4 ms·

Or don't use a massive government sponsored Ponzi scheme for a national retirement plan.

Frondo 10y ago
Social security is not a Ponzi scheme. http://www.politifact.com/florida/statements/2014/sep/24/carlos-curbelo/nod-rick-perry-carlos-curbelo-calls-social-securit/ http://www.politifact.com/florida/statements/2014/sep/24/car...
- cloakandswagger 10y ago
  > "A Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted." Which is exactly what is happening now with the lopsided ratio of retirees and new incoming workers. They seem to have marked the assertion as "False" based off of really semantic technicalities
  - Frondo 10y ago
    The supply of workers will never be exhausted. The program will be tweaked, as it has been all along, to ensure it remains fully functions. Read up on it, it's a lot more interesting than the "it's going broke!!" stuff makes it out to be.
  - soundwave106 10y ago
    If there wasn't a fertility decline in the Western world, there wouldn't be a lopsided ratio of retirees to new incoming workers. That future probably wasn't terribly obvious to the politicians who created them (given that most public pension plans were created roughly between World War I and a bit after World War II). In fact, based on some of the literature of the time (eg The Population Bomb -- https://en.wikipedia.org/wiki/The_Population_Bomb https://en.wikipedia.org/wiki/The_Population_Bomb -- etc.) I'd say it's more like people were fearing the reverse.
  - cmurf 10y ago
    Oh my a short term mismatch in the system; as if we can't make an adjustment. What would privatization of Social Security employ when the stock market crashes, which happens from time to time, to moderate the negative effects. In fact, moderation isn't good enough, it'd have to completely smooth away any negative effect for it to be even remotely tenable. Oh the old people have to move out of their apartment if they can't afford it now? Too bad? http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/ http://www.pewresearch.org/fact-tank/2016/04/25/millennials-...
- JumpCrisscross 10y ago
  > A Ponzi scheme is by definition an illegal crime and an unsustainable set-up that crashes very quickly. Social Security and Medicare, which have been around for decades, are not criminal schemes. This is terrible legalistic reasoning. It essentially says the government cannot create a Ponzi scheme because Ponzi schemes are by definition illegal and governments define what is legal. Better reasoning would incorporate the government's indirect control of inflation, direct control of federal wages and ability to "restructure" social security benefits and taxes, as well as the fact that the economy grows in real terms. This reasoning is more complex, but it is behind why investing in a start-up that plans to go public isn't a Ponzi scheme.
  - chockablock 10y ago
    Enough with the straw man. The article's thesis absolutely does not hang on this interpretation, which only appears deep into the summary. Briefly, in contrast with a Ponzi scheme promising unsustainable returns on investment: -There are no promises of huge returns -The inner workings of the program are public knowledge -There is no fundamental demographic or mathematical reason the system (a pretty straight-ahead social insurance program involving a certain amount of wealth transfer) should ever become insolvent, assuming the political will exists to keep it running.
- Frondo 10y ago
  Wow, downvoters! Seriously, just google "is social security a pyramid scheme". You'll find a LOT of breathless articles from personal blogs and sites like World Net Daily calling it a pyramid scheme. You'll also find a lot of, for lack of a better way to put it, content of actual substance that describes how it's not a pyramid scheme, but a sustainable government program that's worked out just fine for decades (with regular adjustments, as all human endeavors need).
  - uiri 10y ago
    It's not a "pyramid" scheme. A pyramid scheme involves selling a product - something like knives or energy drink. But the actual thing which is sold are licenses to sell the product. Each licensee passes some of their profits up to their licensor who is the licensee of someone else and passes along part of that and so on. Eventually the last round of licensees are stuck with product that they can't sell and the upstream licensors are getting rich from the "pyramid" of downstream licensor/licensees recruited into the scheme. A ponzi scheme is quite different. You pretend to invest an initial investor's money. The returns to that investor are paid out of money coming in from later investors. Social security works in this way. The money paid into social security is not invested at all. The returns from social security (money going out to current retirees) come entirely from new investments (money going in from current workers). This is the basic definition of a ponzi scheme. It is a sustainable ponzi scheme so long as taxes collected from current workers exceed benefits paid out to current retirees. The designers of this system did not count on two things: (a) ever increasing life expectancy and (b) the baby boom. The former has increased the length of time each person collects benefits and the latter has resulted in a demographic bulge that is now hitting its retirement years. Thank you Mr. Bismarck![0] [0] https://en.wikipedia.org/wiki/Otto_von_Bismarck#Old_Age_and_Disability_Insurance_Law_of_1889 https://en.wikipedia.org/wiki/Otto_von_Bismarck#Old_Age_and_...
  - soundwave106 10y ago
    Upvoted you to try to counter-act the downvotes, which I am really confused by. Social security is a pay-as-you-go pension plan, like pretty much almost every public pension plan in the Western world. I understand the comparison to Ponzi schemes, but I consider these comparisons rather hyperbolic. The intent of a pay-as-you-go pension never is fraud. There are some definite problems with pay-as-you-go systems, especially now due to the fertility decline in the West, but the issues do not stem from pure malice.

Social security is not a Ponzi scheme. http://www.politifact.com/florida/statements/2014/sep/24/carlos-curbelo/nod-rick-perry-carlos-curbelo-calls-social-securit/ http://www.politifact.com/florida/statements/2014/sep/24/car...

cloakandswagger 10y ago
> "A Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted." Which is exactly what is happening now with the lopsided ratio of retirees and new incoming workers. They seem to have marked the assertion as "False" based off of really semantic technicalities
- Frondo 10y ago
  The supply of workers will never be exhausted. The program will be tweaked, as it has been all along, to ensure it remains fully functions. Read up on it, it's a lot more interesting than the "it's going broke!!" stuff makes it out to be.
- soundwave106 10y ago
  If there wasn't a fertility decline in the Western world, there wouldn't be a lopsided ratio of retirees to new incoming workers. That future probably wasn't terribly obvious to the politicians who created them (given that most public pension plans were created roughly between World War I and a bit after World War II). In fact, based on some of the literature of the time (eg The Population Bomb -- https://en.wikipedia.org/wiki/The_Population_Bomb https://en.wikipedia.org/wiki/The_Population_Bomb -- etc.) I'd say it's more like people were fearing the reverse.
- cmurf 10y ago
  Oh my a short term mismatch in the system; as if we can't make an adjustment. What would privatization of Social Security employ when the stock market crashes, which happens from time to time, to moderate the negative effects. In fact, moderation isn't good enough, it'd have to completely smooth away any negative effect for it to be even remotely tenable. Oh the old people have to move out of their apartment if they can't afford it now? Too bad? http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/ http://www.pewresearch.org/fact-tank/2016/04/25/millennials-...
JumpCrisscross 10y ago
> A Ponzi scheme is by definition an illegal crime and an unsustainable set-up that crashes very quickly. Social Security and Medicare, which have been around for decades, are not criminal schemes. This is terrible legalistic reasoning. It essentially says the government cannot create a Ponzi scheme because Ponzi schemes are by definition illegal and governments define what is legal. Better reasoning would incorporate the government's indirect control of inflation, direct control of federal wages and ability to "restructure" social security benefits and taxes, as well as the fact that the economy grows in real terms. This reasoning is more complex, but it is behind why investing in a start-up that plans to go public isn't a Ponzi scheme.
- chockablock 10y ago
  Enough with the straw man. The article's thesis absolutely does not hang on this interpretation, which only appears deep into the summary. Briefly, in contrast with a Ponzi scheme promising unsustainable returns on investment: -There are no promises of huge returns -The inner workings of the program are public knowledge -There is no fundamental demographic or mathematical reason the system (a pretty straight-ahead social insurance program involving a certain amount of wealth transfer) should ever become insolvent, assuming the political will exists to keep it running.
Frondo 10y ago
Wow, downvoters! Seriously, just google "is social security a pyramid scheme". You'll find a LOT of breathless articles from personal blogs and sites like World Net Daily calling it a pyramid scheme. You'll also find a lot of, for lack of a better way to put it, content of actual substance that describes how it's not a pyramid scheme, but a sustainable government program that's worked out just fine for decades (with regular adjustments, as all human endeavors need).
- uiri 10y ago
  It's not a "pyramid" scheme. A pyramid scheme involves selling a product - something like knives or energy drink. But the actual thing which is sold are licenses to sell the product. Each licensee passes some of their profits up to their licensor who is the licensee of someone else and passes along part of that and so on. Eventually the last round of licensees are stuck with product that they can't sell and the upstream licensors are getting rich from the "pyramid" of downstream licensor/licensees recruited into the scheme. A ponzi scheme is quite different. You pretend to invest an initial investor's money. The returns to that investor are paid out of money coming in from later investors. Social security works in this way. The money paid into social security is not invested at all. The returns from social security (money going out to current retirees) come entirely from new investments (money going in from current workers). This is the basic definition of a ponzi scheme. It is a sustainable ponzi scheme so long as taxes collected from current workers exceed benefits paid out to current retirees. The designers of this system did not count on two things: (a) ever increasing life expectancy and (b) the baby boom. The former has increased the length of time each person collects benefits and the latter has resulted in a demographic bulge that is now hitting its retirement years. Thank you Mr. Bismarck![0] [0] https://en.wikipedia.org/wiki/Otto_von_Bismarck#Old_Age_and_Disability_Insurance_Law_of_1889 https://en.wikipedia.org/wiki/Otto_von_Bismarck#Old_Age_and_...
- soundwave106 10y ago
  Upvoted you to try to counter-act the downvotes, which I am really confused by. Social security is a pay-as-you-go pension plan, like pretty much almost every public pension plan in the Western world. I understand the comparison to Ponzi schemes, but I consider these comparisons rather hyperbolic. The intent of a pay-as-you-go pension never is fraud. There are some definite problems with pay-as-you-go systems, especially now due to the fertility decline in the West, but the issues do not stem from pure malice.