CBO Report 2005: In the absence of the Bush Tax Cuts the nation would be returning to a surplus in 2011

[I AM NOT THAT GUY 5,715]

I do. Would there have been a problem had the trust been raided countless times?

Not raided. "Invested."

[one...two...tree 2,762]

The claim that Social Security is a ponzi scheme is another one of those lies that RWN's can't seem to shake themselves from.

[mawilson 2,133]

The claim that Social Security is a ponzi scheme is another one of those lies that RWN's can't seem to shake themselves from.

What is a Ponzi scheme?

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

Why do Ponzi schemes collapse?

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

Source: SEC

[mawilson 2,133]

What is Social Security?

Social Security is a pension program that involves the payment of benefits to current retirees with taxes from current workers.

Why is Social Security going to collapse?

With little or no legitimate earnings, Social Security requires a constant ratio of workers to retirees to continue.

With seniors living longer and collecting benefits for many more years and people having smaller families resulting in fewer new workers paying taxes into Social Security, the ratio of workers to retirees is in inexorable decline. Fewer workers for more retirees mean each worker bears an increasing financial burden to pay the benefits that Social Security has promised.

Source: mawilson

[one...two...tree 2,762]

(Fortune) -- It was inevitable that once the phrase "Ponzi scheme" returned to the news in the wake of Bernard Madoff's alleged swindle, a chorus of angry voices would rise to condemn Social Security as, in their words, "the biggest Ponzi scheme of them all."

Their argument -- gaining momentum on the web, among some television commentators, and elsewhere (for examples, see "The Ponzi Scheme That is Social 'Security,' " "The Real 'Mother Of All Ponzi Schemes': Social Security" or "Madoff only the No. 2 Ponzi scheme") -- has a certain appeal because there are indeed some superficial similarities.

Essentially, here's their pitch: a Ponzi scheme is a fraud in which money from one group of people is used to pay promised returns to another group of people. The money isn't invested, it's just transferred, and at some point the scheme collapses because there's not enough income to satisfy withdrawals. (Madoff reportedly confessed to one of his sons that his $50 billion investment business fit that description.) Social Security's critics say it's a multitrillion-dollar Ponzi scheme because although individuals have "accounts," in fact the government uses income from current workers to pay benefits. When benefits exceed income, they say, the system will crumble, just like Madoff's.

It's hard to knock down such a persistent and seemingly elegant analogy. But since it creates a false impression of Social Security, and since I for one consider real Ponzi schemes too important and interesting to obfuscate, it's worth rebutting this myth.

First, in the case of Social Security, no one is being misled. Madoff allegedly falsely claimed to have discovered a "black box" method of earning impressive results, and by doing so enticed individuals and organizations to invest with him. Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns. (Of course, it's true that if Madoff had the power to require participation, he would have had an easier time keeping his alleged scheme rolling.)

Second, Social Security isn't automatically doomed to fail. Played out to its logical conclusion, a Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted. That's when the last people to participate are out of luck; the music stops and there's nowhere to sit.

Talkback: Do you think Social Security is a Ponzi scheme?It's true that Social Security faces a huge burden -- and a significant, long-term financing problem -- in light of retiring Baby Boomers. (The latest projections anticipate Social Security tax revenues to fall below costs in 2017 and the Social Security Trust Funds to be exhausted in 2041.) But Social Security can be, and has been, tweaked and modified to reflect changes in the size of the taxpaying workforce and the number of beneficiaries. It would take great political will, but the government could change benefit formulas or take other steps, like increasing taxes, to keep the system from failing.

Third, Social Security is morally the polar opposite of a Ponzi scheme and fundamentally different from what Madoff allegedly did. At the height of the Great Depression, our society (see "Social") resolved to create a safety net (see "Security") in the form of a social insurance policy that would pay modest benefits to retirees, the disabled and the survivors of deceased workers. By design, that means a certain amount of wealth transfer, with richer workers subsidizing poorer ones. That might rankle, but it's not fraud.

Charles Ponzi, for whom the scheme is named, was unencumbered by such high-minded ideals. When he came to fame in 1920 -- 15 years before Social Security's creation, by the way -- he was a charming, likeable Bostonian who convinced himself that he had found a way to make himself and his investors rich using foreign exchange rates and international postage coupons. When he realized that his method wouldn't work, he should have come clean, but instead he tried to find a legitimate way to deliver on his promises, only to bring ruin on many of his investors and himself.

If the allegations against Madoff are true, he was even worse, having spent many years knowing that his remarkable returns were bogus. He apparently relied at least to some extent on investments from charitable foundations, nonprofit organizations and endowments, which could be counted on to make withdrawals at a predictable pace, extending the lifespan of his operations but devastating the philanthropic community. That alone suggests that Madoff's alleged actions were the antithesis of Social Security, cutting holes in safety nets created by others.

None of this is to suggest that Social Security is a perfect system or that there aren't sizeable problems facing the incoming administration and Congress. But it's not a Ponzi scheme. And Ponzi himself, who died in a hospital charity ward with only enough money for his burial, would never have recognized it as his own.

Mitchell Zuckoff is a professor of journalism at Boston University and the author of "Ponzi's Scheme: The True Story of a Financial Legend."

http://money.cnn.com...rtune/index.htm

Edited August 2, 2011 by DFH

[Mr. Big Dog 10,747]

Democrats had from January 07- January 2011 (especially January 2009 - January 2011) to make the changes you ask for.

Don't forget it.

Well, I understand that you were raised where you expect others to clean up after you and where you are not responsible for your actions, you know, where it's always someone else's fault. You're one of those people that will pour the water out of the a glass and into a bucket and then cry and complain that the glass is half empty. It's half empty only because you purposely made it so. You then want to throw a tantrum when you're not given a smaller glass which you falsely claim is the only way that you can have a full glass of water once again. You just want that smaller glass so you can pour the remaining water into it preferably spilling some more into that bucket in the process. All the while you stand right next to that bucket where you could rather easily recover the water you spilled.

[웃 910]

What is Social Security?

Social Security is a pension program that involves the payment of benefits to current retirees with taxes from current workers.

Why is Social Security going to collapse?

With little or no legitimate earnings, Social Security requires a constant ratio of workers to retirees to continue.

With seniors living longer and collecting benefits for many more years and people having smaller families resulting in fewer new workers paying taxes into Social Security, the ratio of workers to retirees is in inexorable decline. Fewer workers for more retirees mean each worker bears an increasing financial burden to pay the benefits that Social Security has promised.

Source: mawilson

Who cares about SS right now. It is solvent "as-is" until 2036:

[I AM NOT THAT GUY 5,715]

Who cares about SS right now. It is solvent "as-is" until 2036:

The SSA is already paying more in benefits than they are receiving in FICA taxes. The additional money is coming from the general fund.

[Mr. Big Dog 10,747]

The SSA is already paying more in benefits than they are receiving in FICA taxes. The additional money is coming from the general fund.

Indeed. It's the day of reckoning when the SS trust fund needs and expects to be repaid some minor portions of the more than $2.5 trillion it has given to the general fund over the years. This will continue until 2030-something when the SS trust fund is expected to run dry. It isn't funding the general fund until then anymore. This has been coming and know for years and not a damn thing was done about it. Instead, Republicans pretended that we're flush with money and cut taxes and set up new federal bureaucracies, blew up defense spending, started two wars and set up new entitlements. Now they're screaming that we're broke and SS needs to go. They created the very scenario they have wanted since SS was born against their will. Starve the beast!

Edited August 2, 2011 by Mr. Big Dog

[I AM NOT THAT GUY 5,715]

Indeed. It's the day of reckoning when the SS trust fund needs and expects to be repaid some minor portions of the more than $2.5 trillion it has given to the general fund over the years. This will continue until 2030-something when the SS trust fund is expected to run dry. It isn't funding the general fund until then anymore. This has been coming and know for years and not a damn thing was done about it. Instead, Republicans pretended that we're flush with money and cut taxes and set up new federal bureaucracies, blew up defense spending, started two wars and set up new entitlements. Now they're screaming that we're broke and SS needs to go. They created the very scenario they have wanted since SS was born against their will. Starve the beast!

Social Security will never be "broke" as long as they continue to collect payroll and self-employment taxes. See the director's statement on your next annual account summary from the SSA. Once all the securities are redeemed, unless the law is changed, benefits will automatically be reduced to keep the fund solvent.

ETA: In other words, even if Congress and the President do nothing, the heavy lifting has already been done.

Edited August 2, 2011 by Crusty Old Perv

[slim 1,533]

Did anyone get the letter from SSA last year saying something to the effect of, "You can expect a 70% return on your investment."?

[I AM NOT THAT GUY 5,715]

Did anyone get the letter from SSA last year saying something to the effect of, "You can expect a 70% return on your investment."?

You must be young. I can expect full benefits around 2022 until at least 2033 or so, if Congress does nothing at all.

[slim 1,533]

You must be young. I can expect full benefits around 2022 until at least 2033 or so, if Congress does nothing at all.

I still have 30+ years to pay before I can expect anything back. If it's at 70% now, I can only imagine what it'll be once I'm finally able to retire.

[Mr. Big Dog 10,747]

I still have 30+ years to pay before I can expect anything back. If it's at 70% now, I can only imagine what it'll be once I'm finally able to retire.

I thought you expect to kick the bucket before then? So, why worry?

[slim 1,533]

I thought you expect to kick the bucket before then? So, why worry?

Excellent point! I'm off to Five Guys.