Perry no longer thinks SS is a Ponzi scheme.

[Random]

ETA: I don't think Social Security should be to protect the middle class who actually have the means to save and invest for their retirement. It really should be a safety net for the poor.

No. No, no, no. No.

It sounds tempting doesn’t it? Let’s just make sure that Social Security goes to the really needy. But then you get into the whole argument about who is “really needy”. $40,000 a year? How about $39,500? Well, people will adjust to $39,000. Did I say $38,000? I meant $37,000. That's more than enough with a good 401k plan right? So, $35,000, and an 401K plan should be the cutoff. Assuming they have dependants. etc...

After a while it just becomes another program for the poor, and we all know what happens to those.

Conservatives have two types of plans for Social Security. Those that will end it outright, and those that will weaken it to make it easier to end outright in the future. Means testing is one of the later.

 

[IchabodPlain]

It's an accurate analogy of the similar structures: - http://en.wikipedia.org/wiki/Social_Security_%28United_States%29

Yes, let's use Wikipedia. The primary criticism is that the system is only viable as long as there are a larger number of people paying in than are receiving benefits. There are two issues with that:

1) We don't really know exactly where that ratio lies (other than to say it's >1:1).

2) The number, whatever it is, isn't fixed. Ponzi schemes don't have mechanisms to impose increased contributions or benefit cuts. Doing either one or both of those things makes the ratio smaller.

Further, there are a number of methods to impose increased contributions. You can raise the entire rate, broaden the base of taxation by removing the earnings cap, make the rate progressive with income, etc. The same can be said of benefit cuts - cutting monthly checks, increasing retirement age, etc.

A modest combination of cutting benefits and increasing tax - say incrementally raising the retirement age over the next 10 years to 67 and lifting the earnings cap while lowering the rate - makes social security solvent for the foreseeable future. We've gained 7 years or so in life expectancy and are retiring earlier since the program was started - concede half those benefits back and the system is perfectly solvable even while the ratio of paying in vs. drawing out falls. Not very Ponzi scheme-esque.

What I think JoeTheJuggler has been pointing out (among other things) is the same thing which is stated in the wikipedia criticism section. To quote:

One criticism of the analogy is that while Ponzi schemes and Social Security have similar structures (in particular, a sustainability problem when the number of new people paying in is declining), they have different transparencies. In a Ponzi scheme the fact there is no return generating mechanism beyond just contributions from new entrants is obscured[142] whereas Social Security payouts have always been openly underwritten by incoming tax revenue.[143] Private sector Ponzi schemes cannot be sustained indefinitely, whereas Social Security's benefits can theoretically always be sustained by raising taxes on new participants and reducing promised payouts. Because of these and other issues, Robert E. Wright calls Social Security a "quasi" pyramid scheme in his book, Fubarnomics.

My bolding.

Ponzi Schemes mislead investors as to the value of their investment. Social security does no such thing (and least not without considerable equivocation on what is meant by "investment). These two factors - ability to escape the sustainability problem and transparency - separate the two. I'm fully ready to admit that SS and Ponzi Schemes both face a sustainability problem. But to the extent they face them is different - government has more options to remedy the problem. Rather, the sustainability problem which SS faces is more similar to the problems that any government program has: Without increased taxes/taxpayers or benefits cuts, you can't increase spending without going into the red.

 

[sarge]

I disagree. I've been reading estimates of people making the case against means testing who claim it's not significant, but the numbers show that it is. For example, "Only about 10 percent of benefits go to people with outside income of $40,000 or more a year — a figure that most of us would regard as middle class." (Based on the analysis by the Center for Economic and Policy Research. Link.)

But the shortfall we need to make up is only about 20%, right? So this measure alone would halve the problem (the shortfall between revenues and benefits paid out [ETA: or am I comparing wrong percentages?]). To me, that's significant.

As someone else said, we could just cut benefits across the board to 80% of their current levels, but I think it makes more sense as a safety net to keep the current benefits for those who need them, and cut it drastically (or eliminate it) for those that don't.

Then a modest adjustment on the revenue side (though I favor a bigger adjustment--taxing ALL earnings rather than just the first ~$100K) would solve the problem. And in time, as demographics change again, our descendants will have the "problem" of a big surplus.

ETA: I don't think Social Security should be to protect the middle class who actually have the means to save and invest for their retirement. It really should be a safety net for the poor.

I favor a similar approach, except that I would place the cut-off to receive benefits at something closer to the current cut-off to pay taxes. In other words, I will have significantly more than $40K in retirement income (already do in fact), but the goverment and my employer (they are the same) have consistently said that Social Security is 1/3rd of my total retirement benefit (pension and funded 401(k) each 1/3). At this point in the game, I am unwilling to concede that I should forfeit a benefit I have already paid for. and was encouraged to consider as an integral part of my retirement benefits.

As a seperate, unrelated solution I favor eliminating the cap on earnings subject to SS taxes.

 

[mhaze]

I already have many times over. And I notice you have yet to reply to most of my arguments. You continue to ignore the fact that Social Security is not an IRA and argue as if it were.

Social Security is not a contract. It is not an investment. Why is it a surprise that it doesn't have the characteristics of a contract or an investment? (ANSWER THE QUESTION.)

It is a tax-financed government program to help protect retirees and the disabled from poverty (this is what "safety net" means). These aren't "fuzzy" terms. I have pointed out in support of this position the fact that the first month Social Security taxes were collected, benefit checks went out. Do you understand that this is not consistent with the notion of Social Security as an IRA? (ANSWER THE QUESTION.)

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).
You understand it's not a contract, yet you want it expressed in terms that are contractual? You understand it's not an investment or any guarantee of a specific benefit, but you want me to tell you what that guarantee of a specific benefit is? (ANSWER THE QUESTIONS.)

You're making no sense at all. You've simply got to let go of the idea that Social Security is a contract or an investment. It's neither.


A return is something you get on an investment, but Social Security is not an investment. It's a tax. These aren't "vague feel-good-words". These are words with real and specific meanings. You are just viewing everything through a haze, so to speak, wherein tax and investment are somehow the same thing.



No. You do not get a "payback" or a "return" because Social Security is a tax and not an investment. People receive benefit checks from Social Security. Do you understand the difference?​

No, there isn't any problem "with my understanding". There may be a problem with the understanding of a great many people in the general public based on the weasel words, feel-good words and general dishonesty in the respresentation of SS, though.

Here's where you "don't get it". I'm going to continue with my analogy of the 40some hear old union man. And by the way, you are still trying to answer with 500 words what can be answered with one or two.

Here's the paradigm again.

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.​

Here are the answers.

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

No, not if you are going to rely on SS to help make the payment.

2. Do I or DO I NOT get a payback.

You don't know.

See how easy that is?

And that's why we need an "honest discussion".​

 

[mhaze]

....I will have significantly more than $40K in retirement income (already do in fact), but the goverment and my employer (they are the same) have consistently said that Social Security is 1/3rd of my total retirement benefit (pension and funded 401(k) each 1/3). At this point in the game, I am unwilling to concede that I should forfeit a benefit I have already paid for. and was encouraged to consider as an integral part of my retirement benefits....

So it's logical that you'd want to gourge other people more, so that you could get what you were promised. But Joe thinks you were not really promised anything, and that you are not really due anything except by largess.

Note that taxing everyone more does not get you what you think you have coming because there is no contractual obligation to pay you anything.

And that is what I think the actual problem is.

 

[sarge]

So it's logical that you'd want to gourge other people more, so that you could get what you were promised.

It is normal that I would hope to receive a check from Social Security. It is not logical that I would expect any specific amount, however.

It is far more likely that I will receive a check than not, and almost as likely that the check will be at least 80% of what the SS administration currently projects it will be. To my mind, that makes SS more solid than most any other tax funded government entitlement program except for my military retirement- which is actually a contractual obligation and a funded pension.

But Joe thinks you were not really promised anything, and that you are not really due anything except by largess.

"largess" is at least a mild miscarterization of his position as I understand his position to be, and he is essentially correct. I have been promised nothing, and I am due only whatever the SS rules say that I am at the moment I am eligible for and apply to receive SS benefits.

SS is not a Ponzi scheme in any particular. Relative to most government entitlement programs, SS is wildly successful. It is unlikely in the extreme that this will change during the next 40 years.

Note that taxing everyone more does not get you what you think you have coming because there is no contractual obligation to pay you anything.

And that is what I think the actual problem is.[/QUOTE]

 

[mhaze]

.....Ss is not a ponzi scheme in any particular. Relative to most government entitlement programs, ss is wildly successful. It is unlikely in the extreme that this will change during the next 40 years....

Why of course.....

UNLIKELY IN THE EXTREME...

It's all so clear now.

We'll just keep spending 40% more than the revenue for 40 more years, in current dollars adding $60T to the deficit, and using the CBO's rather conservative estimates of 4-5% interest for the US government in five to ten years, we'll just have NO PROBLEM making that 3T interest payment every year. It's not ANY Problem At All that it's three times total 1040 tax revenue to the US Government.

Yes, that makes really really good sense. Let's just step thru it to understand the utter genius.

First, we'll just print money for the excess of interest due over receipts, and we'll just add that to the 60T deficit, giving us more like 100T deficit and 5T interest per year at the end of the 40 years. That'll work just great. I'm so happy now that I understands.

Thank you for enlightening us.

Everything's fine.

<SNIP>

Edited, breach of rule 0.

Replying to this modbox in thread will be off topic  Posted By: Locknar

 

[sarge]

Why of course.....

UNLIKELY IN THE EXTREME...

It's all so clear now.

We'll just keep spending 40% more than the revenue for 40 more years, in current dollars adding $60T to the deficit, and using the CBO's rather conservative estimates of 4-5% interest for the US government in five to ten years, we'll just have NO PROBLEM making that 3T interest payment every year. It's not ANY Problem At All that it's three times total 1040 tax revenue to the US Government.

Yes, that makes really really good sense. Let's just step thru it to understand the utter genius.

First, we'll just print money for the excess of interest due over receipts, and we'll just add that to the 60T deficit, giving us more like 100T deficit and 5T interest per year at the end of the 40 years. That'll work just great. I'm so happy now that I understands.

Thank you for enlightening us.

Everything's fine.

You seem to be stuck on the idea that there are several options available to us for 'fixing' the problem that SS faces a couple of decades down the road. Indeed, it is all much simpler than your hair-pulling, teeth gnashing rant indicates that you believe it to be. We raise revenue and/or reduce benefits.

Doing either or both of these does not make SS a failure. And so far, SS has performed exactly as intended - a record I'm not sure any other entitlement program can match.

It is much more likely than not that I will receive at least 80% of the current projected amount. It is likely that either the amount of my income subject to SS taxes will increase or that my benefits will be delayed, or a combination of both. Disapointing, but something I've known was likely my entire adult life - I was born at the tail end of the post-WWII baby boom.



<SNIP>

Edited by Locknar: 

<SNIP>'ed, Moderated content removed.

 

[mhaze]

You seem to be stuck on the idea that there are several options available to us for 'fixing' the problem that SS faces a couple of decades down the road. Indeed, it is all much simpler than your hair-pulling, teeth gnashing rant indicates that you believe it to be. We raise revenue and/or reduce benefits.

Doing either or both of these does not make SS a failure. And so far, SS has performed exactly as intended - a record I'm not sure any other entitlement program can match.

It is much more likely than not that I will receive at least 80% of the current projected amount. It is likely that either the amount of my income subject to SS taxes will increase or that my benefits will be delayed, or a combination of both. Disapointing, but something I've known was likely my entire adult life - I was born at the tail end of the post-WWII baby boom.



<SNIP>

Edited by Locknar: 

<SNIP>'ed, Moderated content removed.

I'm really not interested in your ... ah.... "Faith".

If you care to show errors in the simple math that I used, go at it. Otherwise, you can have your beliefs and your hopes and I wish you the best of luck with them. But some of us out on the ocean are not hoping and wishing and praying that the leaks in our boats will fix themselves, we are actually plugging leaks.

But go at it with the cash flow problem. At the same time, don't expect to not get laughed at if you just prattle off "raise revenue and reduce expenses" and similar stuff.

 

[sarge]

I'm really not interested in your ... ah.... "Faith".

If you care to show errors in the simple math that I used, go at it. Otherwise, you can have your beliefs and your hopes and I wish you the best of luck with them. But some of us out on the ocean are not hoping and wishing and praying that the leaks in our boats will fix themselves, we are actually plugging leaks.

But go at it with the cash flow problem. At the same time, don't expect to not get laughed at if you just prattle off "raise revenue and reduce expenses" and similar stuff.

I've provided the same "fix" that actual experts agree will work - raise the revenue by eliminating the cap on income subject to SS taxes and either reduce benefits (through applying a means test) or delay benefits.

It is all that simple, really. Your "math" is meaningless. Social Security has a seperate line of revenue. Social Security is solvent today and will remain solvent for 2 decades if we take no action. Social Security will be solvent for the foreseable future if we implement relatively painless changes today - and will likely have a surplus for at least the period from 20-80 years from now if we do. In the budget world, guaranteed solvency 80 years out is about as good as it gets.
\
But by all means, keep protecting us from those windmills.

 

[IchabodPlain]

Why of course.....

UNLIKELY IN THE EXTREME...

It's all so clear now.

We'll just keep spending 40% more than the revenue for 40 more years, in current dollars adding $60T to the deficit, and using the CBO's rather conservative estimates of 4-5% interest for the US government in five to ten years, we'll just have NO PROBLEM making that 3T interest payment every year. It's not ANY Problem At All that it's three times total 1040 tax revenue to the US Government.

Yes, that makes really really good sense. Let's just step thru it to understand the utter genius.

First, we'll just print money for the excess of interest due over receipts, and we'll just add that to the 60T deficit, giving us more like 100T deficit and 5T interest per year at the end of the 40 years. That'll work just great. I'm so happy now that I understands.

Thank you for enlightening us.

Everything's fine.

<SNIP>

Edited, breach of rule 0.

Replying to this modbox in thread will be off topic  Posted By: Locknar

Are you intentionally ignoring the potential reforms offered in this thread? Why is it either do nothing or scrap the program? Raising the retirement age and lifting the earnings cap would make SS solvent for the foreseeable future. You could even lower the rate if you lifted the cap and still be able to deal with the coming demographic shift (which is only a temporary problem).

The fact is that we live longer and retire earlier than we ever have in our history. In 1935, when SS started, the average life expectancy was just under 62. However, that is misleading because of the infant mortality rate, and so the average rate taking that into account was about 72 in 1935. Today it's almost 79 - that is a great thing. The average age of retirement in 1935 was just under 67 - today it's under 64. So we live seven years longer collecting benefits and retire three years earlier. And even this isn't what will bankrupt SS. Rather it's those patterns mixed with the retirement of baby boomers.

Having averaged about 1yr. in life expectancy gains per decade and retiring about .5yr early per decade, by 2028 most will live to 80 but retire at 63. 17 years of collecting benefits is not what the system was designed for.

 

[mhaze]

I've provided the same "fix" that actual experts agree will work - raise the revenue by eliminating the cap on income subject to SS taxes and either reduce benefits (through applying a means test) or delay benefits.

It is all that simple, really. Your "math" is meaningless. Social Security has a seperate line of revenue.... .

No, your logic is irrefutably flawed. You've mistaken the nice little budget of the Enron company coffee shop as existing in isolation of Enron. It doesn't. The department of a company has a budget that doesn't exist in isolation from that company.

Hey, this is accounting 101, dude. Or if you like, lets have the discussion strictly in line with GAP. Take your pick, but in either case, you have to revise your premises, claims, assertions, and conclusions.

 

[Random]

Again, it’s a question of whether you consider Social Security to be part of the overall federal budget or not. If it is not, Social Security is fine for decades and can be made fine for as far into the future as people are willing to predict with minor changes. If it is part of the Federal Budget then we have problems, but then things like increasing income and estate taxes, cutting defense spending, and otherwise fixing the rest of the budget are on the table.

 

[mhaze]

...If it is part of the Federal Budget then we have problems, but then things like increasing income and estate taxes, cutting defense spending, and otherwise fixing the rest of the budget are on the table.

Yes, it is part of the Budget. Granted, it could be made completely independent, and then it could invest worldwide and in corporate bonds, instead of just US Treasuries. But it isn't independent.

And the various things you mention do not impact the simple realities of the numbers I posted two posts back.

 

[RandFan]

No, your logic is irrefutably flawed. You've mistaken the nice little budget of the Enron company coffee shop as existing in isolation of Enron. It doesn't. The department of a company has a budget that doesn't exist in isolation from that company.

Hey, this is accounting 101, dude. Or if you like, lets have the discussion strictly in line with GAP. Take your pick, but in either case, you have to revise your premises, claims, assertions, and conclusions.

Do you mean "GAAP"?

 

[JoeTheJuggler]

No. No, no, no. No.

It sounds tempting doesn’t it? Let’s just make sure that Social Security goes to the really needy. But then you get into the whole argument about who is “really needy”.

You mean just like we do with SSD, Medicaid, food stamps, etc.?

I don't see why this is a problem.

I think it's foolish to send checks to people who don't need them, when Social Security is not an IRA, but is a taxpayer funded safety net for retirees and the disabled.

 

[JoeTheJuggler]

Yes, it is part of the Budget. Granted, it could be made completely independent, and then it could invest worldwide and in corporate bonds, instead of just US Treasuries. But it isn't independent.

First, Social Security is somewhat independent, in that it's not part of the discretionary budget.

Second, so what? We can still do accounting for subunits of the federal government. We can do accounting on the Department of Defense, we can even conduct audits of Planned Parenthood (to find out if they're spending federal funds properly and obeying the rules).

We certainly can analyze the solvency of Social Security.

 

[sarge]

You mean just like we do with SSD, Medicaid, food stamps, etc.?

I don't see why this is a problem.

I think it's foolish to send checks to people who don't need them, when Social Security is not an IRA, but is a taxpayer funded safety net for retirees and the disabled.

I agree, with the same condition as before - "the needy" includes me and every other person that has been assured they will be covered by Social Security. It is one thing to claim that no one has been promissed any specific benefit. It is another entirely to claim that no one was promissed any benefit.

 

[BenBurch]

Do you mean "GAAP"?

It was GAAP when I studied it, too... People who try to tell you what GAAP is without knowing the first thing about it make me smile.

 

[BenBurch]

You mean just like we do with SSD, Medicaid, food stamps, etc.?

I don't see why this is a problem.

I think it's foolish to send checks to people who don't need them, when Social Security is not an IRA, but is a taxpayer funded safety net for retirees and the disabled.

I agree.

No reason for Limbaugh to ever collect a dime, though of course he wouldn't be hypocritical enough to take SS, would he? I'd say that if your income is above $50K exclusive of SS but inclusive of 401K and pension payouts, then you probably don't need 100% of it, and by $70K you would not need a dime of it.