Social Security is Not a Ponzi Scheme, Mr. Perry

[NYcarbineer]

Someone still needs to explain to me how, if there is all this trust fund money still around and the system is so solid, that President Obama would make the kind of statement he did during the debt cieling crisis.

How is it possible that he could not be sure SS checks would be in the mail if the system is safe for the next 25 years.

Looking for some help !!!

The trusts don't own marketable bonds. Nothing can be sold. Instead, you have an account in the trusts in your name which is credited with your contributions and deemed interest.

It's like me borrowing from you except that I give you my word. You can't sell my word to anyone but I still owe you money.

The critics of SS argue that it is a pay as you go system. From an operational standpoint, that is correct. Money coming in is used to pay money going out.

If SS were a real pension fund, money coming in would be used to buy bonds, and bonds would be sold or redeemed to fund money going out. But SS effectively cuts out the middleman and skips the buying and selling of bonds, and instead credits and debits accounts as if it were buying and selling bonds in the trusts. This is why people say SS is an accounting gimmick or there's nothing there. It's because SS is structured like a bond fund but it isn't a real one. Practically, SS is a pay as you go system.

But the economics of the SS trusts are exactly like a government bond pension fund. It works the same way. The critics say "you can't sell assets" for when we have incidences like the debt ceiling debacle. That's true. But the flip side to that is by selling bonds to fund the payout, you would lower the assets in the trust, making it more underfunded, requiring it to raise contributions in the future. It's this kind of shit that politicians play at the state level with government workers pension funds. One could argue that by SS not being a real pension fund, it ties politicians hands and does not allow them to play games like selling assets to pay recipients which just have to be paid for by later generations.

Get this straight. THERE IS NO MONEY. SS is IOU's. Period.
You people can spin shuck and dive until Aunt Bessie calls the cows in for milking.
One thing your pontificating about trust funds, bonds, interest etc. cannot get past is Obama's statement that he was unsure SS Checks could be sent out for August payment.
If there's all this coin hanging around, why did Obama threaten SS recipients with non-payment?

Anyone holding a US treasury or any other bond from anywhere else holds an IOU. Why don't you people get that?

 

[JakeStarkey]

Trust government has nothing to do with socialism or corporatism. It certainly has nothing to do with pregnancy, which was a similie that should never been mentioned. The Hard Right keeps scaring the responsible Republicans and the middle of the road closer to the center. The great majority of America wants nothing to do with the fiscal lunacy of the Hard Right.

 

[kaz]

A Ponzi scheme is fraud. There is no fraud in Social Security. Social Security operates openly and in full compliance with the law.

In a Ponzi scheme, someone is stealing money for their own personal use. No one is stealing money from Social Security. All the money is accounted for.

A Ponzi scheme eventually falls apart because money was stolen and the new money runs out. Social Security can only 'fall apart' if either the US treasury defaults on its obligations or if the Congress and the president fail to make the easily made adjustments to income and outgo that are needed to rationalize SS's future finances.


But, hey, 'Ponzi scheme', like 'death panels', is the kind of 2 word simplistic talking point that the Right loves,

mostly because it doesn't put a lot of pressure on their brains to actually function.

You prefer euphemisms.

Social Security is a fraud because people are being told they are saving for their own retirement when they are not, the money is being spent as it's brought in just like any other tax. .

No, it's not. That's the idiocy that makes it impossible to have an intelligent conversation with the Ponzers.

Idiocy, failing to blindly adhere to liberal ideology. Yep, I'm an idiot.

Try to keep up. Government collects payroll taxes, government spends the money, government keeps tabs of how much money it spent by issuing t-bills to itself, government considers the t-bills it issued to itself to be an "asset." Or as toro calls it, a "collateralized" loan.

Do you see the difference between these scenarios?

You lend Tim $20,000. He agrees to pay it off with interest. You list Tim's debt to you as an asset.

You spend $20,000, you write an IOU to yourself and agree to pay yourself back with interest, you list the debt as an asset.

The latter is the "social security trust fund."

 

[kaz]

It certainly has nothing to do with pregnancy, which was a similie that should never been mentioned

It's an analogy dumb ass.

The Hard Right keeps scaring the responsible Republicans and the middle of the road closer to the center

I like how liberals keep saying this despite the polls showing the reverse, that when Republicans are fiscally conservative they do BETTER. But you just keep believing that as your Democrats get their heads handed to them again. It's when Republicans move to the left they lose.

The great majority of America wants nothing to do with the fiscal lunacy of the Hard Right.

Using your 30 IQ points you're confusing social conservatism, which this is true, with fiscal conservatism, which its not. But hey, it's a heck of a talking point, right?

 

[NYcarbineer]

You prefer euphemisms.

Social Security is a fraud because people are being told they are saving for their own retirement when they are not, the money is being spent as it's brought in just like any other tax. .

No, it's not. That's the idiocy that makes it impossible to have an intelligent conversation with the Ponzers.

Idiocy, failing to blindly adhere to liberal ideology. Yep, I'm an idiot.

Try to keep up. Government collects payroll taxes, government spends the money, government keeps tabs of how much money it spent by issuing t-bills to itself, government considers the t-bills it issued to itself to be an "asset." Or as toro calls it, a "collateralized" loan.

Do you see the difference between these scenarios?

You lend Tim $20,000. He agrees to pay it off with interest. You list Tim's debt to you as an asset.

You spend $20,000, you write an IOU to yourself and agree to pay yourself back with interest, you list the debt as an asset.

The latter is the "social security trust fund."

Wrong. This is more of the Ponzer's idiocy.

Social Security is a standalone separate entity funded by the payroll tax. The payroll tax is invested in US treasuries that are backed by the full faith and credit of the US government, via its general fund, which is funded by taxes other than the payroll tax.

Until you Ponzers grasp that simple concept you will never be capable of intelligently discussing this issue.

 

[NYcarbineer]

What the Ponzer Right is really all about here is that they are trying to avoid facing a very grim reality and that is that Republican tax cutting, borrowing, and spending policies over the past 30 years are really the only thing that has jeopardized social security in any way.

 

[thereisnospoon]

The trusts don't own marketable bonds. Nothing can be sold. Instead, you have an account in the trusts in your name which is credited with your contributions and deemed interest.

It's like me borrowing from you except that I give you my word. You can't sell my word to anyone but I still owe you money.

The critics of SS argue that it is a pay as you go system. From an operational standpoint, that is correct. Money coming in is used to pay money going out.

If SS were a real pension fund, money coming in would be used to buy bonds, and bonds would be sold or redeemed to fund money going out. But SS effectively cuts out the middleman and skips the buying and selling of bonds, and instead credits and debits accounts as if it were buying and selling bonds in the trusts. This is why people say SS is an accounting gimmick or there's nothing there. It's because SS is structured like a bond fund but it isn't a real one. Practically, SS is a pay as you go system.

But the economics of the SS trusts are exactly like a government bond pension fund. It works the same way. The critics say "you can't sell assets" for when we have incidences like the debt ceiling debacle. That's true. But the flip side to that is by selling bonds to fund the payout, you would lower the assets in the trust, making it more underfunded, requiring it to raise contributions in the future. It's this kind of shit that politicians play at the state level with government workers pension funds. One could argue that by SS not being a real pension fund, it ties politicians hands and does not allow them to play games like selling assets to pay recipients which just have to be paid for by later generations.

Get this straight. THERE IS NO MONEY. SS is IOU's. Period.
You people can spin shuck and dive until Aunt Bessie calls the cows in for milking.
One thing your pontificating about trust funds, bonds, interest etc. cannot get past is Obama's statement that he was unsure SS Checks could be sent out for August payment.
If there's all this coin hanging around, why did Obama threaten SS recipients with non-payment?

Anyone holding a US treasury or any other bond from anywhere else holds an IOU. Why don't you people get that?

Apples to oranges.
People BUY US Bonds with their money. When the bond matures, they get back their original investment WITH interest. When the government taxes us and calls it Social Security, what actually happens is the money is put into the general fund and used for other purposes. The so-called bonds ARE the IOU's. They are worthless unless the flow of dollars from current workers buys the IOU's. The government can move money from one place to another in a mad scramble to pay off the current recipients.

The bottom line is there is no actual money in the non existent trust fund.
Why is it you people are so intent on protecting a system that is obviously in deep trouble?
And please do not retort with "it's not in trouble" because the facts say otherwise.
Quite frankly I am pretty sick of you people wanting the status quo (Fiddling as Rome burns) then I find upon my retirement that there's no money because stupid short sighted politicians blew it all on wasteful and fraudulent programs and other pork.
Then I am going to blame someone. You people on the Left who wish the system to remain the same are the ones whom I am going to blame. I am a very unforgiving person when I think someone is taking food off my table.

 

[Toddsterpatriot]

What the Ponzer Right is really all about here is that they are trying to avoid facing a very grim reality and that is that Republican tax cutting, borrowing, and spending policies over the past 30 years are really the only thing that has jeopardized social security in any way.

The Republicans didn't cut Social Security taxes, your Messiah did.

 

[Toddsterpatriot]

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.

So the government sends money to the government and then spends it? What does it pay you back with?

You have to be really stupid not to understand that there is no money in the trust fund. There are no investments. No interest is paid. The "Trust Fund" is a drawer full of worthless IOUs that one government department issued to another government department. They aren't marketable, which means they have no value to anyone.

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.

IF SSI's accounts are worthless, so too are all FEDERAL GOVERMENT issed debt instruments.

Now, the question really is Which debts will be paid and which will not?

Will The USA pay its own people that it owes money to, or will it decide to ONLY pay everybody else it owes money to?

Seems to me that the American people ought to be first in line to get paid.



No guarantee that the masters will decide that, of course.

They do seem to hate the american people, after all, so these complaints about SSI do have some merit.

Now, the question really is Which debts will be paid and which will not?

You have no legal right to your Social Security benefits.
Congress could vote tomorrow to reduce or eliminate your benefits completely.

 

[Flopper]

Social Security is a fraud because people are being told they are saving for their own retirement when they are not, the money is being spent as it's brought in just like any other tax.

Social Security is not a savings plan. I don't know whose telling people that but I doubt it's the government. The fact is Social Security is insurance, to be exact it's Old-Age, Survivors, and Disability Insurance program. Insurance pays only if a certain event occurs. Live insurance pays if you die. Social Security pays if you live.

 

[Toro]

I think this is exactly right. All financial assets are claims against something. All financial assets rely on a growing economy to be fully funded. A declining economy will mean declining stocks, bonds, real estate, commodity prices, and SS obligations.

Consider something that nobody says is a Ponzi scheme — your 401(k). What happens here is that you work while you’re working age. You earn money. You take some of that money to buy shares in firms. Your expectation is that at a future date when you’re not working anymore, you’ll be able to exchange those shares for money. More money than you paid for them in the first place. Why would that work? Well, it could work because you were just stupendously lucky. But the reason we anticipate that it will work systematically is that we anticipate that there will be economic growth. In the future, people will in general have more money, so assets will be more valuable. Save today, sell tomorrow.

Social Security is not a prefunded pension plan or a savings scheme. But it’s actuarial situation is just the same as a stock market investment in this regard. If future economic growth is lower than anticipated, it will be impossible to pay the anticipated level of benefits. On the other hand, if future economic growth is faster than anticipated, it would be possible to pay even more benefits than had been promised. As it happens, over the past 25 years economic growth has been slower than was anticipated a few decades ago. This does create a financial problem for Social Security. But it’s the exact same financial problem as exists for private sector savings schemes. But neither Social Security nor being mildly over-optimistic about your stock picks is a “Ponzi scheme.” A Ponzi scheme is a fraud where in the end the whole pyramid goes bust a bunch of people wind up with no money at all. The absolute only reason Social Security could ever go bust like that would be if elected officials decided they wanted to stop paying benefits.

Social Security Is No More A Ponzi Scheme Than Is Anything Else That Relies On Future Economic Growth | ThinkProgress

Why should I rate the opinion of a political blogger over that of two economists? Try using some critical thinking skills and rate the sources.

I will tell you that as someone with a degree in economics, and having spent nearly 20 years working in the capital markets, the blogger is dead on when he says that the nature of ALL financial securities is that they require growth to continue rising. It doesn't matter if it is a government bond, a corporate bond, a piece of real estate, a stock, or an intangible account in the SS trust, it is all the same - you need perpetual growth or the value declines.

Again, no one has yet to differentiate between the cash flows and economics of a government bond fund and the SS trust fund. The argument that the critics put forth is that "you need to have more people to keep funding SS." But that is exactly true of a government bond. If you do not have growth in the economy, then interest costs on the national publicly traded rise as proportion of national income. This means you either have to raise taxes or cut spending to keep the proportion of government services constant. Or default. SS is the same. If there isn't enough growth, then the value of SS declines, and we either have to cut spending or raise taxes to make up for that decline. That's why if you call SS a Ponzi Scheme, you have to call all government debt a Ponzi Scheme.

The enterprise value (stock plus debt net of cash) of a company is no different. If a company has a declining customer base, the enterprise value of the company will fall. That is the nature of ALL financial assets. Real estate is the same. If you have declining incomes and population, the value of real estate declines. You need rising incomes to perpetuate growth in the real estate market. You need rising incomes and populations to support rising stock prices. You need a new set of buyers to pay out the current holders. That is why it is wrong to say that SS is a Ponzi Scheme merely because it needs a perpetual supply of more people to support it. Krugman is wrong. Samuelson is wrong. That is the nature of ALL financial assets. Thus, if that is your only criteria for a Ponzi Scheme, then all financial assets are Ponzi Schemes. And that's nonsensical.

A requirement for a Ponzi Scheme is that it needs new people to support the old people in the system, but that is not the ONLY requirement. It's like saying anything with an engine is a car. An engine is a requirement for a car, but simply because there is an engine, it doesn't mean the vehicle is a car. It could be a plane or a train. Simply because an economic system requires more people to supply the current people does not make it a Ponzi Scheme. That's the argument which is being made. For something to be a Ponzi Scheme, it needs to be without an economic basis, not just that the new people are paying out the old people.

 

[Quantum Windbag]

You people can spin shuck and dive until Aunt Bessie calls the cows in for milking.
One thing your pontificating about trust funds, bonds, interest etc. cannot get past is Obama's statement that he was unsure SS Checks could be sent out for August payment.
If there's all this coin hanging around, why did Obama threaten SS recipients with non-payment?

Since all S.S. funds are invested in US debt, any money needed to pay benefits not covered by payroll taxes must come from redeeming Special Issue Treasury Bonds held by by the Trust. That amount was less than 5% in 2010. It should be a bit less this year. If the treasury did not have sufficient funds to cover this redemption, then it would take the funds out of current sales of treasury bonds.

So if Congress had not raised the debt ceiling and the treasury did not have sufficient funds to handle say a 5% redemption then benefits would be reduced by 5%. So someone would not get paid.

The US as well as most nations refinance their debt, that is they issue new debt to cover old debt as it comes due. This is a very common practice with commercial bonds. It 's not a problem for most businesses and it's currently not a problem for the government. However if the debt continues to grow faster than GDP which it is doing now, then it will become a concern to all.

The truth is that special interest binds actually reduce the deficit when they are redeemed. That allows the Treasury to issue more bonds and pay SS with those new bonds. If you, like Obama, do not understand this, why should we listen to anything either of you to say about the issue at all?

 

[bripat9643]

The interest earned on the trust fund in 2010 was 108 billion.

2011 Trustees Report: Section IV.A, Short-range estimates

The interest earned on the "Trust Fund" was zero. You can't earn money by paying it to yourself.

 

[Quantum Windbag]

The interest earned on the trust fund in 2010 was 108 billion.

2011 Trustees Report: Section IV.A, Short-range estimates

The interest on the debt was $413 trillion. Do you see a problem with those numbers?

No it wasn't. Were you homeschooled in a meth lab or what?

Does that mean the Treasury Department is lying to me?

Government - Interest Expense on the Debt Outstanding

How about the Dallas Federal reserve when they tell me that the off book liability of the trust fund is over $100 trillion?

If you actually understood the issues here if might be possible to talk to you intelligently, as it is all I can say is that SS makes a Ponzi scheme look like a good investment.

 

[Quantum Windbag]

I think this is exactly right. All financial assets are claims against something. All financial assets rely on a growing economy to be fully funded. A declining economy will mean declining stocks, bonds, real estate, commodity prices, and SS obligations.

Social Security Is No More A Ponzi Scheme Than Is Anything Else That Relies On Future Economic Growth | ThinkProgress

Why should I rate the opinion of a political blogger over that of two economists? Try using some critical thinking skills and rate the sources.

I will tell you that as someone with a degree in economics, and having spent nearly 20 years working in the capital markets, the blogger is dead on when he says that the nature of ALL financial securities is that they require growth to continue rising. It doesn't matter if it is a government bond, a corporate bond, a piece of real estate, a stock, or an intangible account in the SS trust, it is all the same - you need perpetual growth or the value declines.

Again, no one has yet to differentiate between the cash flows and economics of a government bond fund and the SS trust fund. The argument that the critics put forth is that "you need to have more people to keep funding SS." But that is exactly true of a government bond. If you do not have growth in the economy, then interest costs on the national publicly traded rise as proportion of national income. This means you either have to raise taxes or cut spending to keep the proportion of government services constant. Or default. SS is the same. If there isn't enough growth, then the value of SS declines, and we either have to cut spending or raise taxes to make up for that decline. That's why if you call SS a Ponzi Scheme, you have to call all government debt a Ponzi Scheme.

The enterprise value (stock plus debt net of cash) of a company is no different. If a company has a declining customer base, the enterprise value of the company will fall. That is the nature of ALL financial assets. Real estate is the same. If you have declining incomes and population, the value of real estate declines. You need rising incomes to perpetuate growth in the real estate market. You need rising incomes and populations to support rising stock prices. You need a new set of buyers to pay out the current holders. That is why it is wrong to say that SS is a Ponzi Scheme merely because it needs a perpetual supply of more people to support it. Krugman is wrong. Samuelson is wrong. That is the nature of ALL financial assets. Thus, if that is your only criteria for a Ponzi Scheme, then all financial assets are Ponzi Schemes. And that's nonsensical.

A requirement for a Ponzi Scheme is that it needs new people to support the old people in the system, but that is not the ONLY requirement. It's like saying anything with an engine is a car. An engine is a requirement for a car, but simply because there is an engine, it doesn't mean the vehicle is a car. It could be a plane or a train. Simply because an economic system requires more people to supply the current people does not make it a Ponzi Scheme. That's the argument which is being made. For something to be a Ponzi Scheme, it needs to be without an economic basis, not just that the new people are paying out the old people.

That makes investing in a gamble, not a Ponzi scheme.

I did differentiate between the cash flow of a pension fund and SS.

So, again, why should I listen to a blogger when I have two Nobel Prize winning economists that tell me that SS is similar to a Ponzi game?

 

[bripat9643]

You can't pay yourself interest, and you can't loan money to yourself.

Why is it so hard for leftwing nitwits to understand that?

US government funds and the trust fund are separate entities.

No they aren't, nitwit. They are both arms of the government. Your comment is like saying your right hand is not the same entity as your left hand.

I find it incomprehensible how tenaciously the morons in here cling to their delusions.

By law the S.S. trust is held in trust for the surviving beneficiaries. By law, the funds must be invested in government bonds or be paid to beneficiaries.

So the law says a pile of worthless scraps of paper is held "in trust" for the surviving beneficiaries. I can't imagine any claim more idiotic.

If the trust fund is depleted, the benefits will be reduced to S.S. payroll taxes. There is no provision in the law that allows the government funds to be used to supplement S.S. funds.

There is nothing in the trust fund that can be marketed for cash. It's worthless. It was "depleted" the day it was created.

 

[Toro]

Try to keep up. Government collects payroll taxes, government spends the money, government keeps tabs of how much money it spent by issuing t-bills to itself, government considers the t-bills it issued to itself to be an "asset." Or as toro calls it, a "collateralized" loan.

I don't call it a collateralized loan. It's a non-collateralized loan. What is US Treasury debt collateralized against? The Lincoln Memorial? FFS, I thought you worked on Wall Street. Try to keep up.

Do you see the difference between these scenarios?

You lend Tim $20,000. He agrees to pay it off with interest. You list Tim's debt to you as an asset.

Tim has a $20,000 liability. You have a $20,000 asset.

You spend $20,000, you write an IOU to yourself and agree to pay yourself back with interest, you list the debt as an asset.

The latter is the "social security trust fund."

Wrong. Fail.

The government has a $20,000 liability.
You have a $20,000 asset.

It works like this, Mr. Big Shot Wall Street / Consultant

1. You give your money to the SS trusts. Your balance sheet looks like this
Dr. $20,000 in SS

2. The SS trust has created a liability because it has taken your money. It then lends that money to the Treasury. The SS trust's balance sheet looks like this
Cr. $20,000 to you.
Dr. $20,000 to the US Treasury
Net balance $0.

3. The Treasury spends the money. The US Treasury has a balance sheet that looks like this
Cr. $20,000 to the SS trusts.

The US government has taken your money and spent it. It now owes you $20,000 through the SS trusts. The assets and liabilities in the trusts, and thus the liabilities of the US Treasury, will rise and fall based on contributions and redemptions, which is a function of the level of economic growth.

 

[Flopper]

So the government sends money to the government and then spends it? What does it pay you back with?

You have to be really stupid not to understand that there is no money in the trust fund. There are no investments. No interest is paid. The "Trust Fund" is a drawer full of worthless IOUs that one government department issued to another government department. They aren't marketable, which means they have no value to anyone.

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.

IF SSI's accounts are worthless, so too are all FEDERAL GOVERMENT issed debt instruments.

Now, the question really is Which debts will be paid and which will not?

Will The USA pay its own people that it owes money to, or will it decide to ONLY pay everybody else it owes money to?

Seems to me that the American people ought to be first in line to get paid.



No guarantee that the masters will decide that, of course.

They do seem to hate the american people, after all, so these complaints about SSI do have some merit.

Now, the question really is Which debts will be paid and which will not?

You have no legal right to your Social Security benefits.
Congress could vote tomorrow to reduce or eliminate your benefits completely.

True, and they could take away most of your income in taxes, shutdown Medicare, reduce the military to a token force, and do all kinds of crazy stuff.

The US would default on it's debts only if Congress refused to raise the debt limit or people lose faith in the government's ability to make good on it's financial obligations. If that ever happened, the market prices of treasury bonds would fall like a rock. Strange at it make seem, Special Interest Treasuries could still be redeem at par, the price paid for them. It would take an act of Congress to allow the government to default on Special Interest Treasuries. This makes them just a bit safer than normal treasury bonds.

 

[bripat9643]

No, I don't need another link. I have the law and the Social Security Actuarial Reports.

Social Security Act Table of Contents
Actuarial Publications

What you have is fraud on a vast scale. Anyone who swallows that horseshit should be institutionalized.

 

[Toro]

I did differentiate between the cash flow of a pension fund and SS.

No you did not. If you did, you should be able to inject the differences into this schematic.

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
​

This is the money trail. Change it based on how SS and a government bond fund is different.