Ponzi, short for Social Security

Richard Luettgen
New Jersey

It's not that reasonable conservatives believe that government is always the problem, never the solution: it's that we believe that while government can do important things that individuals cannot, it is almost never the entire solution. The problem with liberals is that they believe that pervasive government that robs us of our liberty and beggars us to pay for itself is the only solution.

That said, Social Security's dedicated trust fund is nonsense. It's never been cash, out there earning money by allowing private enterprise to actually build something useful; it's been T-Bills that the government trades for the excess cash collected from workers that isn't paid out immediately to beneficiaries in this massive Ponzi scheme that makes Bernie Madoff look like a piker. The government then spends that excess cash on whatever it chooses, year after year, promising that someday it will pay the T-Bills as they become due and are needed to pay benefits. Unlike the states, that are close to bankrupt (and if you were to consider their unfunded public pension liabilities as real, they would be bankrupt in any sensible accounting scheme), the feds think that they can forever print money today and tomorrow to meet obligations that they entered into yesterday and keep entering into today; or raise taxes again and again and again, until they've expropriated all productive output and find that it's still not enough to satisfy them.

So, what happens when Social Security tax receipts no longer exceed what is actually paid out, and when outlays start exceeding related tax collections by significant sums? Well, one thing is that the federal government no longer will be able to hide a much larger actual operating deficit behind this thin set of skirts, since they can no longer take excess money that no longer exists, to spend as they see fit. The second effect is that those T-Bills start coming due. That would be a hoot, except that our children and grandchildren, and maybe our great-grandchildren, will need to be taxed at truly ruinous levels to collect the cash to make good on those promises. At that time, you will necessarily see a massive reduction and means-testing regime for Social Security and Medicare that will limit recipients to the poorest among us. It won't be law that requires people to work into their seventies (or eighties), it will be the need to feed themselves, because there will be no other help unless your kids can support you.

FDR believed that Social Security would need to be privatized, probably in the sixties, or it would become a Ponzi scheme far too vulnerable to a demographic shift that had a very large number of retirees appearing with too few active workers to support them -- sound familiar? But it was never privatized, not because the markets are too flighty but because Congress refuses to give up the excess cash it spins off, or they'd have to admit that they're actually burning deficit dollars at a much higher rate than they admit to; or, they'd have to cut spending to levels closer to the sum of other tax collections, something that might actually get them kicked out of office by the dependents of all the programs those deficit dollars fund; or, they'd have to increase income taxes enough that middle class people would be converging on D.C. to hang them.

This is the legacy of believing that government is the whole solution all the time.

So, what really to do? If we want a social safety net for the elderly (and just about all of us do), then we'd better start taxing ourselves now to pay for it, now and tomorrow; but take every dime of the excess collected now, DO NOT invest it in T-Bills but in very conservative market instruments that pay real cash as interest, and stop Congress from its decades-long spending spree. If we need to cover expenses that current income tax levels can't satisfy, then make some hard choices -- like getting out of Afghanistan now, calling our troops home from all over the world and cutting the military's budget by at least 50% over ten years. And getting rid of every U.S. Representative and Senator over seventy wouldn't be a bad move either, since they clearly haven't the foggiest idea how to deal with today's and tomorrow's problems.


Tim Kane from Mesa, Az said...

Here's some deconstruct:

I'm fifty, and because of republican/conservative economic and health insurance policies, I can't get a decent job TODAY.

Now those same people are going to insist that I work to the age of 70. That's an oxymoron with a capital O. I'm still able bodied, but can't get a job now!

More deconstruct:

This country is based on one simple governing principle: Free Contract.

In such a society everything you have or earn is based upon bargaining power. And everything that goes on around us, from advertising on television, to personal grooming, to the dens of iniquity on Wall Street and Capital Hill is all about individuals or groups of individuals trying to enhance their bargaining power.

Nobody knows this better than the rich. It is, after all, how they got rich in the first place and how they stay rich in the second.

They hire confederates like the Republican Party and other conservatives, Fox News and Rush Limbaugh to go out and sell to the masses that politics is really all about culture wars, in order to get the more humble classes to surrender ever more bargaining power to the rich. They went after ACORN with rutheless gusto because ACORN proposed to enhance the bargaining power of the poorest of the poor through the legal means available. That effort was promptly stomped out.

And So rich they have become and richer they continue to become. The Republicans and their confederates have done their job. The concentration of wealth in this country is greater than ever...

But the job of the confederates is to ever concentrate more wealth and power... that means despite there massive successes, which have caused aggregate demand in the commercial economy to contract and collapse, they still got to go out and find what money still remains out the the wealthy's grasp, and hand it to them.

Having succeeded all over the place, they are prepared to once again take a run at Social Security.

But what they are proposing here, is violate the Free Contract that their wealth is based on. People have been dutifully paying into social security their whole lives for payouts at the end of their own lives. Now the confederates propose reneging on the contract, after the public has surrendered it's consideration.

Tim Kane from Mesa, Az said...

I don't think they quite know what they are truly suggesting here, and all of its ramifications and consequences. Washington has truly become the Versailles Palace of the 21st century - for all of its courtiers and the confederates to proclaim that the money in the trust fund of the masses now belongs to them.

At that point, the whole issue of free contract becomes unbound. At that point, their property rights become superfluous. At that point, nothing is sacred. It means, in no uncertain terms, that everything is up for grabs. Everything. Most especially the property of the wealthy.

There's a reason the constitution says that the federal government must pay it's debts. That would include the debts the federal government owes the Social Security Trust Fund.

In hindsight, it appears obvious that the once prudent Republican party, which once believed in balanced budgets, through the Bush administration, ran up the budget deficit in give a ways to the wealthy, for the sole purpose of undermining the federal governments ability to pay back to the trust fund what is owed to it.

In hindsight, the 2000 election, the outcome going to the candidate with a lessor number of votes (a half million, no less) looks every day, more and more like a coup. The Brooks Brother's riots, a coup du plutocracy.

Lets be sure of one thing here. These people and pundits and confederates are patently immoral and pathological. What they are proposing is the destruction of American society and America itself, for a few measly baubles that they have no rights to attain.

These people should be locked up in assylums, not writing opinion pieces, let alone running the government.

One last thing: Over the weekend, Maureen Dowd denigrated democrats as lefties, for attacking the Obama administration. But look here... it says a lot about the compromised position of the Obama administration when a minority Republican Party feels it can take a run at Social Security... in the run up to mid-term elections no less. There isn't one Democrat resting easy that Obama is the head of nation and the Democratic party tonight. This belies the confidence of the republicans.

Obama might consider running under the Republican ticket in 2012. At least a third of all Democrats will be voting third party in 2012 - with Democrats like Obama, what difference does it make if a Republican becomes president. If we want to protect Social Security, it would be better to place our bets with a Green Party candidate or someone else who is far out of the reach of Big Money.

Cdr. John Newlin, Vista, Calif. said...

Heads up, Congressman and learn about the top 5 Social Security Myths
Myth #1: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.6 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits—and again, that's without any changes. The program started preparing for the Baby Boomers' retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.

Myth #2: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than they did 70 years ago.3 What's more, what gains there have been are distributed very unevenly—since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth #3: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Myth #4: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market—which would have been disastrous—but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

Myth #5: Social Security adds to the deficit

Reality: It's not just wrong—it's impossible! By law, Social Security's funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.

Frederick Singer,Huntington Beach, CA said...

Random thoughts....

I love the argument that any SS shortfall can be fixed with a "minor adjustment", i.e. an increase in the payroll tax. Over the course of 75 years of "minor adjustments" the payroll tax has climbed from 2 percent with a $48,000 cap (inflation adjusted from $3000 in 1935) to 12.4 percent with a $106,000 cap. Raise the payroll tax rate? Raise the cap? Been there, done that. This is clearly a Ponzi scheme because the new participants pay more and more for the same or lower payout. But unlike most Ponzi schemes, Social Security has the power to force participation under threat of imprisonment, so the slow-motion rip-off continues.

The argument against permitting workers to keep, save and invest their own money for retirement invokes images of Bernie Madoff and Enron. But look how well the politicians have taken care of our money. Trillions in payroll tax revenue were diverted to hide the true size of federal budget deficits and are shown on the books as the phony "Trust Fund". There is no trust fund, there is nothing there. A participant in a Los Angeles Times discussion board put it aptly: The trust fund is akin to writing yourself a promisory note for a billion dollars and declaring yourself a billionaire.

If you want to eliminate the payroll tax cap (presumably without a proportionate increase in benefits for the high income earners), then you night as well merge the payroll tax with the income tax and drop the pretense that social security is an earned benefit -- it would become welfare for the elderly.

Seventy-five years ago, most people didn't live to be 65. Social Security was designed to help people who were too old or too sick to work. It was not designed to finance twenty years of leisure. Retirement benefits should be means tested based on assets, age and health to assure a minimum humane standard of living; if you want to retire early and in style it should be from your own savings and earned private pensions.

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