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

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

#71

Post by Retric »

yummyfajitas wrote: post #65
tptacek wrote: post #62

Earlier quoted context omitted.

Social Security isn't an investment system; it's a social insurance program. A Ponzi Scheme is an investment scam; victim investors are, for a short time, paid an unnaturally high rate of return based on the recruitment of an ever-broadening base of new victims.

The retirement component of social security is not insurance. It does not spread the cost of low probability, high cost events among the insured. Only the very small disability insurance part of SS does this. As I mentioned, that is a separate issue. Tell me; if Madoff called his hedge fund an "insurance program", and actually devoted 1% of it to providing disability insurance, would that make it not a Ponzi scheme?…

What's the odds you live to be 105? What's going to pay your income if you live that long? Ok, what happens in the great depression II shows up in 40 years?

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

#72

Post by tptacek »

spkthed wrote: post #68
tptacek wrote: post #53

Earlier quoted context omitted.

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 poi…

Point one: Right, but, depending upon whose numbers you use in 2018 we stop putting money into the trust fund and start pulling from it. Also, it's not really a trust fund. Excess funding does go into a trust fund but it is then lent to the Treasury and spent. Instead of using the power of time to get a decent rate of return it's basically sitting. Two, I agree, mostly. Since SS depends upon multiple workers for ever…

Again on your first point --- the only one I'll engage here --- the trust fund is:

* a fiction only if you believe that the government will default on its own bonds;

* projected solid into the '40s; and

* a red herring, because without it, we're discussing the general federal budget, and any predicted shortfall in Social Security is going to be dwarfed by Medicare-related programs and defense.

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

#73

Post by mattmaroon »

Retric wrote: post #66
mattmaroon wrote: post #45

Earlier quoted context omitted.

The life insurance aspect of SS is always overlooked in discussions on its impending collapse. I would guess that it's just not a significant factor. The yearly Social Security/Medicare payments for the average American is something like $7,500. Term Life would be what, $600? I'm not sure what you meant after that. Actuarial tables take life spans into account. And people are not living longer, see my original commen…

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.

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

#74

Post by antiismist »

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…

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.

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

#75

Post by mattmaroon »

yummyfajitas wrote: post #65
tptacek wrote: post #62

Earlier quoted context omitted.

Social Security isn't an investment system; it's a social insurance program. A Ponzi Scheme is an investment scam; victim investors are, for a short time, paid an unnaturally high rate of return based on the recruitment of an ever-broadening base of new victims.

The retirement component of social security is not insurance. It does not spread the cost of low probability, high cost events among the insured. Only the very small disability insurance part of SS does this. As I mentioned, that is a separate issue. Tell me; if Madoff called his hedge fund an "insurance program", and actually devoted 1% of it to providing disability insurance, would that make it not a Ponzi scheme?…

Madoff was a Ponzi scheme because he paid 12% interest. That interest meant he had to get new people in the door to fund it. Ponzi himself borrowed money, then paid it back with interest.

Social Security doesn't do this.

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

#76

Post by Retric »

gills wrote: post #63
Retric wrote: post #61

Earlier quoted context omitted.

A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit. SS does not hide the fact that it pays money from dead investors to the living so it's not fraudulent. It does use some money from new investors to payout money but so does life insurance. PS: While some people get far more out of SS than they pay in many people got…

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').

I would suggest that the general fund is a Ponzi scheme backed by selling IOU's. We are borrowing more money to pay the interest on money we already borrowed and adding more debt on top of that. Long term we need to start borrowing less than the interest on our debt - inflation. Which is not all that high a number vs GDP.

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

#77

Post by yummyfajitas »

Retric wrote: post #71
yummyfajitas wrote: post #65

Earlier quoted context omitted.

The retirement component of social security is not insurance. It does not spread the cost of low probability, high cost events among the insured. Only the very small disability insurance part of SS does this. As I mentioned, that is a separate issue. Tell me; if Madoff called his hedge fund an "insurance program", and actually devoted 1% of it to providing disability insurance, would that make it not a Ponzi scheme?…

What's the odds you live to be 105? What's going to pay your income if you live that long? Ok, what happens in the great depression II shows up in 40 years?

As I noted before, the really old are a small fraction of SS. If SS were really just protecting people against outliving their investments (say, it kicked in at age 90) and against disability, I'd have little objection to it. That's just insurance, and a small portion of SS.

As for GDII, I'm not sure how SS helps there. That sounds like a place where the ponzi-like nature of SS will become readily apparent: not enough money from new investors to pay off the old ones.

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

#78

Post by nihilocrat »

antiismist wrote: post #74
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…

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.

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 restraint, constitutional limitation of government, free markets, and a gold standard to place fiscal constraints on government

In a modern political climate these would sound somewhat conservative (mainly 'free markets' and 'limited government'). I think the best modern-day fit would be Libertarianism, which is considered by many to be far-right.

This is why we as a society should really adopt the two-axis means (political compass) of understanding "ism"s. I really hope the public is smart enough to factor just one more dimension into their political analysis, but mass stupidity is always full of surprises.

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

#79

Post by nihilocrat »

alecco wrote: post #56
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! ;)

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.

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

#80

Post by tptacek »

antiismist wrote: post #74
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…

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".
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