Mandatory Ponzi Schemes

US Daily Review ^ | September 17, 2011 | Keith Rodebush

[BUSHdude2000]

When Ida May Fuller received the first Social Security check for $22.54 in 1940 she had paid into the system in the amount of $24.75. By the time of her death in 1975 at the age of 100 years she had received payments totaling $22,882 and change. Is Social Security a Ponzi scheme? Of course it is, money from current investors was used to pay Ida May’s bill far beyond her investment. But there is a distinction. Social Security is a mandatory Ponzi scheme. This is no small difference as the downfall of all Ponzi schemes is when financial downturns make it impossible to keep up payments to past investors and the house of cards falls. With government, they just raise taxes or print money and the scheme rolls on in perpetuity; an effectual anchor on the economy.

Is Social Security constitutional? Article I, section 8 of the U.S. Constitution allows Congress to “…lay and collect taxes, duties, imposts and excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” Therefore, in theory the imposition of taxes to ensure that elderly citizens are not destitute is not beyond the reach of Congress. Whether the actual legislation imposed the tax uniformly, which is required by the same section, or whether it was coercive, RE: unemployment insurance by States, was decided by the SCOTUS in 1937. I fail to see how any court could ever decide otherwise after 76 years of implementation. Social Security is Constitutional. Whether it is intelligent is debatable. Notice also, that it is a general tax; nothing less, with no earmarks for use. There has never been a Social Security ‘fund’ for investing in your retirement.

[ridesthemiles]

How many people paid into SS & died early? All they got was $255 for burial costs.

Lots of people die without any dependents, so there is no other money paid out.

[bethtopaz]

Here’s a link to Michael Ramirez’s latest cartoon on Ponzi schemes: http://cfif.org/v/index-mc1.php?cartoonMonth=2011-09&start=PonziSchemes.jpg&nr=0

Hope it opens for you.

[ngat]

“Is Social Security a Ponzi scheme? Of course it is, money from current investors was used to pay Ida May’s bill far beyond her investment. But there is a distinction. Social Security is a mandatory Ponzi scheme.”

There is another difference, just as significant as the mandatory part. The participants know all this; in a real Ponzi Scheme, the paying off of old investors with the new investors’ money is concealed.

[mountainlion]

Taxes are a ponzi schemes also. You pay for other that what you are being told you are. FAA collects take off and landing for airsystem repairs and fees which go to the general fund so the deficit has to be raised to fix airports. Gas tax goes is said to go to fix roads but ends up in the general funds and we have to raise the deficit to build roads. Our votes are a ponzi scams also as we give our votes for one promise only to be repaid with something opposite.

[SampleMan]

At time of passage ss collection was set close to average age of death. There were also a lot more people at the base of the peramid because of larger families. Adding 20 hrs to avg age and cutting family size in half has made ss untenable.

[goodnesswins]

Could be racist?....since so many black men die younger....

[PeterPrinciple]

To be fair, it is social security insurance, not a retirement plan. It began as an insurance program following some of the principles of life insurance. Where it went wrong was not following the guidelines required of private life insurance. It is interesting that they even had a death benefit.

Again from our view we compare it to a retirement plan, but the original setup was insurance and that was how it was sold and modeled.

[cumbo78]

OK. Its a Ponzi scheme. So what are we going to do to fix it? This past week, Republican Presidential candidate, Cong. Thaddeus McCotter (you know, the one they won’t let debate) introduced the SAVE SOCIAL SECURITY ACT (bill HR 2889) which has been described as the largest reduction of government spending and debt in world history. It does NOT increase the payroll tax, increase the retirement age, reduce benefits or privatize the sytstem, all of which are opposed by the majority of the American public.

The fact that a Presidentail candidate has submitted legislation that reforms, improves and saves Social Security, and that the media would still rather discuss whether it is a Ponzi scheme boggles the mind. Where is the Mainstream Media Coverage? Never mind that, where is the Talk Radio coverage? Rush, Hannity, Levin, Ingraham???????NOTHING!!!

One question. If the roles were reversed and you had a Democrat Congressman who was challenging for his party’s nomination to take on an incumbent President, and he introduced THIS SAME BILL, how many of the Sunday shows would he be on tomorrow?

[org.whodat]

A ponzi scheme is not backed by the good faith and credit of the united states tax payer. That is the difference that matters.

[mo]

“....but the original setup was insurance and that was how it was sold and modeled”

any decent con has just enough truth to it to sell it....

[Oshkalaboomboom]

When Ida May Fuller received the first Social Security check for $22.54 in 1940 she had paid into the system in the amount of $24.75. By the time of her death in 1975 at the age of 100 years she had received payments totaling $22,882 and change.

What this article fails to note is that the $22.54 she received was when the average monthly wage was five times higher, around $125/month, and that over her lifetime she received an average of $52/month. She just happened to live a lot longer than most. In other words, just like the SS recipients of today she lived very modestly. The Ponzi schemers getting rich are the politicians who encouraged generations of people to let the government do their saving for them and now they are hopelessly dependent on the government to keep their pittances coming.

[BUSHdude2000]

Absolutely right. And this is a big issue in the black communities. Many blacks pay in for years, but they die early, even before they start taking benefits. The family gets nothing. Who has been fighting to change this? The Republicans. But don’t ask the black community what they think of the Republican party. Terrence Jeffrey highlighted this topic in Human Event several years ago, it’s probably still online.

[Reily]

I don't know how you can say that it was not ever set up in an actuarial sound fashion. In fact the insurance executives who testified to Congress regarding the SS bill predicted it's current state of financial catastrophe. Of course then just like today Congress was convinced it could simply repeal reality as long of the consequences appeared on some future Congress later watch.

[PeterPrinciple]

I don’t know how you can say that it was not ever set up in an actuarial sound fashion.

---

I said that is the way the sold it as an insurance program. But that is not what they did.

[Reily]

I agree with that!

[El Cid]

Re: 3

Thanks for the link. Ramirez is great.

[Repeal The 17th]

“The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States...”
-
“The States”; The People” and “The United States” carry different meanings in the Constitution, and it is carefully specific and explicit in the usage of these terms.

Article 1 Section 8 does NOT say “...provide for the general welfare of “The People”.

[CynicalBear]

Not getting into whether it’s a ponzi scheme or not but I give very little credit to an article that starts out with that example but doesn’t include the example of the millions who pay into it for a lifetime but die prior to getting anything.

[supercat]

A fundamental problem with SS is politicians' continual equivocation about whether or to what extent promised SS payouts represent any form of binding obligation upon the government.

If they do represent a binding obligation, then the present cash value of all promised future payments represents debt, and the government has been lying enormously about its financial stability. If they do not represent a binding obligation, then the government has been taking large amounts of people's money in return for absolutely nothing. It's unclear to what extent SS should really be viewed one way or the other, but what is clear is that if it were viewed as being at least a 50% obligation there would be mobs with torches and pitchforks going after those in power for so grossly understating the debt, and if it's viewed as being a less-than-50% obligation those in power would be chased out for having robbed the people who paid in lots of money.

Personally, my view is that promised SS payouts are not a legitimate binding obligation; those who would hope to receive them had plenty of time to get out the torches and pitchforks but didn't do so. If they decided they'd rather pay the robbers than shut them down, that was their decision but--having paid the robbers--they, and not their descendants, should be the ones to pay for it.

I do think that in the interest of maintaining social stability it would be worthwhile to pay out enough so retirees don't starve, but that does not imply that retirees should consider themselves morally entitled to such payments. There was once a time when the acceptance of any government largess was viewed as a sign of moral weakness. Much of the decay in society can be attributed to the increasing rarity of that view.