The Government Runs the Ultimate Racket
Pyramid scams collapse when they run out of enough new "investors" to pay earlier promises. Some use this fact to deny that Social Security is really a massive redistribution scheme, since it has lasted over 70 years. That assertion misses two substantial differences between Social Security and other Ponzi schemes however: Social Security involves far longer generations, with people collecting on current promises far into the future; and it has been not one, but a series of Ponzi schemes.
Since Social Security began, each of the many times it has been expanded, those in or near retirement got benefits far exceeding their costs. Those already retired paid no added taxes, and those near retirement paid more for only a few years. FULL ARTICLE
Comments (15)
The government runs quite a few Ponzi schemes, not just SS.
Published: March 12, 2008 10:11 AM
As long as the government is floating plans to bail out the sub-prime borrowers, it might as well float a plan to bail itself out of the unfunded SS liability it has created.
Why not offer a reduced, lump sum now to anyone who wants to opt out of their "eventual" SS retirement income at age 65 similar to what private companies do for early retirees? Companies reduce future payment obligations by the millions using this strategy. Any "gap" in the current Ponzi mechanism could be funded by a terminal-funded government bond issue that would have no less credibility than the current pay-go mechanism. Anyone chosing to opt out would have to sign an irrevocable waiver to any future claim to SS. In exchange, these people would cease having FICA contributions withheld from their wages and they would receive a reduced lump sum acuarial equivalent to what it would require to generate the prospective future monthly SS payment based on their current existing eligibility.
There has to be some economics jock out there looking for a doctoral thesis that could flesh out this concept and make it a plank in one or the other political parties' economic platform.
I have yet to talk to anyone in the workforce, especially anyone under 45, who would not jump on this option if it existed.
Published: March 12, 2008 11:25 AM
CPI overstates inflation? When was this written?
Published: March 12, 2008 11:42 AM
Quote: (The puzzle is why people laud government for doing the same thing on a far greater scale — why we see no headlines reading, "Seniors hurt others in Ponzi scam.") end quote.
A greater puzzle is why all contributors to the libertarian scriptures combined have come up with no solution to the problem or even clearly and succinctly stated the problem:
POSSIBLY FROM THE BEGINNING, POLITICAL AUTHORITY ON THE NORTH AMERICAN CONTINENT, FOR WHAT HAS BECOME THE “USA WORLD EMPIRE”, HAS BEEN DEDICATED TO PROVIDING AN ELITE WITH EVER-INCREASING WEALTH.
Notable fingers have pointed at symptoms but not at the problem or toward a solution. The elite cannot be “educated” to the point of fixing the problem. They admit no problem. The system works very well.
It will not change until the masses are led to action(s) which will deny the elites what they believe their birthright—wealth with no need to produce.
Since motivation for POLITICAL AUTHORITY is provided by the elites, the elites must be convinced change is needed. There IS a problem. To paraphrase Pogo, “We have seen the enemy and he is them.”
I believe implacably our system will not improve as long as the tax code includes compensation for labor and services as part of income for 16th amendment purposes. Rake-off at the point of production (assuming everything anyone is willing to pay someone else to do is production) fuels enough of what the Empire does to make empire building profitable.
Any suggestions for what the masses should do?
Published: March 12, 2008 3:22 PM
I was also going to comment on the CPI. As far as I know, CPI ignores asset prices, diminishes the significants and in some cases ignores energy prices, and often reduces weightings of prices on food. In fact, as far as I know, every time a price index fluctuates a lot, they omit it.
If anything CPI grossly understates inflation, perhaps by as much as two or three times. How else do you explain why money supply annually increases at 12-20%, while inflation stays around 2-4%? For a long time other countries have absorbed the dollars created, but this trend is starting to reverse itself, and yet inflation still appears low.
Published: March 12, 2008 3:32 PM
The author has made a good case that Social Security is a Ponzi scheme. It reminds me of Robert Silverberg's story, "Caught in the Organ Draft", in which increasingly more and younger people are drafted in to donate organs to old people.
I think, however, that a Ponzi scheme has been operating for a long time in poorer countries with strong family ties, such as the Philippines. Each generation raises large families to care for their retirement. This Ponzi scheme breaks down when food and land become scarce: eventually there is a generation unlucky enough to be holding the bomb when it explodes.
How long before the American racket runs out of fuel?
Published: March 12, 2008 5:42 PM
re: cpi overstating inflation - "bastiat" and furash are right. i always assumed that the regular re-jigging of the cpi basket was to minimize the automatic flow-on to indexed benefits, such as pensions, as well as not scaring the (bond) horses.
strange no mention was made of the demographic changes over the life of the scheme (increased longevity, smaller families etc).
Published: March 13, 2008 2:30 AM
The scam is that SS is some sort of insurance. It is not. SS has two unrelated components. First, it is a flat rate capped income tax. Second, it is a universal welfare program.
The main use of maintaining the "insurance" sham is that it allows the Republicans to claim that the poor people don't pay any income tax.
Published: March 13, 2008 1:02 PM
I looked into the best (i.e., most efficient and fairest) way of winding back the Australian equivalent in this article. The problem is, the early winners have already been and gone, so abolishing it is bound to create losers; how best to avoid the burden falling on concentrated groups?
I came up with a grandfathering approach that gradually pushes back entitlement ages while bringing forward a cut off age after which people don't have to pay in. With that, everybody after the wind back starts shares a small part of the burden until it's completely phased out. Of course, politically it's always easier to have a small group of big losers (particularly if it isn't obvious), which is what you get with straightforward ways of abolishing the system. With Paul Disser's scheme, the burden falls on people coming up to entitlements as the real value of those shrink from less money in, or on taxpayers if they bail those out, or on everybody through inflation if it is handled through deficit finance.
Incidentally, formally and in name you can maintain the present system indefinitely whatever the demographics, it's just the ratio of entitlements to payments for each individual that can't hold up. So I think they'll do that and just lie about whether people are getting short changed.
Published: March 13, 2008 9:50 PM
J D asks: "Any suggestions for what the masses should do?"
The answer I apply is in three parts:
1. I Don't vote.
2. I tell others I don't vote because elections are rigged to provide for the [J D's] 'elite' minority.
3. I tell those trying to collect taxes & fines for governments conducting the rigged elections that the 'laws' they are paid to enforce are invalid.
There's more. In particular those who control the mass media know that elections are rigged and spread the propaganda that elections are democratic.
Published: March 14, 2008 6:29 AM
Jim, no. 1 is illegal here in Australia, and so is no. 2 as it encourages others not to vote (google what happened to Albert Langer). I'm sure no. 3 could get you into trouble here as well. Compulsory voting and a non-transparent voting system means the parties can ignore their grass roots and not worry about protest votes since the votes get counted as major party votes anyway.
However, "if not voting made a difference they would ban it", to adapt an old saying - and they have, just in case.
Published: March 14, 2008 8:18 AM
P.M.Lawrence believes it is illegal to not vote in Australia. That reflects widespread confusion and the propaganda that voting is not a right but a duty.
Officials who prosecute non-voters are extortionists and default when put on notice.
The right to vote is also protected by the secret ballot so voters wanting to avoid the trouble of corresponding with extortionists can write "I refuse to vote in rigged elections" on their ballot paper.
As for Albert Langer, his cause was taken up by Joe Bryant and in 2003 the Chief Justice of Australia interjected from the bench to say: "It depends what you mean by vote for." The case is adjourned and the news is suppressed.
As already mentioned, those who control the mass media know elections are rigged, and they keep them so.
Published: March 14, 2008 6:05 PM
Jim, it is illegal not to vote in Australia. The fact that there is a secret ballot makes it impossible to enforce, but that is what the law is. Publicising and encouraging voting of the sort you describe is also illegal.
As for the Albert Langer matter, yes, it is all up in the air now - but nevertheless he went to jail then.
Don't weasel word things by sticking in "believes", giving the impression that it's merely my opinion, when you can check as easily as I can. Yes, I believe it, for the good and sufficient reason that that is the way it is. I have myself been fined for not voting in a local postal election I didn't know was on, when the voting authorities didn't accept that. (Non-payment leads, eventually, to jail.) The presumption of innocence isn't there in this area, at any rate in practice.
Published: March 14, 2008 10:18 PM
We seem to have gone off-topic. I answered J D's question "Any suggestions for what the masses should do?"
My answers reflect my experience over 10 years of not voting, not paying fines & taxes, and not going to jail.
If it works for me, it can work for the masses.
Published: March 15, 2008 5:13 PM
Jim, if it started working "they" would change the rules. That means that that tactic could not be used in isolation but only as part of a larger strategy with other things being done as well, so that the strategy taken as a whole achieved something. Not that I know what else should be done... I was really only pointing out the incompleteness of that single suggestion.
Published: March 15, 2008 11:27 PM