Social Security is Not a Ponzi Scheme, Mr. Perry

[Quantum Windbag]

Funny thing, You can find literally dozens of Quotes online from Liberals, and Democrats, Dating back decades, saying the same thing Perry said. Calling it a ponzi or Pyramid Scheme. Why the Focus on Perry?

Because Perry is a Republican.

 

[bripat9643]

When did I agree to this so-called "contract?"

When SS became law.

I wasn't even born when SS became law. How do you agree to something when you haven't even been born yet?

That's how it works in America. We make laws, you obey them.

Yep, and that's the exact opposite of a contract, which is a voluntary agreement.

If you want to live in a country where you either don't have laws, or don't have to obey the laws you do have,

I would encourage you to move.

Regardless of your counseling skills, SS is not a contract.

You admitted it.

 

[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.

Moving the goal posts?

I thought cash flow was both into and out of a fund, not just in. No wonder I can't get through to you, you do not use generally accepted accounting standards, you use government accounting.

Maybe I can't get through to you because you're either not reading my posts or aren't understanding basic concepts. So I highlighted for you what you said I did not write.

Let's try this again, we are talking about pension funds that invest in government bond funds, not government bond funds.

We are talking about any fund that invests in government bonds. In this example, it is a fund that invests solely in government bonds.

Pension fund cash flow:

Client >> money into fund >> bonds >> time passes >> bonds mature >> client gets paid from his investment and the mature bonds
​

Right. That's the same thing as this.

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​

Juxtaposing the two

Client >> money into fund = Tax money
bonds = Buys bonds ---> Your account is credited
time passes = Government spends all your tax money
bonds mature >> client gets paid from his investment and the mature bonds = Government redeems your bonds from the taxes of others and gives you back your money plus interest

That's the same. Let's look at SS.

Social Security:

Taxpayer >> money goes to retirees >> since current payouts exceed income no money goes to bonds >> time passes >> no bonds to mature >> taxpayer gets paid from new taxpayers
​

Since the SS trusts do not buy bonds, I've removed the inserts which don't relate to cash flows. Particularly

>> since current payouts exceed income no money goes to bonds
and
>> no bonds to mature

SS never buys bonds, no matter if the payout does or does not exceed income.

So now your cash flow schematic looks like this

Social Security:

Taxpayer >> money goes to retirees >> time passes >> taxpayer gets paid from new taxpayers
​

Putting it side by side with this

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
​

Taxpayer = Tax money ---> Your account is credited
money goes to retirees = Government spends all your tax money
time passes >> taxpayer gets paid from new taxpayers = Government gives you back your money plus interest from the taxes of others

So removing those two inserts of yours

>> since current payouts exceed income no money goes to bonds
and
>> no bonds to mature

We see that yours and my descriptions of cash flows are the same.

And what did I remove? Your comment that there are no bonds. In the schematics of the cash flows of a government bonds fund and SS, the only thing that has changed is the presence of bonds. A bond is merely a claim on a cash flow. It does not affect the actual cash flow. Whether a bond is there or not does not change the cash flow. If you lend me money and I pay you back, it does not matter if we had a legal contract or I just gave you my word.

That's my point.

The cash flows of the SS trusts and a government bond pension fund are the same. A bond is merely a claim on a cash flow. It does not affect the actual cash flow.

You've just made my argument. You just don't know it.

If you set up a mutual fund that invested solely in government bonds, the cash flows through the bond fund look just like the cash flows through the social security trusts. It is irrelevant that a bond fund is "investing" because all "investing" is is buying and selling securities. And a security is a claim on a cash flow. It does not effect cash flows.

Tell me again how that is no way, shape, or form, a Ponzi game, and how it will continue to work as long as the demographics continue to endlessly grow.

A pay as you go system can continue forever as long as the contributions exceed the payouts. And the contributions can always exceed payouts if economic growth and/or population growth exceeds the interest rate promised to recipients.

 

[Toro]

OK, fair enough, I'll fix it.

Your name is Joe. You spend $20,000, you write an IOU to yourself, but you call yourself "Steve" when you do it and agree to pay yourself I mean Joe back with interest, you list the debt as an asset.because "Steve" owes you, Joe, the money. You don't owe it to yourself because Toro thinks that would be fraud. But if you call yourself "Steve" then Toro's good with it so you go ahead.

Happy now?

Nope. Because you have your analogy wrong.

Kazmaster sends the government his money for a claim on the tax revenues of the government. Kazmaster has an asset. The government has a liability. The claim is on all future cash flows of the government. Because Kazmaster is an Awesome Master of the Universe, he doesn't have to work ever again. Instead, he lives off the claims owed to him by the government. Others work to provide economic growth which generates the tax revenues to pay off his claim.

You want numbers?

If government collected $100 in tax revenue (other then social security) and $40 in "surplus" social security payments and spent $200, then they would:

Say they had a deficit of $60 (200-100-40).

However, they would issue $100 in treasuries.

If the program is not a fraud, how does the government have $100 in debt when they claimed we had a deficit of $60?

They wouldn't issue $100 in T bills. They would issue $60 in T bills. The operating budget would have a deficit of $100. The unified budget would have a deficit of $60. The government would have a $60 liability to T bond holders and a $40 liability to the SS trusts. To pay that $40 liability in the future, the government would either have to raise taxes or issue Treasury bonds, all else being equal.

No to mention that as I've pointed out, Mr. libertarian, that you:

- Give your children your social security bills

- You give them a "trust" fund to defray the cost, but you give them the bills to fund the trust fund. There is you and your children. Countries are people, individuals. Government, corporations, charities, unions, etc. are not living beings, they are structures created by man. And you are giving your kids the bills for social security and the bills to fund what you lie to them about when you said you funded it.

That's one reason why we should scrap SS as constructed and give people a choice to either invest their SS taxes themselves, or for those who don't wish to manage their own money, run SS like a real pension fund, like they do in Canada and Norway. This would be a hybrid of the Chilean and Canadian models.

 

[JakeStarkey]

Funny thing, You can find literally dozens of Quotes online from Liberals, and Democrats, Dating back decades, saying the same thing Perry said. Calling it a ponzi or Pyramid Scheme. Why the Focus on Perry?

Because Perry is a Republican.

Because he is running for president, you think?

Bachmann beat on him like a drum.

Romney continues to smile.

 

[thereisnospoon]

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's all fine and dandy. A degree in economics is not required to know these things.
You state these conditions (above) as though you are attempting to place a negative spin on them. As though growth and profit were evil.
No you did not state those exact words, so don't ask. It is the tone of your posts that is bothersome.
In any event where your idea goes moot is this:.....There IS NO Social Security Trust Fund. At least one that contains money. The federal government has been using SS tax revenues as though these dollars were simply another tax. Which Social Security actually is. It is a TAX. The only difference is instead of government using this particular tax to provide a service, government simply takes our money uses it for their own purposes and gives SOME of it back after we retire. Well guess what. If a retiree dies, the government keeps the money.
SS is a huge rip off. Why people defend this idiotic system is a mystery.
And please. DO not give me this bullshit about "We paid into that system"....Yes you did. But you also paid income taxes, sales taxes etc. Those dollars are not coming back as dollars either.
So what do we do....
Very simple.
The government sets up a system where each workers Social Security is an individual pension fund. The money cannot be touched for any other purpose. When the person reaches retirement age he or she begins drawing from their account. How is the monthly stipend determined? Simple. Take the age of retirement and subtract that from the average life expectancy divide by 12 and there is the monthly stipend.
If the person dies, the money goes to a directed beneficiary just like an insurance payoff.
If both parents pass, their children or next of kin receive the stipend upon THEIR retirement. After all, it's an asset just like anything else. The children inherit the money.
Oh, one more thing. This new plan .....Not taxable. Nope ,the fucking feds don't get a second bite at the apple.

 

[kaz]

Funny thing, You can find literally dozens of Quotes online from Liberals, and Democrats, Dating back decades, saying the same thing Perry said. Calling it a ponzi or Pyramid Scheme. Why the Focus on Perry?

That was completely different. They said that when Bush was President...

 

[PLYMCO_PILGRIM]

Funny thing, You can find literally dozens of Quotes online from Liberals, and Democrats, Dating back decades, saying the same thing Perry said. Calling it a ponzi or Pyramid Scheme. Why the Focus on Perry?

Because Perry is a Republican.

Correct!

 

[kaz]

You want numbers?

If government collected $100 in tax revenue (other then social security) and $40 in "surplus" social security payments and spent $200, then they would:

Say they had a deficit of $60 (200-100-40).

However, they would issue $100 in treasuries.

If the program is not a fraud, how does the government have $100 in debt when they claimed we had a deficit of $60?

They wouldn't issue $100 in T bills. They would issue $60 in T bills. The operating budget would have a deficit of $100. The unified budget would have a deficit of $60. The government would have a $60 liability to T bond holders and a $40 liability to the SS trusts. To pay that $40 liability in the future, the government would either have to raise taxes or issue Treasury bonds, all else being equal.

You have achieved the liberal ideal. You can simultaneously hold two completely contradictory thoughts in your mind and fully and equally believe both. Is there a trust fund? Yes. Where is it. Treasuries. So the government issued treasuries? No. But you said... Is there debt? No, well yes, well no, I mean yes... You drank the Kool-Aid, you just proved it.

No to mention that as I've pointed out, Mr. libertarian, that you:

- Give your children your social security bills

- You give them a "trust" fund to defray the cost, but you give them the bills to fund the trust fund. There is you and your children. Countries are people, individuals. Government, corporations, charities, unions, etc. are not living beings, they are structures created by man. And you are giving your kids the bills for social security and the bills to fund what you lie to them about when you said you funded it.

That's one reason why we should scrap SS as constructed and give people a choice to either invest their SS taxes themselves, or for those who don't wish to manage their own money, run SS like a real pension fund, like they do in Canada and Norway. This would be a hybrid of the Chilean and Canadian models.

There is a trust fund, yet you agree there are no assets, but there are assets in treasuries. But we didn't issue treasuries... Again, the liberal ideal.

No one who ever grasped libertarianism would argue that. I believe you when you say you drank the kool-aid, I do not believe you were ever a libertarian.

 

[NYcarbineer]

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

And I called him an asshole at the time for doing so.

Feel better?

Now he wants to extend those cuts, and also give them to the Employers as well, and pay for it all by Raising Taxes on people making over 200k. So he can do more Short Term Stimulus that will only buy a short term Blip in GDP, so he can try and ride the "recovery" to another term.

What is he now?

He is wrong. He is suffering, at least in part, from the Republican Disease, the affliction that causes a person to think that every problem America has can be solved with a tax cut.

 

[JakeStarkey]

Perry withstands scrutiny, spirited exchanges with Republican rivals, in debate | The Ticket - Yahoo! News

WASHINGTON (AP) — Rick Perry 1.0 thought Social Security was a "disease" inflicted on the population by the federal government.

Rick Perry 2.0 thinks Social Security deserves to be saved "for generations to come."

That metamorphosis by the Republican presidential hopeful over recent months contributed to some factual stretches Monday night in a GOP debate, both by the Texas governor and his opponents for the nomination.

A look at some of the claims in the debate and how they compare with the facts:

___

PERRY: On Social Security for younger workers, "No one's had the courage to stand up and say, here is how we're going to reform it."

THE FACTS: Many have done just that. Former President George W. Bush and a variety of Republicans since, including some running for president now, have stood for the position that Social Security should be partially privatized, enabling younger workers to divert some of their payroll taxes to individual investment accounts while the entitlement program is kept whole for those already using it or close to retirement.

___

MITT ROMNEY: "The real issue is, in writing his book, Gov. Perry pointed out that in his view that Social Security is unconstitutional, that this is not something the federal government ought to be involved in, that instead it should be given back to the states."

THE FACTS: Perry indeed roundly criticized Social Security in his book, but not quite to the point of calling it unconstitutional. In words he is trying to walk back now, Perry branded the program the "best example" of the "fraud" and "bad disease" spread by Washington in Franklin Roosevelt's New Deal. Perry furthermore criticized the Supreme Court of that era for "abdicating its role as the protector of constitutional federalism."

That falls somewhere short of declaring Social Security unconstitutional.

Perry now has abandoned such rhetoric, adopting the conventional Republican view in a USA Today column Monday that its finances must be made whole to protect current and imminent retirees and make it viable for "generations to come."

___

MICHELE BACHMANN: Obama "stole over $500 billion out of Medicare to switch it over to Obamacare. ... These are programs that need to be saved to serve people, and in their current form, they can't."

ROMNEY: "He cut Medicare by $500 billion. This is a Democrat president. The liberal, so to speak, cut Medicare. Not Republicans, the Democrat."

THE FACTS: "Stole" is a hyperbolic way to describe the kinds of shifts in budget priorities that happen every day in Washington. To pay for expanded insurance coverage, Obama's health care law cuts $500 billion in payments to the Medicare Advantage program — which a congressional agency said was being overpaid — and to hospitals and nursing homes. Nearly all House Republicans, including Bachmann, later voted for a GOP budget plan that retained the same cuts Obama had made.

___

PERRY: The $814 billion economic stimulus program pushed by President Barack Obama "created zero jobs."

THE FACTS: There is no support for that assertion. The nonpartisan Congressional Budget Office said last year that the stimulus increased the number of people employed by between 1.4 million and 3.3 million as of mid-2010. It cut the unemployment rate between 0.7 and 1.8 percentage points, the CBO found.

Economists debate whether the stimulus lived up to its promise or was worth the cost, but no one seriously argues that it created no jobs. Many believe it helped to end the recession even while falling short of its employment goals.

___

BACHMANN: "I was one of the only people in Washington that said do not raise the debt ceiling. Don't give the president of the United States another $2.4 trillion blank check."

THE FACTS: Love or hate the debt deal, it was not a blank check for the president. Congress controls spending. The president can only suggest how the budget should be divvied up. Moreover, the "check" was not exactly blank. The deal that averted a national default requires automatic spending cuts to kick in if Congress does not accept cuts that will be proposed by a supercommittee.

___

RON PAUL: As a Texan, "my taxes have gone up. Our taxes have doubled since (Perry's) been in office. Our spending has gone up double. Our debt has gone up nearly tripled." Perry responded that he had cut taxes by $14 billion in 65 different pieces of legislation.

THE FACTS: Even though they seem to be contradicting each other, both have a point. Overall, the tax burden has grown, but shifted to some extent from state to local governments. Based on statewide tax collection figures, it is quite probable that Paul's total tax burden has doubled. But Perry did sign 65 pieces of legislation that reduced taxes. Taxes would be much higher in Texas if those laws had not gone into effect.

As for spending, it's reaching $86 billion in the next two years, up from $56 billion in Perry's first two years as governor. That's not quite double, as Paul claimed.

Texas' debt has tripled, primarily because of a Perry-backed move that allows the state to finance road construction with bonds instead of having to use cash.

___

Associated Press writers Stephen Ohlemacher, Christopher S. Rugaber and Ricardo Alonso-Zaldivar in Washington and Chris Tomlinson in Austin, Texas, contributed to this report.

 

[NYcarbineer]

When did I agree to this so-called "contract?"

When SS became law.

I wasn't even born when SS became law. How do you agree to something when you haven't even been born yet?

That's how it works in America. We make laws, you obey them.

Yep, and that's the exact opposite of a contract, which is a voluntary agreement.

If you want to live in a country where you either don't have laws, or don't have to obey the laws you do have,

I would encourage you to move.

Regardless of your counseling skills, SS is not a contract.

You admitted it.

The government enters into contracts all the time. How do you think we get planes, for example, for the military? Or bridges built? etc, etc, etc...

And they use YOUR money for them. Did you agree to each of them? Voluntarily?

 

[JimH52]

This is the way it is:

If Perry wins the GOP nod, the election will be between the tea bagging extremist and the rest of the country's voters. Do the American voters want to return to a W administration, on steroids? The GOP will lose the Presidency in 2012 if they allow the Tea Baggers to force Perry through. They lost the Senate in 2012 because they let the Tea Baggers force a couple of loons into Senate nominations. Perry cannot win the General Election. True Baggers want Bachmann, but it has become obvious she is crazy.

 

[Toro]

You want numbers?

If government collected $100 in tax revenue (other then social security) and $40 in "surplus" social security payments and spent $200, then they would:

Say they had a deficit of $60 (200-100-40).

However, they would issue $100 in treasuries.

If the program is not a fraud, how does the government have $100 in debt when they claimed we had a deficit of $60?

They wouldn't issue $100 in T bills. They would issue $60 in T bills. The operating budget would have a deficit of $100. The unified budget would have a deficit of $60. The government would have a $60 liability to T bond holders and a $40 liability to the SS trusts. To pay that $40 liability in the future, the government would either have to raise taxes or issue Treasury bonds, all else being equal.

You have achieved the liberal ideal. You can simultaneously hold two completely contradictory thoughts in your mind and fully and equally believe both. Is there a trust fund? Yes. Where is it. Treasuries. So the government issued treasuries? No. But you said... Is there debt? No, well yes, well no, I mean yes... You drank the Kool-Aid, you just proved it.

I have no idea what you are talking about. I just showed you the mechanics of how this works.

No to mention that as I've pointed out, Mr. libertarian, that you:

- Give your children your social security bills

- You give them a "trust" fund to defray the cost, but you give them the bills to fund the trust fund. There is you and your children. Countries are people, individuals. Government, corporations, charities, unions, etc. are not living beings, they are structures created by man. And you are giving your kids the bills for social security and the bills to fund what you lie to them about when you said you funded it.

That's one reason why we should scrap SS as constructed and give people a choice to either invest their SS taxes themselves, or for those who don't wish to manage their own money, run SS like a real pension fund, like they do in Canada and Norway. This would be a hybrid of the Chilean and Canadian models.

There is a trust fund, yet you agree there are no assets, but there are assets in treasuries. But we didn't issue treasuries... Again, the liberal ideal.

No one who ever grasped libertarianism would argue that. I believe you when you say you drank the kool-aid, I do not believe you were ever a libertarian.

You are walking around in a fog of ideology, unable to discern what I did and did not say. And the belief system one has is in no way relevant to understanding the flow of funds and the nature of assets and liabilities.

I will explain again.

There is a trust fund.
The liabilities of the trust fund are what is owed to the participants.
The assets of the trust fund are what is owed to the trust by the US Treasury.
What is owed to the trust is a liability of the US Treasury.
The US Treasury does not issue Treasury securities to the trusts.

Hope that helps you understand the issue. If not, would you like me to draw you a picture?

 

[flacaltenn]

For the record, I like Quantum W.

But his OP is wrong.

SS is absolutely a Ponzi scheme (or at least akin to one).

That is all.

For the record, all the people trying to convince me that I am right are convincing me I am wrong.

I'm thinking about using that as a signature quote in my footer.. How much ya want for it?

 

[Flopper]

"Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government." Trust Fund FAQs

The argument really boils down to whether you have faith in the United States government to live up to its financial commitments. There is no gold backing our currency and no collateral that backs up any US debt. It's all about faith and trust. Without it, the Social Trust will become worthless as will all treasury bonds, US Savings bonds, and the US dollar. If the Trust becomes worthless, that will be least of our worries.

 

[MiddleClass]

Perry made the fatal mistake he can never live down by calling Social Security a Ponzi Scheme. Right wrong or indifferent, that comment will be his Waterloo.

 

[Liability]

For the record, I like Quantum W.

But his OP is wrong.

SS is absolutely a Ponzi scheme (or at least akin to one).

That is all.

Your brain is a fucking Ponzi scheme that ran out of new investors years ago.

Carbuncle's best effort.

Obviously, as always, it falls far short and quite flat.

 

[saveliberty]

This is the way it is:

If Perry wins the GOP nod, the election will be between the tea bagging extremist and the rest of the country's voters. Do the American voters want to return to a W administration, on steroids? The GOP will lose the Presidency in 2012 if they allow the Tea Baggers to force Perry through. They lost the Senate in 2012 because they let the Tea Baggers force a couple of loons into Senate nominations. Perry cannot win the General Election. True Baggers want Bachmann, but it has become obvious she is crazy.

They are all better choices than Obama.

 

[Quantum Windbag]

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.

Moving the goal posts?

I thought cash flow was both into and out of a fund, not just in. No wonder I can't get through to you, you do not use generally accepted accounting standards, you use government accounting.

Maybe I can't get through to you because you're either not reading my posts or aren't understanding basic concepts. So I highlighted for you what you said I did not write.



We are talking about any fund that invests in government bonds. In this example, it is a fund that invests solely in government bonds.



Right. That's the same thing as this.

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​

Juxtaposing the two

Client >> money into fund = Tax money
bonds = Buys bonds ---> Your account is credited
time passes = Government spends all your tax money
bonds mature >> client gets paid from his investment and the mature bonds = Government redeems your bonds from the taxes of others and gives you back your money plus interest

That's the same. Let's look at SS.



Since the SS trusts do not buy bonds, I've removed the inserts which don't relate to cash flows. Particularly

>> since current payouts exceed income no money goes to bonds
and
>> no bonds to mature

SS never buys bonds, no matter if the payout does or does not exceed income.

So now your cash flow schematic looks like this

Social Security:

Taxpayer >> money goes to retirees >> time passes >> taxpayer gets paid from new taxpayers
​

Putting it side by side with this

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
​

Taxpayer = Tax money ---> Your account is credited
money goes to retirees = Government spends all your tax money
time passes >> taxpayer gets paid from new taxpayers = Government gives you back your money plus interest from the taxes of others

So removing those two inserts of yours

>> since current payouts exceed income no money goes to bonds
and
>> no bonds to mature

We see that yours and my descriptions of cash flows are the same.

And what did I remove? Your comment that there are no bonds. In the schematics of the cash flows of a government bonds fund and SS, the only thing that has changed is the presence of bonds. A bond is merely a claim on a cash flow. It does not affect the actual cash flow. Whether a bond is there or not does not change the cash flow. If you lend me money and I pay you back, it does not matter if we had a legal contract or I just gave you my word.

That's my point.

The cash flows of the SS trusts and a government bond pension fund are the same. A bond is merely a claim on a cash flow. It does not affect the actual cash flow.

You've just made my argument. You just don't know it.

If you set up a mutual fund that invested solely in government bonds, the cash flows through the bond fund look just like the cash flows through the social security trusts. It is irrelevant that a bond fund is "investing" because all "investing" is is buying and selling securities. And a security is a claim on a cash flow. It does not effect cash flows.

Tell me again how that is no way, shape, or form, a Ponzi game, and how it will continue to work as long as the demographics continue to endlessly grow.

A pay as you go system can continue forever as long as the contributions exceed the payouts. And the contributions can always exceed payouts if economic growth and/or population growth exceeds the interest rate promised to recipients.

You asked me about the difference between cash flow in a pension fund that invest entirely in government bonds and the cash flow in Social Security, then you focus on how the government handles the cash it gets. Since I know you are informed enough to understand that what you asked and what you are talking about are two different things, the only thing I can conclude is you are deliberately trying to obfuscate the issue for everyone else in this thread, because I would hate to think you believe I would fall for it.

Also, as many people have repeatedly pointed out, payouts currently exceed payins in SS, and will only get worse as time goes on. That makes SS an unsustainable Ponzi game, not a pay as you go system.