thank you for reading it.
Social Security/Medicare Ponzi Scheme
- Thread starter ETcallhome
- Start date
A interesting summary. However I disagree with a number of points in your perspective which I will elaborate on later. I will however point out that even the yearly reports (2016 Report) from the Social Security Administration disagree with your assertions. Each year the report outlines the assumptions and risks
Each year the report outlines the year when the OASI fund and DI fund will not longer be able to pay their full commitments. Currently the old age fund will not be able to fully pay commitments starting in about 2034; the disability fund will run out money much sooner.
Let's take a look on page 6 of the 2016 report at the start of the Conclusion - "Under the intermediate assumptions, DI Trust Fund asset reserves are projected to become depleted in the third quarter of 2023, at which time continuing income to the DI Trust Fund would be sufficient to pay 89 percent of DI scheduled benefits. Therefore, legislative action is needed soon to address the DI program’s financial imbalance. The OASI Trust Fund reserves are projected to become depleted in 2035, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits."
The yearly social security report also provides information on demographic issues which drive the system -- with clear statements that payments from current workers fund the payments of older workers -- meaning that it matters greatly how few workers there are (as shown by the tables and charts).
As I pointed out DI should not be lumped in with OASI . It has a quite different set of problems, much less easily addressed. The 2035 estimated date for OASI is assuming congress continues to disregard the Trustees recommendations as they have for a number of years now. There is nothing at all wrong with OASI, the problem is with Congress. OASI is sound if managed as intended and the contribution rate is adjusted from time to time according to the actuarial computations. Originally the Trustees asked for a 1 cent employer employee increase. This was ignored so when Congress finally gets around to doing something the required adjustment will be greater because they failed to act in a timely manner. As I said it seems to be deliberate. It's disgraceful. I favor taking OASI out of Congresses hands altogether and letting the Trustees run it.
It is quite true that when Congress does not increase the contribution rate as requested in a timely manner, as they have not done, then ultimately there will not be enough money in the trust combined with current contributions to both pay the current pensioners and guarantee the pensions of current contributors. But there is no requirement that the number of current workers be greater than the number of pensioners for the system to remain sound. The contribution dollars and trust dollars are fungible, as I noted. The only requirement for soundness is that Congress follow the Trustees recommendations based on the actuaries computations which take changing demographics into account.
I have objected for years to this wide-spread misunderstanding that the system is a Ponzi scheme because current contributions are used to pay current pensions. This simply avoids exchanging dollars in the trust for contribution dollars. But at the same time it is understandable why so many are being misled.
From the 2016 report:
. Law-makers have a broad continuum of policy options that would close or reduceSocial Security's long-term financing shortfall. Cost estimates for many such policy options are available at www.ssa.gov/OACT/solvency/provisions/. The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in orderto phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits and could pre-serve more trust fund reserves to help finance future benefits. Social Security will play a critical role in the lives of 61 million beneficiaries and 171 million covered workers and their families in 2016. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.
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Ponzi scheme it is.
America’s Ponzi scheme: Why Social Security needs to retire
http://www.pbs.org/newshour/making-sense/americas-ponzi-scheme-why-social-security-needs-to-retire/
Social Security: The Most Successful Ponzi Scheme in History
https://mises.org/library/social-security-most-successful-ponzi-scheme-history
The selling of social security as a sound fiscal enterprise is possible only by grossly misrepresenting the facts.
A good rate of return on investment? It was only for those in earlier generations who didn't pay much and continually had their benefits increased by congress. (to buy votes)
According to the Urban Institute, the avg man who retired in 2010 will receive less than he paid in during his life in ss taxes. Almost ten percent less.
Similarly, the continual need to increase taxes to "fix" the system is another scam. It uses a finite time period to make the calculation for the "fix". At the end of the "fix" it needs another "fix". Because it's underfunded again. But even that doesn't reveal the extent of the "fix" scam. In real life, the system always needs another "fix" even before the finite life ends of the previous "fix", because they weren't using realistic numbers to calculate their "fix".
When using an infinite horizon, instead of a finite time horizon to calculate what would be necessary for a real fix to the system, it reveals so many trillions in underfunding that it is virtually impossible to make it work in the long run.
The shit is going to hit the fan eventually. It does not add up and it's being sold using scam tactics to elongate it as much as possible.
America’s Ponzi scheme: Why Social Security needs to retire
http://www.pbs.org/newshour/making-sense/americas-ponzi-scheme-why-social-security-needs-to-retire/
Social Security: The Most Successful Ponzi Scheme in History
https://mises.org/library/social-security-most-successful-ponzi-scheme-history
The selling of social security as a sound fiscal enterprise is possible only by grossly misrepresenting the facts.
A good rate of return on investment? It was only for those in earlier generations who didn't pay much and continually had their benefits increased by congress. (to buy votes)
According to the Urban Institute, the avg man who retired in 2010 will receive less than he paid in during his life in ss taxes. Almost ten percent less.
Similarly, the continual need to increase taxes to "fix" the system is another scam. It uses a finite time period to make the calculation for the "fix". At the end of the "fix" it needs another "fix". Because it's underfunded again. But even that doesn't reveal the extent of the "fix" scam. In real life, the system always needs another "fix" even before the finite life ends of the previous "fix", because they weren't using realistic numbers to calculate their "fix".
When using an infinite horizon, instead of a finite time horizon to calculate what would be necessary for a real fix to the system, it reveals so many trillions in underfunding that it is virtually impossible to make it work in the long run.
The shit is going to hit the fan eventually. It does not add up and it's being sold using scam tactics to elongate it as much as possible.
The only ones who will "make out" on SS as a retirement income (not including all the "disabled" parasites)... are the ones in the generation before the Boomers.
Yes... The Boomers... who paid the most into SS and who have paid the most Federal Income tax... they're getting hosed too.
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The average upper middle class boomer will get under a 1% return on what they put into Social Security. Many will get negative returns out of the system. Nearly all would have been better putting all their Social Security money into an investment account that earned a 3% return.
What you have stated is essentially correct according to the urban institute think thank, which is sometimes characterized as left leaning and sometimes called non partisan.
Some charts break it down between groups.
..the ss part of the charts show that of the six groupings, there are only two that pull out more money than they put in. They are both married couples where one spouse either didn't work or had a job making little money. With those two scenarios, the spousal benefit kicks in and the spouse who earned little or no money gets the spousal benefit and gets fifty percent of what the high earning spouse gets, and thus they pull out more than what they put in.
Every other group pulls out less than they put in. The trick to getting more out of the ss system than you put in is to have a spouse that doesn't work.
The charts also show that people are getting far more from medicare than they put in, and this is because general tax revenues are helping to fund that system. It's no wonder that people like medicare. They get more than they're paying for in medicare taxes.
And then there's this chart.
It shows how as time has gone on and 'fixes' have been applied to the ss system, which is nothing more than a tax increase, ss recipients have gone from getting far more than they put in until now, the avg retirees are getting less than they put in. And it will get worse with every "fix".
The ss system is unsound on an actuarial basis and all these fixes don't change that, they only put off the day of armagedon. The fixes just make the tipping point occur a little later. Everyone hopes to get theirs out before it blows up.
To make it sound it would take massive tax increases coupled with huge benefit reductions.
Not until I get mine!
The Wall Street campaign against S.S. has been amazingly successful. For those that want accurate information on ROI, the information and studies are out there. Studies that include segment of the income spectrum not included in the above studies. Do a search and you will find them.
In the mid-eighties hedonics was introduced into the method of computing the CPI. This is reflected in the COLA for Social Security. But a realistic COLA can not be supported without an adequate contribution rate and correctly set cap. Ultimately, failure to adjust affects ROI negatively, and bolsters the arguments for killing S.S. altogether. This, I suspect, is the reason behind so much foot dragging in Congress. The nice charts above do not show the results for low wage earners.
If we don't look after the the low end of the labor class we will be in real trouble in the second half of this century! This is easily remedied. However the attacks on S.S. have been so relentless and so successful that Congress seems to lack the will to do what is needed. This is very unfortunate for the long term social stability of the country.
One can see the eventual outcome years in advance. It is relatively easy to make the necessary corrections now; it won't be easy later. I'll be dead! But those who are much younger, won't be. It's ironic that I am more concerned about the future of those much younger than myself then they themselves are. Those who fail in the present to recognize the importance of Social Security to the Nation's social fabric will suffer the consequences of their inattention later. They have far too little concern for their own future welfare.
I have already made it clear why defined contribution plans, because of the absence of a large shared risk pool, can not satisfy the needs of the low end of the labor class. Can there be any question that it would be far better to make the adjustments called for by the actuaries and keep self-funded social security sound indefinitely, than to create a large underclass that will become wards of the State in their old age.
I do understand why from Wall Street's point of view it is better to get the government completely out of the pension business. I'm not surprised at this. After all, I know Wall Street well. Wall Street has never had the welfare of the labor class in mind. Malcolm Muggeridge was right when he said vanity, greed. and instinct were the driving forces behind all human endeavors.
In the mid-eighties hedonics was introduced into the method of computing the CPI. This is reflected in the COLA for Social Security. But a realistic COLA can not be supported without an adequate contribution rate and correctly set cap. Ultimately, failure to adjust affects ROI negatively, and bolsters the arguments for killing S.S. altogether. This, I suspect, is the reason behind so much foot dragging in Congress. The nice charts above do not show the results for low wage earners.
If we don't look after the the low end of the labor class we will be in real trouble in the second half of this century! This is easily remedied. However the attacks on S.S. have been so relentless and so successful that Congress seems to lack the will to do what is needed. This is very unfortunate for the long term social stability of the country.
One can see the eventual outcome years in advance. It is relatively easy to make the necessary corrections now; it won't be easy later. I'll be dead! But those who are much younger, won't be. It's ironic that I am more concerned about the future of those much younger than myself then they themselves are. Those who fail in the present to recognize the importance of Social Security to the Nation's social fabric will suffer the consequences of their inattention later. They have far too little concern for their own future welfare.
I have already made it clear why defined contribution plans, because of the absence of a large shared risk pool, can not satisfy the needs of the low end of the labor class. Can there be any question that it would be far better to make the adjustments called for by the actuaries and keep self-funded social security sound indefinitely, than to create a large underclass that will become wards of the State in their old age.
I do understand why from Wall Street's point of view it is better to get the government completely out of the pension business. I'm not surprised at this. After all, I know Wall Street well. Wall Street has never had the welfare of the labor class in mind. Malcolm Muggeridge was right when he said vanity, greed. and instinct were the driving forces behind all human endeavors.
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Sorry, I forgot to mention this. Please pay attention to the dates at the bottom of the bars in the graphs above. What you are looking at is a graphical depiction of the effect of ignoring the S.S. actuaries. (I like to describe it as what happens if Wall Street gets its way.) Look at other studies for ROI in prior years if you want to see what is intended, and what will be the ROI if the actuaries recommendations are followed. The most important thing is to look at ROI's for low income workers. These are the workers S.S. is designed to protect. The ROIs will always be skewed in favor of the low wage worker. Well done studies are available.
It is the easiest thing in the world to wreck Social Security if that is the intention! It is almost as easy to create and maintain a sound system that works to everyone's advantage. The choice should be based on logic and rational argument; not political ideology, and Wall Street greed.
Let us never forget that figures don't lie but liars figure. Be sure you know what is included in "social security benefits" when looking at data. Is it all S.S. programs including DI, or has OASI been broken out. This is critical, because as I mentioned DI should be treated as a separate entity. It has its own unique set of problems. Treating OASI and DI as though they are one considerably muddies the waters. But it's a useful tactic if you're a Wall Street tycoon itching to get your hands on the 2 trillion sitting in the OASI Trust.
It is the easiest thing in the world to wreck Social Security if that is the intention! It is almost as easy to create and maintain a sound system that works to everyone's advantage. The choice should be based on logic and rational argument; not political ideology, and Wall Street greed.
Let us never forget that figures don't lie but liars figure. Be sure you know what is included in "social security benefits" when looking at data. Is it all S.S. programs including DI, or has OASI been broken out. This is critical, because as I mentioned DI should be treated as a separate entity. It has its own unique set of problems. Treating OASI and DI as though they are one considerably muddies the waters. But it's a useful tactic if you're a Wall Street tycoon itching to get your hands on the 2 trillion sitting in the OASI Trust.
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There is only one thing you need to know. Just one thing.
The 'fixes' that they recommend are only for a specific period of years. If they could actually fix ss, they would do it. When they say they've made it good until X date, it means they can't actually fix ss. They are only trying to give a failed program a veneer of respectability by claiming it's fixed when it has not been fixed at all. Just moved the point of collapse to a later date.
And thanks, piezoe, for pointing out in post above that when you gave roi numbers, in reality you were using a ginned up number that only applied to a certain segment. Low wage workers. And it more than likely has all kinds of other 'adjustments' to get there, too. What other components of the data did they leave out to arrive at this exceptional roi?
And piezoes fix is to calculate cpi differently so that the recipients get a bigger paycheck and make a better return. Of course no mention of what that will do to the already multi trillion dollar underfunded trust fund if they pay even more of it out sooner.
It's no different than cuba, venezuala and all the rest. It's going to collapse into a heap and cause massive societal disruption, but we need to do it because it's good for the poor, right.
The 'fixes' that they recommend are only for a specific period of years. If they could actually fix ss, they would do it. When they say they've made it good until X date, it means they can't actually fix ss. They are only trying to give a failed program a veneer of respectability by claiming it's fixed when it has not been fixed at all. Just moved the point of collapse to a later date.
And thanks, piezoe, for pointing out in post above that when you gave roi numbers, in reality you were using a ginned up number that only applied to a certain segment. Low wage workers. And it more than likely has all kinds of other 'adjustments' to get there, too. What other components of the data did they leave out to arrive at this exceptional roi?
And piezoes fix is to calculate cpi differently so that the recipients get a bigger paycheck and make a better return. Of course no mention of what that will do to the already multi trillion dollar underfunded trust fund if they pay even more of it out sooner.
It's no different than cuba, venezuala and all the rest. It's going to collapse into a heap and cause massive societal disruption, but we need to do it because it's good for the poor, right.