I’ve said it before; I’ll say it again.
This again? Right down to the same title as always? Has it risen to the top of the Right Wing Topics to Raise’ list again.
No it isn’t a Ponzi Scheme. As you well know.
But it won’t stay static. Inflation assures that money in a non-interest bearing account will decrease in value.
This is flat-out false, and it comes up in almost every one of these threads. The government issues debt for a variety of reasons, but a primary one–the primary one–is because they need cash. The level of debt varies directly with how short of funds the government happens to be. There’s not some magically derived amount of debt that is issued regardless of the Feds’ needs.
SS is currently spending out more than they are currently receiving and the “trust fund” is basically an IOU, like all government promises–meaning, it will not magically transform into greenbacks when the money is needed. So, unless taxes are raised or there’s a surplus, debt will be issued to pay out those waiting for their piece of the pie. The “trust fund” might just as well be a billboard on I-95 saying, “We promise we’ll pay you your SS benefits,” and all it does is essentially push out the issuance of another Treasury debt instrument into the future, an instrument that is issued because the Feds need the dough. It’s a debt that ultimately exists because the Feds are short the cash, not some immutable wall of debt that would have existed at that exact level, SS or no SS.
Umm…thats what I said. The Trust Fund didn’t create the deficit spending by the General Fund during the last 30 years, it would’ve happened anyways. Hence deb2world’s scheme of just keeping the surplus under a mattress somewhere would put us in worse fiscal shape then we are now, as the General Fund would owe the same amount, but the interest on the money it owed would’ve gone to outside bond holders instead of staying within the gov’t in the form of General Fund payments to SS.
To plug in some numbers as an illustration: if in 1991, the gov’t needed to raise 2$ to cover a deficit by issuing 20 year bonds whose total interest over the 20 year period was 10%, and lets say the SS surplus that year was 1$
Deb2world’s plan: the gov’t sells bonds to China worth 2$ and puts the 1$ extra SS money under the mattress. Twenty years later the bonds come due, we owe China 2.20, and have an extra 1 in the SS fund to cover SS shortfalls. Total money we owe in 2011: $1.20
What really happened: the gov’t issued one bond to China worth 1$, and “sold itself” a bond for 1$. Twenty years later, we owe China 1.10$. We also owe the Trust Fund 1.10, but since thats part of the federal gov’t, paying it back just shuffles money around, it doesn’t change the bottom line. Total money we owe in 2011: $1.10
Does this billboard on I-95 happen to be backed by the force of Federal law and the 14th Amendment?
If not, the billboard and the Social Security Trust Fund are indeed different.
Another way that SS differs from a Ponzi scheme: A Ponzi scheme is built on the idea that you get such “fantastic” returns that you never want to cash in. The fraud induces you to keep your money in the “investment portfolio” so that you will continue to have “fantastic” returns. SS does none of that. The payoffs and risks are above board and everyone that pays in will collect when/if they reach a certain age or certain conditions happen.
As was said in this and other threads, the ONLY similarity is that SS requires income from future investors, but a moment’s thought would let you know that most businesses require that. You would think that Wal-Mart is a stable company, but if tomorrow nobody shopped there, it would go belly up. Do you believe that Wal-Mart is a legitimate company or a scam trying to take your money?
I continue to find it positively amazing that people treat the federal government writing itself an IOU as a “trust fund.” By the same logic I could build up my savings by writing, on scraps of paper, “I promise to pay myself a hundred bucks next year.”
These debates are always surreal arguments over terminology, but the fact of the matter is that** there’s no money**. The federal government of the United States, which includes the Social Security Admininistration, has no savings.
It is true that over the course of the last three decades, about $2.5 trillion has been collected in Social Security payments than has been paid out. But all that money has been spent, every last dime.
We already covered this, in a very detailed thread not more than a few months ago. It’s also been detailed up-thread.
The money that was spent from the general fund would have been spent whether SS existed or not. The debt is no larger than it would have been otherwise. The only difference is that the person holding the debt is the SS trust fund rather than external investors.
It is very much a trust fund, just the same as if I buy a whole bunch of treasury bills I can rightly call that a trust fund even though it’s really just an IOU from myself (the taxpayer).
Here is my favorite part: we owe a bajillion dollars to China and this is bad, because we have to pay it back. We owe a bajillion dollars to SS recipients, but for some reason we don’t need to pay it back? WTF, are we going to default on the bonds for SS but pay the fucking Chinese? You’d have seniors beating their Congresspeople to death with walkers.
You can expect any change to SS to have some clause like “does not apply to people born before xx/xx/xxxx”. In other words, the largest block of us voters (the baby boomers) isn’t going to screw themselves over - just everyone else.
That could be achieved by raising the limit. It is easily doable. It is well worth it.
Why didn’t you show the total needed for the next millenium. That is an even bigger number and more terrifying?
SS is a very large program and very well run.
SS does have a similarity with Ponzi schemes. Some of the schemes could been actual financial successes if the money had actually been invested. Instead, the schemers take the money for themselves. We have done the same thing with SS funds. Spending the SS revenue on other things in return for US Bonds is the same as the Ponzi schemer taking the investment for themselves and giving their victims an IOU in return.
No. It isn’t.
The SS revenue was not spent. It was invested in special-issue treasury securities.
If this was true then my bank is also a Ponzi scheme, cause they spent my money on something else and only gave me an IOU in return.
These days your bank might be engaged in some kind of scheme, but the intention is that they invest in some kind of financial transaction that will produce a return. The US government does not do the same thing. We can pretend that government spending is an investment, but how many bills state the rate of return, or even provide a rationale for how the money will result in increased revenue? Even the modern casino type banks wouldn’t invest in a company that shows a meager profit once every 40 years.
BTW: I’m not calling SS a Ponzi scheme, I’m calling politicians crooks, and the American public suckers.
Let’s examine this for a moment. SS has surpluses, so they invest in special US bonds.
You’re saying that the US should then not spend the money that has moved from the SS ledgers to the General Fund. What should the US do with the funds gained by selling bonds? Buy US treasuries?
And yet again we have people confusing the deficit spending of the Federal government with Social Security. The two are different. For the past 30 years, SS brought in more cash than it needed to pay out. Instead of sticking it all under the mattress - SS instead invested it and earned interest on that investment. This was a smart way to take excess money and make more money out of it.
The fact that the Federal government raided this cash to fund deficit spending is NOT a SS issue. It is a Federal deficit spending issue. The two are very different - and it’s dishonest to blame SS for deficit spending at the Federal level. If you wish to complain about deficit spending - by all means, go right ahead. But SS as a program on its own, did the right thing by investing excess cash, thereby making more money for itself.
ETA: This post is not in reference to those immediately above. It is instead aimed at the Pro-Ponzi crowd.
Yeah, why doesn’t the government turn a profit? It’s outrageous!
This is what Americans actually believe.
Exactly right. Social Security is one of the few bright spots in an otherwise bleak federal budget picture. It is nearly self-sustaining (as pointed out above), and can be brought into perpetual stability with rather minor adjustments.
Yet it is still one of the first targets by those who like to conflate the entire budget issue with Social Security. The reality is that those making this argument, in general, just don’t like Social Security, and hope to eliminate or privatize it.