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"Social pension system is a Ponzi scheme" is argument I've heard from people with certain political leaning often enough I wondered if Reagan or Thatcher said i

by glogla 4y ago

"Social pension system is a Ponzi scheme" is argument I've heard from people with certain political leaning often enough I wondered if Reagan or Thatcher said it or something. It never made sense to me. As long as the number of people is relatively stable, there's nothing Ponzi on it. Even with the number of people changing, there are other important inputs into the equation - automation, efficiency, etc.

tristor 4y ago
All of these systems rely on working people to pay the tab for retired people because of demographic shifts and inflation causing outputs to exceed inputs. At least Social Security is definitely a Ponzi that per the SSA will only be able to guarantee me 65% of what I am owed when I hit the (continually increasing) payout age. I align with neither Reagan or Thatcher, but I did pass my math classes.
- nerdponx 4y ago
  But it's not inherently a Ponzi scheme, it's just been mismanaged.
- glogla 4y ago
  Is taxes paying for education Ponzi scheme as well? If not, why is current workers paying future workers (now kids) education different from current workers paying past workers (now retirees) pensions?
  - tristor 4y ago
    > why is current workers paying future workers (now kids) education different from current workers paying past workers (now retirees) pensions? Well for one thing, education scales with demographic shifts and pensions don't. If less people are being born, at a roughly similar cost/student (administrative bloat aside), educational costs go down as the population growth shrinks. Pensions on the other don't, they only go down on the other end (people dying) and reductions in the birth rate negatively impact the ability of successive generations to pay for prior generation's pensions. Education costs are also strictly bounded per person, as they aren't for life, only for K-12. I'm not trying to be coy, but it's pretty shocking to me there's multiple respondents that don't seem to understand that the basic premise of public pensions/social security are literally ponzi schemes that are unsustainable with demographic shifts. They utterly rely on continued economic and population growth in order to have enough inflows to meet their outflow obligations, which I would suggest is nearly identically equivalent to a ponzi scheme, where you are paying old investors with new investors money...
    - glogla 4y ago
      I don't think anything you said explains why it would be a Ponzi scheme. Ponzi scheme isn't a scheme because you pay old people with new people's money, but because there is promise of exponential growth that is unsustainable and often literally impossible. For this to be true of pensions, they would have to (inflation adjusted) grow, which they don't. Yes, if there's less productive people and more non-productive people, that changes the balance but it is a balance, not unlimited growth of a Ponzi scheme.
      - tristor 4y ago
        "A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors." [1] The only thing there that is arguably untrue about social security / public pensions is "investors". Depending on whether or not you consider contributions to social security / public pensions as an investment or not, it falls on one side or the other of the literal line of what a Ponzi scheme is. Even if you don't consider it an investment, in /every other aspect/ it is effectively the same as a Ponzi scheme. That is not to say that public pensions are a bad thing. I'm merely pointing out that they carry a demographic risk that is unaccounted for, just as a Ponzi scheme carries significant investment risks that are unaccounted for due to faked returns. There is no requirement that you promise exponential growth that is literally impossible for something to be a Ponzi scheme. The key element is that you use money from new participants to pay out "returns" to older participants, thus fraudulently claiming/faking said returns. That is it. [1]: https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme

by glogla 4y ago

tristor 4y ago

All of these systems rely on working people to pay the tab for retired people because of demographic shifts and inflation causing outputs to exceed inputs. At least Social Security is definitely a Ponzi that per the SSA will only be able to guarantee me 65% of what I am owed when I hit the (continually increasing) payout age. I align with neither Reagan or Thatcher, but I did pass my math classes.

nerdponx 4y ago
But it's not inherently a Ponzi scheme, it's just been mismanaged.
glogla 4y ago
Is taxes paying for education Ponzi scheme as well? If not, why is current workers paying future workers (now kids) education different from current workers paying past workers (now retirees) pensions?
- tristor 4y ago
  > why is current workers paying future workers (now kids) education different from current workers paying past workers (now retirees) pensions? Well for one thing, education scales with demographic shifts and pensions don't. If less people are being born, at a roughly similar cost/student (administrative bloat aside), educational costs go down as the population growth shrinks. Pensions on the other don't, they only go down on the other end (people dying) and reductions in the birth rate negatively impact the ability of successive generations to pay for prior generation's pensions. Education costs are also strictly bounded per person, as they aren't for life, only for K-12. I'm not trying to be coy, but it's pretty shocking to me there's multiple respondents that don't seem to understand that the basic premise of public pensions/social security are literally ponzi schemes that are unsustainable with demographic shifts. They utterly rely on continued economic and population growth in order to have enough inflows to meet their outflow obligations, which I would suggest is nearly identically equivalent to a ponzi scheme, where you are paying old investors with new investors money...
  - glogla 4y ago
    I don't think anything you said explains why it would be a Ponzi scheme. Ponzi scheme isn't a scheme because you pay old people with new people's money, but because there is promise of exponential growth that is unsustainable and often literally impossible. For this to be true of pensions, they would have to (inflation adjusted) grow, which they don't. Yes, if there's less productive people and more non-productive people, that changes the balance but it is a balance, not unlimited growth of a Ponzi scheme.
    - tristor 4y ago
      "A Ponzi scheme (/ˈpɒnzi/, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors." [1] The only thing there that is arguably untrue about social security / public pensions is "investors". Depending on whether or not you consider contributions to social security / public pensions as an investment or not, it falls on one side or the other of the literal line of what a Ponzi scheme is. Even if you don't consider it an investment, in /every other aspect/ it is effectively the same as a Ponzi scheme. That is not to say that public pensions are a bad thing. I'm merely pointing out that they carry a demographic risk that is unaccounted for, just as a Ponzi scheme carries significant investment risks that are unaccounted for due to faked returns. There is no requirement that you promise exponential growth that is literally impossible for something to be a Ponzi scheme. The key element is that you use money from new participants to pay out "returns" to older participants, thus fraudulently claiming/faking said returns. That is it. [1]: https://en.wikipedia.org/wiki/Ponzi_scheme https://en.wikipedia.org/wiki/Ponzi_scheme