Perry no longer thinks SS is a Ponzi scheme.

[mhaze]

Well, you might look at my comment in #92, email those guys and ask, get a copy and check my work, whatever.

I don't know or care. I'm just answering your question about what's in the book.

 

[Neally]

The antithesis of the argument that two superficially similar things can actually be quite different isn't that two of the same thing can't be different at all. So your rebuttal is silly and nonsensical.

I understand that some people need to portray things in the simplest terms possible to better grasp complex ideas, but sometimes a lot can be lost in the translation. To call Social Security a Ponzi scheme while ignoring the significant differences that differentiate the two is facile and simpleminded.

Sorry, condescending rebuttals are no replacements for logic. I've given the description and definition of Ponzi in post 72. Random reaffirmed the the same modus operandi in post 77. SS fits that description, structure, definition, and modus operandi regardless of the other differences between the two, ergo it passes the duck test.

 

[RandFan]

Sorry, condescending rebuttals are no replacements for logic. I've given the description and definition of Ponzi in post 72. Random reaffirmed the the same modus operandi in post 77. SS fits that description, structure, definition, and modus operandi regardless of the other differences between the two, ergo it passes the duck test.

I think it can be argued to be one. But there are some important differences. In a Ponzi sheme money owed never comes off the books unless it's paid. SS ends when someone dies. Also, while there is a fund the general fund is available to cover SS.

http://books.google.com/books?id=zBQ0BzYdtiUC&pg=PA27&dq=%22the+beauty+about+social+insurance%22+samuelson&hl=en&ei=4ixpTqnoNrPKiAKcib23Dg&sa=X&oi=book_result&ct=result&resnum=10&ved=0CGEQ6AEwCQ#v=onepage&q=%22the%20beauty%20about%20social%20insurance%22%20samuelson&f=false


(italics from original)

So Paul Samuelson argued that it was basically a Ponzi scheme, and he did so in defense of Social security. And his reasoning is quite correct - given certain assumptions, the Ponzi scheme nature of Social Security shouldn't cause any problems. The problem is that those assumptions (rate of economic and population growth) turned out to be wrong.

He also said that basically the whole free market economy is a Ponzi scheme.
If Republicans were to argue in favour of sustainability in other areas of the market, their criticism of social security wouldn't sound quite as hollow.

 

[Neally]

I think it can be argued to be one. But there are some important differences. In a Ponzi sheme money owed never comes off the books unless it's paid. SS ends when someone dies. Also, while there is a fund the general fund is available to cover SS.

I'd agree that in a Ponzi scheme money is still owed to the estate if a participant dies, although in the real world this probably rarely happens, but the reason that most people call SS a "Ponzi scheme" is the fact that new money is used to pay older participants and that it is unsustainable.

The fact that the general fund can cover the deficit does give reassurance that the funds will be paid, and it would be political suicide for any administration to let it fail, but Perry is really calling the attention to the fact that it has do be reformed either in the payouts or funding. Since it is such a third rail topic, I'm afraid it is likely to be kicked down the road. Let's hope we don't end up like Greece.

 

[mhaze]

I'd agree that in a Ponzi scheme money is still owed to the estate if a participant dies, although in the real world this probably rarely happens, but the reason that most people call SS a "Ponzi scheme" is the fact that new money is used to pay older participants and that it is unsustainable.

The fact that the general fund can cover the deficit does give reassurance that the funds will be paid, and it would be political suicide for any administration to let it fail, but Perry is really calling the attention to the fact that it has do be reformed either in the payouts or funding. Since it is such a third rail topic, I'm afraid it is likely to be kicked down the road. Let's hope we don't end up like Greece.

I'd agree that the politicians are and will continue to scurry around looking for some sort of a "soft landing" to this mess, and of course while doing so they don't like words like "Ponzi" being used. Huntsman, and Romney said exactly this in the debate #3: they didn't LIKE the word.

My opinion is that Perry knows exactly what he is doing in using words. He's creating controversy, with him at the center of it.

Well that's just an opinion, of course.

 

[RandFan]

...in the real world this probably rarely happens...

People rarely die?

The fact that the general fund can cover the deficit does give reassurance that the funds will be paid, and it would be political suicide for any administration to let it fail, but Perry is really calling the attention to the fact that it has do be reformed either in the payouts or funding. Since it is such a third rail topic, I'm afraid it is likely to be kicked down the road. Let's hope we don't end up like Greece.

Truth is if the money hadn't been raided for other stuff it would be solvent for some time.

Attacking Social Security

Social Security’s attackers claim that they’re concerned about the program’s financial future. But their math doesn’t add up, and their hostility isn’t really about dollars and cents. Instead, it’s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.

About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.

FWIW: Krugman is a Nobel prize winning economist. That doesn't make him right but it gives him a bit of credibility.

 

[johnny karate]

Well, you might look at my comment in #92, email those guys and ask, get a copy and check my work, whatever.

I don't know or care. I'm just answering your question about what's in the book.

I can't find it in the book so it must not be there! All those news outlets are lying!

No, what you're doing is denying evidence that Rick Perry wanted to dismantle Social Security and is now backpedaling away from that position.

It's wholly transparent and rather pathetic.

 

[johnny karate]

FWIW: Krugman is a Nobel prize winning economist. That doesn't make him right but it gives him a bit of credibility.

Clearly, the cogent arguments presented by the Nobel Prize-winning economist are wrong, because Neally already proved Social Security is a Ponzi scheme by using the duck test.

Nothing beats the duck test.

 

[Random]

I'd agree that in a Ponzi scheme money is still owed to the estate if a participant dies, although in the real world this probably rarely happens, but the reason that most people call SS a "Ponzi scheme" is the fact that new money is used to pay older participants and that it is unsustainable.

But it doesn't have to be unsustainable, that's the difference. As long as birth rates, death rates, employment figures, and some other demographics remain constant, a Social Security formula can be created that will last forever without any modifications. The problem is that these things change over time, so the formula needs to be adjusted every few years.

Social Security's obligations are reduced when people die, as everyone does eventually. The only way Ponzi could get obligations off his books was by paying them off with other people's money. This is a major and fundamental difference that the "Social Security is a Ponzi scheme" crowd always ignores.

Again, imagine a very simple Social Security program. Each week, the government takes 5% of the paychecks of all US workers and puts this money in a pool. This pool of money is then evenly distributed to every US citizen over the age of 65. Fairness issues aside, when would this system run out of money? Is this a Ponzi Scheme?

 

[TragicMonkey]

Again, imagine a very simple Social Security program. Each week, the government takes 5% of the paychecks of all US workers and puts this money in a pool. This pool of money is then evenly distributed to every US citizen over the age of 65. Fairness issues aside, when would this system run out of money?

When the number of people over 65 is greater than the number of people receiving paychecks. Generations are not even in number--the Baby Boomers are notorious for being "the basketball in the snake". And people are living longer and longer.

Also, there is no guarantee that "evenly distributing" the money collected will be sufficient for the needs of those receiving it-- what if it works out to a hundred bucks a month each?

 

[Random]

When the number of people over 65 is greater than the number of people receiving paychecks. Generations are not even in number--the Baby Boomers are notorious for being "the basketball in the snake". And people are living longer and longer.

Not even then. Remember that people are having children as well. These children will turn into workers and add money to the system. This version of Social Security will only run out of money 65 years after people stop having children, at which point I think we will have much bigger problems.

 

[mhaze]

I can't find it in the book so it must not be there! All those news outlets are lying!

No, what you're doing is denying evidence that Rick Perry wanted to dismantle Social Security and is now backpedaling away from that position.

It's wholly transparent and rather pathetic.

Nonsense. You simply do not have any "evidence" for your position. You have hearsay. You know nothing except what you've been told to think and believe.

It couldn't get any simpler than this. You made a claim, and you backed it up with other people making the claim. The claim is verifiable physically in the real world. I've got the source material, and it is false. I have provided the actual paragraphs that Perry wrote. You were asked to give the page numbers of the supposed quotes, and you cannot do it.

Tough, dude. Reality's a bitch sometimes. The position of Perry on Social Security is as laid out in 84 and 89. You claimed it was changing with recent statements by Perry. The facts are it is not changing.

Go by a book store, get the book and refute me.

If they are not sold out, of course.

 

[mhaze]

Not even then. Remember that people are having children as well. These children will turn into workers and add money to the system. This version of Social Security will only run out of money 65 years after people stop having children, at which point I think we will have much bigger problems.

As long as you can print money to pay Social Security, Social Security will have money to send to people. It may not be worth the postage on the envelope, but they can instruct everyone to use direct deposit.

 

[sarge]

I am in favor of means testing to help control the projected increase in Social Security benefits paid out, and I'm in favor of taxing all earnings rather than merely the first ~$100K which would result in a lower SS tax rate.

I believe it is an unjustified leap of faith to assume that the increase in revenues generated by eliminating the income ceiling would necessarily result in a lower SS tax rate. It is more likely that raising or eliminating the ceiling on income subject to SS taxes would result in greater income for the SS trust fund without impacting the flat SS tax rate.

That eliminating the income ceiling would probably not lower the tax rate isn't particularly important, however. It is the best method of simultaniously eliminating the BBB* while preserving the current level of benefits. So long as there is an income ceiling without a corresponding means test for benefits, the SS tax remains an onerously regressive one.






*Baby Boom Bubble. I think I invented the term.

 

[mhaze]

I believe it is an unjustified leap of faith to assume that the increase in revenues generated by eliminating the income ceiling would necessarily result in a lower SS tax rate. It is more likely that raising or eliminating the ceiling on income subject to SS taxes would result in greater income for the SS trust fund without impacting the flat SS tax rate...

Given that SS payouts are equal to 3/4 of total 1040 government revenues, and given that we spend 40% more than we take in, the kind of rationalizing you are engaging in is quite meaningless.

The money's not there. They print it. The future obligations far, far exceed the ability to pay from revenues. They'll print it, and it will be worth nothing.

If something may be computed to have "no substantial value", who cares about your type of considerations?

Maybe they have some short term (3-5 years) bearing. That's about all.

 

[sarge]

Given that SS payouts are equal to 3/4 of total 1040 government revenues, and given that we spend 40% more than we take in, the kind of rationalizing you are engaging in is quite meaningless.

I don't think "rationalizing" means what you think it does. That is twice in two days that you have used it improperly.

If Social Security paid out more money this year than it received (it did) and this circumstance is likely to continue for future years (it is) but not forever (it isn't), then SS is only in trouble if the interest the trust fund accrues does not cover the SS income shortfall and the shortfall will last long enough to deplete the trust fund (it will). So - Social Security will someday be in real trouble if nothing is done to either increase revenue or decrease payments.

Of all the ways to increase revenue enough to make a difference, the method that causes the least hardship for the most people is to simply eliminate the cap on income subject to social security taxes. This would generate revenue sufficient to keep scoial security solvent until the baby boomers start dying off. So, as Joe pointed out, as long as we don't have another population spike, this alone would likely solve the social secuirty "problem".

This solution, alone, would not eliminate the regressive nature of Social Security taxes. Joe's other solution (means testing benefits) would. I do not support this approach, however, without seeing at what income threshold benefits begin to decrease and at what threshold they disappear. I would prefer an absolute cap on benefits (one already exists) and a guarantee of some minimal level of benefits regardless of the lifetime amount of social security taxes paid. In this way, relatively well off folks will have paid in considerably greater sums than they can ever receive and relatively less well off folks will receive greater sums than they ever paid, but every one sees a tangible benefit from the existance of SS.

The money's not there. They print it. The future obligations far, far exceed the ability to pay from revenues. They'll print it, and it will be worth nothing.

Ahh.... the old "fiat money is not real money" argument. Sorry, I don't care to engage in such an argument.

If something may be computed to have "no substantial value", who cares about your type of considerations?

Maybe they have some short term (3-5 years) bearing. That's about all.

The money owed the SS trust fund can not reasonably be computed to "have no substantial value." Demonstrate that you have cleared this hurdle, or the debate can not progress.

 

[mhaze]

I don't think "rationalizing" means what you think it does. That is twice in two days that you have used it improperly.....
Ahh.... the old "fiat money is not real money" argument. Sorry, I don't care to engage in such an argument.



The money owed the SS trust fund can not reasonably be computed to "have no substantial value." Demonstrate that you have cleared this hurdle, or the debate can not progress.

A standard measure used in analyzing stocks is "quick liquidity test". Let's just apply that to the US government and it's SS obligations.

Wait....YOU DON'T WANT TO???

This matter can be examined by taking a simple prediction and looking at it's implications for social security.

Prediction: Within ten years, either by force or voluntarily, US government spending will approximately equal US government revenue. It may be with a much larger increase in debt and a high interest rate, or a moderate increase in debt and a moderate increase in interest. In either case, interest payments alone will take the 1040 revenue streams.

This means spending will be down in current day dollars by about 40%. Of the remaining 60%, a much larger fraction will be interest payments than is the case today. That has obvious implications for entitlement spending including SS. The budget of the corporation overall trumps your little departmental budgeting exercise.

 

[sarge]

A standard measure used in analyzing stocks is "quick liquidity test". Let's just apply that to the US government and it's SS obligations.

Wait....YOU DON'T WANT TO???

I also do not wish to conduct a taste test between an apple and a volkswagen to determine which is the better fruit.

This matter can be examined by taking a simple prediction and looking at it's implications for social security.

Prediction: Within ten years, either by force or voluntarily, US government spending will approximately equal US government revenue.

Well, yes to the first and yes to the second...... and neither has anything to do with the discussion.

That the US may ballance its general budget does not make Social Security either insolvent or a ponzi scheme.

This means spending will be down in current day dollars by about 40%.

No - it means that either spending will drop or revenue will increase, or a combination of both, and only then if your prediciton of a ballanced budget actualy comes true.

That has obvious implications for entitlement spending including SS, and this trumps your little departmental budgeting exercise.

I'm afraid you are making no sense at all. You have demonstrated no progression from "the country will reduce its budget deficit" to "social secuirty is a ponzi scheme that is insolvent".

So long as Social Secuirty has a seperate line of funding, then social security can remain solvent even during frustrating budget years that adversly impact other entitlement programs.

 

[RandFan]

Clearly, the cogent arguments presented by the Nobel Prize-winning economist are wrong, because Neally already proved Social Security is a Ponzi scheme by using the duck test.

Nothing beats the duck test.

 

[mhaze]

.....You have demonstrated no progression from "the country will reduce its budget deficit" to "social secuirty is a ponzi scheme that is insolvent".

So long as Social Secuirty has a seperate line of funding, then social security can remain solvent even during frustrating budget years that adversly impact other entitlement programs.

Yes, I've already noted that as long as dollars can be printed, dollars can be handed out. But if the corresponding increases in the money supply and the resulting inflation lowers the value of said dollars, then this is nothing more than juggling money from year n+3 to year n. That of course, reaches a point of limiting returns and limiting benefits.

Mincing words and trying to narrow the scope of the discussion won't get around these general issues. If you want to claim that when spending is reduced by 40%, social security won't be reduced at all, go ahead. Makes no difference to me. Just seems rather unlikely that will be the case.

And there is no contractual obligation to pay any SS, only a promise that changes with the winds. Frankly, your attitude illustrates well the problem which Perry spoke of about SS:

"Now if you say Social Security is a failure, as I have just done, you will inherit the wind of political scorn. Seniors might think you want to cut the benefits they have paid for. Politicians will want to take advantage, stirring up fear about benefits that will be lost if you elect another "heartless Republican." I get it. ....

But by remaining quiet, politicians are really saying they think the American people won't understand it if we share the grim details of our financial future....

Is that how we should respect our fellow citizens? By underestimating their intelligence, their desire to retire with greater stability, or their commitment to the next generation? ...."