I think the key difference is that a Ponzi scheme is a fraudulent investment scheme, promising (and temporarily achieving) a large return on investment. The Social Security system does not make the pretense of being an investment system. It’s an insurance and welfare system.
This is also why insurance is not considered a Ponzi scheme, even though it uses payment from some members to pay out to others.
No. I wasn’t looking to get into any sort of dispute which is why I didn’t name either you or the other person that used “T-bills” in this thread. We are in GQ so I made a factual correction to a common mistake.
Well, no, hence my own emphasis on “like” in my description.
Agreed on the strict definition of a Ponzi scheme. All I’m saying is that the mechanics are similar. People always pounce on people who call Social Security a Ponzi scheme, and while it’s technically not due to definitions, it operates in the same manner.
Insurance is guaranteed by contract (barring things as insolvency). Social Security depends on the government not to renege via means-testing and such. Futhermore, people who are forced into Social Security (i.e., the vast majority of us) know (or should know) how it operates, as well as insurance customers.
I mean, heck, if I offered a Ponzi scheme and avoided the fraudulent aspects by being upfront about how it worked, I’d still find people dumb enough to invest, and the earlier investors would still eek out their profits. Even without the fraud, I think we could agree that it’s still a Ponzi scheme. Social Security (again) works the same way.
I think that would be a pyramid scheme, not a Ponzi scheme.
Only in the most general ways, such as accepting money today in return for a benefit tomorrow, which really dilutes the whole Ponzi-ness of the scheme. The whole point in labeling something a Ponzi scheme is to invoke the presence of fraud. That is why it is a ‘scheme’. I can think of no other financial ‘schemes’ that are not fraudulent.
That post is so full of stupid it’s hard to know where to start. Do you really think the government “prints money” when it needs to spend more? “Hey Billy Bob, turn up the knob on the printing press, we need more money”.
And yes Social Security was “sold” as a self sustaining program. THAT’S WHY IT HAS ITS OWN TAX THAT IS ONLY USED TO PAY FOR SOCIAL SECURITY BENEFITS. Ever look at a pay stub?
Social Security has been taking in more than it spends for decades. They invested that money in special US bonds. They could just as easily have bought Canadian bonds. The US is just as obligated to honor those bonds as we are to honor what we sold to the Chinese.
And you spelled dependent wrong.
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Saying that Social Security is “like” a Ponzi scheme is like saying that a banana is “like” an apple. Don’t apples and bananas both come from trees? Well, yes, but they are completely different in every other way. The way Social Security runs is as transparent as glass, nobody is told that it is going to make them rich, the investments used for the Trust Fund are the safest on earth, the program has worked for what, 70 years, and there is no question that the program can continue to be viable for decades with minor changes. None of these features are found in a Ponzi scheme. They are the opposite of a Ponzi scheme.
If there is anything that Social Security is most like, it is an insurance program. Do you consider car insurance to be “like” a Ponzi scheme?
Social Security is solvent for the next 26 years if we do nothing. Then it will pay 80 percent. That is not broke. It can not access the treasury nor can it add to the deficit in any way.
Social Security was changed a few years ago to accommodate the post war baby boomers. It has a huge pile of Tnotes banked for it. The plan was to use the pile of notes when the boomers came on line and use it all when they were gone. That is what is happening.
Republicans lie like hell when it comes to SS because they want to privatize it. It is run on less than 3 percent of what it takes in. If you are dumb enough to think a bank of financial service will beat that, then you are a Republican. Facts and thought are not permitted in their unreasoned and stupid hate of social programs.
I might add that Social Security is solvent for decades. And when it does run into the wall, it will still be solvent if we 1. Raise the cap that the wealthy pay (they only pay SS taxes on the first 106k of their income) or 2. Reduce benefits to 75% of their current level.
So the people who are freaking out about this are either unable or unwilling to understand what’s happening.
Anyone who calls it a ponzi scheme is either trying to deceive uneducated people, or uneducated themselves.
They are not uneducated. They have been paid to do all they can to convince the American people that it should be privatized. There are billions of dollars that the bankers could get their thieving hands on. That kind of money makes them crazy. They are willing to bankroll any candidate they can rely on to push for their largest theft to date. Just figure what a 30 percent cut of SS would net for bankers. It would be as big as healthcare. A pot of gold.
Doug Elmendorf, director of CBO:
http://cboblog.cbo.gov/?cat=15&paged=4
“The balances in trust funds have accrued because income associated with those programs has exceeded the expenses; when that happens, the surplus cash flow is used to finance the government’s ongoing activities, and the trust fund is credited with a corresponding amount of Treasury securities. Although trust funds have an important legal meaning, in that they may constrain the amount a program can spend, they are essentially an accounting mechanism and have little relevance in an economic or budgetary sense. The value of Treasury securities held by trust funds and other government accounts measures only some of the commitments the government has made, and it includes some amounts that may not represent future obligations at all.”
How about that economic guru that lefties love - Krugman?
http://www.bostonreview.net/BR21.6/krugmann.html
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).
Given the Republicans (and Blue Dogs and "centrists) traitorous desire to unnecessarily force the Federal government to default, it might be worth asking how we are going to protect the SS Trust Fund from the Republicans. But if we can figure out a way to stop the Republicans, Blue Dogs and “centrists” from creating fake crises, SS will be fine.
No it will not be over. It is solvent for at least 26 years. Then it could pay 80, percent for about 75 more. I suspect even TERR will live long enough to collect . If we made a small modification it will be solvent for a century. How the hell is that a ponzi? How the hell is that not a great government program? It is run on less than 3 percent of income. What the hell do rightys need? It is a bottom line life saver for people when then get old. It helps people who get sick or injured . It helps kids whose parents die.
Of course the rightys would say, let them croak or starve, they are not my problem. They are like innocent people of death row, just bad luck to be them. Or people who get sick without health insurance, jJust a drag on the economy that should die quickly and cheaply.
Of course. Krugman called it a “Ponzi game” but he really didn’t mean it. I guess the Nobel prize winner doesn’t know what he means when he writes it.
What about the Doug Elmendorf quote? Did he also not mean it?
A little consistency here would be nice. If you don’t want to treat the Social Security trust fund as separate from the rest of the budget, that’s fine, but then that means that Social Security is simply another government program funded out of the government’s overall revenue/borrowing streams. As such, it’s no more a ponzi scheme than Medicaid or the Federal highway system.
I’ll let Krugman speak for himself.
Krugman called it a Ponzi scheme that actually works. That is a huge distinction. Many get more out than they put in ,but nobody is scammed out of their money. With decent employment, the younger people would always keep up with the need of the program. We would have no problem if we hadn’t offshored our work and industries. But it still is in good shape.
Undeniable, along with the bloated growth of the federal government.