Oh, no, not a Ponzi scheme, no siree, and how dare any of those nasty presidential candidates say so:
There were only 1.75 full-time private-sector workers in the United States last year for each person receiving benefits from Social Security, according to data from the Bureau of Labor Statistics and the Social Security board of trustees.
That means that for each husband and wife who worked full-time in the private sector last year there was a Social Security recipient somewhere in the country taking benefits from the federal government.
Pretty simple demographic reality, but even supposedly conservative Republican candidates feel free to jump all over the one person willing to acknowledge it, and then even that person backs down in the face of the opposition. Doesn't say much about our current ability to face the truth.
Comments
I'm disappointed Perry had to tone down his description, but not surprised. He's simply calling a spade a spade, but with the media being fully invested in ALWAYS backing the Democrats' agenda its extremely hard for any Republican to make any innocuous remark without it being twisted and demonized.
Perry's absolutely right, SS is the very definition of a ponzi scheme and the only reason it's lasted this long is because it's mandatory to "invest" in it.
Tim, a Ponzi scheme is defined as an unprofitable arrangement in which returns are overstated in order to encourage participate to investing additional sums.
Life insurance meets that definition. Social security does not, since you aren't allowed to invest more.
If you want to call them both socialism, have at it, but when you describe Social Security as a Ponzi scheme, it makes you sound dumb, and we both know that's not true.
Harl, according to the SEC:
"A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors."
And:
"Why do Ponzi schemes collapse?
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out."
http://www.sec.gov/answers/ponzi.htm
"it makes you sound dumb, and we know that's not true" sounds very dumb to me! And I believe Tim's definition is much, much more true than yours!
Life expectancy of an 18 year old born in 1900 was an additional 51.68 years. This means those who lived to age 18 would live to age 79.68 years. If they made it to age 65, they could expect to live an additional 15.99 Years, meaning they would die at age 81. This was not unknown to SS-OASI in 1937 when the first payroll tax was with held at 2% up to $3,000 of wages for a grand total of $60 per year. The US Treasury Rate was known at 3%. They also new that there would be nearly 9 million people age 65 and over in 1940, the first year SS-OASI benefits were paid (1 year earlier than scheduled). There were a total of 49 million workers. The ratio of workers to those age >=65 was roughly 5 to 1. Not everyone was covered under social security. They wanted constant good paying workers, not the undesirable low wage with temporary wages (Agriculture, Farmers, Military, Domestic Service, Federal government, State and Local government, Ministers, Railroads, Tips, Professional groups & self employed (Doctors, Dentists, Lawyers)). The reason was simple based on the target benefit low wage earners would take far more out of the program than they contributed. Only those who were age 65 and had paid SS-OASI taxes were eligible for benefits. In the first year there were roughly 225K beneficiaries and 28 million workers paying into SS-OASI.
The targeted benefit was 50% of wages in 1935, there was no COLA. Based on this the payroll tax had to be 5% in 1937 with not wage growth, not 2%. In fact based on the wage growth at the time, the tax had to be 9.8% for the 18 year old, but for a 50 year old it would have to be 33.4%. Clearly Social Security advertised a benefit far more than it could deliver based on the known constraints a the time (life span, benefit, tax rate, treasury rate, age of the workers). The SS-OASI tax rate did not reach 8% until 1968 I believe, some 31 years after the first tax was with held.
The tax was legislated to increase by 1% every three years until 1949 when it would be 6%. However, Congress delayed these schedule increases because it would hurt the economy. By 1950, SS-OASI was projected to run out of money and they raised the payroll tax and base by 50% and began to enroll the less desirable workers. This created a second tier of revenues to pay the first tier. In 1955 SS-OASI paid more in benefits than it collected in taxes and did this many times until 1965. All the time the tax, base were increased as well as enrolling ever more non covered workers to pay those before them. A short term boost in revenues for a far larger future cost. By 1970 SS-OASI began to pay more out than it collected in taxes and in 1983 exhausted the trust fund and borrowed $11 Billion from the SS-DI and Medicare Trust funds. This is not allowed any more by federal statute.
Is social security a Ponzi Scheme? I would say it is a mutated form of the original Ponzi Scheme in that it is more evil and sinister. Elected representatives now dictate the tax rate, base, retirement age, benefit with no guraentee that you get anything in return.
A. J. Altmeyer, Chairman
Social Security Board Before the House Ways and Means Committee November 27, 1944
How could Social Security possibly be an investment fraud? IT'S NOT AN INVESTMENT.
The "fraudulent" part of Social Security is that people think that they are saving for their retirement, when in fact, that's impossible. Those of working age have always supported children and the elderly. Money is a fiction. The problem is that you cannot accumulate manpower in 2010 to use in 2031.
If we saved 50% of our GDP for use by Social Security and we waited until 2031 to spend that money, the money wouldn't buy any more than if we saved 2% of our GDP, because the value of money depends on the scarcity of it. If you have too many dollars chasing too few goods and services, dollars become worth much less.
"Social Security" isn't the problem. The problem is that we're going to have a lot of retirees and not many workers in a few decades. The ONLY way to solve the problem is to change the ratio of retirees to working stiffs. Unfortunately, we can't just say "You'll have to wait a few more years to retire" any more than King Canute could order the tide not to come in. There are many people who retire BEFORE they reach 65 for health reasons, many of them because their bodies are broken working in unsafe factories, and if we raise the retirement age to 70, there will be an even larger percentage who have to retire "prematurely."
And the only way to produce a marked reduction in the number of retirees would be to kill them off.
And if we breed more workers, they'll arrive too late to do much good, not to mention that raising and educating those workers would take vast amounts of money. On the other hand, it's easy enough to IMPORT those workers. What's more not only have they been already raised to adulthood, and educated, but many of them would arrive with capital which could be invested in building our economy.
We clamped down on immigration in the 1900-1910 period when the unions were afraid that foreigners were being used to bust unions. Instead, factory owners got southerners to move north to work in the factories, accomplishing the same anti-union effect. However, if you compare growth of the US economy before and after the restrictions on immigration, it's clear that the tightened immigration laws hurt the US economy.
Looking at the communities where immigrants have settled, they have tended to be the places where our economy has grown fastest. Foreigners cannot compete with native Americans for most jobs, so they form their own companies, and small companies create most new jobs.
Fixing the immigration system so it's easier to legally enter the US, easier to get a green card, easier to become a citizen, will result in a boom for the US economy. That's an economy which went into the dumper big-time by 1930, recovered slightly due to pent-up demand after WWII, but then started drifting downward again, fairly rapidly deteriorating for the last four decades.
Fixing the economy, fixing Social Security, and fixing the immigration issue all in one fell swoop? Sure thing - and if you stick around, I make great chili as well!
Is social security an investment? Harl says no, but does not identify why. Social Security was sold to the American People by FDR.
FDR's Social Security
January 17, 1935
Three principles should be observed in legislation on this subject.
First, the system adopted, except for the money necessary to initiate it, should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.
Second, excepting in old-age insurance, actual management should be left to the States subject to standards established by the Federal Government.
Third, sound financial management of the funds and the reserves, and protection of the credit structure of the Nation should be assured by retaining Federal control over all funds through trustees in the Treasury of the United States.
http://www.ssa.gov/history/reports/ces/ces3.html
The 1936 Government Pamphlet on Social Security
2% payroll tax in 1937 increasing to 6% in 1949.
$25 weekly payroll would pay 50 cents a week for a benefit at age 65 of $53 a month.
$50 weekly payroll would pay $1.00 a week for a benefit at age 65 of $74.50 a month.
Death Benefit prior to age 65 was 3.5% of OASI wages.
http://www.ssa.gov/history/ssb36.html
They identify a tax rate and a benefit that would be paid in exchange. It was not an investment, but a con, ponzi scheme, pyramid scheme, theft by legislation. Good thing there are 118 million potential voters under age 46. Keep telling them they need to pay more taxes, increase their retirement age and you might find they get really fed up with a con.
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