Is Social Security a Ponzi Scheme?

Since 1980 the Republican controlled houses of congress have intentionally not raised the Worker Soc Sec Retirement withholding amounts so as to not have to properly increase SS-Benefits to cover inflation! And it was not because the Republicans actually cared about the workers themselves as the Republicans were more focused on keeping the Low Wage industries' in the US matching Employer Soc Sec withholdings as low as possible.

An so wee have had an intentionally undefended SS-Retirement fund the last 40+ years of the Republican controlled congress, that mostly had the Republican Congressional Majority overlapping many Democrat Controlled executive office tenures! And so Social Security does not work By Republican Party Anti New Deal design, before and especially since 1980!

The Social Security 2100 act needs to get passed so that no low wage retiree gets a SS-Retirement check that's below 100% of the federal poverty level and that Republican Tax Cut for the most wealthy and Corporations in the US needs to be allowed to elapse to pay for that. And really the Corporate Tax Rates in the US needs to be returned to the same levels that they where when Eisenhower was POTUS and to fix the 40+ years of Republican Party intentional underestimating the proper SS-Withholding amount to properly fund Social Security!

The article quotes Paul Samuelson:

> The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in — exceed his payments by more than ten times (or five times counting employer payments)!

I checked this using my work history. I download my wage history from ssa.gov, downloaded the payroll tax history from somewhere, and download one year T-bill rates over my working lifetime so far.

It turns out that if the payments from me and my employer had been used to buy one year T-bills, and when those matured they had been rolled over into new one year T-bills, the amount that would be there now would be enough to pay my SS benefit if I started collecting now (2 years before full retirement age) for around 17 years, which happens to be around the life expectancy of a male my age. That's assume the T-bills stop rolling when I start collecting and so there is an uninvested lump sum of cash. Keep rolling over to new T-bills and it can cover several years beyond my life expectancy.

That suggests that at least for workers with salary history similar to mine you could actually have a sound system--we are contributing enough that it should be possible to cover our benefits.

I'm pretty sure this is just a coincidence. People who made more than me would also likely find results similar to mine, but people making substantially less would probably find their benefit exceeds what their contribution could cover.

That's because your monthly SS benefit depends on what your "averaged index monthly earning" (AIME). That's the average you earned a month during your 35 highest earning years with each year indexed to current dollars. The method to go from AIME to monthly benefit amount looks like this (with the specific numbers depending on what you you become eligible to start receiving benefits):

  90% of the first $1000 of your AIME +
  32% of the AIME over than but less than $6000 +
  15% of the AIME at or above $6000

E.g., someone whose AIME is $1k would get $900/month. Some with $10k AIME would get $3100/month. The second person would have contributed 10x as much but only have a benefit 3.4x as much.

Lifting the cap, converting the tax from a payroll to a general income (including capital gains) tax (and therefore also including other income in benefit calculations), and adding several additional bend points rather than capping benefits would stabilize the fund forever, while broadening the kind of income generating activities people could rely on while benefiting from the safety net retirement system.

But simply uncapping the tax without other reforms is probably the easiest short-run solution.

Funding it from the general fund is probably fine. The whole "trust fund" idea was pretty bogus.

The pay-as-you-go idea never anticipated a baby boom and baby bust, but a trust fund wasn't a good solution, either. It just obscured the fact that it was a tax increase on the lower and middle classes.

Water under the bridge, now. The fact is that social security is an entitlement. If the SS budget does not have enough money to pay it, the government is in violation of the law. The money will come from the general fund, and it will be raised by either taxes or borrowing.

"Social Security is not necessarily a Ponzi scheme" except the way the USA managed it.