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)

#111

Post by pg » Mon, Jan 05, 2009, 10:27 PM UTC

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…

but the expectancy of a working-age adult ... has barely budged since before Social Security was invented. Lifespan from birth ... has risen almost entirely due to lower infant mortality.

This is not true. While it's true that infant mortality rates in industrialized countries have decreased a lot since the 1930s, so have mortality rates at every age.

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

#112

Post by tptacek » Mon, Jan 05, 2009, 11:04 PM UTC

mattmaroon wrote: post #108

tptacek wrote: post #46

Earlier quoted context omitted.

Just like the interest you earn on your health insurance?

You actually do earn interest on HSAs right? I don't know much about them other than the bit I read, but they seem to be all the rage nowadays.

Yes, but an HSA is explicitly not an insurance account; it's a tax-advantaged savings account you use to cover routine, predictable medical expenses while a high-deductable insurance plan covers broken bones and gigantism.

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

#113

Post by viggity » Tue, Jan 06, 2009, 2:01 AM UTC

harpastum wrote: post #2

"In 1964, Barry Goldwater was much reviled for suggesting that participation in Social Security be voluntary. I thought it was a good idea then. I still think so." A guess why Goldwater was reviled? Voluntary Social Security would be DOA. It doesn't make fiscal sense for the upper class to pay social security, so they wouldn't. That leaves the lower class' taxes going to pay for it--somehow I don't think there's enou…

SS is supposed to pay benefits in proportion to how much you put into the system (each dollar YOU specifically put in, you supposed to get out). It wasn't meant as a wealth redistribution scheme and so far it isn't a hardcore redistribution scheme. The "rich" are capped at paying 15% of their income up to ~$100k. Not much money from the rich currently goes to the poor via SS (Medicaid is a different beast)

Now, Obama has floated the idea to remove the $100k cap, WITHOUT paying any additional benefit. With the economy in its current condition, he has backed off that idea, but I won't be surprised if he resurrects the idea if we have a quick recovery.

SS is a scam because on average it pays roughly 1% interest per year, versus an 8% average return in stock market. Furthermore it is scam because the government feels compelled to hide half of the money it takes from you by making your employer pay for half of your FICA taxes.

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

#114

Post by justindz » Tue, Jan 06, 2009, 2:09 AM UTC

mattmaroon wrote: post #106

justindz wrote: post #99

Earlier quoted context omitted.

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 lif…

I blame it on the government for citing the worthless stat in the first place. They rarely express it as anything other than from birth expectancy. They should mention it from some stable age like 5, then simply show infant mortality stats separately. Though I guess they don't want to do that because we have one of the worst rates in the developed world.

Congress is good at fund raising, not math.

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

#115

Post by alecco » Tue, Jan 06, 2009, 2:53 AM UTC

nihilocrat wrote: post #79

alecco wrote: post #56

Earlier quoted context omitted.

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! ;)

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.

That's OK. But why do you down-vote what you don't agree with?

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

#116

Post by mattmcknight » Tue, Jan 06, 2009, 3:33 AM UTC

tptacek wrote: post #37

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…

This was one of the intellectual flaws of the Bush privatization scheme; they calibrated returns from individual private accounts to the average lifespan, without noting that a pretty large contingent of social security beneficiaries would outlive the average. Current estimates are that many of us will be long retired before there even is a "gap" between Social Security funding and Social Security benefits. The trust…

The trust fund doesn't exist. It's a line on the books, but it's been borrowed fund to pay for other expenses.

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

#117

Post by mattmaroon » Tue, Jan 06, 2009, 4:54 AM UTC

Retric wrote: post #110

mattmaroon wrote: post #105

Earlier quoted context omitted.

That's not worth much in and of itself. It has to be compared with past data to be relevant to the argument. Also, it would have to be that 18-65 has gone down while 66+ has gone up. Seems highly unlikely to have done so significantly.

Still looking, but I found one for japan: http://www.mhlw.go.jp/english/database/db-hw/lifetb04/2.html 1955: 40 and live to 60 = 71%; 2004: 40 and live to 60 = 88%; 1955: 60 and live to 80 = 32%; 2004: 60 and live to 80 = 64%; Edit US: http://www.infoplease.com/ipa/A0005124.html (Looks like deaths are down per 100,000 people but I can't find the right tables.) Edit: Got it: Even more old people in the US: 1990 vs 200…

That's not showing anything about life spans, just the baby boomers getting older. It's the retiree to worker ratio shifting as they age.

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

#118

Post by miked » Tue, Jan 06, 2009, 5:19 AM UTC

tptacek wrote: post #64

gills wrote: post #63

Earlier quoted context omitted.

One point that has not appeared in your dialog, in favor of identifying SS as a Ponzi scheme, is that the excess accumulation of Social Security taxes has been spent on other things and replaced with IOUs by Congress (this is how the Clinton administration produced a so-called budget 'surplus').

First, the Clinton administration did not synthesize a surplus out of the social security trust fund; they simply had the good fortune to take office during a period of historic productivity expansion. Second of all, the "IOUs" you're talking about are government bonds. For your argument to hold, you have to assert that the government is going to default on its own bonds.

Governments default on their own bonds often enough. Cf. Argentina plus a whole slew of third-world countries.

I'll skip the theory and offer a single data point: the employees of the Social Security Administration do not, themselves, use or pay into SS. Neither do any other US Government employees. That is, the people who know the most about the system think it's so good that they don't want any part of it. It's almost like they know something some of us don't.

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

#119

Post by tptacek » Tue, Jan 06, 2009, 5:20 AM UTC

mattmcknight wrote: post #116

tptacek wrote: post #37

Earlier quoted context omitted.

This was one of the intellectual flaws of the Bush privatization scheme; they calibrated returns from individual private accounts to the average lifespan, without noting that a pretty large contingent of social security beneficiaries would outlive the average. Current estimates are that many of us will be long retired before there even is a "gap" between Social Security funding and Social Security benefits. The trust…

The trust fund doesn't exist. It's a line on the books, but it's been borrowed fund to pay for other expenses.

So, when do you think the government is going to default on its own bonds? 2010? 2018?

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

#120

Post by Retric » Tue, Jan 06, 2009, 3:16 PM UTC

mmmurf wrote: post #104

tptacek wrote: post #37

Earlier quoted context omitted.

This was one of the intellectual flaws of the Bush privatization scheme; they calibrated returns from individual private accounts to the average lifespan, without noting that a pretty large contingent of social security beneficiaries would outlive the average. Current estimates are that many of us will be long retired before there even is a "gap" between Social Security funding and Social Security benefits. The trust…

The privatization plan would give the beneficiary ownership over the investment, so there is not a problem, it just means that the investment has longer to grow. Ideally someone doesn't just build up a pile of money and intend to die with $0, he/she intends to leave some to the next generation or to charity.

I am single why should I give my money to charity, my will is going to say take it out into the forest and burn it.

Only slightly kidding. A close friend of mine had a trust fund worth a little over 6 million and was looking to inherent a lot more when his grandmother died. He is dead now and imo money really messed up his life.