Thread: Is Social Security a "Ponzi Scheme?"

This is kind of interesting.

Apparently Mr. Paul Krugman wrote a response to an article by someone else in the Boston Review back in 1996. In part of the reply we find the following:

I like Freeman's idea of providing each individual with a trust fund when young rather than retirement benefits when old, but we had better realize that this is a significant change in the character of the social insurance system. 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).

What Consensus?

Huh...maybe TEA Party "whackos" aren't the only ones who have considered Social Security to be akin to a Ponzi scheme.

Originally Posted by lutherf

This is kind of interesting.

Apparently Mr. Paul Krugman wrote a response to an article by someone else in the Boston Review back in 1996. In part of the reply we find the following:

What Consensus?

Huh...maybe TEA Party "whackos" aren't the only ones who have considered Social Security to be akin to a Ponzi scheme.

What would have happened to all of those savings in the 2009 crash?

Originally Posted by USCitizen

What would have happened to all of those savings in the 2009 crash?

That would depend entirely on what they were invested in. Furthermore, any money that was added to someone's account (private, probably invested in mutual funds) would have showed remarkable gains over the past two years.

If SS were switched to private accounts there is no reason that qualified accounts would have to conform to a risk template that was heavy into Treasuries while still allowing a certain percentage of more aggressive investment. The idea would be, again, ownership while supplementing other retirement vehicles.

Originally Posted by USCitizen

What would have happened to all of those savings in the 2009 crash?

If you kept the investments another 2 years, they would be up 50% from then (based on the DJIA) or 10% from when you first invested.

Originally Posted by jviehe

If you kept the investments another 2 years, they would be up 50% from then (based on the DJIA) or 10% from when you first invested.

Most of mine were in GE, one of the largest and best dividend-paying blue chips. Went down from a high in '07 around $44, presently at $15.

The whole idea that stocks historically appreciate at 10% a year, and 'buy and hold' is thus a profitable investment strategy, has been turned on it's head. My lesson is to employ a moving stop-loss, but it cost me about $40,000 to learn.

Originally Posted by mahayana

Most of mine were in GE, one of the largest and best dividend-paying blue chips.

There's the issue. Even one great firm can still stumble or be victim to outside influences and costs you a lot.

Originally Posted by mahayana

Most of mine were in GE, one of the largest and best dividend-paying blue chips. Went down from a high in '07 around $44, presently at $15.

The whole idea that stocks historically appreciate at 10% a year, and 'buy and hold' is thus a profitable investment strategy, has been turned on it's head. My lesson is to employ a moving stop-loss, but it cost me about $40,000 to learn.

GE is up 88% from 2 years ago. Obvisouly you should not have all your investments in one stock.

Originally Posted by jviehe

GE is up 88% from 2 years ago. Obvisouly you should not have all your investments in one stock.

Absolutely, mortgage backed derivatives were the place to be.

Hah.

Through the years this same discussion happens over and over, and it seems more ridiculous every time. SS began with 40 workers paying the benefits of one beneficiary. By 1950 that number dropped down to 16.5 workers per beneficiary, in 1990 only 3.4, and today somewhere around 1.75 workers per SS recipient. I could care less whether one labels that a Pyramid Scheme, Ponzi Scheme, or unsustainable entitlement. The most important word that needs to be used is failure. The program is a complete failure. Blame it on the program, blame it on the politicians implementing the program, I don't care. As long as one is honest enough to admit that Social Security is failing.

I concur. Its also unconstitutional, not that anyone cares.

It's both a failure and unconstitutional to some people because they're not getting it presently, don't think they'll ever need it (after all, they've never been sick or had any financial reverses of any type and most of them believe these only happen to people god hates anyway) and so don't want to pay for it. These are the same people who argue that government shouldn't be able to make them buy Health Insurance because they feel fine now (but will usually be the first one in the ER when they get the sniffles). Lots of them also contend that you can have all the benefits of civilisation without paying for them whatsoever so "taxes are theft". You can wrangle all you want from here to doomsday, the fact that SS has been both upheld in every case by the SCOTUS and worked without a hitch for over 70 years, (have the checks ever failed?) knocks all your bs arguments into the proverbial cocked hat, but then I forget, these are conservatives, reality means nothing to them.

Well chis matthews thought so.....

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