[Adonis]

Sp5 Wrote:

Sure, demographics are an issue. Age of eligibility and SS benefits have been adjusted over the years, and will continue to be adjusted based on population ratios. That will be an issue under ANY plan, as consumption and growth will slow along with population growth.

It does not change the legitimacy of the SS debt instruments or the problems with the alternatives.

The big question is, what is a government for? Some people would be ok with old ladies begging in the streets like in the Philippines, but if you have a big enough economy, and a government which preserves public order and the enforcement of contracts, no reason why you shouldn't have a decent retirement system for old people or even a guaranteed minimum income. I've seen enough money go down the toilet for stuff with a lot less value.

There are several facets to the Social Security question.

1. Is it a ponzi scheme?
2. Is it a sustainable program?
3. Does govt have a moral/social imperative to provide it?
4. Is it moral for the govt to compel citizens to provide for others?

Lets focus on question #1, since thats the thread topic. You didn't address that part of my post.

Is Social Security a ponzi scheme?

A ponzi scheme is one that takes new investments to pay prior investors can we agree?

Wikipedia Wrote:

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

Ponzi vs. Pyramid?

Wikipedia Wrote:

A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish these schemes from Ponzi schemes:

A pyramid scheme typically collapses much faster because it requires exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants.

Which is exactly what SS does in that the US Gov compels initial and continued reinvestment. It just hasn't reached the 1:1 ratio yet. I would also posit that all defined benefit plans are ponzi schemes and are doomed to failure by any objective mathematical standard.

SS.gov beneficiary ratios

The link above tells us the following ratios of workers:beneficiaries:

1940 159.4
1945 41.9
1955 8.6
1965 4.0
1975 3.2
1985 3.3
1995 3.3
2005 3.3
2013 2.8

So we can see that there is still enough new investors (workers) to pay the old investors (beneficiaries) off and keep a little kickback (which goes right into the general fund). The Baby Boomer generation is just now reaching retirement age so the ratio will trend toward 2:1 or lower. But thats only half the puzzle, not only do you have demographic shifts there are economic shifts as well. As we have shifted away from a manufacturing based economy and towards a financial/service economy, large numbers of well paying jobs have disappeared to be replaced by lower paying jobs, a trend which is only accelerating into the foreseeable future.



This is the second half of a 1-2 punch and will have an effect of cratering gross tax receipts just when they're needed most. Of course the easy thing for people with a gov mindset is to "tax something!" and "raise the FICA threshold", "put a transaction tax on Wall Street", or "tax the rich" when they should be thinking "how do we put 10,000,000 people to work?" Enter the God Emperor.

As to the sanctity of the trust fund we agree, social security benefits will be paid in nominal dollars, of that there is no doubt. Taking one look at the unfunded liabilities however makes me question what those benefits would be worth in real terms. This presupposes there will be no tax revolt where the young generation realizes that the GI Generation and the Boomers saddled them with debt bondage from which they will never benefit and gives the middle finger to the old. Young healthy people are not signing up for Obamacare to subsidize the old/sick, welcome to Generational Warfare.

FACT: Social Security is a ponzi scheme at gun point.