Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman) • Hacker News Board

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#51

Post by tptacek » Mon, Jan 05, 2009, 3:25 PM UTC

lionhearted wrote: post #29

tptacek wrote: post #20

Earlier quoted context omitted.

Every time people write sentences that start with "Hackers tend to" and involve "the government", I throw up a little in my mouth. You could use the same logic about "individualist hackers" to argue against gun control. But then you'd be Eric Raymond. Hackers are people who like to build things. That's all. They don't all think like you. Some of our country's greatest entrepreneurs are also its strongest believers in…

No worries, I feel like I've learned an important lesson here about generalizing. For the record, you don't need to talk about being tarred, throwing up in your mouth, for me to get your point - but it does get across that how you feel about this. I'll be more careful about broad generalizations going forwards, and best wishes.

Sokay. You're being nicer than I am at this point.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#52

Post by spkthed » Mon, Jan 05, 2009, 3:28 PM UTC

tptacek wrote: post #43

dantheman wrote: post #41

Earlier quoted context omitted.

There is no such thing as a social security trust fund. The government uses that money to fund other programs and puts IOUs in there; that means when more are receiving than contributing there will be a massive tax burden on those contributing they get hit with both their normal SS tax, plus the taxes to cover the shortfall.

If there's no such thing as a social security trust fund --- in which case, Reagan and Greenspan's baby boomer FICA tax hike was a huge scam --- then there's no social security crisis. There's just a general budget issue. But in the general budget, Social Security is dwarfed both by other entitlement programs and by a host of other programs. If you don't believe in the Social Security trust fund, then we should be di…

Well, SS and Medicare are over 40% of the annual Federal budget and will quickly rise as the funding issues start appearing.

SS is actually the biggest program and percentage of the annual budget we have. Medicare is second, defense is the third.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#53

Post by tptacek » Mon, Jan 05, 2009, 3:28 PM UTC

spkthed wrote: post #50

tptacek wrote: post #33

Earlier quoted context omitted.

First, the words "ponzi scheme" don't mean "anything where you put X in and get X - n out." Second, Social Security isn't an investment program. The goal of Social Security is to provide each generation of retirees with a baseline level of income. It has succeeded at this task. Third, we're not facing massive shortfalls. We raised taxes on the baby boomers in the early '80s to build up the social security trust fund…

On the second point, that baseline is going to drop much, much lower unless they drastically raise taxes. We have what, 8 years until we start taking out more than is going in. On the third note, agreed. Medicare/Medicaid have massive problems. That doesn't mean that SS doesn't have problems too. They do have issues with workers taking more out than putting in. The birth rate continues to decline. On the small paymen…

On your first point, the "we have until 2018 before the trust fund runs out" factoid is apocryphal. Present estimates put that date into the 2040s. And that's simply the point at which Social Security starts being funded out the general budget, assuming the retirement age isn't adjusted.

On your second point, there's "birth rate" and there's "productivity", and those are two hugely different things.

On your third point: again, 1/3rd of Social Security recipients derive almost their entire income from it, and fully 2/3rds of recipients derive more than half their income for it. Your anecdote isn't particularly convincing.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#54

Post by yummyfajitas » Mon, Jan 05, 2009, 3:31 PM UTC

Retric wrote: post #35

mattmaroon wrote: post #26

Earlier quoted context omitted.

Even if it wasn't for the anomalous population boom that is causing the problem, you would essentially be being forced by the government to put a portion of your salary into an investment with a 0% interest rate. Which granted, would look good to a lot of people right now, but is bad financial planning on the whole. On the other hand, I reject his cries of paternalism for the simple reason that other people's poverty…

In defense of social security: It pays significant disability and survives benefits which has little to do with investing and everything to do with insurance. So consider SS as insurance in case of a long life. Some people will live well over 100 so finding the "correct" amount of money to save is overkill for most people who die far younger than that. If you invested a portion of your savings each year and pooled yo…

SS is a Ponzi scheme. Payout for current investors is provided by the payin of future investors.

Then to fool you, a small fraction of the program is devoted to other legitimate purposes. Disability/survivor benefits are an extremely small portion of social security, less than 1% last time I checked.

Incidentally, as far as living to 100, buy a lifetime annuity. Or even just have the government pay for retirement for the poor 90+ crowd. Again, an extremely small part of SS.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#55

Post by tptacek » Mon, Jan 05, 2009, 3:36 PM UTC

spkthed wrote: post #52

tptacek wrote: post #43

Earlier quoted context omitted.

If there's no such thing as a social security trust fund --- in which case, Reagan and Greenspan's baby boomer FICA tax hike was a huge scam --- then there's no social security crisis. There's just a general budget issue. But in the general budget, Social Security is dwarfed both by other entitlement programs and by a host of other programs. If you don't believe in the Social Security trust fund, then we should be di…

Well, SS and Medicare are over 40% of the annual Federal budget and will quickly rise as the funding issues start appearing. SS is actually the biggest program and percentage of the annual budget we have. Medicare is second, defense is the third.

[citation needed]

Social Security is 21% of the budget currently. That's:

* at par with Medicare and related medical entitlements.

* rapidly going to be outpaced by Medicare liabilities

* less than we spend on defense

* funded from the Social Security trust fund, unlike those other two

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#56

Post by alecco » Mon, Jan 05, 2009, 3:49 PM UTC

tokenadult wrote: post #11

"The present discounted value of the promises embedded in the Social Security law greatly exceeds the present discounted value of the expected proceeds from the payroll tax. The difference is an unfunded liability variously estimated at from $4 trillion to $11 trillion--or from slightly larger than the funded federal debt that is in the hands of the public to three times as large." The mismatch between the promised b…

The current group on the receiving end did pay.

Noam Chomsky wrote a great essay on this non-issue: http://www.chomsky.info/articles/20050601.htm

(Hey, the guy's from MIT, don't down-vote me that much, please! ;)

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#57

Post by alecco » Mon, Jan 05, 2009, 3:50 PM UTC

A shame it is impossible to down-vote stories.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#58

Post by Retric » Mon, Jan 05, 2009, 3:54 PM UTC

yummyfajitas wrote: post #54

Retric wrote: post #35

Earlier quoted context omitted.

In defense of social security: It pays significant disability and survives benefits which has little to do with investing and everything to do with insurance. So consider SS as insurance in case of a long life. Some people will live well over 100 so finding the "correct" amount of money to save is overkill for most people who die far younger than that. If you invested a portion of your savings each year and pooled yo…

SS is a Ponzi scheme. Payout for current investors is provided by the payin of future investors. Then to fool you, a small fraction of the program is devoted to other legitimate purposes. Disability/survivor benefits are an extremely small portion of social security, less than 1% last time I checked. Incidentally, as far as living to 100, buy a lifetime annuity. Or even just have the government pay for retirement for…

SS has collected trillions more than it has paid out. To deal with the post baby boom reduction in the work force. A true Ponzi scheme can't be stable over hundreds of years but SS could be.

PS: I would like to see SS start at ~75 which seems to be the time when most people are incapable of meaningful work. And it's the age where most people who retired young start having major problems with their savings keeping up with inflation. I would also increase benefits slightly because it would be the only source of income for many people. I fear a lot of people retired far younger than the would have because of SS and ended up far poorer because they outlived their savings.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#59

Post by yummyfajitas » Mon, Jan 05, 2009, 4:05 PM UTC

Retric wrote: post #58

yummyfajitas wrote: post #54

Earlier quoted context omitted.

SS is a Ponzi scheme. Payout for current investors is provided by the payin of future investors. Then to fool you, a small fraction of the program is devoted to other legitimate purposes. Disability/survivor benefits are an extremely small portion of social security, less than 1% last time I checked. Incidentally, as far as living to 100, buy a lifetime annuity. Or even just have the government pay for retirement for…

SS has collected trillions more than it has paid out. To deal with the post baby boom reduction in the work force. A true Ponzi scheme can't be stable over hundreds of years but SS could be. PS: I would like to see SS start at ~75 which seems to be the time when most people are incapable of meaningful work. And it's the age where most people who retired young start having major problems with their savings keeping up…

A Ponzi scheme is an investment system where the payout of current investors comes from the payin of future investors. That's the definition of ponzi.

Does SS meet that definition or not? If so, it's a Ponzi scheme. The fact that it lasted longer than other historical Ponzi schemes does not change it's nature.

Re: Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

#60

Post by patrickg-zill » Mon, Jan 05, 2009, 4:15 PM UTC

SS started as a scam and will end as a scam.

SS was set up with rules based on actuarial tables, used by all insurance companies.

The rules for 65 as the start of collection were because the actuarial tables at the time showed that only about 25% of the population would reach that age. And since white women live the longest, black men were paying for a benefit it was unlikely they would ever receive.

SS did not originally have survivor benefits and disability either, those were added by FDR in the years after SS originally passed.

Unlike either term or whole life insurance, SS pays nothing if you die before your time for payments to start. With term, you would get paid, with whole life, there would be other investment benefits involved, like the ability to borrow against a certain amount of the policy while still alive.