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)

#91

Post by sethg » Mon, Jan 05, 2009, 7:02 PM UTC

[deleted] wrote: post #90

mattmaroon wrote: post #23

Earlier quoted context omitted.

Here's 2 scenarios. a) Government borrows $4 trillion from the Chinese at 2% annually. b) Government borrows $4 trillion from Americans, by way of Social Security, at 2% annually. What's the difference in what the government owes after 10 years? Either way the government has to raise $4 trillion (plus interest) in taxes, borrow it, or print it to pay it off. Either way everyone is in the exact same boat, except in bo…

[deleted]

Voters.

Unless the US economy really goes in the toilet[], Congress is not going to substantially cut Social Security benefits for retirees. (The Republicans couldn't get partial SS privatization to pass Congress even when Bush was at the height of his popularity.)

[]and if the economy gets that bad, then anyone who relied on private savings or investment for their retirement is probably also screwed.

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

#92

Post by sethg » Mon, Jan 05, 2009, 7:08 PM UTC

euccastro wrote: post #25

mattmaroon wrote: post #3

It's not really a Ponzi scheme. A Ponzi scheme pays interest to attract investors so it needs significantly more customers with each iteration. Madoff's infamous one paid out 12% annually, so it needed to grow by 12% each year just to achieve stasis (or it would have if cash outs equaled profits anyway, some years it was probably more or less). Social Security isn't a Ponzi scheme because it would work perfectly well…

[Social Security] would work perfectly well if the population remained stable over time, or shrank. And it would even be alright if it grew slowly and linearly. You got it right but say it backwards. The problem is population shrinking. The generation retiring is much larger than the ones still working when population has shrunk at some point. Baby Boom wouldn't be a problem in this respect, had it been followed by B…

But long-term population shrinkage can be accommodated by raising the Social Security tax (an fund-raising option that was not available to Ponzi or Madoff). As long as the generation-to-generation increase in worker productivity is greater than the generation-to-generation increase in the tax, it won't harm the general welfare.

And if that doesn't do the trick then the US can always let in more working-age immigrants.

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

#93

Post by byrneseyeview » Mon, Jan 05, 2009, 7:19 PM UTC

mattmaroon wrote: post #23

byrneseyeview wrote: post #22

Earlier quoted context omitted.

The government borrowing from SS is no different than them borrowing from the Chinese, either way it has to be repaid. I'd like to offer you an annuity. Here's how it works: you give me about 15% of your paycheck every year, and I spend the money on whatever I feel like. I replace it with a piece of paper that says "Dear Byrneseyeview: Please tender to the bearer -- Byrneseyeview -- an amount equal to the sum borrowe…

Here's 2 scenarios. a) Government borrows $4 trillion from the Chinese at 2% annually. b) Government borrows $4 trillion from Americans, by way of Social Security, at 2% annually. What's the difference in what the government owes after 10 years? Either way the government has to raise $4 trillion (plus interest) in taxes, borrow it, or print it to pay it off. Either way everyone is in the exact same boat, except in bo…

Either way everyone is in the exact same boat, except in boat b, Americans pay the opportunity cost of investing at 2%. In boat a the Chinese do.

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

#94

Post by dantheman » Mon, Jan 05, 2009, 7:57 PM UTC

tptacek wrote: post #88

dantheman wrote: post #84

Earlier quoted context omitted.

Defense spending is a lot, but it is actually one of the few things that the federal government is supposed to do and it's only 20% of the federal budget whereas medicare and ss are at 60%

That's not true. The OMB's own figures put Social Security at 20%, and Social Security is funded by a dedicated tax. Medicare is a much bigger problem. Budget comparisons are also subject to both chicanery (playing around with what you consider a defense expenditure) and bias (Social Security is the largest monolithic expenditure in the budget, just like MadMenSeries2.mp4s.zip is the biggest single file on my filesys…

I will admit that the numbers can be juggled around quite a bit; but from most charts SS is 20% & medicare/medicate/etc are about 40% dod is about 20..

the fact that SS is funded by a dedicated tax doesn't have any relevance.

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

#95

Post by Retric » Mon, Jan 05, 2009, 8:01 PM UTC

mattmaroon wrote: post #73

Retric wrote: post #66

Earlier quoted context omitted.

The average lifespan is not increasing but the percent of people living into old age is. Someone dieing at 55 vs 60 does not save SS the money of someone dieing at 85 vs 80. The baby boom also distorted the number of young people supporting old people, but over the next 40 years far more people will reach 95 than did 40 years ago. The other main support of SS was the long term increase in income, but middle class wag…

You have it backward. The percentage of people living into old age has not changed significantly. The average lifespan from birth has, but that's not relevant to SS. The average lifespan of someone who enters the system (an adult, at let's say age 18) is the same. The percentage of people who live from the age of 18 to the age of 95 will not be higher than 40 years ago, in fact, it may be lower.

The average lifespan has not changed much once you hit 18, but your chances of dieing between 30 and 40 have gone up where your chances of dieing between 60 and 70 have gone down. I need to find and old actuarial table from the 50's to show compare with today.

Edit: http://www.ssa.gov/OACT/STATS/table4c6.html

I should say the odds of hitting 100 from 1 are about the same but the odds of hitting 100 from 65 have increased.

Male death probability with some comments by me:

  01) 0.000513 
  06) 0.000182 
  11) 0.000104
  12) 0.000156	
  13) 0.000273  (wow big jump suicide?)
  14) 0.000435  (some car)
  18) 0.001061  (more car)
  21) 0.001361  (full car)
  23) 0.001438  (peak of early death risk)
  31) 0.001367  (still car)
  41) 0.002629  (start of heath issues?)
  51) 0.005657
  61) 0.012966
  71) 0.030131
  81) 0.075724  
  91) 0.199019  	
  101) 0.388563

PS: Old age is bad for your heath but 21 vs 31 is about the same because it's mostly accidental death aka car accidents. Just watch the increase from 14 till 23.

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

#96

Post by nihilocrat » Mon, Jan 05, 2009, 8:05 PM UTC

tptacek wrote: post #81

nihilocrat wrote: post #79

Earlier quoted context omitted.

Chomsky is a pretty hardline radical liberal, so it's fairly likely that an HN reader or two thinks what he writes is pure and utter garbage.

How do you at one point in a thread discuss how "liberal" is an ad hominem, and in another part of the thread dismiss someone as a "hardline radical liberal"?

Because I'm not using "liberal" as an insult. I can't tell where you see an ad hominem, I'm "dismissing" Chomsky because he has a long track record plus popular image of being a radical liberal, which was the focus of my reply. I think you are assigning too much tone to a text-based discussion.

The use of "liberal" in the other thread was referring to "classical liberal". I was mainly trying to point out how the definitions that are popularly used these days should be preferred over definitions of "liberal" that might have been accurate two hundred years ago when the original "classical liberals" were contemporary.

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

#97

Post by gojomo » Mon, Jan 05, 2009, 8:06 PM UTC

tptacek wrote: post #80

antiismist wrote: post #74

Earlier quoted context omitted.

I'm not sure why you are writing about the Heritage Foundation or "Conservatism": Milton Friedman is a classic liberal ( http://en.wikipedia.org/wiki/Classical_liberalism ), so it's a strange vicarious ad hominem attack. His laissez-faire ideas have been extremely influential and have a stunning track record of success where they have been used.

I don't think you can, with any intellectual honesty, call Milton Friedman a "liberal" economist without pointing out that you're using a different definition of the term than the mainstream. If he's a "classic liberal", he's also an "anti-progressive".

...different definition of the term than the mainstream.

Mainstream American English, sure.

In Europe, 'classical liberals' are still just called 'liberals', or sometimes villified as 'neoliberals' by the Euro-left for their adherence to brutish Friedmanesque economic views. I think that usage also dominates in regions of British English. So more English speakers worldwide might agree that Friedman is a 'liberal economist' than parochial Americans would disagree.

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

#98

Post by nihilocrat » Mon, Jan 05, 2009, 8:09 PM UTC

antiismist wrote: post #82

nihilocrat wrote: post #78

Earlier quoted context omitted.

You shouldn't act like terms exist in a vaccuum. Remember that the Republicans and Democrats were on completely different sides of the political spectrum less than a century ago. Classical liberalism is a doctrine stressing individual freedom and limited government. This includes the importance of human rationality, individual property rights, natural rights, the protection of civil liberties, individual freedom from…

I'm just saying that his idea here should not be evaluated by a comparison to a group of people that he isn't even a member of. I do like the two axis chart though.

That's a fair assessment, and I also agree that we shouldn't be assigning people to either side of the aisle in discussions where it's not important. Alas, social security is a very political issue that has many people with strong feelings in either direction, so it is very hard to avoid seeming partisan.

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

#99

Post by justindz » Mon, Jan 05, 2009, 8:09 PM UTC

mattmaroon wrote: post #73

Retric wrote: post #66

Earlier quoted context omitted.

The average lifespan is not increasing but the percent of people living into old age is. Someone dieing at 55 vs 60 does not save SS the money of someone dieing at 85 vs 80. The baby boom also distorted the number of young people supporting old people, but over the next 40 years far more people will reach 95 than did 40 years ago. The other main support of SS was the long term increase in income, but middle class wag…

You have it backward. The percentage of people living into old age has not changed significantly. The average lifespan from birth has, but that's not relevant to SS. The average lifespan of someone who enters the system (an adult, at let's say age 18) is the same. The percentage of people who live from the age of 18 to the age of 95 will not be higher than 40 years ago, in fact, it may be lower.

This is an important point you've raised. In particular, lowered infant mortality combined with a poor grasp of statistics makes it look like you and I are living longer, even when those infants that might have died before could end up keeling over at 30 from health problems and we might die a few years earlier than we were likely to a few decades ago.

Also, people who are living longer as a result of advances in life-saving surgery are doing so in poor health as a result of the reasons for the increased necessity of these surgeries such as coronary heart disease and type 2 diabetes. Increasing the retirement age in this context could mean attempting to employ a bunch of people not fit to be productive, in a worst case scenario.

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

#100

Post by mynameishere » Mon, Jan 05, 2009, 8:25 PM UTC

gislebertus wrote: post #19

As a long-time entrepreneur, I'm concerned most about a market: are there people able and willing to buy what I'm selling? Social Security helps with the "able" part, by making sure that no American lives in abject poverty if they're old or crippled. Before Social Security, this was a big problem. About a quarter of Americans lived in poverty, and about half of old people. More people with more money to spend means a…

More people with more money to spend means a bigger market for whatever I'm selling. That's why Social Security is good. That's why markets are bigger in places with lots of Social Security-type programs (Europe, the U.S.) than in places without them (South America, Africa).

Where to start? Sheesh. Markets are "bigger" in the US than South America because of social security? How on earth did you come up with that notion? Besides being completely upside down (viz, social security draws money from the free market) South America most certainly has its share of SS equivilents:

http://www.ssa.gov/policy/docs/progdesc/ssptw/2006-2007/amer...