Social Security is Not a Ponzi Scheme, Mr. Perry

[NYcarbineer]

[Currently SS is paying out more than it takes in.

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Trustees Report Summary

Why would exclude interest income? That's the whole point of investing the money.

In 2010 SSA took in 677 billion and paid out 585 billion, thus increasing the trust fund by the difference.

Some Ponzi scheme lolol

 

[Toro]

Pension funds are not transfer payments, SS is.

I guess that means I actually explained the difference.

You have not explained the differences in cash flows. You've just called cash flows different things.

Explain how cash flows are different in a government bond pension fund compared to the SS trusts. Walk us through the differences between the two. None of you guys who call SS a Ponzi Scheme have explained how cash flows from a government bond fund differ from the cash flows in the SS trusts.

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

But if a pension fund invests only in government bonds, how is that any different from SS?

Government bond fund cash flow
Tax money ---> Buys bonds ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government redeems your bonds from the taxes of others and gives you back your money plus interest

SS cash flow
Tax money ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government gives you back your money plus interest from the taxes of others

What is the difference in cash flows other than the issuance and redemption of bonds?

 

[Quantum Windbag]

[Currently SS is paying out more than it takes in.

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Trustees Report Summary

Why would exclude interest income? That's the whole point of investing the money.

In 2010 SSA took in 677 billion and paid out 585 billion, thus increasing the trust fund by the difference.

Some Ponzi scheme lolol

In 2007 Bernie Madoff took in paid out money, but took in more, thus adding to the $50 billion total amount he was able to scam from people.

Ponzi schemes always work, until they don't.

 

[Toddsterpatriot]

It is to Republicans. Even many on Social Security. Only they don't know it's Social Security. They think it's from "fans".

Ummmm....the point is, a Ponzi scheme would be an improvement.

 

[NYcarbineer]

T-bills are debt obligations. SS is a transfer from current workers to current retirees. Equating them is equivalent to saying that a horse is the same as a car because they both move.

Technically, unless you are depleting the Trust Fund, you are not using current workers funds to pay retirees.

There is no SS Trust Fund. Oh at one time SS tax money was sequestered. Until the federal government started taking it for other uses.
Fact.. The SS System was never intended as a retirement fund. It is a supplement. Nor was it ever intended for each worker paying into the system to get their money back.
Not even close. Fact.....Far too many people receive SS benefits, without paying a dime into the system. That does NOT include beneficiaries of deceased workers or those one LEGITIMATE SS Disability.
SS has too many people riding in the boat and too few rowing the boat.

Sequestered? What are you talking about?

 

[Quantum Windbag]

You have not explained the differences in cash flows. You've just called cash flows different things.

Explain how cash flows are different in a government bond pension fund compared to the SS trusts. Walk us through the differences between the two. None of you guys who call SS a Ponzi Scheme have explained how cash flows from a government bond fund differ from the cash flows in the SS trusts.

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

But if a pension fund invests only in government bonds, how is that any different from SS?

Government bond fund cash flow
Tax money ---> Buys bonds ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government redeems your bonds from the taxes of others and gives you back your money plus interest

SS cash flow
Tax money ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government gives you back your money plus interest from the taxes of others

What is the difference in cash flows other than the issuance and redemption of bonds?

Because the pension fund actually invest the income, and pays out from the proceeds of government bonds. SS pays out of proceeds, and then invests in bonds. Why does a person who actually handles investments not understand the difference between front loading investments and front loading payments?

 

[Full-Auto]

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

What about the $2.5 trillion surplus?

What surplus?
Its in IOUS

 

[Toddsterpatriot]

It is to Republicans. Even many on Social Security. Only they don't know it's Social Security. They think it's from "fans".

Social Security is a bigger and better ponzi scheme than Bernie Maddof ever thought of.

For all your working life--you and your employer pay 12..4% of your gross wages into this fund. If you're lucky enough to make it to 67 years old they will give you back diddly sqaut on your investment--and should you meet your demise early and are single they simply confiscate your contribution. The Federal Government uses this fund to pay for wars--foreign aid--disaster relief--and about anything and everything other than what it was intended for--the well being of the elderly in this country.

That's why Rick Perry is right--he won't win election on his stance--because so many are dependent on social security today.

If you are old, $1,800.00 a month is nothing to sneeze at.

Compared to what your 12.4% over your career invested in stocks and bonds (and CDs even) would earn , $1800 a month is something to sneeze at.

And if you die before retirement, the government keeps your "contributions"

 

[NYcarbineer]

[Currently SS is paying out more than it takes in.

Trustees Report Summary

Why would exclude interest income? That's the whole point of investing the money.

In 2010 SSA took in 677 billion and paid out 585 billion, thus increasing the trust fund by the difference.

Some Ponzi scheme lolol

In 2007 Bernie Madoff took in paid out money, but took in more, thus adding to the $50 billion total amount he was able to scam from people.

Ponzi schemes always work, until they don't.

What is wrong with you people?

Now every investment operation in the world is a Ponzi scheme that just hasn't gone broke?

And STILL people wonder why conservatism is dead.

 

[NYcarbineer]

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

What about the $2.5 trillion surplus?

What surplus?
Its in IOUS

You do understand that's how SS makes interest on the money, right?

 

[Quantum Windbag]

Why would exclude interest income? That's the whole point of investing the money.

In 2010 SSA took in 677 billion and paid out 585 billion, thus increasing the trust fund by the difference.

Some Ponzi scheme lolol

In 2007 Bernie Madoff took in paid out money, but took in more, thus adding to the $50 billion total amount he was able to scam from people.

Ponzi schemes always work, until they don't.

What is wrong with you people?

Now every investment operation in the world is a Ponzi scheme that just hasn't gone broke?

And STILL people wonder why conservatism is dead.

Only of they take payments from current workers to pay retiree benefits.

 

[Toddsterpatriot]

most retirement funds run in the private sector are pretty much the same....

boomers not only paid for their parents SS, but they paid for a good portion of their own future SS retirement, by contributing the SS Surplus since Reagan DOUBLED (100% increase in our taxes for SS back in 1983).

The SS surplus money loaned, has to be paid back with income tax moneys.

Doubled?

In 1981, the employee tax for Social Security was 5.35%.
In 1988 it was 6.06%.
It's now 6.2%.

FICA & SECA Tax Rates

Maybe you should recheck your math?

 

[Lakhota]

What surplus?
Its in IOUS

So, in other words, China should be real nervous about holding U.S. IOUs...?

 

[Flopper]

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

What about the $2.5 trillion surplus?

The 2.5 trillion dollar balance is fully invested in US treasuries as required by law for over 70 years. Most of the money in the fund is from interest, not contributions.

The mechanics are pretty simple. The treasury issues benefit checks directly out of payments receive from payroll taxes. Excesses are reinvested. Any shortage is covered by selling bonds in the portfolio.

In 2009 and 2010, receipts were about 5% less that benefits. This was due to higher unemployment and the temporary reduction in payroll tax rate. By 2012-14, the CBO projects the shortage to be less than 1%. After that contributions are expected to surpass benefit payments for a few years then begin a rapid fall resulting in a zero balance by around 2038. At that time payment of benefits will come 100% from contributions and benefits will be about 25% less than they are now. This is if Congress does nothing which seems unlikely.

 

[Full-Auto]

What about the $2.5 trillion surplus?

What surplus?
Its in IOUS

You do understand that's how SS makes interest on the money, right?

Yes I do

Now pay close attention........................................

Government - Interest Expense on the Debt Outstanding

Refute it if you can!!!

 

[Flopper]

What surplus?
Its in IOUS

So, in other words, China should be real nervous about holding U.S. IOUs...?

All US debts are IOUs as are all sovereign debt.

 

[Full-Auto]

What surplus?
Its in IOUS

So, in other words, China should be real nervous about holding U.S. IOUs...?

They should. Maybe you guys could throw in some more QE just to show some good faith.

 

[Toro]

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

But if a pension fund invests only in government bonds, how is that any different from SS?

Government bond fund cash flow
Tax money ---> Buys bonds ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government redeems your bonds from the taxes of others and gives you back your money plus interest

SS cash flow
Tax money ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government gives you back your money plus interest from the taxes of others

What is the difference in cash flows other than the issuance and redemption of bonds?

Because the pension fund actually invest the income, and pays out from the proceeds of government bonds. SS pays out of proceeds, and then invests in bonds. Why does a person who actually handles investments not understand the difference between front loading investments and front loading payments?

You are confusing form for substance. A pension fund that invests solely in government bonds is sending your money to the government and the government spends it which it then pays you back in the future by taxing others. That is exactly what SS does, except it doesn't go to all the trouble of issuing bonds.

And no, SS does not buy and sell bonds. It credits the accounts as if it were buying and selling bonds. That is confusing, I know, but the economics of the cash flows through SS and a government bond fund are the same.

As for front loading payments, that was relevant 40 years ago but it isn't today since everyone has been paying into it since. True, they - and we - have not paid enough into it for the benefits we will receive, but that is a funding and a liability issue, not a "Ponzi Scheme" issue.

 

[saveliberty]

Actually it is a "we don't want to have to change anything about SS near an election problem".

 

[Listening]

Yes, originally it did.

SS is a poor system. It needs to be reformed. If we want to keep it as it is, we either have to start paying more taxes into it or cut benefits. I think we should reform it. People should be given a choice whether they want to run their own investment account. Most people will likely say no, so for those people, SS should be run like a real pension fund, not like it is today. You could lower taxes paid into the system and easily make it fully funded if you did.

We are on very close agreement here.

Like so many other things, GWB really blew the messaging on this one. Never ever use the word "private" or "privatize". But, it should be treated more like a bank account and banking rules should apply.

People should have some minimum which would then pass on to an hier (which could, in theory, make them "paid up").

If people wanted to go beyond the minimum, that would be their choice.