Social Security is Not a Ponzi Scheme, Mr. Perry

[NYcarbineer]

The Republicans didn't cut Social Security taxes, your Messiah did.

And I called him an asshole at the time for doing so.

Feel better?

I do.

So why did you bring the Republicans into the conversation, they didn't **** up Social Security.

The Republicans have started or escalated 4 wars in the last 30 years, and didn't pay for any of them,

if overwhelming debt threatens the security of the loans made to the general fund by Social Security,

then it's the GOP's fault.

 

[Toddsterpatriot]

And I called him an asshole at the time for doing so.

Feel better?

I do.

So why did you bring the Republicans into the conversation, they didn't **** up Social Security.

The Republicans have started or escalated 4 wars in the last 30 years, and didn't pay for any of them,

if overwhelming debt threatens the security of the loans made to the general fund by Social Security,

then it's the GOP's fault.

Social Security isn't any more actuarially sound if those wars never happened.

Obama is going to add as much debt in his 4 years in office as Bush did in 8. So what?

 

[Quantum Windbag]

There you go talking about one thing when I am talking about something else.

Let me make this easy and stipulate up front that when I say cash flow I am not talking about actual cash, I am talking about little 1s and 0s in a computer file, that way you understand that the I am not talking real money.

Then you aren't talking about "cash flow." Cash flow is how cash moves from A to B to C. It is how one calculates the economics of an asset. This is why I say the economics does not change when you look at the cash flow of a bond fund or the SS trusts.

FTR, most money and most securities are 1s and 0s. Most bonds do not exist in tangible form. They exist as a computer entry in repositories. You can't actually physically touch those bonds. They are represented only by what are known as CUSIPs, or numbered and lettered identifiers for the specific security. In this sense, the Treasury market is more similar to the nontradable obligations in the SS trusts than you might imagine. You can't go find the stacks of IOUs in the SS trusts. But guess what? You can't find the stacks of bonds representing Treasury securities because they, like the assets in the SS trusts, don't exist in tangible form! In fact, that's true of most stocks as well.

The bonds are assets, and not part of cash flow until they are traded.

That is not true. Bonds are assets but represent a claim on cash flows. It does not matter if it is traded. All trading does is move claims around. It doesn't change the claim. Let's say I borrow money from you. You make me sign a contract that I will pay you interest and principle. You are the lender, I am the borrower. Initial cash flow flows from the lender to the borrower. Future cash flow flows from the borrower to the lender. The terms of the cash flow are defined by the contract. If you sell the contract to someone else, it does not change the nature of the contract. It does not change the nature of the cash flow. Future cash flow still flows from the borrower to the lender. The only difference is the lender has changed since you have sold the contract to someone else. Now I must pay the new owner of the contract.

What you are talking about is "liquidity," the ability to buy and sell. Liquidity does not change nature of the cash flow. Liquidity merely shifts the cash flows around between different buyers and sellers. That will affect the valuation of the cash flows, but it doesn't change the nature of the cash flows. The borrower still has to pay the note holder.

The cash flow of the government, what they do with the money they get from selling a bond, is irrelevant to the cash flow of a pension fund that invest in those bonds, or of Social Security.

Right, sort of. The lender to the government - the buyer of Treasury bonds or contributor to the SS trusts - doesn't care about what the government does with the money they have lent it. What they care about is getting paid back plus interest. So they care about receipts of the government.

As we both noted in our cash flow schematics - and you were correct BTW - the government spends the money they receive from the proceeds of bond sales and SS receipts. They then tax the economy to pay back the cash flows.

You handle investments, do your clients require you to track the cash flow of the corporations when you buy stock, or are they satisfied with whether or not the stocks increase in value? Talking about how the bonds, or the stocks, gain value is a side issue here, what is important is how the funds handle the cash.

Stocks and bonds and valued based on their cash flows. They are valued based on their current cash flows - represented by interest on bonds and dividends on stocks - and future cash flows - future interest payments on bonds and future dividend payments on stocks. Stocks that do not pay dividends are capitalized based on their ability to pay dividends in the future, which is measured by the future cash flow of the company which is discounted back to the present.

The argument that I am making can be applied to any financial asset, not just government bonds. It is confusing, I know. When I started to research SS and how it worked, it took awhile for it to click for me. And finance and assets are my life.

Like I keep saying, you are talking about the actual assets in the account, and I am talking about the cash flow in the account. A pension fund that invests in bonds does not pay dividends out of income, that would be illegal, it pays dividends out of sales of the bonds. SS, on the other hand, routinely pays dividends out of income, and then invests any excess money. The 1s and 0s look the same, but one is legal for anyone, and the other is only legal for the government.

 

[Quantum Windbag]

And I called him an asshole at the time for doing so.

Feel better?

I do.

So why did you bring the Republicans into the conversation, they didn't **** up Social Security.

The Republicans have started or escalated 4 wars in the last 30 years, and didn't pay for any of them,

if overwhelming debt threatens the security of the loans made to the general fund by Social Security,

then it's the GOP's fault.

How many have Democrats started or escalated?

 

[flacaltenn]

Heck the Romans were smart enough to tax the occupied in their conquests. The cost for the privelege of being rescued and occupied by the best occupiers on the planet..

Why should WE have to pay for occupying them? We've built them schools, roads, power plants, --- time for them to get taxed eh? Social Security is NOW FIXED!!

 

[Raoul_Duke]

Also, as many people have repeatedly pointed out, payouts currently exceed payins in SS, and will only get worse as time goes on. That makes SS an unsustainable Ponzi game, not a pay as you go system.

Payouts do currently exceed payins but that's because we're in the middle of a massive recession so lots of people aren't paying in plus we've slashed payroll taxes on the people who still are paying in. Social security is scheduled to be unable to pay 100% of its benefits in 2037. According to the SS actuaries the worst case scenario in 2037 is that SS would only be able to pay 75% of benefits on an ongoing basis. But because SS is indexed to wages, and wages rise faster than priices, 75% of benefits in 2037 will afford a higher standard of living to 2037 retirees than 2011 retirees currently enjoy.

And SS isn't a Ponzi scheme. It only needs about a 0.6% og GDP increase over the next couple of decades to be able to pay 100% of benefits for the next 75 years.

SS is a social insurance scheme. It's always been designed so that current workers fund current retirees. As such it works in much the same way to most inssurance schemes that operate in every country -- current premiums pay current insurance claims. If SS is a Ponzi scheme so are insurance companies.

According to the SS actuaries, we are going to be paying out more money we take in from now until 2037, at which point the fund will be exhausted and the income will only support 75% of promised payouts. That is not the worse case scenario, and actually assumes a pretty rosy economic future that includes a 4% growth rate per year and that we do not extend the current payroll tax cuts. Obama not only requested an extension, he wants to expand them by giving people another 2% tax cut, and wants to throw in an employer side tax cut, and another cut if employers hire unemployed people.

FYI, the fact that something works is not evidence that it is not a Ponzi scheme. How long did Bernie Madoff run his scheme before it fell apart? Did the fact that it worked all that time make it not a Ponzi scheme?

The difference between insurance and SS has been covered in this thread, go educate yourself.

We're not going to be extending any payroll tax cuts indefinitely so we don't have a problem until 2037. Can you explain the difference between insurance ans SS to me please, I don't feel like wading through 50 pages. And a Ponzi scheme like Madoff ran claims to invest investors' money and pay them on the earnings of those investments. SS makes no such claim -- it has always taken in money and paid it out immediately to recipients. And it has always done this transparently, with every penny in and out accounted for. I'm pleased you seem to be agreeing with me that SS works. Excellent.

 

[flacaltenn]

And it has always done this transparently, with every penny in and out accounted for. I'm pleased you seem to be agreeing with me that SS works. Excellent.

Please don't actually read this thread. It'll break your little 10 year old heart..

 

[Raoul_Duke]

And it has always done this transparently, with every penny in and out accounted for. I'm pleased you seem to be agreeing with me that SS works. Excellent.

Please don't actually read this thread. It'll break your little 10 year old heart..

Perhaps you could point out to me where you think I'm wrong.

 

[flacaltenn]

Here you come waltzing in late and haven't read the assignment and you want me to give you the Cliff Notes version??

But because you're new (welcome to USMB) -- I'll give a hint..

http://www.usmessageboard.com/4125176-post530.html

http://www.usmessageboard.com/polit...-post4113518.html?highlight=theft#post4113518

http://www.usmessageboard.com/4131803-post665.html

Surely you can find other parts of these 60 pages interesting enough to challenge your cute naive belief in the GREAT MANAGEMENT of Soc Sec..

 

[saveliberty]

And it has always done this transparently, with every penny in and out accounted for. I'm pleased you seem to be agreeing with me that SS works. Excellent.

Please don't actually read this thread. It'll break your little 10 year old heart..

Perhaps you could point out to me where you think I'm wrong.

You can start by looking at CBO figures and see in 2037 the light go out on SS. Then check the assumptions made to make it last that long and see we will not do that well.

 

[Quantum Windbag]

Payouts do currently exceed payins but that's because we're in the middle of a massive recession so lots of people aren't paying in plus we've slashed payroll taxes on the people who still are paying in. Social security is scheduled to be unable to pay 100% of its benefits in 2037. According to the SS actuaries the worst case scenario in 2037 is that SS would only be able to pay 75% of benefits on an ongoing basis. But because SS is indexed to wages, and wages rise faster than priices, 75% of benefits in 2037 will afford a higher standard of living to 2037 retirees than 2011 retirees currently enjoy.

And SS isn't a Ponzi scheme. It only needs about a 0.6% og GDP increase over the next couple of decades to be able to pay 100% of benefits for the next 75 years.

SS is a social insurance scheme. It's always been designed so that current workers fund current retirees. As such it works in much the same way to most inssurance schemes that operate in every country -- current premiums pay current insurance claims. If SS is a Ponzi scheme so are insurance companies.

According to the SS actuaries, we are going to be paying out more money we take in from now until 2037, at which point the fund will be exhausted and the income will only support 75% of promised payouts. That is not the worse case scenario, and actually assumes a pretty rosy economic future that includes a 4% growth rate per year and that we do not extend the current payroll tax cuts. Obama not only requested an extension, he wants to expand them by giving people another 2% tax cut, and wants to throw in an employer side tax cut, and another cut if employers hire unemployed people.

FYI, the fact that something works is not evidence that it is not a Ponzi scheme. How long did Bernie Madoff run his scheme before it fell apart? Did the fact that it worked all that time make it not a Ponzi scheme?

The difference between insurance and SS has been covered in this thread, go educate yourself.

We're not going to be extending any payroll tax cuts indefinitely so we don't have a problem until 2037. Can you explain the difference between insurance ans SS to me please, I don't feel like wading through 50 pages. And a Ponzi scheme like Madoff ran claims to invest investors' money and pay them on the earnings of those investments. SS makes no such claim -- it has always taken in money and paid it out immediately to recipients. And it has always done this transparently, with every penny in and out accounted for. I'm pleased you seem to be agreeing with me that SS works. Excellent.

Insurance is paying someone to assume the risk, SS is not.

Are you saying that if I ran a Ponzi game that actually told people that I was not investing money the government would not have me up on charges of running a Ponzi scheme? If so, I have some ocean front property I need to sell.

 

[OohPooPahDoo]

the argument made by the reason piece in the op is that it's worse than a ponzi scheme...it has the added benefit of being 100% correct.

what other ponzi scheme has made payments as they come due for 75 years?

what other ponzi scheme had the power if the irs behind it, to compel the participation of more "investors", under threat of imprisonment?

none. that's kinda the point.

 

[OohPooPahDoo]

FYI, judicial activism is not disagreeing with me, judicial activism is a judge using the bench to ignore precedents and law to make policy decision and law.

Wrong, judicial activism is a judge using the bench to ignore precedents and law to make policy decision and law in your opinion.

Which makes you wrong about the mandate being a tax. You should try admitting it instead of resorting to ad hominems.

Stop your whining and get health insurance.

 

[OohPooPahDoo]

You want to balance that nit-pickin' against the SPECIFIC BENEFIT a 40 yr. old will get at retirement? He's got to survive another 28 yrs of Congresses before that becomes clear.

The specific benefit you will get from any investment can't be predicted for more than 30 years in advance.

The actual RISKS involved in projecting whether you'll be eligible, when you'll be eligible, what you're eligible for and what you will have to PAY INTO IT for the next 28 yrs. You got THOSE figures for me???

Now THAT'S stupid..

All I can tell you is that producers in the economy will always have to produce the goods and services those too old to produce need. Can you come up with a system that avoids that?

Nobody expects that a single investment can be predicted 30 years out. That's why you should constantly review your investments and make STABLE, WISE adjustments in WHAT you're invested in.

That wouldn't guarantee sufficient funds for the rest of your life. If you've got enough money to live at 4% interest and rates drop to 2% - you can't just make "WISE adjustments" and cause interest rates to go up.

 

[OohPooPahDoo]

Really?

I checked the website, and it is theoretically possible for a person to get injured the very first day he is ever employed and still be covered under SSDI. type as large as you want, it will not change the facts.

Only for those under age 22 - and then their parents must have paid enough credits.

What if the parent never worked?

No benefits would be payable on the record of a parent who never worked.

Benefits For Adults Disabled Before Age 22: Disability Planner

BTW - did you know its possible to get injured your very first day of work and collect workman's comp? I know the concept of insurance escapes you - but many forms of insurance begin as soon you start paying in. That's the whole idea - you're paying for risk coverage, not for a rainy day account.

Thanks for proving it is actually possible to get SSDI without actually paying into it.

Not if your parents didn't. You'd be collecting on your parents SSDI, That's like saying its possible to get (fill in the blank) without having to pay for it - obviously if your parents pay for it, you didn't have to. Doesn't mean it wasn't paid for.

 

[OohPooPahDoo]

Insurance is paying someone to assume the risk, SS is not.

SS assumes part of the risk of living to an age too old to work or becoming disabled from work.

We've been through this before, a zillion times.

Are you saying that if I ran a Ponzi game that actually told people that I was not investing money the government would not have me up on charges of running a Ponzi scheme?

No, they wouldn't. If you can convince people to just give you their money for nothing in return, and you're paying the applicable taxes, and you're using no deceit, that's not at all illegal. Why would it be?

 

[Flopper]

"Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government." Trust Fund FAQs

The argument really boils down to whether you have faith in the United States government to live up to its financial commitments. There is no gold backing our currency and no collateral that backs up any US debt. It's all about faith and trust. Without it, the Social Trust will become worthless as will all treasury bonds, US Savings bonds, and the US dollar. If the Trust becomes worthless, that will be least of our worries.

The argument really boils down to whether you have faith in the United States government to live up to its financial commitments

Those Social Security "commitments" can be altered at a moments notice.

There is no gold backing our currency

The Fed currently holds about $470 billion in gold. As well as $2.8 trillion in other assets.

Our gold does not backup the currency. It is also not collateral for government debt.

Most of the discussion in this thread revolve around the possibility that Congress would allow S.S. to fail. That is not going to happen because there are a host no brainier fixes. Once Congress fixes S.S. Revenue will cover benefits except during recession. That makes the existence of the trust fund a rather moot point. If a combination of the following fixes are implemented, Congress should be able to spread the burden so it's not devastating for any group.

Reduce benefits by 5%. That would lower the deficit by 30%.

Raise the retirement age. There are various proposals such as raise it to 68 or even 70.

Require bigger contributions from workers and employers. Raising the 6.2% rate to 7.3% would wipe out S.S. projected deficit.

Boost future contributions. The Social Security tax bite could be increased from 6.2% to 7.2% for workers and employers in 2022, for example, and to 8.2% in 2052, which would completely eliminate the shortfall.

Tax as needed. Social Security contribution rates could be designed to increase as funds are needed and be reduced when there are surpluses.

Modify the Social Security tax cap. If all earned income above $106,800 were subject to Social Security contributions but did not count toward benefits, Social Security's projected deficit would be completely eliminated.

Average in more working years. Social Security checks are based on an average of a worker's 35 highest paid years in the work force. Those who haven't worked 35 years have zeros averaged in. The averaging period could be increased to 38 or 40 years, which would reduce the deficit by 14% and 23%, respectively.

Decrease the cost-of-living adjustment. Social Security benefits are automatically adjusted each year to keep up with inflation, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Reducing the cost-of-living adjustment by 1% each year would wipe out 78% of the projected shortfall.

Reduce spousal benefits. Social Security pays a benefit to nonworking and low-earning spouses of up to 50% of the benefit paid to the spouse with the higher income. One proposal would gradually lower the maximum spousal benefit to 33% by 2026.

Include more workers. Some Americans are currently exempt from Social Security taxes, including state and local government workers participating in alternative retirement systems, federal workers hired before 1984, college students working at academic institutions and ministers who choose not to be covered. Extending coverage to workers who previously didn't participate would reduce the Social Security shortfall by about 9%.

A legacy tax. The first retirees who received Social Security payments from the system didn't pay Social Security taxes throughout their entire working lives, which contributes to Social Security's fiscal problems. Several ideas have been raised to counteract this legacy cost, including a 3% legacy tax on earnings above the tax cap of $106,800 or on adjusted gross income of more than $125,000 for individuals and $250,000 for couples.

Diversify investments. Part of the Social Security trust fund could be invested in equities to try to earn returns that would help sustain the Social Security program. Investing 15% of trust fund assets in equities could lower the projected deficit by 14%,

 

[OohPooPahDoo]

Our gold does not backup the currency.

The gold held by the Treasury for the Federal Reserve IS held as collateral against outstanding Federal Reserve Notes - just like Treasury bills, notes, and bonds, and (now) mortgages.

 

[Quantum Windbag]

FYI, judicial activism is not disagreeing with me, judicial activism is a judge using the bench to ignore precedents and law to make policy decision and law.

Wrong, judicial activism is a judge using the bench to ignore precedents and law to make policy decision and law in your opinion.

Actually, that is pretty much the definition.

Judicial activism - Wikipedia, the free encyclopedia

judicial activism - Wiktionary

If your opinion does not match the definition that does not make my acceptance of the real world's definition wrong.

Which makes you wrong about the mandate being a tax. You should try admitting it instead of resorting to ad hominems.

Stop your whining and get health insurance.

You idiots made it to expensive for me, so now you have to pay for my health care.

 

[OohPooPahDoo]

You idiots made it to expensive for me, so now you have to pay for my health care.

I did no such thing. Please stop whining.