Perry no longer thinks SS is a Ponzi scheme.

[JoeTheJuggler]

Please answer in a fashion that could be laid down contractually.

Why? Social Security is not a contract. It's a taxpayer financed safety net for retirees and the disabled. There's nothing fuzzy about it.

Any investment firm could answer this question.

And the reason we can't answer that about Social Security is that Social Security is not an investment firm, and Social Security taxes are not an investment. In fact, a key difference between an investment and and tax is that one is voluntary. For an investment, if you're misled about the value of an investment, you will make decisions that will hurt you. With Social Security taxes, you don't get to decide whether or not to pay them based on what you think you'll get back.

No double talk or weasel words in your answer please. We've had enough of that here.

YEs, please cut it out. Your logic here is that Social Security is like a Ponzi scheme because it can't be defined as an investment? Think about it for a minute before you post such illogical nonsense.

If you can't answer my question, then I'd like SS changed to where in the law as written my question can be answered.

YEs, you've made it clear that you agree with Perry. You think SS should be eliminated and replaced with something like an IRA. Then, if people misled you about the value of the IRA by giving you payments that didn't come from that investment, it would indeed be like a Ponzi Scheme. But since you can't answer questions about Social Security as if it were an investment, it is reasonable to admit that Social Security is not an investment, but is a tax-financed government safety net.

If you support the current law but can't answer my question, you are supporting a fraud on the public.

Bull. It has none of the characteristics of fraud. No crime has been committed, and no one has been enriched through deception. Your statement is false.

That we can't answer your question which assumes Social Security is an investment points to the fact that Social Security is not an investment.

And again I remind you that benefit checks went out the very same month that Social Security taxes were collected. Does that sound like an investment, or a tax financed government program?

 

[JoeTheJuggler]

You don't see the irony in those two statements? A Ponzi scheme is NOT a state-operated charity with age and disability-related criteria, funded through a tax on wages.

It sounds like he's using the same bent logic mhaze is using. Basically, they're saying that if we assume Social Security is an investment (despite the fact that it's not), it would be a lousy long term investment (which is arguable, but too hypothetical to be very meaningful), and therefore (if we ignore fundamental elements of a Ponzi Scheme, such as someone enriching himself by deception), as an investment (which it's not), Social Security is like a Ponzi Scheme.

 

[Bri]

It sounds like he's using the same bent logic mhaze is using. Basically, they're saying that if we assume Social Security is an investment (despite the fact that it's not), it would be a lousy long term investment (which is arguable, but too hypothetical to be very meaningful), and therefore (if we ignore fundamental elements of a Ponzi Scheme, such as someone enriching himself by deception), as an investment (which it's not), Social Security is like a Ponzi Scheme.

Yes, in one sentence he states that it's the same as a Ponzi scheme, but in the very next sentence he states precisely how it's not anything like a Ponzi scheme.

-Bri

 

[JoeTheJuggler]

The key difference between Social Security and other ponzi schemes is that the State compels participation in Social Security. At least Madoff's investors volunteered.

And doesn't that difference point out that Social Security can't possibly share the principle characteristics of a Ponzi Scheme (deception about the value of an investment by giving "returns" on the investment that actually come from other investors or other sources, but not the investment itself)?

If you're not free to decide whether or not to "buy", then there really can't be fraud by deception, can there? It's a tax, not an investment.

The only remaining characteristics the two have in common is that money paid in by one taxpayer doesn't go back to the same taxpayer. This is true, as I've said, of virtually all government programs. (And if that's all they mean, why not say Social Security--and all taxation--is like theft? It's inflammatory and not very accurate if the only common characteristic is transfer of money that isn't a purchase.)

 

[JoeTheJuggler]

It's both accurate and fair to say that SS and a Ponzi scheme share the same flawed structure of paying old participants with new participants [sic] money, BECAUSE THEY DO.

First, it's not a flawed structure. Remember, it's a tax, not an investment.

Second, if that's all you mean, then don't you think "Ponzi Scheme" (which is fraud--enriching someone by deception) is the wrong way to describe this?

Older participants are being paid by new contributors. SAME as a Ponzi scheme.

That's actually not a characteristic of a Ponzi Scheme. I think you're confusing Ponzi Scheme with a Pyramid Scheme. They're similar, but not the same. In a Ponzi Scheme there is no upstream or downstream. Investors are misled about the value of the investment because the con artist pays out some moneys claiming that they are returns on the investment when they are not. The source of that money can be other investors (not in any particular order--a newer participant could be paid with money that came from money that con artist got from an older participant; in fact, the scheme is best suited to gaining the investor's confidence--that's the "con" in "con game"-- in order to get him to increase his investment).

At any rate, none of this applies since Social Security is a tax, not an investment.

Of course, and a bad investment alone does not define a Ponzi scheme.

No. A Ponzi Scheme is a fraud perpetrated on voluntary investors. It works by misleading the investors by paying out fake returns on the investment with money that comes from sources other than the investment (other investors--in no particular sequence--or from any other money the con artist has).

 

[Newtons Bit]

So if Social Security is just tax, and not an investment, then why does the Social Security Administration send participants statements stating that their monthly benefit is based on the amount of money they put in? Why does one have at least $5,040 put into their SS account before one can draw benefits? Why does the average person have to put in $50,400?

This sounds suspiciously like a program that isn't just a tax. In fact, it looks like the Social Security Administration is doing everything it can to make it look like an investment.

 

[Bri]

So if Social Security is just tax, and not an investment, then why does the Social Security Administration send participants statements stating that their monthly benefit is based on the amount of money they put in?

Because Social Security benefits are based on the amount of money you made during your working career (the idea is to replace a percentage of your working wages after you retire). But I have my statement right here in front of me, and I don't see where it claims that the money I put in is given back to me at retirement (presumably with interest or minus losses) as an investment would be. Can you tell me where it says that?

This sounds suspiciously like a program that isn't just a tax. In fact, it looks like the Social Security Administration is doing everything it can to make it look like an investment.

Except that the statement clearly states that it is a tax and that benefits are based on current law and could be changed at any time by Congress.

-Bri

 

[mhaze]

They do? I have my statement right here in front of me. Can you tell me where it says that?

Yes, it does.

But you are dealing with the liars and crooks of the government, remember?

http://www.ssa.gov/mystatement/

 

[Unabogie]

Experts disagree.

Er...

So why did I use the P-word? Basically because Paul Samuelson had done the same; he was basically just being cute, and I was emulating him — which now turns out to be a mistake.

But anyway, anyone who uses my statement as some kind of defense of Rick Perry and all that is playing word games. I explained what I meant in that Boston Review article, and it was nothing at all like the claims that Social Security is a fraud, is destined to collapse, and all that. Social Security is and always has been mainly a pay-as-you-go system, which is nothing at all like a classic Ponzi scheme.



Of course, the usual suspects won’t pay any attention to what I’ve just said. But if anyone is actually listening …

 

[Bri]

Yes, it does.

But you are dealing with the liars and crooks of the government, remember?

http://www.ssa.gov/mystatement/

I clarified my post. The reason the Social Security statements state that the monthly benefit is based on the amount of money they put in is because Social Security benefits are (currently) based on the amount of money you made during your working career (since the idea is to replace a percentage of your working wages after you retire). In addition, the amount you're taxed is (currently) based on your income. So in that regard the amount you receive is related to the amount you were taxed (in the sense that both are based on your income).

However, it isn't an investment and the statement doesn't indicate or even imply that it is. It clearly refers to the money you pay into Social Security as a tax.

-Bri

 

[Neally]

Similar is not identical. Normal investment has similarities to Ponzi schemes. So does health insurance. If it isn't identical to what a Ponzi scheme is, then it isn't a Ponzi scheme.

And I never claimed the whole of SS is identical to a Ponzi scheme, did I? I stand by what Wikipedia said, "Ponzi schemes and Social Security have similar structures (in particular, a sustainability problem when the number of new people paying in is declining)"

Again, you are ignoring the very information you cite. The only real similarity is the sustainability problem when the number of new people paying declines. That's it. This is completely superficial.

Um no, it's a rather significant structural similarity that can result in insolvency, or maybe you don't think insolvency is a big deal?

First, it's not a flawed structure. Remember, it's a tax, not an investment.

Okay, JoeTheJuggler declares that a flawed structure that could lead to insolvency is not really a flawed structure. Got it. Oh and the fact that the funds come from taxes verses volunteered investment isn't the point.

Second, if that's all you mean, then don't you think "Ponzi Scheme" (which is fraud--enriching someone by deception) is the wrong way to describe this?

It's a totally accurate way to describe their structure, as Wikipedia said, "Ponzi schemes and Social Security have similar structures (in particular, a sustainability problem when the number of new people paying in is declining)" Are they identical in all aspects? Of course not, I never claimed they were. You are so focused on the differences that you can't admit to the similarities except to hand wave them away with your silly, "it's the same as any tax funded program" analogy.

That's actually not a characteristic of a Ponzi Scheme. I think you're confusing Ponzi Scheme with a Pyramid Scheme. They're similar, but not the same. In a Ponzi Scheme there is no upstream or downstream. Investors are misled about the value of the investment because the con artist pays out some moneys claiming that they are returns on the investment when they are not. The source of that money can be other investors (not in any particular order--a newer participant could be paid with money that came from money that con artist got from an older participant;

I'm beginning to see why you continue to struggle with arguing your point since you clearly don't understand what you are talking about. Ponzi schemes are very different from pyramid schemes, but Ponizi schemes do pay older investors with income from new investors, thus they require an ever increasing base of new investors. SS now pays older participants with income from newer participants - JUST LIKE A PONZI SCHEME.

No. A Ponzi Scheme is a fraud perpetrated on voluntary investors. It works by misleading the investors by paying out fake returns on the investment with money that comes from sources other than the investment (other investors--in no particular sequence--or from any other money the con artist has).

The contortions that you use to attempt to make your failing case are getting to be rather pathetic now. "Ponzi schemes and Social Security have similar structures (in particular, a sustainability problem when the number of new people paying in is declining)"- Wikipedia.

 

[mhaze]

So you're saying SS doesn't give you specified return? Ponzi schemes are sold on the basis that you will get something back, usually defined. So in that regard SS and Ponzi schemes are entirely different.

Make yer bleedin' mind up, hey?

Wrong. I'm asking you, Joe, and Bri to clearly state what I'll get from SS, in terms that could be contractual (I understand that they are not). I'm asking you to look at the variance between this "reasonable expectation of return" by the consumer, and the vague feel-good-words that you guys are using.

This is very reasonable. Consider if I was 42, a union worker, and had a pension fund that was supposed to give me X dollars. I've got an IRA that has Y dollars. I've got SS that says it should pay Z dollars. Now I'm trying to plan retirement.

Can I have a mortgage that continues past the date of my retirement?

I'm aware of some risk level in the pension fund, and in the IRA. I'm wondering about that in the SS.

This isn't complicated stuff. Do I or DO I NOT get a payback? If the best you can answer is "maybe", then I'll plan on retiring without counting on the SS, and I'll consider it a scam, and I'll certainly be okay with the Ponzi scheme concept. Because I know that people that got in early got a payback, but people that got in late might not or would not.

 

[Bri]

Wrong. I'm asking you, Joe, and Bri to clearly state what I'll get from SS, in terms that could be contractual (I understand that they are not). I'm asking you to look at the variance between this "reasonable expectation of return" by the consumer, and the vague feel-good-words that you guys are using.

I'm not sure I understand what you're asking for here or what your point is. Maybe Joe can respond. Do you not receive a Social Security statement each month that gives you an estimate of the benefits you'll receive?

This isn't complicated stuff. Do I or DO I NOT get a payback? If the best you can answer is "maybe", then I'll plan on retiring without counting on the SS, and I'll consider it a scam, and I'll certainly be okay with the Ponzi scheme concept. Because I know that people that got in early got a payback, but people that got in late might not or would not.

So by your definition, investments should be considered scams or Ponzi schemes because you may or may not get a payback?

People will likely continue to get paybacks from Social Security, unless the program is entirely dismantled. Like most tax-funded programs, the amount of payback people will get going forward will depend on Congress. If Congress decides to raise the tax, the payout could continue to be the same as it is now. More likely, Congress will change the payout formula, perhaps based on need. I suspect that the amount anyone will get won't differ that much from what's on their Social Security statement since Congress likely will phase in any changes made so that any reductions in benefits will be reflected on Social Security statements long before anyone approaches retirement.

-Bri

 

[mhaze]

Originally Posted by JoeTheJuggler
First, it's not a flawed structure. Remember, it's a tax, not an investment.

...Okay, JoeTheJuggler declares that a flawed structure that could lead to insolvency is not really a flawed structure. Got it. Oh and the fact that the funds come from taxes verses volunteered investment isn't the point.....

Wow....

Now if someone was talking like Joe is talking, would you expect to get a monthly retirement check from them?

I'm not sure I understand what you're asking for here or what your point is. Maybe Joe can respond. Do you not receive a Social Security statement each month that gives you an estimate of the benefits you'll receive?

-Bri

As I've pointed out, SS has ceased sending those statements out. However, that's quite irrelevant to my question.

You may be using the words "expect to get" quite more loosely than I. The mortgage company expects to get a payment from me or contractual consequences occur. There is a binding contract behind the expectations.

With SS we appear to be dealing with a vague sort of promise that may shift with the winds of politics. There isn't anything complicated about the scenario I laid out for the union worker above. I am asking you guys what should the guy do?

 

[Bri]

As I've pointed out, SS has ceased sending those statements out.

I got mine earlier this year, so perhaps before they stopped sending them. There is an online tool you can use to estimate your benefits.

You may be using the words "expect to get" quite more loosely than I. The mortgage company expects to get a payment from me or contractual consequences occur. There is a binding contract behind the expectations.

With SS we appear to be dealing with a vague sort of promise that may shift with the winds of politics.

Yup, that's how tax-funded government programs work. Congress is free to adjust or dismantle them.

There isn't anything complicated about the scenario I laid out for the union worker above. I am asking you guys what should the guy do?

I suspect that a lot of people are unable to save enough for retirement or lost money on their retirement investments and therefore would wind up on the streets without the SS benefits. Your scenario doesn't really apply to them since they're going to live on whatever benefits they get from Social Security plus whatever they are able to save regardless.

In your scenario, he can use the online calculator to estimate how much he'll get from Social Security. It's not likely to be that far off for anyone approaching retirement. Social Security will probably continue to do what it was designed to do unless Congress decides to get rid of it, but in order to keep benefits at today's rates for those most in need they will need to make some adjustments to taxes collected and/or to the formula used to calculate benefits (for example, making benefits based on need). The same goes for any tax-funded government program.

-Bri

 

[JoeTheJuggler]

With SS we appear to be dealing with a vague sort of promise that may shift with the winds of politics.

As opposed to highway projects, defense contracts or any other government program???

You continue to fail to understand why Social Security doesn't have the characteristics of an investment (much less a fraudulent investment): because it's not an investment. It is, again, a tax financed government program. That's why making "buying in" an optional thing doesn't make any sense.

 

[BenBurch]

It is ignorant to call it a Ponzi Scheme. Nobody who has studied economics and understood it would do so if they were being honest.

It is a modified Tontine; http://en.wikipedia.org/wiki/Tontine

A Tontine is about the oldest form of life insurance.

 

[Newtons Bit]

It is ignorant to call it a Ponzi Scheme. Nobody who has studies economics and understood it would do so if they were being honest.

It is a modified Tontine; http://en.wikipedia.org/wiki/Tontine

A Tontine is about the oldest form of life insurance.

So it's a Tonti Scheme?

 

[Newtons Bit]

Because Social Security benefits are based on the amount of money you made during your working career (the idea is to replace a percentage of your working wages after you retire). But I have my statement right here in front of me, and I don't see where it claims that the money I put in is given back to me at retirement (presumably with interest or minus losses) as an investment would be. Can you tell me where it says that?

Lose the straw man. I said it is based on the money that is put in, which is stated in various ways throughout the statement. Most clearly "we estimated your benefit amounts using your average earnings...".

Except that the statement clearly states that it is a tax and that benefits are based on current law and could be changed at any time by Congress.

And my 401k statement says that my estimated retirement benefit is based on market performance and could be changed at any time as well.

 

[BenBurch]

So it's a Tonti Scheme?