in other words there's a pile of money being accumulated…
because you put money in the government saves it for you
and then when you retire you get it out…
That's just simply not true
The money, payroll taxes going into Social Security, are spent
They're spent on benefits and they're spent on government programs
There is no trust
We're on the ultimate pay-as-you-go system…
The only thing Social Security has is a pile of IOUs
from one part of government to the next…
therefore when you have more retirees living longer for greater benefits
with fewer people paying in
the system inevitably will go into the red"
George W Bush
Our Social Security system
is the very definition of a Ponzi, or pyramid scheme.
Congressman Ron Paul
"Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan:
what you get out depends on what you put in.
So it does not look like a redistributionist scheme.
In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in.
Well, the Ponzi game will soon be over, thanks to changing demographics,so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).
Paul Krugman, 1996
If Bernard Madoff
distributed money received from new investors to older investors
until there wasn’t enough money to continue
does Social Security operate under the same structure
with mandatory participation?
"Politicians of all stripes have used the Social Security money to pay for other government expenses.
Those funds were even counted to offset the deficit, although now that Social Security is no longer in a surplus, ...that has gone away.
...The classic Ponzi is where you get money from one group and then find another group to pay the "returns" to the first, and so on, until you run out of people and the game is up.
[Charles] Ponzi...took money from one group, telling them they would get it back later, and then spent the money with another group, telling them the same thing.
The difference between a Ponzi and Social Security is that SS is legal and is done in full view of the public with everyone knowing the deal."
If Social Security taxes were increased in 1983
to ease the burden of a smaller generation
tasked with providing benefits to a larger number of longer living elders
why would elected leaders borrow and spend the surplus?
We are building up a nasty inter-generational clash by plundering the savings of current workers to fund a bloated state and an aging bulge of pensioners who – through no fault on their own: many were even forced to retire before they wanted to – have become ruinously expensive for a shrivelled tax base.
...Let us call it the last roll of the dice."
Was it justifiable for the baby boom and their elders,
to promise themselves tens of trillions of unfunded benefits,
like Social Security, Medicare and Medicaid,
for future generations to pay for?
It is grossly irresponsible for the baby boom generation
to expect Generations X and Y
to be saddled with our national debt,
our trade debt, and our infrastructure debt,
and the retirement debt created by baby boomers
enjoying long retirements supported by future tax increases
on their children.
If workers earn, pay taxes, spend, save and invest,
while retirees divest, downsize, budget
and draw income and healthcare benefits,
what’s going to happen when more retirees want
what fewer workers may not be able to deliver?
"Our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax”...
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
...How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars...
...This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
...Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
...Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on.
...Our country is broke and can no longer afford no- pain, all-gain “solutions.”
Laurence J. Kotlikoff
Professor of economics at Boston University
If there’s trillions of dollars difference
between publicly outstanding debt investors can buy and sell,
and non-marketable intragovernmental debt,
who is it owed to,
who has to pay how much and when,
how could those who know or should and don’t
let the country borrow trillions from itself,
and why are most Americans unaware?
The most reprehensible fraud…
is the systematic and total ransacking of the Social Security trust fund…
the Social Security payroll tax has become a money machine
for the US Treasury
generating fantastic revenue surpluses
in excess of the costs of the Social Security program…
The public fully supported enactment
of hefty new Social Security taxes in 1983
to ensure the retirement program’s long-term solvency and credibility
The promise was that today’s huge surpluses would be set safely aside
in a trust fund to provide for baby-boomer retirees in the next century
Well, look again
The Treasury is siphoning off every dollar of the Social Security surplus
to meet current operating expenses…
By thus reducing the deficit
we mask the true enormity of the Federal budget crisis
while creating the illusion that Congress and the administration
are actually doing something about deficits…
The hard fact is…the Social Security system
will find itself paying out vastly more in benefits than it is taking in…
and the American people will wake up to the reality
that those IOU’s in the trust fund vault
are a 21st century version of Confederate banknotes
Of course, the Treasury would have the option of raising taxes
to repay the astronomical sums we have borrowed from the trust fund
But that would be a brazen rip off of working Americans...
Any way you slice it, it is a lousy public policy
to borrow… from the trust fund with no credible plan for reimbursement
…this approach allows us to mask the true scale of the…deficit
thus making it easier for us politicians to sit on our hands
US Senate, October 13, 1989
What could happen if a generation of underemployed, underpaid
educated and indebted young adults
become disillusioned by their elders’ financial mismanagement
and seek to identify and punish those responsible?
Social Security to start cashing Uncle Sam's IOUs
…For more than two decades, Social Security collected more money in payroll taxes than it paid out...
…This year…the retirement program is projected to pay out more in benefits than it collects in taxes…
Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs…
…For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.
Associated Press, March 14, 2010
If a private financial institution
were as reckless with its fiduciary responsibility
as Congress has been with Social Security and Medicare
there would be howls of indignation, demands for regulation
and calls for the resignation and prosecution of those responsible
The earth belongs to each of these generations during its course,
fully and in its own right.
The second generation receives it clear
of the debts and incumbrances of the first, the third of the second, and so on.
For if the first could charge it with a debt,
then the earth would belong to the dead and not to the living generation.
Then, no generation can contract debts greater than may be paid
during the course of its own existence.
Thomas Jefferson to James Madison, 1789
"Your proceedings are clouded by illegitimacy.
...the purpose of the secrecy is to defer public discussion of cuts in Social Security and Medicare until after the 2010 elections.
...it is impossible to have a fair discussion of any important question when the professional participants in that discussion have been picked, in advance, to represent a single point of view.
...Future Deficit Projections Are Generally Based on Forecasts Which Begin by Assuming Full Recovery, But This Assumption Is Highly Unrealistic.
...To understand how the discussion of future deficits is being framed, it is necessary to grasp the work of the principal forecasting authority, the Congressional Budget Office. CBO's projections...wipe out the current deficits, over a very short time horizon, by assuming a full economic recovery.
...CBO claims to expect a relatively rapid return, over five years, to high levels of employment, and the baseline incorporates a correspondingly high rate of real growth in the early recovery from the great crisis.
...under present financial conditions this scenario of a rapid return to high employment is highly unrealistic.
...Having Cured the Deficits with an Unrealistic Forecast, CBO Recreates Them with Another, Very Different, But Equally Unrealistic Forecast.
...In the CBO forecasts, big future deficits arise from a combination of (a) rapidly rising health care costs and (b) rising short-term interest rates, in the context of (c) a rapid return to high employment and (d) continued low overall inflation.
...Even if CBO were right about recovery, which it is not, this projection is internally inconsistent and wholly implausible.
...the economic forecasts on which you are being asked to develop a credible plan for reducing deficits over the medium term are a mess. The unemployment and growth forecasts are implausibly optimistic, while the inflation and interest rates projections are implausibly pessimistic and mutually inconsistent.
Good policy cannot be based on bad forecasts.
...The only way to grow out of our deficit is to cure the financial crisis.
To cure the financial crisis would require two comprehensive measures. The first is debt restructuring for the entire household sector, to restore private borrowing power. The second is a reconstruction of the banking system, effectively purging the toxic assets from bank balance sheets and also reforming the bank personnel and compensation and other practices that produced the financial crisis in the first place. To repeat: this is the only way to generate deficit-reducing, privately-funded growth and employment.
...the practices of banks and investment banks with which they were closely associated worked to destroy the financial system..., But I would wager that the Commission has spent no time, so far, on a discussion of the relationship between deficit reduction and financial reform.
...the goal is to defer recognition of the difficulties for as long as possible.
...Recommendations based on CBO's unrealistic budget and economic outlooks are destined to collapse in failure.
...Thus the interesting twist in your situation is that the Republic would be better served by advancing no proposals at all."
James K. Galbraith
Lloyd M. Bentsen, jr. Chair in Government/Business Relations,
Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin,
and Vice President, Americans for Democratic Action, June 30, 2010
Via The Economic Populist
Nations are not ruined by one act of violence
but quite often, gradually, and almost imperceptibly
by the depreciation of their currency through excessive quantity
Discovered Earth was not the center of the Universe