/progdata/transactions.html
sometimes hard to tell if you are just willfully ignorant or prefer propaganda.
Try reading the material on the link that you provided. There were no marketable securities bought and sold. All you had were accounting entries. The actuarial tests showed that the programs were in trouble and that major reforms were needed if SS and Medicare were to be returned to solvency. There is no evidence that voters or Congress have any intention of reforming the failed programs and certainly there isn't enough money and future contributions to make good the unfunded liabilities.
This from someone who "the US is bankrupt" even while it continues to sell bonds at near zero interest rates and has a AAA/AAA/AA+ credit rating.
First, you have more than $100 trillion in debt and unfunded liabilities, a $1.3 trillion deficit, and tax revenues of only $2.1 trillion. That makes the US bankrupt in any reasonable meaning of the term. Note that I did not say that there would be a default. It is easy to simply print all of the money to make good on the promises. But that kills the currency and is a default in real terms.
And the independent rating agencies do not have the US debt rated highly. Weiss has it just a bit above junk. Dagong Global Credit Rating had treasuries at single A.
That's called a deficit, and will eventually have to be brought under control, or it could lead to a serious cash crunch at some future date.
You are adding more than $1 trillion to the debt and more than $4 trillion to the unfunded liabilities. There is no way to bring anything under control because the revenues are too small.
Sure there are. A simple way is to simply cut benefits by 25% in 2036, which is already current law. Or, if you want to maintain benefits, they could raise the cap and increase the retirement age somewhat. Or increase payroll taxes a bit. Or all of the above.
How do you get to 2036 when the fund is out of money and running a deficit today? Remember that not too long ago idiots like you were telling us that the plans would not go negative until 2017.
"Since 1989, such expenses have totaled one percent or less of combined expenditures from the trust funds."
http://www.ssa.gov/oact/STATS/admin.html
Pay attention to your pal Larry, who pointed out that, "The formal name of SS is Old-Age, Survivors, and Disability Insurance (OASDI) program." The total administrative costs are 2.3%. I don't know about you but $6.5 billion seems like a lot of money for administrating a plan, particularly when the expenses incurred by regulatory compliance on the part of employers are not counted.
That's not their responsibility, but that of the American people and their elected representatives. Don't you remember? America was at a crossroads. One candidate said to use the surpluses for tax cuts. The other said to keep it in a lock box. The first candidate said the tax cuts would pay for themselves, so the cinched the deal. How did that work out for you?
I remember. Americans chose between two individuals unfit to be dog catchers. Both were for the warfare/welfare state. And Americans got what they deserved.
That is incorrect. They used the surpluses to fully funded the Social Security Trust Fund in the last years. Gore said that if elected President, he would continue to do so. If we include intragovernmental transfers, they not only set money aside for Social Security, but had a bit left over, to boot.
Please read Ron's comments and check his references. Your ignorance is astounding.
No. It wasn't an error. The payroll tax was purposefully cut temporarily due to the recession.
It makes little difference because the plan was going negative. That is what happens when you have fewer jobs and a greater portion are lower paying. Between them Clinton, Bush, and Obama killed off the middle class as they grew the size of the government to the current monstrous size. (Although you have to give Clinton credit because he tried to slow the growth and cut regulations.)
No. Payroll taxes are not enough to pay for the benefits. Given that there are no marketable securities in the trust funds the Treasury has to make up the shortfalls by borrowing at a time when deficits are out of line.
VangelV: The actuarial tests showed that the programs were in trouble and that major reforms were needed if SS and Medicare were to be returned to solvency.
Social Security can never be insolvent. Under current law, benefits will be automatically cut when the money runs out. The key is that most people don't want to see that happen, and so there is discussion of how to continue to program at current levels of benefits.
VangelV: First, you have more than $100 trillion in debt and unfunded liabilities, a $1.3 trillion deficit, and tax revenues of only $2.1 trillion. That makes the US bankrupt in any reasonable meaning of the term.
Under any reasonable definition, when people flock to buy your bonds at near zero interest rates, you are not bankrupt. You might say current debt levels are unsustainable, but that is a far cry from bankruptcy.
VangelV: Weiss has it just a bit above junk. Dagong Global Credit Rating had treasuries at single A.
Then the U.S. is not bankrupt by your own standards.
VangelV: You are adding more than $1 trillion to the debt and more than $4 trillion to the unfunded liabilities. There is no way to bring anything under control because the revenues are too small.
Of course you can bring it under control. You can cut benefits, or you can raise taxes, or both.
VangelV: How do you get to 2036 when the fund is out of money and running a deficit today?
Because people overpaid payroll taxes for decades in order to tide over the demographic bulge. If you decide to renege on these bonds, which would require legislation, then benefits would be cut today. Benefits paid would equal payroll taxes collected. It's a pay-as-you-go system.
VangelV: Pay attention to your pal Larry, who pointed out that, "The formal name of SS is Old-Age, Survivors, and Disability Insurance (OASDI) program." The total administrative costs are 2.3%.
Overhead for Disability Insurance is 2.3%, because of the cost of qualifying, overhead for just the Old Age and Survivors Insurance is 0.6%, the total for the entire program is 0.9%.
http://www.ssa.gov/oact/STATS/admin.html
VangelV: I don't know about you but $6.5 billion seems like a lot of money for administrating a plan,
In fact, 0.6% for a retirement plan is a low number.
VangelV: Americans chose between two individuals unfit to be dog catchers.
But only one advocated using the Social Security surpluses to cut income taxes.
You seem to be overly focused on just the negatives in the U.S. economy. But just a decade ago, the U.S. had structural budget surpluses. This is not an insoluble problem.
Social Security can never be insolvent. Under current law, benefits will be automatically cut when the money runs out.
First, the money has already run out but benefits have not been cut. Second, that is what insolvent means; you can't meet your promised obligations.
The key is that most people don't want to see that happen, and so there is discussion of how to continue to program at current levels of benefits.
Unfunded liabilities stand at $16 trillion. Benefits will have to be cut.
Under any reasonable definition, when people flock to buy your bonds at near zero interest rates, you are not bankrupt.
That is not true. You may be able to borrow for a while even though you can't pay off your present debts. The US is now in the position of the best looking horse in the glue factory. As the hot money and scared money flees to the perceived safety of treasuries the USD gets a bit stronger and the bond bubble will not be popped for a short period. But Obama and Bernanke are pissed because they want to be a part of the currency wars and wish to devalue just as quickly as they can. (As the Swiss just did.) The fact that in the face of a Euro collapse we only saw the index hit around 76 tells us what we need to know. It isn't good news except for those who have loaded up on the precious metals and PM stocks.
Then the U.S. is not bankrupt by your own standards.
Martin Weiss makes exactly the same claim that I do. But note that the fact that the US can print its own money to pay back bondholders means that there won't be a technical default. The default will come via inflation and a fall in the purchasing power.
You might say current debt levels are unsustainable, but that is a far cry from bankruptcy.
But it is bankruptcy if you are looking at payments that will not have real purchasing power.
Of course you can bring it under control. You can cut benefits, or you can raise taxes, or both.
Yes, you can cut benefits by more than 50% or double taxes. But those are not minor changes at the margin and constitute a default in anyone's books.
Because people overpaid payroll taxes for decades in order to tide over the demographic bulge.
But that money was already spent by Congress. The IOUs that replaced it can't be sold to raise money. You are back to having to increase taxes to get you to 2036. Nobody signed up for that.
If you decide to renege on these bonds, which would require legislation, then benefits would be cut today.
They are not bonds. They are IOUs. And they do not need any legislation because they are not worth anything.
Benefits paid would equal payroll taxes collected. It's a pay-as-you-go system.
This is a default. People got statements telling them how much they would get each month. When you tell them that they will get less you just defaulted. This is how a typical bankruptcy works. The assets are sold and the creators get the assets. In this case the assets are worthless.
Overhead for Disability Insurance is 2.3%, because of the cost of qualifying, overhead for just the Old Age and Survivors Insurance is 0.6%, the total for the entire program is 0.9%.
Read Larry's take on this. They are both part of the same plan. The cost is 2.3% PLUS the cost paid by the employees who have to ensure compliance. As usual, the government is not efficient and is spending more than %6 billion on administration. A private trustee institution could do the job for less than half the cost and would not let the funds be stolen by Congress.
But only one advocated using the Social Security surpluses to cut income taxes.
There is no material difference between Obama and McCain. They are both incompetent and economically illiterate fools. The only one who saw what was coming and warned voters was Ron Paul but the Republicans were too stupid to choose him as their candidate.
You seem to be overly focused on just the negatives in the U.S. economy. But just a decade ago, the U.S. had structural budget surpluses. This is not an insoluble problem.
The total US debt never went down. Its decline has been accelerating since Nixon severed the link to gold but its problems go back a lot further. The last president that was interested in following the constitution was Grover Cleveland. That was a long time ago.
VangelV: First, the money has already run out but benefits have not been cut.
The U.S. temporarily cut payroll taxes. Meanwhile, U.S. law requires that Social Security cover its deficits with the Trust Fund.
VangelV: Second, that is what insolvent means; you can't meet your promised obligations.
Under current law, Social Security is a "pay-as-you-go" system with a Trust Fund to manage cash flow and advanced funding.
VangelV: Unfunded liabilities stand at $16 trillion. Benefits will have to be cut.
Or taxes raised. Or a combination of both.
VangelV: You may be able to borrow for a while even though you can't pay off your present debts.
Then you're not bankrupt. You may be headed that way, but that's not what you said.
VangelV: But it is bankruptcy if you are looking at payments that will not have real purchasing power.
If you call a tail a leg, how many legs does a dog have?
VangelV: Yes, you can cut benefits by more than 50% or double taxes.
It would require about an increase above normal payroll taxes of about 1.5% each for employer and employee.
VangelV: But that money was already spent by Congress.
By the American people, you mean. Much of it was in tax cuts.
VangelV: You are back to having to increase taxes to get you to 2036. Nobody signed up for that.
Bush and many prominent Republicans said cutting taxes would pay for itself. How did that work out?
VangelV: They are not bonds.
"There are two types of special issues: short-term certificates of indebtedness and long-term bonds."
http://www.ssa.gov/oact/progdata/specialissues.html
VangelV: And they do not need any legislation because they are not worth anything.
The Trust Fund was established by the Social Security Act Amendments of 1939.
VangelV: This is a default. People got statements telling them how much they would get each month. When you tell them that they will get less you just defaulted.
No, it's not a default. The amount of benefits can be changed by law, as the courts have agreed.
VangelV: The cost is 2.3% PLUS the cost paid by the employees who have to ensure compliance.
Why do you keep saying 2.3%. That the cost of only the Disability Insurance portion of the program. The entire program has overall costs of 0.9%. There is cost to comply with any pension or investment plan.
VangelV: A private trustee institution could do the job for less than half the cost and would not let the funds be stolen by Congress.
That's why we suggested you check the overhead on your own retirement plan. Most plans are well over 1%.
VangelV: The total US debt never went down.
Public debt decreased dramatically, and there were structural surpluses that would have left the U.S. in a much stronger fiscal position to whether the financial meltdown.
" Try reading the material on the link that you provided. There were no marketable securities bought and sold"
what those "entries" show is that FICA revenues are converted into treasury securities when received and SS holds them and redeems them on a daily basis to pay benefits.
the IOUs include not only the 2.1 trillion surplus but every penny that comes into FICA - a trillion a year.
and when SS pays benefits - they redeem those securities.
your "marketable" securities is more ideological blather.
Just like pay-as-you-go - those securities were NEVER DESIGNED to be marketable from the get go.
That's just your idea....about how you think it ought to be.
...again.. more blather and more ignorance... about the verifiable facts...
you've demonstrated clearly despite your highminded rhetoric that you don't know bat guano from shinola about SS...just what you suck up from propaganda...
VangelV: Unfunded liabilities stand at $16 trillion. Benefits will have to be cut.
Or taxes raised. Or a combination of both.
The math does not work. The $16 trillion is just for SS. If you look at all debt and all unfunded liabilities you get more than $100 trillion in an economy that generates $2 trillion in total taxes where the government spends $3 trillion. The only way to 'fix' the problem is to destroy the currency by printing enough money to make the system 'viable'. But that destroys the money and things get worse.
When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany
This Time Is Different: Eight Centuries of Financial Folly
"The math does not work. The $16 trillion is just for SS. If you look at all debt and all unfunded liabilities you get more than $100 trillion in an economy that generates $2 trillion in total taxes where the government spends $3 trillion.
the math works just fine for SS and FICA.
It is much more problematical for the income-tax-funded side of the budget because you conveniently forget that almost a trillion of that 2.1 trillion is FICA tax - dedicated to SS.
it's the 1.3 trillion left that is the real problem because our non-FICA expenditures far exceed it.
trying to conflate FICA with Income Tax is what does not work unless one is into propaganda and misinformation, and obfuscation.
the budget that is in the most trouble by far is the income-tax-funded budget not SS.
your "marketable" securities is more ideological blather.
No. The actuaries made it very clear that they are non-marketable IOUs.
The cash generated by a surplus in any year is turned over to the Treasury in exchange for special Treasury securities. The Treasury uses the cash to finance the government’s ongoing activities. If the trust funds’ cash receipts are less than their outlays, the Treasury securities they hold are redeemed for cash as needed. The Treasury obtains that cash from other revenues or by borrowing from the public.
If the IOUs were anything but IOUs they would be sold and the proceeds would be used to pay for the benefits. But they have no value and the Treasury has to borrow the cash to make up the shortfall.
Trust funds and types of investments
The Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund comprise the Social Security trust funds. Both funds are managed by the Department of the Treasury through their Bureau of Public Debt. Since the beginning of the Social Security program, all securities held by the trust funds have been issued by the Federal Government. There are two general types of such securities:
Special issues—available only to the trust funds
Public issues—marketable Treasury bonds available to the public.
The trust funds now hold only special issues, but they have held public issues in the past.
Special issue types and properties
There are two types of special issues: short-term certificates of indebtedness and long-term bonds.
The certificates of indebtedness are issued on a daily basis for the investment of receipts not required to meet current expenditures, and they mature on the next June 30 following the date of issue.
Special-issue bonds are normally acquired only when special issues of either type mature on June 30. The bonds have maturities ranging from one to fifteen years.
The above properties of special issue securities are summarized in the following table.
Type of special issue Investment
frequency Maturity
Certificates of indebtedness Daily Next June 30
Bonds June 30 1 to 15 years
Special issue redemption rules
When special issues need to be redeemed prior to maturity, the securities are redeemed in order of
Earliest maturity date;
Lowest interest rate for securities with the same maturity date.
http://www.ssa.gov/oact/progdata/specialissues.html
... since you refuse to read and understand ... notice the word "daily basis".
The trust funds now hold only special issues, but they have held public issues in the past.
The fact remain the same. The securities are not marketable. When there is a shortfall they are 'redeemed' by having the treasury borrow the money. The same would be true if the charade were eliminated and the 'trustees' admitted that the cupboard is bare.
... since you refuse to read and understand ... notice the word "daily basis".
I read well, thank you. You have something that is called a security and matures that has no value. When there is a shortfall the securities are not sold to the public. The Treasury has to borrow money to make up the shortfall.
How is this different than not having anything in the SS trust fund?
" How is this different than not having anything in the SS trust fund? "
because the money that comes from FICA is real and not debt.
if you're worried that it gets traded for worthless IOUs... then why not keep the FICA revenues and not trade for securities?
how many entities that hold US Treasuries (of any kind) have not been able to "redeem" the for Cash?
ZERO!
you say we borrow to pay back SS.
why is that SS's fault?
If SS continues to generate 99% of the money it needs and you say the trust fund is broke and the securities are worthless IOUS...then why is that something that is wrong with FICA/SS?
for your same scenario - borrowing to pay bills...
is that what they are doing with Medicare Part B and DOD?
are they doing it worse than with SS since all the are really doing with SS is "topping" it off because of the temporary FICA tax reduction.
you focus on FICA/SS when the problem on all counts in on the income-tax side and much more a problem with Part B, MedicAid and DOD.
why do you say SS is THE problem when it's not?
if you're worried that it gets traded for worthless IOUs... then why not keep the FICA revenues and not trade for securities?-Larry
Because 100%+ of all FICA revenues are now being spent on current beneficiaries. Those worthless IOU's are now making up the difference and guess who's covering the worthless IOU's? Um...that would be the 50% of American workers who actually pay any federal income tax.
why do you say SS is THE problem when it's not?-Larry
When total expenditures eclipse total revenue SS is a problem. As has been repeatedly pointed out, the trust fund, consists primarily of IOU's. Why should current and future generations be responsible for the profligate spending of prior generations?
Of course the founders (especially Jefferson), realized this when they prophesied each generation would construct their own government regardless of the dictates of prior generations.
if you're worried that it gets traded for worthless IOUs... then why not keep the FICA revenues and not trade for securities?-Larry
Because 100%+ of all FICA revenues are now being spent on current beneficiaries. Those worthless IOU's are now making up the difference and guess who's covering the worthless IOU's? Um...that would be the 50% of American workers who actually pay any federal income tax.
was that not a surplus generated by FICA rather than a deficit?
has the US not paid any treasury notes?
why do you say SS is THE problem when it's not?-Larry
When total expenditures eclipse total revenue SS is a problem. As has been repeatedly pointed out, the trust fund, consists primarily of IOU's. Why should current and future generations be responsible for the profligate spending of prior generations?
REALLY? how about the other parts of the budget that ECLIPSE SS?
do you mean for the income-tax side of the budget?
I agree. So why are you focused on the smallest of the problems?
Of course the founders (especially Jefferson), realized this when they prophesied each generation would construct their own government regardless of the dictates of prior generations.
yadda yadda blather blather...
SS is not a problem compared to the other problems.
we have a 1.5T deficit - an annual structural deficit that has nothing to do with SS and your solution? kill SS?
yepper.. makes sense, eh?
SS has a relatively MINOR deficit right now almost entirely due to the temporary 2% FICA Tax while the rest of the budget is 1.5T in deficit.
yet you say it's SS that needs cutting?
hells bells. if you CUT SS benefits, you'll actually cause another surplus....
cutting SS does absolutely nothing for the part of the budget that is 1.5T in the hole.
it must be in your DNA... it's just plain dumb.... to look at the 1.5T and then point to SS as the culprit.
it's quite clear you are a charter member of the "don't confuse me with the facts" club.
was that not a surplus generated by FICA rather than a deficit?-Larry
Was, is the operative word here, Whatever happened to that surplus? Umm..it was spent and replaced with bonds. However, when those bonds are redeemed to cover current outlays taxes must be collected to cover the cost.
it must be in your DNA... it's just plain dumb.... to look at the 1.5T and then point to SS as the culprit.
it's quite clear you are a charter member of the "don't confuse me with the facts" club.-Larry
Where did I ever say SS is the cause of the rest of the federal budget deficit?
Which facts am I ignoring?
SS is currently operating in deficit, the trust fund is made up of securities (IOU's) and bonds, Those paying federal income tax are on the hook for these obligations, all previous surpluses have been spent by our government, to make SS solvent we need to raise the wage cap, FICA rate, retirement age or cut benefits. Larry, those are the facts, and that is why SS is indeed a ponzi scheme.
was that not a surplus generated by FICA rather than a deficit?-Larry
Was, is the operative word here, Whatever happened to that surplus? Umm..it was spent and replaced with bonds. However, when those bonds are redeemed to cover current outlays taxes must be collected to cover the cost.
so? the same thing is true of ALL outlays and the part that is owed SS is minuscule to the others so why would you cut SS... FIRST?
it must be in your DNA... it's just plain dumb.... to look at the 1.5T and then point to SS as the culprit.
it's quite clear you are a charter member of the "don't confuse me with the facts" club.-Larry
Where did I ever say SS is the cause of the rest of the federal budget deficit?
you seem to be prioritizing it FIRST when it is the smallest of the deficits by far and can be fixed immediately by restoring the 2% FICA cut and can be put back to no deficit at all with one of more than 30 options.
So we can fix SS with relatively minor fixes yet you prioritize SS for cuts... why?
Which facts am I ignoring?
see above.
SS is currently operating in deficit, the trust fund is made up of securities (IOU's) and bonds, Those paying federal income tax are on the hook for these obligations, all previous surpluses have been spent by our government, to make SS solvent we need to raise the wage cap, FICA rate, retirement age or cut benefits. Larry, those are the facts, and that is why SS is indeed a ponzi scheme.
taxpayers are ALSO on the hook for 1.5T which is way, way more than the relatively small and temporary SS deficit - that has KNOWN fixes.
a ponzi scheme is one in which everyone loses everything...
that's simply not the case with SS.
SS has made changes BEFORE - LIKE pushing the retirement age - as we should as life expectancy extends and re-setting the COLA which tracks faster than inflation..
calling SS a ponzi scheme in the light of the above facts just illustrates your proclivity to propaganda....
if SS is a ponzi scheme then what is Medicare Part B and D?
how come I don't hear the ponzi scheme from you for those ?
far, far more tax money goes to pay for those programs than SS...
the idea that the SS surplus is "gone" is ludicrous when just considering the facts:
http://www.ssa.gov/oact/progdata/investheld.html
every day.. FICA Taxes are exchanged for special issue treasury bonds and every day older securities are redeemed - with interest to pay SS recipients.
there is no "fund"
but there are indeed IOUs.
Savings Bonds are IOUs.
in your own 401K - you likely have some percentage of treasury IOUs.
China and Japan hold IOUs.
as far as I know, the US has NEVER not paid cash whenever they have been presented.
SS will be the LEAST of our problems if the govt decides it will no longer honor the securities.
No responsible Congressman would vote to do that and no President would allow the Treasury to do that.
you seem to think that we'd stop paying ALL securities.
Well.. if we did that - we'd no longer have a 14T debt - right?
and we'd no longer be able to sell treasury notes - no one would buy them.
but FICA - would continue to generate a trillion dollars a year and that money would then just go directly to recipients and not get converted into treasury notes at all.
yes.. they'd be down 25% but that would be the LEAST of our problems once we defaulted on treasury notes.
you have a doomsday scenario only a rabid libertarian having a wet dream would love...
it won't happen in this world.
if SS is a ponzi scheme then what is Medicare Part B and D?-Larry
Do Medicare Part B and D promise benefits that are unsustainable? Are there trust funds for these programs with worthless IOU's? Are my children and grandchildren expected to pay a higher portion of their income to these programs than preceding generations? If the answer to any or all of these questions is yes, than yes, they too are ponzi schemes.
how come I don't hear the ponzi scheme from you for those ?-Larry
Because I thought we were talking about SS being a pyramid/ponzi scheme. Why change the topic?
a ponzi scheme is one in which everyone loses everything... -Larry
Nice try, many early investors may actually be greatly enriched if the scheme can be continued long enough(as is the case with SS)
Where did I ever say SS is the cause of the rest of the federal budget deficit?
you seem to be prioritizing it FIRST when it is the smallest of the deficits by far and can be fixed immediately by restoring the 2% FICA cut and can be put back to no deficit at all with one of more than 30 options.
-Larry
I haven't prioritized anything, I've only responded to the original post and comments of others. You claim SS deficits can be "fixed immediately" with 30 different options. Larry it is precisely each and every one of those options that make SS a ponzi scheme.
Do Medicare Part B and D promise benefits that are unsustainable?
are you kidding? both of them offer fire sale insurance at 75% off and both will double every decade in tax expenditures.
Part B right now consumes 210 billion in in 10 years will require more than 400 billion in tax dollars.
in 10 years... SS will still be almost level...requiring virtually NO tax dollars.
Are there trust funds for these programs with worthless IOU's?
yes they BOTH have trust funds and both trust funds need tax hundreds of billions of tax dollars.
Are my children and grandchildren expected to pay a higher portion of their income to these programs than preceding generations? If the answer to any or all of these questions is yes, than yes, they too are ponzi schemes.
did you see the part about them increasing almost exponentially - and YES your kids will be paying for them?
how come I don't hear the ponzi scheme from you for those ?-Larry
Because I thought we were talking about SS being a pyramid/ponzi scheme. Why change the topic?
because in terms of tax dollars required to subsidize the program SS requires almost none compared to these programs.
these programs eclipse the outlays for SS.
a ponzi scheme is one in which everyone loses everything... -Larry
Nice try, many early investors may actually be greatly enriched if the scheme can be continued long enough(as is the case with SS)
ha ha ha.. the "early" investors are in the ground guy..
it's a pay-as-you-go system JUST LIKE Medicare Part B is but Part B needs 210 billion of tax dollars right now today whereas SS needs virtually none in comparison.
Where did I ever say SS is the cause of the rest of the federal budget deficit?
you seem to be prioritizing it FIRST when it is the smallest of the deficits by far and can be fixed immediately by restoring the 2% FICA cut and can be put back to no deficit at all with one of more than 30 options.
-Larry
I haven't prioritized anything, I've only responded to the original post and comments of others. You claim SS deficits can be "fixed immediately" with 30 different options. Larry it is precisely each and every one of those options that make SS a ponzi scheme.
these options are the same options that you'd see in any private insurance that also operates pay-as-you-go.
In your mind - if the insurance company raises the premium or reduces the benefits to keep it solvent - it's a "ponzi" scheme.
nice try but still the same old propaganda...
you simply either do not understand pay-as-you-go programs or you just refuse to admit that's how insurance works...
every year - the various insurance that you pay for likely has changes in premiums and/or benefits - they have to.
They were never pre-funded and neither was SS because both of them were designed from the start to be pay-as-you-go programs.
the two major differences are:
1. - FICA is mandatory and private insurance is not
2. - private insurance can and does change premiums and benefits on a continuous basis to remain solvent and SS cannot make such changes without approval from Congress.
your view seems to be that SS cannot be fixed by altering premiums or benefits but even if it can - it's a ponzi scheme.
by your definition every insurance sold is a ponzi scheme.
because the money that comes from FICA is real and not debt.
OK. I'll play. We have two scenarios.
In your scenario there is a trust fund that has $100 in contributions coming in and $110 in payments going out. Your 'trust fund' has IOUs that have no market value and can't be sold. To make up the difference the Treasury borrows $10 and 'retires' an IOU.
In my scenario there is a trust fund that has $100 in contributions coming in and $110 in payments going out. My 'trust fund' has no assets. To make up the difference the Treasury borrows $10.
In both cases the Treasury had to borrow $10. In both cases there are no marketable assets that can be sold to make up the shortfall. So what is the difference other than in your scenario everyone pretends that the IOUs have a value?
if you're worried that it gets traded for worthless IOUs... then why not keep the FICA revenues and not trade for securities?
There is no exchange for marketable securities. There is only money going out as it is being replaced by IOUs that have no market value.
how many entities that hold US Treasuries (of any kind) have not been able to "redeem" the for Cash?
George Orwell would be proud. US Treasuries are marketable. You can go to the bond market and sell them. The IOUs can't be sold on any market and have no market value.
If you can't understand the difference than you are stupider than I think. If you understand but still deny the difference then you are just dishonest.
I follow your scenario(s) but you're talking about $10 for SS verses $500 for Medicare Part B, $1000 for MedicAid and $1000 for DOD.
so you tell me why you're worried more about the $10...
why do you presume that if the govt can't pay all of it's bills that it shorts SS first?
why do you focus on SS when we have a 1.5T structural deficit which is a far bigger threat to us fiscally?
you say we borrow to pay back SS.
why is that SS's fault?
The trustees are not doing their duty. They should have resigned rather than let Congress play the game and deceive ordinary Americans who were too naive to question.
If SS continues to generate 99% of the money it needs and you say the trust fund is broke and the securities are worthless IOUS...then why is that something that is wrong with FICA/SS?
The unfunded liabilities are at $16 trillion. Cash flows are negative. That means that the plan is not viable. End of story. A private plan with the same characteristics would have been shut down because it was not solvent. The managers who stole the money would be in jail.
has the US not paid any treasury notes?
It does not have to. When I need to sell a treasury note I can go to the market and raise the money that I need. That can't happen with the IOUs because they are not marketable Treasury Bonds. They are IOUs.
If you can't understand the difference than you are stupider than I think. If you understand but still deny the difference then you are just dishonest.
let me ask... if you are saying that the US CAN SELL marketable securities to cover it's debt then what precludes them from selling more treasuries to give cash to SS when they redeem their "non-marketable" securities?
the primary reason they are not marketable is because SS is allowed to redeem them at any time for full cash value...but the govt can surely sell more treasury notes and move that cash to SS - no?
so? the same thing is true of ALL outlays and the part that is owed SS is minuscule to the others so why would you cut SS... FIRST?
I would shut down or restructure all insolvent programs and would stop stealing contributions. But given the more than $100 trillion in debt and unfunded liabilities restructuring is not going to work. The choice is between saving the programs or the currency.
I would shut down or restructure all insolvent programs
since both Medicare Part B and D are funded from income taxes as is DOD and Homeland Security - do you consider all of them "insolvent"?
how do you determine "insolvency" for programs that are funded from income taxes?
"Ron H: And, as I explained already, this so called surplus resulted from accounting slight of hand involving intragovernmental transfers.
It's not slight of hand. The government calculates both total debt and public debt. By both measures, the Clinton Administration had a surplus."
"Ron H: The CBO link you keep coughing up only shows public debt, not total national debt.
That is incorrect.
On-Budget
1999, $1.9 billion
2000, $86.4 billion
http://www.cbo.gov/budget/data/historical.pdf"
And there's that same lame CBO link again, that doesn't show total national debt, only debt held by the public!
The budget surplus shown on this page results from intragovernment transfers being called income. That is, by any definition, accounting slight of hand.
I can't believe you are really this obtuse. If you are, then I'm sorry for you. If not, then you are an obnoxious liar.
You have been provided with links that demonstrate your errors. You need to either read them and explain why the information there is wrong, or admit that the information you keep presenting is incomplete, and not adequate to support your conclusion.
Or, you could just admit that you are a liar, and we could be done with it.
zachy "No. It wasn't an error. The payroll tax was purposefully cut temporarily due to the recession."
And how has that worked out for you?
Is this tax cut one you approve of?
You obviously think the Bush tax cuts were a mistake. How about this one?
I follow your scenario(s) but you're talking about $10 for SS verses $500 for Medicare Part B, $1000 for MedicAid and $1000 for DOD.
so you tell me why you're worried more about the $10...
I am not worried 'more.' I point out that with a deficit of more then $1 trillion and payroll taxes being so high already there is no way to make good on the SS promises given the $16 trillion in unfunded liabilities. That makes SS insolvent, which is what this thread is about.
I do not dispute that Medicare is in even more trouble. I do not argue about that because this thread is titled, "Social Security IS a Pyramid Scheme".
let me ask... if you are saying that the US CAN SELL marketable securities to cover it's debt then what precludes them from selling more treasuries to give cash to SS when they redeem their "non-marketable" securities?
the primary reason they are not marketable is because SS is allowed to redeem them at any time for full cash value...but the govt can surely sell more treasury notes and move that cash to SS - no?
You don't understand. The IOUs can't be sold and have no market value. They can only be 'redeemed' by new borrowing activities from the Treasury. That puts the 'trust fund' in the same position as one that has nothing in it.
Why you refuse to admit this is a question that only you can answer.
since both Medicare Part B and D are funded from income taxes as is DOD and Homeland Security - do you consider all of them "insolvent"?
No. Medicare is insolvent because it can't meet its promises. But DOD and Homeland Security have not made any promises that can't be met by cutting their budgets by 90%.
how do you determine "insolvency" for programs that are funded from income taxes?
You don't because they have not made promises that require future funding at the same levels. As I wrote above, you can simply cut their budgets to the bone and do not need to run a deficit.
I am not worried 'more.' I point out that with a deficit of more then $1 trillion and payroll taxes being so high already there is no way to make good on the SS promises given the $16 trillion in unfunded liabilities. That makes SS insolvent, which is what this thread is about.
I do not dispute that Medicare is in even more trouble. I do not argue about that because this thread is titled, "Social Security IS a Pyramid Scheme".
except that is clearly is not if about a trillion dollars a year continues to fund it successfully with small deficits while the other entitlements are in much worse condition.
the "pyramid / ponzi scheme" is more aptly applied to programs like Medicare Part B which requires 75% taxpayer funding whereas SS - barely requires anything from income taxes.
And SS has known fixes to bring it back to not only solvency but 100 year solvency.
What is more likely - for Congress to choose the options to make it solvent or to refuse to fund it from income taxes?
Isn't it most likely that Congress will choose one or more options to make it solvent and then get on with the task of figuring out what to do with those programs that are in 10 times worse condition?
I keep asking...
are you opposed to the CONCEPT of payroll taxes and FICA/SS or are you truly concerned about it's finances?
The "fix" for Medicare Part B will be what?
they'll have to raise the premiums and cut the benefits - right?
so what is that a viable approach for Medicare Part B but not SS?
the only thin I get out of this is that you're opposed to payroll taxes/FICA MORE than you care about the problems with Medicare Part B because you and the folks who entitle this thread don't say "Medicare Part B is a Pyramid Scheme".
this is how the right wing frames the issue.. and you play along with it even though the facts clearly demonstrate that whatever "fix" is chosen for Medicare Part B.. will also work for SS.
but you keep going right back to SS like a dog on a bone...
You don't understand. The IOUs can't be sold and have no market value. They can only be 'redeemed' by new borrowing activities from the Treasury. That puts the 'trust fund' in the same position as one that has nothing in it.
I admit that but why won't you admit that the govt can sell as many marketable securities as the market will bear and use that to buy back the non-marketable IOUs?
I can't believe you are really this obtuse. If you are, then I'm sorry for you. If not, then you are an obnoxious liar.
I think that it is a combination of the two. But I do think that he is starting to get it and is looking for a way out of the hole he created for himself. Look for the use of more language that mangles the meaning of the words being used and more diversions and lousy logic.
the "pyramid / ponzi scheme" is more aptly applied to programs like Medicare Part B which requires 75% taxpayer funding whereas SS - barely requires anything from income taxes.
SS has unfunded liabilities of $16 trillion. That makes it a Ponzi scheme.
I admit that but why won't you admit that the govt can sell as many marketable securities as the market will bear and use that to buy back the non-marketable IOUs?
Government is not 'SELLING' IOUs. It is taking the money and leaving behind IOUs. There is a huge difference that you are overlooking.
SS has unfunded liabilities of $16 trillion. That makes it a Ponzi scheme
Medicare Part D has bigger unfunded liabilities than SS.
ALL INSURANCE has unfunded liabilities .. at some point
that's why they increase their premiums and/or change benefits.
the whole unfunded liability blather is just horse manure.
any program that operates actuarially - looks ahead - and if they see deficits they increase premiums or reduce benefits.
none of them are called ponzi schemes because they perform the analysis to see the potential deficits nor take action to prevent them.
continuing to say this is just plain willful ignorance of the realities - a purposeful adherence to a propaganda narrative.
Government is not 'SELLING' IOUs. It is taking the money and leaving behind IOUs. There is a huge difference that you are overlooking.
what the hell do you think marketable treasury security are?
what do you think the Chinese are holding?
are you daft?
when they sell those securities to the Chinese guy - they're getting CASH to spend....
and that cash can and is spent on DOD, Medicare Part B AND a very small amount on SS to redeem those non-marketable securities.
As long as we can sell securities we can redeem the non-marketable ones with CASH.
"let me ask... if you are saying that the US CAN SELL marketable securities to cover it's debt then what precludes them from selling more treasuries to give cash to SS when they redeem their "non-marketable" securities?
the primary reason they are not marketable is because SS is allowed to redeem them at any time for full cash value...but the govt can surely sell more treasury notes and move that cash to SS - no?"
I have promised myself I wouldn't respond to every stupid thing you say, because if I do, I won't have time to do anything else.
In this case I just can't help myself.
Yes, the US can now sell more marketable treasuries to cover its debts, up to a limit of $16.something trillion. That is exactly the problem. The reason the national debt is so high, is because Treasury keeps issuing new debt in the form of treasury bonds.
You can't suggest borrowing to pay SS shortfalls, and demand the national debt be paid off at the same time. Get a clue...please!
"As long as we can sell securities we can redeem the non-marketable ones with CASH."
It is encouraging that after several months, and hundreds, if not thousands of blog comments about SS, you finally seem to be dimly aware that there are marketable and non-marketable securities, and that those in the SS trust fund are non-marketable.
Yes, treasury securities can be sold until no one will buy any more, or until the service on that debt consumes the entire federal budget.
Either of those means the end of the world as we know it.
The Chinese have been heard grumbling that they are losing confidence, and would rather invest elsewhere.
I would mention the federal debt limit, but after the most recent fiasco, it's apparent that its only function is to provide a stage prop for posturing politicians.
of ALL of the debt that you fret about, SS is the smallest and most easily fixed.
all of this fru fru about SS and not a word about selling treasury notes to pay for DOD, Medicare Part B, C, D, Homeland Security, etc.
why? Because your real objections are to the payroll tax but you won't come out and admit it.
your focus on this is almost SOLELY on the single program that is the least of the deficit problems, most easily fixed, and the "deficit" is really the surplus it originally created.
So while the other programs that have put us 1.5T in the hole continue to expand and consume more taxes and accumulate more debt - you focus on the one program that has - to this point - actually stayed within it's funding parameters for most of it's 65 year history.
the only "dimwit" here are the ideologues who are clearly opposed to the CONCEPT of SS and are willing to use propaganda, misinformation, and outright lies to portray it's status as something other than the realities.
and in the process revealed just how ignorant the ideologues are about simple verifiable facts about the trust fund and how it operates.
the thousands of posts have one by one knocked down the lies and propaganda that were foisted on us and what we are left with at the ed of the day is the dogged but dumb insistence that SS is THE problem and all the evidence and facts brought to this prove otherwise.
the "don't mess my mind up with the facts" crew have also demonstrated why they are basically fringe-thinking zealots that not even Ron Paul agrees with.
Even Ron Paul's 5-year balanced budget plan REFORMs SS rather than gets rid of it.
the solution for SS is the SAME SOLUTION that will be done for Medicare Part B and D (and other entitlements) and that is increase premiums and reduce benefits but the changes for SS in comparison to Medicare Part B are small and will not affect people in near the same way that those changes will affect - the very same people who also use Medicare Part B.
ALL INSURANCE has unfunded liabilities .. at some point
When an insurance company no longer has the assets to cover the expected payments it has to make the plan whole again or it is shut down. There is no way to find the $16 trillion that it would take to make SS viable and no plan to take all those IOUs and replace them with marketable treasuries as is required.
what the hell do you think marketable treasury security are?
what do you think the Chinese are holding?
The Chinese are holding USTs. If they want to they can go into the bond market and sell them. The IOUs can't be sold in any market because they are IOUs, not bonds. How daft can you be?
when they sell those securities to the Chinese guy - they're getting CASH to spend....
and that cash can and is spent on DOD, Medicare Part B AND a very small amount on SS to redeem those non-marketable securities.
As long as we can sell securities we can redeem the non-marketable ones with CASH.
It is true that when a treasury bond is sold the Treasury gets cash. That cash can be used to finance government activities. The insurance company that buys that bond gets interest. If it needs to make some unexpected payments it can go to the bond market and sell the bond to someone else for cash.
It is true that when an IOU is issued to the SS Trust Fund the Treasury gets the cash that came from excess SS contributions. It is also true that the cash can be used to finance government activities. But when the SS trustees find that they are short and need to raise money they can't sell the IOUs because there is no market for them. They have to go to the Treasury and ask that it give them the amount that they are short. Treasury does this by borrowing money.
In the first case the borrower has a security that is easily converted to cash in the open market. In the second there is no marketable security. The IOU can only be redeemed if the Treasury is able and willing to borrow new money from someone in the open markets or resort to the printing presses and devalue the currency.
The fact that you pretend that there is no difference between an IOU and a marketable bond tells us all we need to know about your integrity.
am I now to understand that he is stupider than the world's stupidest person?
As illogical as this answer may seem the answer is YES!!!
mike k: Because 100%+ of all FICA revenues are now being spent on current beneficiaries.
That's only because of the temporary payroll tax holiday due to the recession.
mike k: Why should current and future generations be responsible for the profligate spending of prior generations?
That's a good point. After having enjoyed the tax cuts based on surpluses in payroll taxes, instead of leaving it to the next generation, perhaps you should consider raising your own taxes now. At least you should pay back the Trust Fund what you borrowed.
mike k: Are my children and grandchildren expected to pay a higher portion of their income to these programs than preceding generations?
Great point again. It makes much more sense for your own generation to rectify the situation. As nearly everyone agrees they want to keep Social Security, that means additional taxes, and maybe some adjustments to the program.
VangelV: In my scenario there is a trust fund that has $100 in contributions coming in and $110 in payments going out. My 'trust fund' has no assets. To make up the difference the Treasury borrows $10.
Well, what actually happened was that you went to the Trust Fund and borrowed $10 saying you would pay it back later. If you decide to renege, then that just means Social Security will only pay $100 instead of $110. Your mom will just have to understand that you spent the money when you got your tax cut.
VangelV: There is only money going out as it is being replaced by IOUs that have no market value.
According to law, they are backed by the full faith and credit of the United States. They are promises, whatever that's worth.
Zachriel: http://www.cbo.gov/budget/data/historical.pdf
Ron H: And there's that same lame CBO link again, that doesn't show total national debt, only debt held by the public!
It shows both the on-budget and off-budget deficit/surplus. For instance, it shows that after putting money in the Trust Fund cookie jar, in 2000 the U.S. still had $86 billion left over. If we only include the off-budget deficit/surplus, which is what most economists mean by deficit/surplus, the surplus in 2000 of $236 billion. In other words, the U.S. ran a surplus by on-budget and off-budget.
Ron H: You obviously think the Bush tax cuts were a mistake. How about this one?
The U.S. economy needs a much strong stimulus. As that is unlikely to occur for political reasons, the U.S. economy will continue to struggle for some time. Typically, it takes 5-7 years to recover from a financial meltdown.
VangelV: It is taking the money and leaving behind IOUs. There is a huge difference that you are overlooking.
Which shows the problem isn't with Social Security, but the rest of the budget which is relying on payroll taxes to keep income taxes low.
That's only because of the temporary payroll tax holiday due to the recession.
No it isn't. The SS contributions are down because millions of jobs have been lost and the distribution of pay is different. When a fired machinist or an oil rig worker goes to work delivering pizza the number of jobs does not change but the contributions to SS fall sharply. More lower paying jobs and a big rise in the number of people collecting have a way of bringing forward the day of reckoning.
After having enjoyed the tax cuts based on surpluses in payroll taxes, instead of leaving it to the next generation, perhaps you should consider raising your own taxes now. At least you should pay back the Trust Fund what you borrowed.
There are so many things wrong with your statement that I have trouble figuring out where to begin. But let us give it a shot.
First, Americans have not 'enjoyed' tax cuts. Their tax burden is higher today than it has been for quite some time. In the old days Americans had high marginal tax rates but also had many deductions that kept their burden manageable. Their property taxes were low. They did not have to pay tens if not hundreds of thousands more so that their kids would be educated in a decent school. They were not hit by hundreds of special fees and charges that were hidden in utility bills, licensing applications, sales receipts, etc. That was why a family could do very well by having one wage earner working around 40 hours per week. Try that today and see how far it gets you.
Second, our earnings belong to us, not some future generation. People own their own bodies and earnings that are produced by those bodies belong to them, not future generations and certainly not the government.
Third, American taxpayers and workers did not rob the trust funds; the politicians did. Punishing people who had already contributed by asking them to pay back what was stolen to them tells us just what kind of screwed up authoritarian ideology you believe in.
I could say more but I doubt that an authoritarian would understand pro-liberty arguments based on principle.
Our President and Chief Politician said it all: "the Congress must pass the INCREASE IN DEBT LIMIT Bill, or the Social Security Checks might not go out on time" !!
Well, what actually happened was that you went to the Trust Fund and borrowed $10 saying you would pay it back later. If you decide to renege, then that just means Social Security will only pay $100 instead of $110. Your mom will just have to understand that you spent the money when you got your tax cut.
There was no tax cut. Congress stole the excess contributions that workers made to fund SS and used it to buy votes. Now that the day of reckoning has come authoritarians like you come out of the woodwork to blame the victims and defend the thieves.
According to law, they are backed by the full faith and credit of the United States. They are promises, whatever that's worth.
They are IOUs. Not securities. The fact that Congress has been arguing that the IOUs had value tells us that this was all a DELIBERATE scam.
The U.S. economy needs a much strong stimulus. As that is unlikely to occur for political reasons, the U.S. economy will continue to struggle for some time. Typically, it takes 5-7 years to recover from a financial meltdown.
You can't recover unless you allow the malinvestments to be liquidated.
All a bailout does is prop up companies that have no business existing and government jobs that should never have been created. Well, that is not exactly true. A bailout also helps to make the middle men who handle transactions and the politically connected to get much richer while taxpayers and consumers get stiffed. But there is a bright side to it. Those of us who bet on the stupidity on government also get much richer as our anti-currency assets explode in real value and our after-tax purchasing power goes up substantially.
VangelV: The SS contributions are down because millions of jobs have been lost and the distribution of pay is different.
Yes, those are also important factors.
VangelV: First, Americans have not 'enjoyed' tax cuts. Their tax burden is higher today than it has been for quite some time.
Federal taxes are at their lowest level as a percentage of GDP in 60 years.
http://blogs.reuters.com/felix-salmon/files/2010/12/US_TAXGDP1210.gif
VangelV: Second, our earnings belong to us, not some future generation.
You have it backwards. Part of your earnings go to the previous generation in the form of Social Security and Medicare. As you are borrowing to make those payments, you are leaving the repayment of your mom's retirement to your children.
VangelV: Third, American taxpayers and workers did not rob the trust funds; the politicians did.
Well, admittedly, more people voted for the other guy, but due to peculiarities in your electoral system, Bush became President in 2000. And to be fair, even though he didn't get the most votes, he did get a heck of a lot of them. And he promised to use the Social Security surpluses to cut income taxes, and so he did.
Which shows the problem isn't with Social Security, but the rest of the budget which is relying on payroll taxes to keep income taxes low.
Income taxes are not low. Half of Americans pay no income tax and more than 70% of all taxes come out of the top 10% of wage earners even though that group earns less than 50% of the total income.
It is government spending that is too high. You have lifeguards earning $150 K and policemen making $250K a year. You have bridges to nowhere and subsidies for job killing industries like solar or wind generation. You fund meaningless 'scientific' studies that tell us nothing about the real world. It is all a scam where the parasite class gets to screw over the taxpayer. But that game is in extra innings and the pitcher is getting tired. Eventually the market will set things right and when it does both the idiot taxpayers who let this happen and the greedy parasites who thought that the party would never end will get what they deserve.
VangelV: There was no tax cut.
Sure there were.
Economic Growth and Tax Relief Reconciliation Act of 2001
Jobs and Growth Tax Relief Reconciliation Act of 2003
VangelV: They are IOUs. Not securities.
Yes, and by law, they are backed by the full faith and credit of the United States. For what that's worth.
VangelV: You can't recover unless you allow the malinvestments to be liquidated.
The problem is that you can't just renege on millions of contracts without throwing markets into turmoil. Generally what happens after a financial meltdown is a period of deleveraging.
VangelV: All a bailout does is prop up companies that have no business existing and government jobs that should never have been created.
Yes, they should have been put in receivership (but we can only imagine the uproar over government takeovers). The problem was that there was no mechanism for winding down such large entities. The idea was to leave the reforms to later, once the markets stabilized, but since then, the American political system has been shown to be dysfunctional.
VangelV: They are IOUs. Not securities.
Zachriel: Yes, and by law, they are backed by the full faith and credit of the United States. For what that's worth.
That wasn't clear. They are special-issue securities. Yes, like all securities, they are IOUs, in this case, backed by the full faith and credit of the United States (AAA,AAA,AA+).
Yes, and by law, they are backed by the full faith and credit of the United States. For what that's worth.
That wasn't clear. They are special-issue securities. Yes, like all securities, they are IOUs, in this case, backed by the full faith and credit of the United States (AAA,AAA,AA+).
What is clear is that they are not marketable. Which means that they can only be redeemed as long as investors want to lend to a heavily indebted government or if the government resorts to money printing. What is also clear is that there is no difference between a trust fund with these IOUs and one that has no IOUs. In both cases recipients need the Treasury to go out and borrow more money to keep its promises.
Federal taxes are at their lowest level as a percentage of GDP in 60 years.
Of course they are. There was a huge crash that created massive losses that can be written off for years to come. There are no major trading gains that produce capital gains and both individuals and corporations have plenty of write-offs that will cut their tax bills for much of the next decade.
You have it backwards. Part of your earnings go to the previous generation in the form of Social Security and Medicare.
Those people paid into the SS program and are entitled to get benefits as long as it is solvent.
As you are borrowing to make those payments, you are leaving the repayment of your mom's retirement to your children.
Which is wrong. That is why the insolvent plans need to be wound up and all the assets sold off. The proceeds can be used to pay off creditors who can plan for their own retirement without burdening others.
Well, admittedly, more people voted for the other guy, but due to peculiarities in your electoral system, Bush became President in 2000. And to be fair, even though he didn't get the most votes, he did get a heck of a lot of them. And he promised to use the Social Security surpluses to cut income taxes, and so he did.
First presidents from both parties robbed the 'trust funds.' Second, it is Congress that is responsible for spending, not the President. Third, voters were not told that both sides would rob the trust funds so nobody voted for the thefts.
Economic Growth and Tax Relief Reconciliation Act of 2001
Jobs and Growth Tax Relief Reconciliation Act of 2003
Tax revenues went up after the passage of that legislation as companies and families paid more of their earnings to various federal, state, and local governments.
And you are forgetting that there should be almost no federal income tax paid because the Constitution does not give the federal government the authority to do very much. About 90% of all federal employees need to be fired and most federal activities need to be wound down, including the SS and Medicare programs.
Yes, and by law, they are backed by the full faith and credit of the United States. For what that's worth.
As Greece, Italy, and Portugal are showing, when the chips are down it is not worth very much.
The problem is that you can't just renege on millions of contracts without throwing markets into turmoil. Generally what happens after a financial meltdown is a period of deleveraging.
Bankruptcy is how you handle promises that can't be met. Unless you let the markets clear you will never recover and the economy will muddle along until it collapses again.
Yes, they should have been put in receivership (but we can only imagine the uproar over government takeovers).
Who said anything about government takeovers? You let the bankruptcy laws handle the problem and let the assets go into the hands of creditors and solvent competitors.
The problem was that there was no mechanism for winding down such large entities.
Of course there is. This is what bankruptcy courts do.
The idea was to leave the reforms to later, once the markets stabilized, but since then, the American political system has been shown to be dysfunctional.
The idea was to try to buy votes. Period. That idea seems to have failed just as was predicted.
" When an insurance company no longer has the assets to cover the expected payments it has to make the plan whole again or it is shut down. There is no way to find the $16 trillion that it would take to make SS viable and no plan to take all those IOUs and replace them with marketable treasuries as is required.
"
you MISS the ENTIRE POINT of looking-ahead to see if you are going to end up with unfunded liabilities.
Insurance companies do this all the time and each year - they updated their premiums and benfits according to those calculations.
you call that process - a "ponzi" scheme.
"The Chinese are holding USTs. If they want to they can go into the bond market and sell them. The IOUs can't be sold in any market because they are IOUs, not bonds. How daft can you be? "
whoever owns them can present them at any time for cash - and they receive it.
you can call them whatever you wish but the point is they get redeemed for cash when presented.
if the day ever comes when the cash is no longer provided, the least of our problems with be SS "non-marketable" notes.
In the first case the borrower has a security that is easily converted to cash in the open market. In the second there is no marketable security. The IOU can only be redeemed if the Treasury is able and willing to borrow new money from someone in the open markets or resort to the printing presses and devalue the currency.
The fact that you pretend that there is no difference between an IOU and a marketable bond tells us all we need to know about your integrity.
there is no pretending here at all.. I'm pointing out that as long as the treasury can sell notes for cash that they can sell as many as they need to pay cash to SS for their non-marketable notes.
the fact that the SS notes cannot be marketed is irrelevant if they can still be redeemed for cash by selling marketable securities.
there is no difference is getting cash for DOD or SS by selling marketable securities.
once you have the cash in hand - it is fungible.
the gas tax trust fund and Medicare Part B trust fund work exactly the same way.
neither one of them sells marketable securities and whenever gas tax money or Part B premiums are received they are immediately put into the treasury and whenever money is spent by DOT or by Medicare Part B - it comes form the treasury.
ALL 3 - the DOT, Medicare Part B and SS get cash the same way.
the "non-marketable" securities are basically internal promises to redeem for cash - internal debt.
of the 14T in debt that we have - about 4T is internal.
we know 2.1T is SS.. what is the rest for?
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