4 ms·

I'd be careful about the use of the term ponzi scheme. I think it's a rather dangerous example of doublespeak: https://en.wikipedia.org/wiki/Doublespeak https:

by Kinnard 11y ago

I'd be careful about the use of the term ponzi scheme. I think it's a rather dangerous example of doublespeak: https://en.wikipedia.org/wiki/Doublespeak https://en.wikipedia.org/wiki/Doublespeak Social Security exactly fits the definition of a Ponzi Scheme[1], has serious sustainability issues[2], and could do far more damage to hundreds of millions of people if it were to collapse. No one is going after the people running Social Security though it is far more dangerous. [1] "operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator." [2] Social Security is a Ponzie Scheme: https://en.wikipedia.org/wiki/Social_Security_(United_States)#Claim_that_it_is_a_Ponzi_scheme https://en.wikipedia.org/wiki/Social_Security_(United_States...

cjensen 11y ago
The claim that Social Security is a Ponzi scheme is nonsense -- though it seems to fit the definition at first glance, if you think through it far enough you will see it does not fit. Since a Ponzi scheme is defined as an "investment", it is therefore voluntary. A Ponzi scheme can only obtain such volunteers if it promises each volunteer investor more than it pays in. It therefore requires an ever-growing pool of investors. Since there is a finite number of people on the planet, a Ponzi scheme must fail at some point. By contrast, Social Security is a mandatory scheme, and the pay-in and pay-out can be dynamically adjusted to ensure that it remains solvent. In particular, no guarantee is made that pay-out will exceed pay-in. Do not mistake the impending Social Security deficit for an inherent outcome of the scheme. The deficit could easily be fixed if politicians on both sides would stop pandering to their bases.
- Kinnard 11y ago
  The fact that it is compulsory while it would allow those who run it to extract more to prevent a collapse, would do nothing to assuage the damage were it to collapse.
  - vkou 11y ago
    The fact that the payouts will be adjusted is what will prevent it from collapsing.
  - mikeash 11y ago
    Likewise, the fact that it would do damage if it collapsed has nothing to do with whether or not it's a Ponzi scheme.
0xcde4c3db 11y ago
The mechanism is similarly structured, but the goals are entirely opposite: An ideal Ponzi scheme pays out all of its income to the organizer and none of its income to the participants. An ideal Social Security scheme pays out all of its income to the participants and none of its income to the organizer.
- deleted 11y ago
  [deleted]
ruddct 11y ago
Not to get into a tangent about social security and how the program manages money, but this isn't quite an applicable comparison. Gov't sponsored 'ponzi schemes' can pretty safely be assumed to exist for about as long as the sponsoring government does (or, if they're dissolved, one can pretty safely assume some kind of payout. At least in a revolution-fearing democracy). If the government goes away, your investment into a pension program is probably a pretty low priority. A ponzi scheming company disappearing has a much more direct effect on the people who've invested in it.
- drcode 11y ago
  Social security isn't a Ponzi scheme because it's mandatory. If it was a true Ponzi scheme, you'd have the option not to participate in it. /s
  - Gibbon1 11y ago
    Social Security is an insurance program. Which is why it's formal name is: Old-Age, Survivors, and Disability Insurance (OASDI). As such it doesn't promise to invest the money paid in at all. 90% of it is just paygo. Money comes in from working stiffs. Money goes out to grandma so she can buy catfood. The remainder is 'invested' in government securities.
  - toast0 11y ago
    There are some options, https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=3821&hitOffset=19&docID=2025 https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=3821... Clergy also may have the ability to opt out.
jwatte 11y ago
That would be true if Social Security was an investment. However, it is a social welfare program and a tax combined into one. In 2040 when the current balance is tipped, that program can become solvent without increasing the tax by reducing payouts by 25%. Meanwhile, the current federal budget is only funded to about 2/3, so there are other programs I'd worth about earlier, if I'd care about programs and the taxes funding them.

by Kinnard 11y ago

cjensen 11y ago

The claim that Social Security is a Ponzi scheme is nonsense -- though it seems to fit the definition at first glance, if you think through it far enough you will see it does not fit. Since a Ponzi scheme is defined as an "investment", it is therefore voluntary. A Ponzi scheme can only obtain such volunteers if it promises each volunteer investor more than it pays in. It therefore requires an ever-growing pool of investors. Since there is a finite number of people on the planet, a Ponzi scheme must fail at some point. By contrast, Social Security is a mandatory scheme, and the pay-in and pay-out can be dynamically adjusted to ensure that it remains solvent. In particular, no guarantee is made that pay-out will exceed pay-in. Do not mistake the impending Social Security deficit for an inherent outcome of the scheme. The deficit could easily be fixed if politicians on both sides would stop pandering to their bases.

Kinnard 11y ago
The fact that it is compulsory while it would allow those who run it to extract more to prevent a collapse, would do nothing to assuage the damage were it to collapse.
- vkou 11y ago
  The fact that the payouts will be adjusted is what will prevent it from collapsing.
- mikeash 11y ago
  Likewise, the fact that it would do damage if it collapsed has nothing to do with whether or not it's a Ponzi scheme.

0xcde4c3db 11y ago

The mechanism is similarly structured, but the goals are entirely opposite: An ideal Ponzi scheme pays out all of its income to the organizer and none of its income to the participants. An ideal Social Security scheme pays out all of its income to the participants and none of its income to the organizer.

deleted 11y ago
[deleted]

ruddct 11y ago

Not to get into a tangent about social security and how the program manages money, but this isn't quite an applicable comparison. Gov't sponsored 'ponzi schemes' can pretty safely be assumed to exist for about as long as the sponsoring government does (or, if they're dissolved, one can pretty safely assume some kind of payout. At least in a revolution-fearing democracy). If the government goes away, your investment into a pension program is probably a pretty low priority. A ponzi scheming company disappearing has a much more direct effect on the people who've invested in it.

drcode 11y ago
Social security isn't a Ponzi scheme because it's mandatory. If it was a true Ponzi scheme, you'd have the option not to participate in it. /s
- Gibbon1 11y ago
  Social Security is an insurance program. Which is why it's formal name is: Old-Age, Survivors, and Disability Insurance (OASDI). As such it doesn't promise to invest the money paid in at all. 90% of it is just paygo. Money comes in from working stiffs. Money goes out to grandma so she can buy catfood. The remainder is 'invested' in government securities.
- toast0 11y ago
  There are some options, https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=3821&hitOffset=19&docID=2025 https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=3821... Clergy also may have the ability to opt out.

jwatte 11y ago

That would be true if Social Security was an investment. However, it is a social welfare program and a tax combined into one. In 2040 when the current balance is tipped, that program can become solvent without increasing the tax by reducing payouts by 25%. Meanwhile, the current federal budget is only funded to about 2/3, so there are other programs I'd worth about earlier, if I'd care about programs and the taxes funding them.