Our Unsustainable National Ponzi Scheme
We have a national Ponzi scheme where Congress collects about $785 billion in Social Security taxes from about 163 million workers to send out $585 billion to 50 million Social Security recipients. Social Security's trustees tell us that the surplus goes into a $2.2 trillion trust fund to meet future obligations. The problem is whatever difference between Social Security taxes and benefits paid out is spent by Congress. What the Treasury Department does is give the Social Security Trust Fund non-marketable "special issue government securities" that are simply bookkeeping entries that are IOUs.
According to Social Security trustee estimates, around 2016 the amount of Social Security benefits paid will exceed taxes collected. That means one of two things, or both, must happen: Congress will raise taxes and/or slash promised Social Security benefits. Each year the situation will get worse since the number of retirees is predicted to increase relative to the number in the workforce paying taxes. In 1940, there were 42 workers per retiree, in 1950 there were 16, today there are 3 and in 20 or 30 years there will be 2 or fewer workers per retiree.
Social Security is unsustainable because it is not meeting the first order condition of a Ponzi scheme, namely expanding the pool of suckers.
~George Mason economist Walter Williams
16 Comments:
When are the economists and academics going to grasp that we all know about the Social Security issue and NO ONE CARES!
This is not a complex issue. Few, if any, expect benefits or taxes to remain unadjusted to account for the shortfall in contributions starting on or about 2016. We understand that the 14% Social Security taxes paid into the system are nothing more than a phantom income tax. We don't care. Individual taxpayers making $75,000 or less per year contribute an increasingly smaller portion of federal revenues every year.
At the end of the day, someone else is going to pay for the Social Security problem. Its a non-issue to taxpayers making $75k or less each year.
"...and NO ONE CARES!"
And thus, sad commentary on a once great nation. Don't forget that taxation was the impetus for the first war for American independance. I see no reason why there could never be a second.
Spot on !!!!
Another option would be to raise the eligibility age. Remember, when Social Security was first introduced, the eligibility age was right around or slightly above the average life expectancy.
Another option would be to raise the eligibility age. Remember, when Social Security was first introduced, the eligibility age was right around or slightly above the average life expectancy.
Amazing! We have a government forced savings program that pays depositors less than the rate of inflation, denies the right of inheritance and is being administered as a Ponzi scheme. And the answer, to it's approaching bankruptcy, is to deny contributors access to their savings until they are on their death beds.
Man, liberals must love you.
Here's an idea. Give people private accounts. Allow them to invest their forced savings in government bonds at market rates. Allow them to pass the unused portion of their savings on to their children. That way liberals cannot steal your savings and "invest" them in stupid schemes to "perfect" society.
They have a third option: Cut other government programs. People do not realize that once SSA goes into the red, in say 2016, the government must act. It doesn't matter what it says about how much is in the "Trust Fund." Here's a hint, there is nothing in the trust fund but IOUs from the government, which means that some of these IOUs must be redeemed in order to keep sending out the monthly checks. The Feds must then either cut other programs to divert the money to SSA, or raise taxes to divert the money to SSA or cut the SSA monthly outflow.
Odd that people want to tell me it's a Ponzi scheme after I've paid into Social Security for forty five years.
The Feds must then either cut other programs to divert the money to SSA, or raise taxes to divert the money to SSA or cut the SSA monthly outflow.
There is a fourth and more obvious option; the Treasury issues public debt for the intragovernmental debt as needed. That's the plan when anticipated SSA expenditures exceed revenues in 2017.
Social security is not the major entitlement issue going forward. Medicare/Medicaid takes that crown.
Anonymous,
Liberals hate me because I'm as conservative as they come. Obviously, then, I believe in people paying their own way when it comes to retirement.
But I'm also a realist. Social security isn't going away anytime soon.
My point is if the eligibility age is pushed back to a point where very few would ever collect, or even if they DID collect it wouldn't be for very long, the program could be shrunk to the point of statistical insignificance. Maybe then, when people realize it really doesn't do anybody much good, could the tax be reduced over time until the day comes when the program could be scrapped altogether.
Way to stereotype me, though. Keep trying...and failing.
My point is if the eligibility age is pushed back to a point where very few would ever collect...
My point is that fine tuning this fraud is not the answer. All we would accomplish is to give the liberals further license to steal.
By creating private accounts we put our savings beyond their reach, we receive fair market rates on our savings and we build wealth for the next generation.
I'm not interested in saving Social Security as it is currently being administered. I want a revolution!
I'm sorry about calling you a lib.
My point is that fine tuning this fraud is not the answer
Read the 2008 Report and report back. You are an echo-boomer who is underemployed and over educated and only concerned about your own ass. If you agree to support your parents in their golden years, then put up the capital (that is called real moolah of which you have none), purchase an inflation adjusted annuity (not from the government sponsored AIG teat), and go the private savings path for yourself.
You don't have a clue about net present value.
Social security isn't a Ponzi scheme because it isn't an *investment*!
Note to fboness:
Back when you first started paying into Social Security, Barry Goldwater mentioned the issue. But Lyndon Johnson blew it off saying that Goldwater hated senior citizens.
Wow, that was incoherent. I know Geroge Mason's econ department as the one that hire smart conservatives. This thing was written by a stupid one. A really, really stupid one.
Let's go to first principles. An individual can invest for retirement. A pool of individuals, perhaps represented by a company's emplyees in a defined-benefit plan, can do so as well.
A society ever and always pays benefits to retirees from current production.
Ever.
Always.
This is why nobody cares. Because paying retirees out of current production is how retirement works.
Nobody gets upset when water runs downhill, you know.
A Ponzi scheme is a term that describes a fraudulent investment operation: defrauded investors believe they will make a profit from their initial investment.
Social Security, on the other hand, is a social insurance program; it was not designed nor was it ever touted to an investment vehicle designed to make one's money grow.
You would think that Williams (and other economist free-market think tank guns-for-hire) would know that. (They do, of course; but being honest and straightforward with the reading public is not what their employers' are paying them to do.)
If I were to run a program that mirrored Social Security I would go to jail for fraud.
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