patrick.net

Krasting is generally highly dishonest about social security.

"Anyone under 45 today is paying for something that they should expect to get 75 cent on the dollar. Clearly a Ponzi."

is a lie. A 25% decrease in benefits is not getting "75% on the dollar" of contributions.

Let's try again Troy:

See this: http://www.cato.org/pub_display.php?pub_id=13625

For me, the cato link was easy to understand and explains clearly SS is a ponzi.

A Ponzi scheme also requires a Charles Ponzi. Who in SS is at the point of the pyramid and intends to steal the money? Also, the books in SS are open and it's not some black box operation.

Cook County resident says

A Ponzi scheme also requires a Charles Ponzi. Who in SS is at the point of the pyramid and intends to steal the money? Also, the books in SS are open and it's not some black box operation.

During the recent debt ceiling debate, the President threatened Social Security payments. Sure, it was an empty threat, but one made nonetheless, and it gives the answer to your question: The government "stole" the money for other purposes via IOU's they call "bonds" (which are not tradeable on the market like other bonds). Otherwise, there would have been zero need to bring up social security at all during this issue.

Paralithodes says

During the recent debt ceiling debate, the President threatened Social Security payments. Sure, it was an empty threat, but one made nonetheless, and it gives the answer to your question: The government "stole" the money for other purposes via IOU's they call "bonds" (which are not tradeable on the market like other bonds). Otherwise, there would have been zero need to bring up social security at all during this issue.

Transferring a surplus from one government account to another isn't theft. It's not like the DoD or Agriculture has a secret account in the Caymens and they intend to bail out when things get hot. The accounts are public information for people who care to look into such stuff. Again, there is no Ponzi here.

If there's anything shady going on, it's the fiction that the social security transfers aren't real debts and need to be repaid later.

austrian--

I really can't believe this lie continues. Here's a quote from Cato that you need to consider:

"Unfortunately, in order to keep paying previous investors, Ponzi had to continue finding more and more new investors. Eventually, he couldn't expand the number of new investors fast enough, and the scheme collapsed"

That is not the case with Social Security. The baby boom population distorts things a lot and allows dishonest politicians to make hay, but the fact is that SS isn't now, nor has it ever been a Ponzi scheme.

Paygo is diffferent than Ponzi. One requires a constantly growing population of investors and, as such, will eventually collapse. The other can run infintely with a stable population of investors and accurately defined benefits.

Does that help?

And the discussion of the SS surplus getting raided is an entirely different topic and not relevant to a thread about it being a Ponzi.

Paralithodes says

The government "stole" the money for other purposes via IOU's they call "bonds" (which are not tradeable on the market like other bonds). Otherwise, there would have been zero need to bring up social security at all during this issue.

No, social security bonds are as good as any other bonds. If they weren't we'd be $2.5T away from the debt limit, since they are counted in it.

The reason Obama held a gun to granny's head was to force the Republicans to stop being dicks about raising the debt limit. This is obvious.

If push came to shove Obama could have sold off some of the bonds the SSTF holds before their maturity. This would have reduced the debt subject to limit and allowed Timmy to sell more regular bonds.

But doing that would have given the Republicans more time to fuck with the economy. 3 months running at or above hte debt limit was enough damage.

austrian_man says

Let's try again Troy:

why? My point about Krasting is completely correct, he was lying about getting "75c on the dollar".

I'm not going to be diverted into some Cato bullshit, but thanks.

OK, I have been diverted. Two lies in the Cato piece:

"As with Ponzi's scheme, when the number of new contributors dries up"

Last I checked the US economy and the number of US workers is not "drying up". If and when the US economy fails, then SS will prove to be unsustainable.

Our economy is under systemic pressure, yes, but the baby boom was followed by a baby boom echo that can replace them.

Generation Y's productivity is ~80% greater than the baby boom's so our economy can in fact handle the redistribution of Social security, which, after all, is not the long pole in our economy's tent.

If you want to talk ponzi schemes let's talk about the 5% of the country taking 33% of the income. That, in fact, is unsustainable.

The second lie in that Cato garbage is that raising contribution levels is bad:

"In fact, Social Security taxes have been raised some 40 times since the program began. The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase."

It is good that contribution levels are raised, as long as distributions pay that back + a return to each contributor.

Conservatives, for all their backwards-looking and fondness for the 19th century, do not understand history that well. Social Security was instituted because people don't save. It is natural not to save, because people start out young and do not really internalize they are going to be old and decrepit some day.

Social Security forces people to save. But, there is a paradox of savings -- we all can't save, and the economy cannot support an entire generation of (risk-free) savings, either.

Social Security, for what it is, is not broken and does not need fixing.

This is not to say a better national pension program cannot be devised. But I have yet to see one that provides what social security provides, a guaranteed risk-free return.

Bellingham Bob says

Our economy is under systemic pressure, yes, but the baby boom was followed by a baby boom echo that can replace them.

Yeah I see your point.

Bellingham Bob says

This is not to say a better national pension program cannot be devised. But I have yet to see one that provides what social security provides, a guaranteed risk-free return.

What about inflation? Does it really matter you get the money back if the "guaranteed risk-free return" is a negative real return? LOL

yeah, eliminating inflation would also make pension savings more predictable.

If I were King of everything there would be no debt and no inflation.

But any free economy wants tons of debt. It's what economies do, get themselves in over their heads.

You can see this in any century and age with an identifiable monetary economy.

http://www.biblegateway.com/passage/?search=Deuteronomy+15%3A1%2CDeuteronomy+15%3A2&version=NASB

Bellingham Bob says

But any free economy wants tons of debt.

Wrong. Any free economy wants debt that is marginally productive. There is something called marginal productivity of debt. As long as the debt can be serviced through productive means, that debt is good for the economy. What we have is an economy where debt fuels more debt. That is the crux of the problem and I don't understand why such an obvious fact is misconstrued.

Bellingham Bob says

It's what economies do, get themselves in over their heads.

It is what greed does when it gets into people's heads. It is not what an actual free economy does. When debt is uncontrolled, is it really a free economy? Debt has to be controlled through some means. I'm not saying gold standard is the only answer, all I'm saying is there has to be some means to limit the debt.

Bellingham Bob says

You can see this in any century and age with an identifiable monetary economy.

Which is why there are boom-bust cycles.

Troy,

Please see this paper if you will, it makes an earnest attempt to explain the debt problem from an Austrian Economics perspective.

Without having any political bias against Austrian Economics per se, please point me as to where the author is wrong:

http://www.bullionbasis.com/web_documents/duration_and_perpetual_debt.pdf

Run away from anyone who cites the CATO INstitute. They are a crazy nutjo right wing group that essnetially wants no govt at all.

HousingWatcher says

Run away from anyone who cites the CATO INstitute

I am neither right wing nor left wing. I am just considering the arguments presented for the relevant subject. You can choose to run away if you want.

I see that more often than not - instead of focusing on the content, there's a lot of arguments about the political affiliations of the source. This is irrelevant as long as the content makes sense.

austrian_man says

Any free economy wants debt that is marginally productive.

That's your problem, there. Your bias is towards a rational free economy. It colors all that you think and write.

It is wrong.

What we have is an economy where debt fuels more debt. That is the crux of the problem and I don't understand why such an obvious fact is misconstrued.

The obvious fact here is that all economies fuck themselves up over time. It's what they do.

I'm not saying gold standard is the only answer

Good, because the gold standard doesn't control debt inflation, either.

austrian_man says

there's a lot of arguments about the political affiliations of the source.

Cato doesn't have a political affiliation. It has an affiliation with bullshit.

Austrianism can be synthesized with Georgism, btw.

http://www.foldvary.net/

Bellingham Bob says

That's your problem, there. Your bias is towards a rational free economy. It colors all that you think and write.

100% agree.

Bellingham Bob says

It is wrong.

Don't agree here. because it contradicts with this:

Bellingham Bob says

all economies fuck themselves up over time.

I'm saying we eventually get back to reality. Whether its voluntary or involuntary is the uncertainty part.