Perry no longer thinks SS is a Ponzi scheme.

[sarge]

I crossed out the part that represented YOUR OPINION.

Careful, lest your entire posting history on this subject get lined out.

It's more a redistribution plan because it rewards equally people who work for 10 years or 40 years, than by looking at "rich vs poor".

No, it isn't - but okay so long as you understand now that you were wrong about it being an individual retirement account.

And the capping of the income at which SS is taxed is done because of a corresponding cap on maximum benefits. Those are near 50,000 per year incidentally.

So? As SS is cleraly not an individual retirement account, and as SS is learly a social safety net (welfare), it makes no sense at all to attempt to link maximum contributions to maximum benefits.

If SS is a worthwhile program, then SS should be fully funded - and the tax that supprots it should not be the most regressive one we have.

There also is "means testing" in the current law.

There is an ass-backward form of means testing in the current law. Those that would most benefit from being able to work and draw SS benefits are exactly the ones most discouraged from doing so.

For example, wages received after SS starts result in a 50% reduction in SS benefits.

Close. Not exactly, but close.

 

[mhaze]

Your argument might have more validity if we did not have 80 years of data showing the government living up to its obligation in SS.

Obligation?

And also, your statement's illogical because of an attempt to predicate future action based on the past. What if I argued, that a better cause and effect scenario would be to forecast our likely future action on SS based on reviewing a group of countries which spent 40% more than they took in?

Many of those no doubt had a long history of "good years". Looking at countries with similar over spending problems and how they handled such a thing would be more correct. Many of those no doubt had a past history of making good on their retirement obligations.

 

[Lurker]

Ask all the people in Russia that stopped getting retirement checks in the 1991-1992 timeframe your questions.

Wait....did something happen in 1991 that might have had an influence?

Russia not equivalent to the US

Ask someone in Greece if their retirement checks were reduced last year.

No, that couldn't possibly happen here.

Greece not equivalent to the US.

If you want to run around afraid that we might turn into Greece or Russia be my guest. I think that fear is unfounded.

Ask someone in Argentina what the buying power of their retirement checks was in 2002 and thence forward.

Want more?

All I see if you making comparisons to countries that are in no way comparable to the US. Russia? Are you expecting a complete overhaul of our government to a totally new form? Greece, Argentina? Are you really comparing us to countries that historically have had troubles with their economies? Has the US had anything comparable?

 

[Skepticemea]

Why are they not comparable to the US? Is it because they are spelt differentling?

 

[mhaze]

Why are they not comparable to the US? Is it because they are spelt differentling?

Russia not equivalent to the US


Greece not equivalent to the US.

If you want to run around afraid that we might turn into Greece or Russia be my guest. I think that fear is unfounded.



All I see if you making comparisons to countries that are in no way comparable to the US. Russia? Are you expecting a complete overhaul of our government to a totally new form? Greece, Argentina? Are you really comparing us to countries that historically have had troubles with their economies? Has the US had anything comparable?

???? So there is something wrong with looking historically at countries with a pattern of overspending, and seeing what happened? That's called LEARNING THINGS.

I already asked, how many examples you want?

• Weimer Republic 1923? Those on their equivalent of SS starved or died of consequences of malnutrition en mass.
  
• Hungary 2010? Just nationalize all the IRAs and 401k plans....
  
• Ireland and France? Just take the pension money and use it for other stuff, they won't notice (NOTE: these countries run with the Central Euro bank, so this is similar to our just "printing money").
  
• Bolivia? Just take all the pension money, and give the public some vague promises.

Oh, and regarding the part I bolded in your post? What "FEAR"? There is no contractual obligation to pay. So do you allege that I "fear" something happening that I don't have a right to have not happen?

It's not me that's not making sense.

 

[Lurker]

Obligation?

And also, your statement's illogical because of an attempt to predicate future action based on the past.

Yeah, totally illogical to look at the past to discern the future.

What if I argued, that a better cause and effect scenario would be to forecast our likely future action on SS based on reviewing a group of countries which spent 40% more than they took in?

OK, so you are looking at the past of these countries to predict our future. Yep, that is totally logical.

Snideness aside, your method is not altogether wrong but it simplifies a situation greatly. Surely you would agree that there would be far more inputs to the model than what you described and some of those inputs would have a large impact on the results of your prediction.

 

[Lurker]

???? So there is something wrong with looking historically at countries with a pattern of overspending, and seeing what happened? That's called LEARNING THINGS.

Only if you can control for other factors.

I already asked, how many examples you want? Weimer Republic 1923? Those on
their equivalent of SS starved or died of consequences of malnutrition en mass.

Let me get this straight....you want to compare the US economy to the Weimar Republic 1923 economy? Did we just go through a devastating war that I did not know about? Are we experiencing hyperinflation and missed it on the news? Are we paying reparations?

My point is you need to find countries and times that are as similar to the US as possible if you want to control for these other factors. I would posit that Russia at the time of the change and Weimar 1923 have far too many factors to make the comparison. I believe we could find modern European countries that are more appropriate for comparisons and see if they have defaulted. Let's take Germany for example. Have they defaulted? Or the UK. Have they defaulted? France? Italy? These are the economic powerhouses of Europe.

How about Australia? Anything there?

What you are doing, mhaze, is citing anecdotal evidence. A better skeptic would find all cases that satisfy your criteria and see what percent of countries defaulted. That would make your case. At this point I have no way of knowing whether your anecdotes come out to 5% or 95% of the total cases. If it came out to the former I would yawn, the latter I might be joining you in your alarm.

 

[mhaze]

Only if you can control for other factors.


Let me get this straight....you want to compare the US economy to the Weimar Republic 1923 economy? Did we just go through a devastating war that I did not know about? Are we experiencing hyperinflation and missed it on the news? Are we paying reparations?

My point is you need to find countries and times that are as similar to the US as possible if you want to control for these other factors. I would posit that Russia at the time of the change and Weimar 1923 have far too many factors to make the comparison. I believe we could find modern European countries that are more appropriate for comparisons and see if they have defaulted. Let's take Germany for example. Have they defaulted? Or the UK. Have they defaulted? France? Italy? These are the economic powerhouses of Europe.

How about Australia? Anything there?

What you are doing, mhaze, is citing anecdotal evidence. A better skeptic would find all cases that satisfy your criteria and see what percent of countries defaulted. That would make your case. At this point I have no way of knowing whether your anecdotes come out to 5% or 95% of the total cases. If it came out to the former I would yawn, the latter I might be joining you in your alarm.

Huh? Think if you were a banker, and you were reviewing credit applications for loans. Someone brings a stack in and says "What do you think about this batch- these are applicants spending over 40% more than they take it?"

It does not take a rocket scientist to see that that overspending will come to a screetching halt. Thus, you have not even gotten to the point of suggesting analogies that are analogies - you've just thrown out an apparently random group of country names. That's ridiculous.

Also, think over what you are asking when you say "Have they defaulted?" One of the ways to not default is to stop paying things that were previously sacred....like pensions. Regarding "default on paying the SS", there can be none, because there is no contract and obligation.

Finally: You accuse me of citing anecdotal evidence, when it was in response to you alleged that 80 years of payments should make one comfortable for the future. So your one anecdotal is good, but mine on a dozen similar situations is not?

 

[Lurker]

Huh? Think if you were a banker, and you were reviewing credit applications for loans. Someone brings a stack in and says "What do you think about this batch- these are applicants spending over 40% more than they take it?"

It does not take a rocket scientist to see that that overspending will come to a screetching halt. Thus, you have not even gotten to the point of suggesting analogies that are analogies - you've just thrown out an apparently random group of country names. That's ridiculous.

I would think the banker would rely on an actuarial analysis to determine if the hypothesis is true or not.

You are saying the banker should rely on anecdotes that the person dropping off the stack has preedited to affirm his agenda.

Finally: You accuse me of citing anecdotal evidence, when it was in response to you alleged that 80 years of payments should make one comfortable for the future. So your one anecdotal is good, but mine on a dozen similar situations is not?

As far as anecdotes, I would say that using the US as an anecdote to make predictions on US future perfomance would be better than what you have done. The law of similarity applies here.

Look, I am not saying that what you are proposing is not without merit, I just think it would need to be done in a much more scientific fashion to generate enough value to base a response. You have carefully picked examples of countries that "defaulted" when a specific criteria was met but like I said earlier, we don't know which side of the distribution you are on. Are you cherry picking the 5% of defaulters or the 95% of defaulters. Surely you see the value in knowing more than what you have provided.

 

[mhaze]

I would think the banker would rely on an actuarial analysis to determine if the hypothesis is true or not.

You are saying the banker should rely on anecdotes that the person dropping off the stack has preedited to affirm his agenda.


As far as anecdotes, I would say that using the US as an anecdote to make predictions on US future perfomance would be better than what you have done. The law of similarity applies here.

Look, I am not saying that what you are proposing is not without merit, I just think it would need to be done in a much more scientific fashion to generate enough value to base a response. You have carefully picked examples of countries that "defaulted" when a specific criteria was met but like I said earlier, we don't know which side of the distribution you are on. Are you cherry picking the 5% of defaulters or the 95% of defaulters. Surely you see the value in knowing more than what you have provided.

You are making things up. I'm not proposing anything, but only noting that countries which have been spending 40% more than they take in experience a correction after which they spend about the same as they take in. That happens 100% of the time. Simple. There are variations in the corrections.

Many times they affect entitlements because those are the big areas where cuts are possible. Because the corrections occur 100% of the time, there is no way I can, as you allege, "cherry pick". There is no need to develop a statistical model where you "control other factors". The factor of consideration is a gross imbalance between spending and revenues.

Oh, one final thing. That analogy with the banker and his decisions about the stack of folders for people spending 40% more than they take in? Why the doubletalk? It's not complicated, and there are no nuances.

The banker trashes them.

Like I said...how many more examples do you want?

 

[corbin]

It is not a retirement account because you do not pay in with an expectation that your contributions will grow, you do not make voluntary contributions, you can not influence how the contributions are invested, and you have no reasonable expectation that you will receive any defined benefit from the contributions. The only similarity between an individual retirement account and SS is that you may benefit from both when you actually retire. By your logic, Medicare is also a "retirement" account.

Medicare isn't a retirement account because it is subsidized medicine, not future money. Quite a basic and obvious difference.

You do expect your contributions to grow, and they do a little bit as long as the pool of people paying is greater than the pool of recipients. This is the way it has been for a while. You get less return than you would from other investments, but you still put money in with expectation of return. If you don't expect any return, then congratulations, you are one step closer to realizing that it is a horrible deal.

Okay - now I get it. Things are what you say they are because you get to re-define the words. Cool superpower you have there.

Which words did I redefine? You pay now with the expectation of retirement money. How is that not a retirement account?

SS is clearly a redistribution program. Relatively well off persons contribute more than they receive and poor people get more than they pay. Really wealthy persons get less than they pay, but pay too little to start with.

Its redistributionist, but its not:

Commenting on the redistributionary nature of Social Security, Krugman once wrote "Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in)." [141]

Do you consider everything you fail to understand to be ridiculous?

Good one. Very witty.

 

[JoeTheJuggler]

So I've been away from this thread for nearly a day, and it's moved on considerably. Is Mhaze still defending the claim that Social Security is a Ponzi Scheme?

Is he still mischaracterizing the situation of its long-term solvency and the steps that would be required to guarantee that solvency?

 

[JoeTheJuggler]

Its [sic] redistributionist, but its [sic] not:

Yeah Krugman is just wrong here. Again, Social Security has always paid out benefits from taxes collected. The very first month Social Security taxes were collected in 1937, benefit checks went out in the same month. If it weren't "redistributionist", then it would mean they just sent checks back to the taxpayers in the exact same amount as the taxes they paid in, but of course, that's not how it happened.

It has never been a forced IRA. It has always been a tax-payer financed safety net for retirees (and later, for the disabled too).

 

[JoeTheJuggler]

SS is clearly a redistribution program. Relatively well off persons contribute more than they receive and poor people get more than they pay. Really wealthy persons get less than they pay, but pay too little to start with.

Yep. And some recipients (especially of SSD) have paid little or nothing into the system.

ETA: And those people who received checks the very first month couldn't possibly have ever paid anything in!

 

[sarge]

Medicare isn't a retirement account because it is subsidized medicine, not future money. Quite a basic and obvious difference.

Nonsense.

Medicare and Social Security are both directly tax-payer funded social safety nets. Each has its own line of funding, each guarantees no defined benefit, each pays benefits without specific regard for the amount of taxes paid by an individual recipient.

Medicare and Social Security are more alike than Social Security and an individual IRA.

You do expect your contributions to grow, and they do a little bit as long as the pool of people paying is greater than the pool of recipients.

No one expects their Social Security benefits to grow in proportion to their contributions as a result of interest earned - and that is the exact nature of the expectations of an individual retirement vehicle.

This is the way it has been for a while. You get less return than you would from other investments, but you still put money in with expectation of return. If you don't expect any return, then congratulations, you are one step closer to realizing that it is a horrible deal.

Social Security benefits have never been directly tied to Social Security contributions, and any expectation of some guaranteed rate of return on "contributions" is the result of ignorance of the nature of Social Security.

Social Security is either a good deal or a bad deal, depending on where one sits. I would be fine with otping out of Social Security right now and forfeiting my lifetime contributions to avoid the future taxes. My parents literally depend on their Social Security income for their livelyhoods. For them, Social Security is a very good deal. Of course, that is due in part to the absolute fact of the redistributive nature of Social Security - a fact you previously denied.

Which words did I redefine? You pay now with the expectation of retirement money. How is that not a retirement account?

You have (so far) redefined both "retirement account" and "redistributive".

Its redistributionist, but its not:

Social Security is absolutely redistributive.

Good one. Very witty.

I often (but not always) respond to snark with snark. Don't get your tampon fuse alite because I am better at it.

 

[sarge]

So I've been away from this thread for nearly a day, and it's moved on considerably. Is Mhaze still defending the claim that Social Security is a Ponzi Scheme?

Are they still mischaracterizing the situation of its long-term solvency and the steps that would be required to guarantee that solvency?

Yep. Got to China, and decided to keep on digging.

 

[corbin]

Social Security is either a good deal or a bad deal, depending on where one sits. I would be fine with otping out of Social Security right now and forfeiting my lifetime contributions to avoid the future taxes. My parents literally depend on their Social Security income for their livelyhoods. For them, Social Security is a very good deal. Of course, that is due in part to the absolute fact of the redistributive nature of Social Security - a fact you previously denied.

The question I'm asking is this: would your parents, the people whom social security is purported to favor the most in its redistribution, have been better off investing all the money that they paid into social security in private investments instead?

 

[RandFan]

The question I'm asking is this: would your parents, the people whom social security is purported to favor the most in its redistribution, have been better off investing all the money that they paid into social security in private investments instead?

At the moment it is most unlikely. In nearly 11 years the DJI hasn't moved up much. I gave you the example of my mother. The banking scandal and meltdown of the stock market forced her from her home and into my sister's. If it weren't for SS she'd have little of anything. It amazes me that after the events of the past 10 years people can even ask such a question. Let me say it again.

No.

 

[sarge]

The question I'm asking is this: would your parents, the people whom social security is purported to favor the most in its redistribution, have been better off investing all the money that they paid into social security in private investments instead?

Are we past the "redistribution" and "private retirement account" then?

My parents would almost not have been better off. Social Security requires the employer to contribute as much as the employee - and it is unlikely in the extreme that wages would be 7% higher if the Social Security tax had disappeared as they began working.

My parents, without the forced nature of Social Security, might not have had the discipline to invest 7% of their gross income in a retirement account, and probably would not have been able to afford to invest 14% (their contribution + the employers) even if the had had the discipline to do so.

My mother had a pension plan that her employer abandoned in favor of a 410(k) plan. She rolled the amount in her pension plan over into the 401(k), then began to invest 4% of her earnings into the 401(k) - an amount matched by her employer. She had the misfortune to retire very soon after the 401(k) lost a considerable percentage of its value - as did virtually everyone else's. Good thing she and my father both have Social Security. The reverse should have been true, but now the 401(k) supplements the Social Security.


So - it is likely that my parents would not have been better off had they not been paying into Social Security all that time. Of course, someone else's milleage may vary. It is safe to say that a very large number of Americans would not be better off today if they had kept the money that went to Social Security.

 

[corbin]

Are we past the "redistribution" and "private retirement account" then?

Well, given that you are now comparing social security to private investment as though they are competing services, er, no.

My parents would almost not have been better off. Social Security requires the employer to contribute as much as the employee - and it is unlikely in the extreme that wages would be 7% higher if the Social Security tax had disappeared as they began working.

Let's not get confused about who pays the social security tax, now. The entirety of the tax is borne by the employee:

There is a fiction that the Social Security tax is half on the individual and have on the employer - that the individual only pays x% and that the employers pays an equal percentage. That's nonsense, that's bookkeeping. That's not economics; not reality. The part an employers pays is part of his wage cost. If an employer considers that it is worth his while to hire an additional worker, he has to consider as part of his additional cost not only what he will pay to his worker, but also the extra taxes he will have to pay to the government. It makes no difference to the employer at all if he pays the worker a bigger check and the worker pays a larger part of that directly to the government, or he pays the worker a smaller check but in addition has to send a check to Washington. What matters to him is the additional number of dollars it costs him to hire an additional person. So the fact is, that the so-called tax on the employer is paid by the employee... this been subjected to empirical test. A paper by the Brookings Institute in Washington, D.C., published a couple of years ago, demonstrated empirically that the tax on the employer was shifted to the employee.

What do you mean its unlikely that the wage would increase 7%? The wage doesn't have to increase at all, it just has to not be automatically reduced by taking from it. And the number is 14%.

My parents, without the forced nature of Social Security, might not have had the discipline to invest 7% of their gross income in a retirement account, and probably would not have been able to afford to invest 14% (their contribution + the employers) even if the had had the discipline to do so.

So that's her own negligence. It is not the result of an inability to pay, it is merely the result of not wanting to pay. The many shouldn't be punished to rectify and enforce the mistakes of the few. That makes no sense whatsoever.

And, of course, as you have already learned, the amount freed up to be invested privately would indeed be 14% through higher wages. It is merely a trick of accounting to think that the employer bears the cost of the additional tax - one side is taken transparently and is written on the employees paycheck, and the employers side is in his books in the form of lower wages for the employee.

My mother had a pension plan that her employer abandoned in favor of a 410(k) plan. She rolled the amount in her pension plan over into the 401(k), then began to invest 4% of her earnings into the 401(k) - an amount matched by her employer. She had the misfortune to retire very soon after the 401(k) lost a considerable percentage of its value - as did virtually everyone else's. Good thing she and my father both have Social Security. The reverse should have been true, but now the 401(k) supplements the Social Security.

This point boils down to why we believe that people's investments were made insolvent. You think its because of animal spirits, I think its because of government policy that creates malinvestment and moral hazards. As such, I believe the solution is to remove the policy that creates this drama and allow investments to be sound, rather than supplement the problem with the inefficient band-aid of social security.