Why We Should Terminate Social Security

4/20/2004 | Jaysun

[Jaysun]

Imagine with me, if you will, that all of the problems plaguing Social Security are suddenly solved. Forget the baby boomers, forget the raided “trust fund”, forget the fraud! Just pretend for a moment that all of those things are remedied by a series of reforms. Now, are you ready for the kicker? Such reforms still wouldn’t be enough to save Social Security. In fact, nothing can save social security.

Social Security is doomed for the same reason that chain letters haven’t made my Aunt Edna a Millionaire! The benefits paid to one generation are being funded by the next generation. The mandatory taxes that you and/or your employer pay (FICAS and FICAMC) are being used to fund the world’s largest pyramid scheme – and the base is crumbling fast!

In the six decades since “benefits” began being doled out by that great tax collector in the sky, some very predictable patterns have emerged. We can look at the last 60 years and see what a continuance of the program (even without the aforementioned time bombs) will produce. For example, the number of people working compared to the number of beneficiaries has remained constant at about 3.3 for the last 35 years. I made it a point to give the program the benefit of the doubt in my figures. Take a moment to look over the table below. I’ll include links to the raw data for the doubters among you.

ITEM	CURRENTLY 1999	5 YEAR 2009	10 YEAR 2014	20 YEAR 2024	50 YEAR 2054
ANNUAL PAYOUT (includes disabled, blind, and aged)	$30,959,475,000.00	$62,689,605,395.00	$89,206,502,104.00	$180,663,567,449.00	$1,499,699,702,201.00
ADMINISTRATIVE COST	$3,328,000,000.00	$7,125,252,000.00	$10,425,783,000.00	$22,321,616,000.00	$219,066,721,000.00
MAX TAXABLE EARNINGS	$84,900.00	$111,225.00	$145,710.00	$250,076.00	$1,264,211.00
% OF INCOME TAXED (both sides*)	15.30%	18.23%	21.73%	30.86%	88.39%

*Figure shown represents total paid by self-employed or total after business matches the employee’s withholdings. A regular employee is responsible for half of the figure shown.

We need to completely abandon Social Security if we hope to save our economy, our elderly, our disabled, and our country. We’re on a collision course with disaster. A program that will lead to ridiculously high taxes (and that will soon go bankrupt anyway) will only serve to choke out businesses and leave the people in poverty. It isn’t fair that some have paid for years and will not get anything in return, but the alternative is certain ruin. Demand that your representatives carry out the hard but necessary task of killing this cancer before it kills us. We can’t continue to prostitute our nation to socialism without contracting the proverbial STD that has laid ruin to so many others before us.

I arrived at the projected figures by averaging the actual numbers over a number of years. Then I simply increased the current figures by the appropriate averages. All in all, if everything goes the way that it has been going for the last several decades, then the figures above will be accurate. Of course, these figures assume that “baby boomer” and other such problems go away without incident. In truth, the reality is much worse than I’ve shown – but I wanted everyone to see the best case scenario.

We should replace social security with family, community, church, neighbors, charities, and individual responsiblilty, and personal savings.

ª JAYSUN§

The amount paid out has increased an average of 7.31% per year since 1990. ANNUAL PAYOUT
The administrative cost has increased an average of 7.91% per year since 1958. ADMINISTRATIVE COST
The maximum taxable earnings have increased an average of 5.55% per year since 1937. MAX TAXABLE EARNINGS
The percent of taxable income has increased an average of 3.57% per year since 1937. % OF INCOME TAXED
The ratio of Social Security covered workers to beneficiaries has averaged 3.33 per year since
1988. I must note, however, that their ratios don’t include a substantial number of beneficiaries.
The actual ratio is presently closer to 2 workers per beneficiary. RATIO OF WORKERS TO BENEFICIARIES

[Jaysun]

[backhoe]

Well, it's been noted that SS is a Ponzi scheme so many times that I'll pass on that, to make these other points:

1- when SS was first introduced, the retirement age was 65, and the average lifespan circa 63... so it was a bit of a swindle from the start... but wait, there's more!

2- when started, there were something like 240 workers supporting every retiree... each year, that ratio declines, benefits go up, and so from an actuarial and demographic basis, SS is unsustainable.

[evad]

$1,499,699,702,201.00

Hey dude..what comes after trillion?

[SpyGuy]

[Social Security taxes] are being used to fund the world’s largest pyramid scheme

Actually, this type of scam is correctly called a "Ponzi Scheme" and anyone caught engaged in creating one is prosecuted for fraud. (Except our own government, of course.)

[Jaysun]

Well, it's been noted that SS is a Ponzi scheme so many times that I'll pass on that, to make these other points:
1- when SS was first introduced, the retirement age was 65, and the average lifespan circa 63... so it was a bit of a swindle from the start... but wait, there's more!
2- when started, there were something like 240 workers supporting every retiree... each year, that ratio declines, benefits go up, and so from an actuarial and demographic basis, SS is unsustainable

Right. Good point(s). The thing that gets me is that everyone seems to think that it's smooth sailing once we get over the influx of "baby boomers" - but that just isn't so. It's a disaster.

[vannrox]

Ratio of Social Security Covered Workers to Beneficiaries Calendar Years 1940-2000
Year	Covered Workers (in thousands)	Beneficiaries (in thousands)	Ratio
1940	35,390	222	159.4
1945	46,390	1,106	41.9
1950	48,280	2,930	16.5
1955	65,200	7,563	8.6
1960	72,530	14,262	5.1
1965	80,680	20,157	4.0
1970	93,090	25,186	3.7
1975	100,200	31,123	3.2
1980	113,656	35,118	3.2
1985	120,565	36,650	3.3
1986	123,400	37,322	3.3
1987	126,287	37,951	3.3
1988	130,142	38,420	3.4
1989	132,478	38,859	3.4
1990	133,672	39,470	3.4
1991	132,969	40,172	3.3
1992	133,890	41,029	3.3
1993	136,117	41,840	3.3
1994	138,197	42,516	3.3
1995	141,027	43,108	3.3
1996	143,415	43,498	3.3
1997	146,135	43,793	3.3
1998	148,896	44,076	3.4
1999	151,333	44,367	3.4
2000	153,691	45,166	3.4
2001	153,716	45,668	3.4
2002	153,837	46,176	3.3
2003	154,309	46,752	3.3
Notes: Data for 1945-1989 from Table II.F19 of the 2000 Trustees Report. Data for 1990-2003 from 2004 Trustees Report, Table IV.B2. The following footnotes apply to these data: 1. The numbers of beneficiaries do not include certain uninsured persons, most of whom both attained age 72 before 1968 and have fewer than 3 quarters of coverage, in which cases the costs are reimbursed by the general fund of the Treasury. The number of such uninsured persons was 179 as of June 30, 1999. Totals do not necessarily equal the sums of rounded components. 2. Historical covered worker data are subject to revision. 3. Covered Workers is defined as those who are paid at some time during the year for employment on which Social Security taxes are due. 4. Beneficiaries as defined as those with monthly benefits in current-payment status as of June 30. Monthly Social Security benefits were first paid starting in January 1940. Data for 1940 computed from Tables 4.B.1 and 5.A.4 from the 1998 Annual Statistical Supplement to the Social Security Bulletin. The following footnotes apply to the 1940 data only: 1. Covered workers is defined as in the rest of the table. 2. Beneficiaries are defined as those with monthly benefits in current-payment status as of December 1940. This is a slightly different basis than that used in the rest of this table. Therefore the ratio for 1940 is only approximately comparable to the data for the subsequent years.

[vannrox]

Ponzi scheme

From Wikipedia, the free encyclopedia.

A Ponzi scheme is a fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors. It is illegal in most countries. The scheme is named after Charles Ponzi, an Italian immigrant to the United States. The manner of Ponzi's initial scheme was actually fairly crude, and the schemes are considerably more sophisticated in the present day.

The idea behind the Ponzi scheme is fairly straightforward, and exploits the basic human tendency towards greed. The scheme then perpetuates itself using envy. Although there are variations, here is a classic scenario:

An advertisement is placed somewhere promising extraordinary returns on an investment - for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to any number of causes, such as "global currency arbitrage", "futures trading" or anything else that sounds sufficiently plausible.

Initial investors are usually wary, but eventually someone will invest a small sum (say $5000). Sure enough, 30 days later, the investor receives $6000 - their original capital plus 20% ($1000). At this point greed subsumes reason, and the investor will rush to raise a larger investment. Also typically at this point word begins to spread, and other envious investors will clamour for the opportunity to participate. Soon numerous people will have made $2000 on a $10000 investment, and people are starting to mortgage their houses to raise more capital.

The reality of the scheme is that the "return" is being paid out of the incoming investment money. As Investor B invests $10000, $2000 of that is taken to pay the return to Investor A who invested a month earlier. This obviously makes no sense financially.

However, the catch is that at some point in time the scheme will vanish, typically at a point where a "critical mass" of capital has been achieved, and the operators disappear taking all of the capital amassed with them. A sad aspect of this is that typically all of those who actually made a "profit" at an earlier stage of the scheme will have (voluntarily) re-invested that money back in, so they lose it anyway.

A common variation involves a smaller return for a short-term investment (say 10% over 30 days), but a fantastic return for a longer investment (say 200% after six months). Once the initial trust has been achieved after making the shorter term gain, people are far more likely to leave their funds for this longer period. This naturally gives the operators more time to plan their disappearance.

Are state pensions a Ponzi scheme?

It has been suggested that some state pension schemes, e.g. the U.S. Social Security and the U.K. State pension schemes bear disturbing resemblances to Ponzi schemes in their mode of financing. This is because benefits are paid from taxes currently being collected, rather than from the taxes previously paid by the current beneficiaries. This also explains why the aging of the Baby Boomer generation presents a threat to the U.S. Social Security system: as more of the Baby Boomers retire, there will be more people collecting social security benefits than there will be workers paying taxes for social security benefits.

However, critics of this view state that the balance income and outgoings from Social Security is sustainable because the returns from Social Security are not high enough to cause the system to run out of money. Another analysis is that whether the system is based on pension funds or on a "state pension" scheme, the resources (goods and services) available in a given country are the same, and the choice of the repartition scheme (between the active population and the retired population) does not change anything, basically, to the problem of population aging: if fewer resources are available, any system will have difficulties.

Compare: Pyramid scheme

[Publius6961]

Social Security is doomed for the same reason that chain letters haven’t made my Aunt Edna a Millionaire! The benefits paid to one generation are being funded by the next generation. The mandatory taxes that you and/or your employer pay (FICAS and FICAMC) are being used to fund the world’s largest pyramid scheme – and the base is crumbling fast!

Actually, seeing the pyramid scheme for what it is, is bad enough. But it's actually worse. A generation ago, people were encouraged to participate without having to add to the pot at all!

Why do you suppose that pyramid schemes are a crime in all legal jurisdictions from the feds to the local town? Except for this one.

[vannrox]

Pyramid scheme

From Wikipedia, the free encyclopedia.

A pyramid scheme is a business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered. Pyramid schemes have been in existence for at least a century. The method of conducting business known as multi-level marketing (MLM), as well as matrix schemes, often closely resembles pyramid schemes.

Pyramid schemes come in many variations. The earliest schemes involved a chain letter distributed with a list of 5-10 names and addresses on it. The recipient was told to send a specified small sum of money (typically $1 to $5) to each of the people listed. Having done this, the recipient was then to remove the first person on the list, move all of the remaining names up one place, and to add their own name to the bottom of the list. Finally, this person was to mail the letter out to as many people as possible.

Success in such ventures rested solely on the exponential growth of new members. Hence the name "pyramid", indicating the increasing population at each successive layer. Unfortunately, simple analysis will reveal that within a few iterations the entire global population would need to subscribe in order for all of the members to earn any income. This is impossible, and the vast majority of people who participate in these schemes simply lose their money.

Although pyramid schemes have been declared illegal, they still persist in many forms. While schemes simply involving the blatant exchange of money have generally disappeared, many schemes persist that purportedly "sell" a product to mask the primary intention of simply enrolling new members. The distinguishing feature of these schemes is the fact that the product being sold has little to no intrinsic value of its own. Examples include "products" such as brochures, cassette tapes or systems which merely explain to the purchaser how to enrol new members, or the purchasing of name and address lists of future prospects. The costs for these "products" can range up into the hundreds or thousands of dollars. A common Internet version involves the sale of documents entitled "How to make $1 Million on the Internet" and the like.

There are numerous pyramid schemes that sell such intrinsically worthless products which market themselves as "multi-level marketing" programs. This is unfortunate, because there are in fact a number of perfectly legitimate businesses which use this MLM business model.

The key identifiers of a pyramid scheme are:

• A highly excited sales pitch
• Vaguely phrased promises of limitless income potential
• No product, or a product being sold at a price ridiculously in excess of its real market value.
• An income stream that chiefly depends on the commissions earned by enrolling new members.
• A tendency for only the early investors/joiners to make any real income.

The key distinction between these schemes and "legitimate" MLM businesses (e.g. Excel Communications) is that in the latter cases a meaningful income can be earned solely from the sales of the associated product or service. While these MLM businesses also offer commissions from recruiting new members, this is not essential to successful operation of the business by any individual member.

Compare To: multi-level marketing, Ponzi scheme, Matrix scheme

See also: marketing, make money fast, LGAT

[Jaysun]

Actually, this type of scam is correctly called a "Ponzi Scheme" and anyone caught engaged in creating one is prosecuted for fraud. (Except our own government, of course.)

I agree. I wasn't sure if everyone would know what a Ponzi Scheme is - so I opted for the easier "pyramid scheme" description. It's the same concept. Ponzi, chain letters, pyramid schemes, MLM.... they all use the next guy in line to prop up the current guy - and eventually you run out of guys!

[TruthShallSetYouFree]

Hey dude..what comes after trillion?

Bankruptcy. Okay, quadrillion.

[ThePythonicCow]

what comes after trillion?

From http://mcraeclan.com/Graeme/Language/MillionsAndBillionsAndZillions.htm

Power of 10	Number	American Name	British Name
3	1, 000	Thousand	Thousand
6	1, 000, 000	Million	Million
9	1, 000, 000, 000	Billion	Thousand Million
12	1, 000, 000, 000, 000	Trillion	Billion
15	1, 000, 000, 000, 000, 000	Quadrillion	Thousand Billion
18	1, 000, 000, 000, 000, 000, 000	Quintillion	Million Billion
21	1, 000, 000, 000, 000, 000, 000, 000	Sextillion	Thousand Million Billion
24	1, 000, 000, 000, 000, 000, 000, 000, 000	Septillion	Trillion
27	1, 000, 000, 000, 000, 000, 000, 000, 000, 000	Octillion	Thousand Trillion
30	1, 000, 000, 000, 000, 000, 000, 000, 000, 000, 000	Nonillion	Million Trillion

[bilhosty]

Are you really going too end social security just like that? After all these years I have paid into it you are just going too leave me high and dry? Don't get me wrong there is much to dislike about the federal welfare state, but conservative or not I think most people accept social security and even if reform is needed as it is. We will find away too keep it afloat. Why don't you pick on ssi which is usually a rip off or aid for the arts or public broadcasting or agriculture programs. Social Security is the one part of the welfare state that virtually everyone including me supports. We Conservatives will not get very far knocking social security.

[backhoe]

The thing that gets me is that everyone seems to think that it's smooth sailing once we get over the influx of "baby boomers" - but that just isn't so. It's a disaster.

Precisely... it really is a damned mess. And further complicating it are those of the Greedy Geezer Generation who wail and agitate about "I'm entitled to it!" I have a number a relatives in that category, sorry to say, who really don't care how great the burden is on active workers so long as they get their benefits.

[MarthaNOStewart]

Thank you. NO SS is not a Ponzi or pyramid scheme, you just don't understand the concept at all. There are millions who pay into SS and never collect because they die first. The disabled must have SS to remain independent of their families. I think it is the ONLY program the gov't ever conceived that is logical. It helps elderly have safe housing, as many children would not take good care of parents even if they could afford it...they are too busy.
Just because it is jeapordized by those who beg, borrow and steal from it, doesn't mean it isn't a feasable answer to one's needs in old age, or in case of disability.
Some moron is going to spew at me, so I am not going to answer any obnoxious posts...just going to go on record as being in favor of Social Security as it should be run,not as it is run.
Most of your email scammers and pyramid people expect to get money right away, and SS only pays later in life. Many people die before collecting, which would leave good balance for those who do live....we are paying just in case we do live a long life and can't work...and it will benefit those who make it even if it doesn't benefit us, that is the concept. I do take issue with some of SSI and other programs that do give more to those who have not paid, but that is different issue.

[bilhosty]

I never spewed and I never called anybody names like moron or anything else. Would it therefore be wrong too save money for retirement because you might never get too spend it, and it might go too some one like your heirs. So too we might not live too get social security. But we will know that our children and other loved ones will. Even if I do not live to get it. I find it a comfort knowing that it is there and so do most people. best wishes Bill

[templar]

The real problem with retirees is that they will begin using the surplus funds collected by SS taxes. The government needs those funds to finance it's daily operations and cannot afford to lose them to retiree payments.

Of course, we could always just pursue unlimited borrowing to finance both government and SS payments. That would add the problem to the national debt, and, as I am assured by various FReeper 'economists' whenever I mention it, that doesn't matter since we'll "grow" our way out of it.

So,m as the song says, "don't worry ... be happy".

[ARCADIA]

in favor of Social Security as it should be run,not as it is run.

There is a tendency to blame the beneficiaries for the crimes of the program administrator. Unlike, those who would attack it, SS is here to stay.

[evad]

yeah!!
I think when we get to a nonillion, we're in trouble.

[familyofman]

Need detais as to how you plan to end SS. Will it just go away someday; no more FICA w/h, no more payments from the system, excess funds collected - who gets them, how will the greatly expanded general deficit be impacted, and does the end of the SS program include other programs - Medicare...?
No plan can succeed without taking care of the little details. Will churches and other social organizations be 'required' to pick up the slack - or just operate on the assumption that they will fill all voids for everyone? I'm sure all the details to accomplish your goal have been well thought out, please share them with us.