Thread: Is Social Security a "Ponzi Scheme?"

Originally Posted by Disillusioned_1

Insurance also does that. Sometimes you get more out than you put in, sometimes you put in more than you get out.

Social security is something like "retirement insurance". Its not a ponzi scheme or even a pyramid scheme. In fact, thus far social security has been a completely solvent program and has run a surplus of trillions. The problem is that the rest of the government has been spending social security funds for decades on things that aren't social security, and writing an accounting book "IOU" to the social security administration.

Thus...Ponzi scheme. Actually it started as one as well.

Social Security is not your standard Ponzi Scheme, it is the ultimate Ponzi Scheme.

If you work, you have no choice but to participate. Once you are done working, by qualification you may not be entitled to benefits. Just that in itself is basically government sponsored forced participation into a Ponzi Scheme with the ability to actually exclude participants paying in from ever collecting. Or, the another form of wealth redistribution sold as responsible "social insurance." The ultimate and intentional lie.

The issue right off is Social Security is a pay as you go program basically meaning today's workers are paying for today's recipients. It is dishonest to suggest that today's workers are paying into the system for the purpose of getting their dollars back. Someone else down the road will be paying for today's workers (assuming they are qualified to ever collect.) All the way back to the inception of Social Security the idea was to generate cash into government trust for later distribution to someone(s) else. At no time was Social Security designed to function as other investment vehicles do where your dollars are by account exclusively yours (with of course increases from investment direction.) Even in mutual funds and so forth, your funds in buy shares in the fund (thus, yours). Social Security does not function that way and is more Ponzi in design as those funds paid in are no longer yours.

That leads to the next issue. By ratio, the intentions of Social Security trust management was to have more paying into the trust than ever paid out of the trust at any one time. By both dollars in vs. out, and workers to trust dependents. Or, all of the fundamentals of a Ponzi Scheme (not to be confused with a Pyramid Scheme even though you can look to similarities between the two.)

With that ratio comes a major problem. Just as most socialistic programs and Ponzi Schemes eventually experience, you run out of other people's money to continue the process. Depending on the source you are willing to accept, in 1950 the ratio of paying in workers to paid out dependents was roughly 16:1. Today it is a little north of 3:1. Once the baby boomers make there way into the program it will be perhaps less than 2:1. At 16:1 the process would probably work even though it is still just the ultimate Ponzi Scheme designed to move wealth from one party to the next. But politics destroyed that allowing for more to collect based on condition without bothering to change any of the standards that would keep the ratio more 16:1. Or, politically moving the program to be a more realized wealth redistribution vehicle vs. what it looked like at inception. The answer from the left is to tax more. Said another way, increase the forced entry participation costs to ensure coverage for today's group of selected dependents and allow the ratio to continue to deteriorate. After all, when you run out of participants you get the typical liberal answer... confiscate more.

With all of this it is easy to argue that Social Security is the ultimate Ponzi Scheme. No matter how clever you argue the other way you are still left with a forced pay as you go system designed to allow the government to circumvent quite a few areas of criminal and investment law.

Why?

If the Social Security program were replicated anywhere in the private sector where workers were forced to participate to pay out today's dependents yet themselves may not qualify to be dependents down the road, it was shown that the forced payments just went into a general fund for payment to someone else, and that the trust could dictate payment output in some cases ignoring cost of living increases at the same time, then the organizers of would be facing multiple life times in jail and millions (if not billions) in fines from all the charges they would face. Yet, our government can get away with this activity and sell it as "social insurance."

Social Security needs to be phased out else this disaster of a program will just continue to bleed out.

Originally Posted by Sluggo

Social Security is not your standard Ponzi Scheme, it is the ultimate Ponzi Scheme.

If you work, you have no choice but to participate. Once you are done working, by qualification you may not be entitled to benefits. Just that in itself is basically government sponsored forced participation into a Ponzi Scheme with the ability to actually exclude participants paying in from ever collecting. Or, the another form of wealth redistribution sold as responsible "social insurance." The ultimate and intentional lie.

The issue right off is Social Security is a pay as you go program basically meaning today's workers are paying for today's recipients. It is dishonest to suggest that today's workers are paying into the system for the purpose of getting their dollars back. Someone else down the road will be paying for today's workers (assuming they are qualified to ever collect.) All the way back to the inception of Social Security the idea was to generate cash into government trust for later distribution to someone(s) else. At no time was Social Security designed to function as other investment vehicles do where your dollars are by account exclusively yours (with of course increases from investment direction.) Even in mutual funds and so forth, your funds in buy shares in the fund (thus, yours). Social Security does not function that way and is more Ponzi in design as those funds paid in are no longer yours.

That leads to the next issue. By ratio, the intentions of Social Security trust management was to have more paying into the trust than ever paid out of the trust at any one time. By both dollars in vs. out, and workers to trust dependents. Or, all of the fundamentals of a Ponzi Scheme (not to be confused with a Pyramid Scheme even though you can look to similarities between the two.)

With that ratio comes a major problem. Just as most socialistic programs and Ponzi Schemes eventually experience, you run out of other people's money to continue the process. Depending on the source you are willing to accept, in 1950 the ratio of paying in workers to paid out dependents was roughly 16:1. Today it is a little north of 3:1. Once the baby boomers make there way into the program it will be perhaps less than 2:1. At 16:1 the process would probably work even though it is still just the ultimate Ponzi Scheme designed to move wealth from one party to the next. But politics destroyed that allowing for more to collect based on condition without bothering to change any of the standards that would keep the ratio more 16:1. Or, politically moving the program to be a more realized wealth redistribution vehicle vs. what it looked like at inception. The answer from the left is to tax more. Said another way, increase the forced entry participation costs to ensure coverage for today's group of selected dependents and allow the ratio to continue to deteriorate. After all, when you run out of participants you get the typical liberal answer... confiscate more.

With all of this it is easy to argue that Social Security is the ultimate Ponzi Scheme. No matter how clever you argue the other way you are still left with a forced pay as you go system designed to allow the government to circumvent quite a few areas of criminal and investment law.

Why?

If the Social Security program were replicated anywhere in the private sector where workers were forced to participate to pay out today's dependents yet themselves may not qualify to be dependents down the road, it was shown that the forced payments just went into a general fund for payment to someone else, and that the trust could dictate payment output in some cases ignoring cost of living increases at the same time, then the organizers of would be facing multiple life times in jail and millions (if not billions) in fines from all the charges they would face. Yet, our government can get away with this activity and sell it as "social insurance."

Social Security needs to be phased out else this disaster of a program will just continue to bleed out.

That's not going to sit well with goober.

Originally Posted by smurf

That's not going to sit well with goober.

Well, it would not be the first time goober and I were on complete opposite sides of some debate. Probably will not be the last either.

Originally Posted by Damn Yankee

Say at age 20 you make $20,000/yr ($1667/mo) and pay 6.2% of your income into a fund matched by your employer, and continue this practice until you retire at age 65. After 45 years in a slight risk investment (and with a 45 year term it is almost inconceivable that a "slight risk" investment would have any risk), earning 7%, you would have $783,802 dollars in the bank. (Let's forget inflation here because we will assume that your raises would at least keep up with inflation.) By continuing your 7% investment, never touching the principle, you would be able to draw $4572 in interest per month upon retirement. That's 2.74 times your pre-retirement income. A low risk, 5% investment would earn you almost twice your pre-retirement income.

There's more than enough money to pay for for long-term disability insurance if something happens to you along the way.

Except that's not what Social Security does. If you became disabled at a young age, you'd get Social Security disabilty payments, in your example, if you became disabled, you get sympathy from the Sheriff as he auctioned off your home.

In a scenario where millions of people invest in a "slight risk" over 45 years, some will be wiped out, others will do very well, others not so well.
That's why it's called risk.
When Warren Buffet does it it looks easy, because he taking the money from people who aren't professional investors.

Originally Posted by smurf

That's not going to sit well with goober.

Sluggo has been wrong before.
He's wrong now.

Can you name a "Ponzi Scheme" whose finances are public and has been operating for nearly 80 years?
No, because that isn't a Ponzi Scheme, Ponzi Schemes fall apart as soon as they are revealed.

Originally Posted by goober

Sluggo has been wrong before.
He's wrong now.

Can you name a "Ponzi Scheme" whose finances are public and has been operating for nearly 80 years?
No, because that isn't a Ponzi Scheme, Ponzi Schemes fall apart as soon as they are revealed.

The only reason that social security hasn't crumbled is the government's ability to tax.

Originally Posted by goober

Sluggo has been wrong before.
He's wrong now.

I assumed it was only a matter of time that the attitude you show towards other members here would make it my way.

Originally Posted by goober

Can you name a "Ponzi Scheme" whose finances are public and has been operating for nearly 80 years?

Yes, Social Security.

Originally Posted by goober

No, because that isn't a Ponzi Scheme, Ponzi Schemes fall apart as soon as they are revealed.

This one has not fallen apart just yet, it has too much vested government support in the continuation of creating dependents on the system at the expense of others. It is not social insurance, it is government sponsored theft for the purpose of keeping up a Ponzi Scheme. All have to pay, few benefit, and all at political will. Again, if replicated in the private sector all the organizers would be in jail.

Originally Posted by goober

Sluggo has been wrong before.
He's wrong now.

Can you name a "Ponzi Scheme" whose finances are public and has been operating for nearly 80 years?
No, because that isn't a Ponzi Scheme, Ponzi Schemes fall apart as soon as they are revealed.

To be sure, it is not the classic Ponzi Scheme.

But then, I know of no other Ponzi Scheme that could not only force its victims to participate, but at higher cost over time, as well.

So your argument is faulty.

It's not a Ponzi Scheme, a Ponzi Scheme has victims.
The "victims" of Social Security are the people who paid into it and get nothing.
And so far that's no one, even the guy who pays into it every week until he's sixty six years old, and get's hit by a bus and dies on his way to mail his application for benefits, got the security of knowing Social Security would be there if he lived to retire.

The victims will be the people who abolish Social Security, self selected victims, who understand what they are doing, those are hardly victims (well, victims of stupidity).
There is some strain on the system, it can be alleviated with minor changes, the system is sound.


When the US collapses, and it will, then there will be victims, but Social Security will be the least of their problems.

Originally Posted by goober

Except that's not what Social Security does. If you became disabled at a young age, you'd get Social Security disabilty payments, in your example, if you became disabled, you get sympathy from the Sheriff as he auctioned off your home.
...

You failed to read this portion of my post:

There's more than enough money to pay for for long-term disability insurance if something happens to you along the way.

Originally Posted by goober

It's not a Ponzi Scheme, a Ponzi Scheme has victims.
The "victims" of Social Security are the people who paid into it and get nothing.
And so far that's no one, even the guy who pays into it every week until he's sixty six years old, and get's hit by a bus and dies on his way to mail his application for benefits, got the security of knowing Social Security would be there if he lived to retire.

The victims will be the people who abolish Social Security, self selected victims, who understand what they are doing, those are hardly victims (well, victims of stupidity).
There is some strain on the system, it can be alleviated with minor changes, the system is sound.

When the US collapses, and it will, then there will be victims, but Social Security will be the least of their problems.

America is full of the victims of the Social Security Ponzi Scheme. They are mostly in their 30s and 40s, but there are those in their 50s, 60s, and 70s, as well. Only time will tell exactly how each individual fares, and the more inflation that there is, the more poorly they will fare.

So why do you think that the U.S. will collapse, goober?

Oh, and the heirs of that sixty-six year old that got hit by the bus would beg to differ with you. That "security of knowing" isn't going to do little grandson Timmy much good as he tries to get himself established in this difficult economic environment.

But that is of little concern to you, because in the long run we're all dead, and you are only concerned about your own well being, correct? Little Timmy can suck it up as long as you get yours, right goober?

Originally Posted by goober

Sluggo has been wrong before.
He's wrong now.

Can you name a "Ponzi Scheme" whose finances are public and has been operating for nearly 80 years?
No, because that isn't a Ponzi Scheme, Ponzi Schemes fall apart as soon as they are revealed.

Unless of course you're the one writing the laws.

Ponzi scheme illegal...government wants to run one...voila, it's legal.

Although you probably could argue it's difficult to call it a Ponzi scheme when you're forced to contribute to it at gunpoint.