Posted on 12/28/2008 5:40:39 PM PST by Lorianne
In the aftermath of the Madoff implosion, quite a few people have pointed out the parallels between a Ponzi scheme and Social Security. Arnold Kling, whom I respect, has written:
I’ve been thinking that Madoff is a perfect analogy for the public sector. The government gives people money, which it expects to obtain by taking the money from people in the future. Even the Center on Budget Policy and Priorities, not known as a right-wing organization, sees the U.S. fiscal stance as unsustainable (pointer from Ezra Klein via Tyler Cowen)—in other words, a Ponzi scheme.
Other people have gone farther. Paul Mulshine of the New Jersey Star Ledger wrote a column entitled “The Ponzi scheme that Baby Boomers are waiting to cash in on.” And Jim Cramer has called Social Security the biggest Ponzi scheme in history.
Superficially, these critics have a point, and there is a parallel between Social Security and a Ponzi scheme. But on a fundamental level, they are very wrong, and it’s worth explaining why.
First, the parallel. Social Security taxes current workers to pay Social Security benefits for current retirees. In other words, the new entrants into the Social Security system, the young workers, pay off the previous entrants, the older workers. And despite the fact you have a Social Security “account”, there is no necessary link between what you paid into the system in taxes, and what you receive.
That’s very similar to the structure of a Ponzi scheme, where new investors pay off the original investors. As long as enough new ‘victims’ are brought into the scheme, it keeps growing and growing. But when the new investors runs out, the Ponzi collapses. Analogously, the slowdown in population growth puts pressure on Social Security finances.
(Excerpt) Read more at businessweek.com ...
AND it’s always been KNOWN to be just that.
Anyone under 50 who thinks they will see a dime of SSI is living in a fantasy world.
SSI is just another tax with no return of any service.
Hmmmmmm, let me think...... Yes?
How can I elaborate on the best answer? Dayumed right it is.
Unquestionably.
I once got into a discussion with a member of management at Social Security. I advocated privatization, or at least allowing people to put their money in the stock market rather than rely on the miserable rates of return SS will pay.
He told me that wouldn’t work because the FICA taxes being paid by workers NOW is being distributed to those who receive SS NOW.
That is the very definition of a Ponzi scheme.
: an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks
Yes of course
To those stupid enough to see it as anything else but a ponzi scheme, yes.
which is good news for career welfarists and illegals....they get the goldmine and everyone else gets the shaft
This article’s title is one of those things that make you say “Duh”.
My answer: Mostly.
It started as a pure Ponzi scheme, as new entrants paid benefits to old. It will end either in collapse, or possibly, at reduced benefit levels, a straight pay -as-you-go transfer program from young workers to retirees.
Forget about the “investments” in government IOUs that SS holds. The end game is a modest pension scheme based on transfers (or economic collapse with currency debasement, depending on the realism of the politicians and the voters.) Think of it along the lines of the Earned Income Tax Credit, which is nothing of the sort — maybe it could be renamed as the Old Age Earned Credit, or somesuch.
Well at least we get something!
Do fat puppies poot?
ABSOLUTELY, and it will crush our children with 70-80% taxes
Yes, you got to either have an ever increasing working class, or hike taxes to keep it going.
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