State of the Union Address

[Mister Moose]

Alternatively, we could start allowing more immigration so the population grows, but there are probably too many nativists around for that to be a viable solution.

So your idea to fix a partial Ponzi scheme is to make it a larger Ponzi scheme...

What could go wrong?

It's not a ponzi scheme. That's just something conservatives like to say because it makes a good sound bite. Social security works very similarly to many private insurance programs. One of the primary reasons the program is in danger now is the pool is too small to support the benefit due to population decline. (What population decline?)

There are many reasons beyond a shrinking labor pool. When SS was begun in the 1930s life expectancy was less than 65. Today it’s well into the 70s and longer. Back then there were 7 workers for each beneficiary. Today it’s far less. Survivor benefits were rightly expanded to include husbands by court decision. Other benefits have expanded as well. The SS tax has grown along with benefits but obviously not enough to keep the program solvent in the future based on actuarial tables. Ponzi scheme? No, but we need to do something sooner rather than later.

From Wikipedia:
The basic premise of a Ponzi scheme is "to rob Peter (The taxpayer)to pay Paul (The retiree). Initially, the operator pays high returns to attract investors and entice current investors to invest more money. When other investors begin to participate, a cascade effect begins. The schemer pays a "return" to initial investors from the investments of new participants, rather than from genuine profits.


Bubba, paying out more in benefits than you invested is a Ponzi scheme. Not balancing the actuarial needs of the system and deceiving the participants is a Ponzi scheme. Taking the principal and spending it is a Ponzi scheme. Because the intent is good and it is operated by the government instead of a thief, does not exempt the government from that label.

[easyrider16]

Sanders, Warren introduce bill to increase Social Security benefits and extend solvency

https://vermontbiz.com/news/2023/februa ... and-extend

Took a minute to figure out what they're doing, but the proposal is basically what Dick suggested - Apply the combined OASDI payroll tax rate on earnings above $250,000, and tax all earnings once the current-law taxable maximum exceeds $250,000.

So bottom line -the plan would tax the highest earners and use the money to fund social security benefits. I don't hate it.

[easyrider16]

From Wikipedia:
The basic premise of a Ponzi scheme is "to rob Peter (The taxpayer)to pay Paul (The retiree). Initially, the operator pays high returns to attract investors and entice current investors to invest more money. When other investors begin to participate, a cascade effect begins. The schemer pays a "return" to initial investors from the investments of new participants, rather than from genuine profits.

Bubba, paying out more in benefits than you invested is a Ponzi scheme. Not balancing the actuarial needs of the system and deceiving the participants is a Ponzi scheme. Taking the principal and spending it is a Ponzi scheme. Because the intent is good and it is operated by the government instead of a thief, does not exempt the government from that label.

If you're going to quote Wikipedia, why not start with the first sentence: "A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors."

By definition, a ponzi scheme involves a fraud. Social security is not fraudulent. All of its finances are fully public. It's also not being sold to you as an investment, nor are you promised a return on your investment. Also, I would note that right now, and for the life of the program, it has never paid out more than it has taken in. If changes are not made, it may become insolvent, but it is not insolvent now, nor has it ever been. So no, social security does not come close to meeting the definition of a ponzi scheme.

Social security works like insurance. There's a pool that people pay into, and they are paid a defined benefit from the pool upon a certain life event. Like all forms of insurance, so long as the pool is large enough to pay the promised benefit, the program can continue indefinitely.

[Mister Moose]

By definition, a ponzi scheme involves a fraud. Social security is not fraudulent. All of its finances are fully public. It's also not being sold to you as an investment, nor are you promised a return on your investment. Also, I would note that right now, and for the life of the program, it has never paid out more than it has taken in. If changes are not made, it may become insolvent, but it is not insolvent now, nor has it ever been. So no, social security does not come close to meeting the definition of a ponzi scheme.

Kinda sorta. Social Security is not a criminal fraud, but it has not been honest on maintaining its solvency. And D'oh, the very first year the program paid out more than it took in from each beneficiary. Oh,

but the total paid wasn't more than the total taken in

you (might) say. Same as a Ponzi scheme.

Social security works like insurance. There's a pool that people pay into, and they are paid a defined benefit from the pool upon a certain life event. Like all forms of insurance, so long as the pool is large enough to pay the promised benefit, the program can continue indefinitely.

No. Insurance companies have actuaries that make accurate assessments and then act to adjust the rates to more than cover the losses. Otherwise they would go bankrupt. The insurance companies also have a large income stream from their investment portfolios, premiums are not kept as 100% cash. It has nothing to do with the size of the pool, it has to do with the amount of water coming in and the amount of water out the drain.

The government has not adjusted rates to adequately match the actuarial needs of the program. Rates are set by political pressure at times, not always economic. In addition, some beneficiaries did not pay anything into the pool. There is no insurance policy ever where you get paid on a claim you didn't pay the premium on the policy.

[easyrider16]

Kinda sorta. Social Security is not a criminal fraud, but it has not been honest on maintaining its solvency.

How so? All of its finances are public. What isn't honest about it?

And D'oh, the very first year the program paid out more than it took in from each beneficiary. Oh,

but the total paid wasn't more than the total taken in

you (might) say. Same as a Ponzi scheme.

Also the same as insurance. Having one thing in common with a ponzi scheme doesn't make SS a ponzi scheme any more than it makes insurance a ponzi scheme.

No. Insurance companies have actuaries that make accurate assessments and then act to adjust the rates to more than cover the losses. Otherwise they would go bankrupt. The insurance companies also have a large income stream from their investment portfolios, premiums are not kept as 100% cash. It has nothing to do with the size of the pool, it has to do with the amount of water coming in and the amount of water out the drain.

The government has not adjusted rates to adequately match the actuarial needs of the program. Rates are set by political pressure at times, not always economic. In addition, some beneficiaries did not pay anything into the pool. There is no insurance policy ever where you get paid on a claim you didn't pay the premium on the policy.

Certainly I'd agree that political pressures come in to play with how SS is run, but that doesn't mean adequate adjustments haven't been made to meet the actuarial needs of the program. For example, adjustments were made in 1983 to raise the retirement age. If the current proposal discussed above passes, rates will have been adequately adjusted to meet actuarial needs for the next 75 years. You might criticize how it is being run, but mismanagement does not make SS a ponzi scheme.

As to investments, that is how some insurance companies turn a profit, by investing part of the pool. SS doesn't need to do this to meet current obligations, and trying to do it would be fraught with consequences we might not like. But investing part of the pool from SS is an idea that has been floated from time to time, and it remains an option.

I don't believe that people who haven't paid into SS can collect SS benefits. There are some family benefits, but that is no different from any other kind of spousal or survivor benefit for other types of insurance.

[XtremeJibber2001]

Seems Pence is going the GWB route by giving younger folks an option to invest a portion of SS.

https://twitter.com/Acyn/status/1626309 ... 73154?s=20

I don't hate the idea, but devil is in the details. I think the saying goes ... If you're explaining, you're losing.