I'd like to impose a new fiscal measure. Whenever you say either "America is Greece!" regarding our fiscal debt -- or anything like that -- or "Social Security is a Ponzi Scheme!" you have to send $10 to the US Treasury.
Monday's bond markets have the yield on the 10-year Greek bond at 23.54 and on the US ten-year note at 1.95. So enough about that... OK?
Social Security is pay-as-you-go. Ponzi's scheme was not as it depended on continuous doubling the ratio of contributors to investors (read this wonderful treatment by Social Security's historian).
As the above link concludes:
The first modern social insurance program began in Germany in 1889 and has been in continuous operation for more than 100 years. The American Social Security system has been in continuous successful operation since 1935. Charles Ponzi's scheme lasted barely 200 days.
Now, let's just think for another minute about this pay-as-you-go process.
For much of its long and successful history, today's workers have financed the benefits of yesterday's workforce. When demographic factors have led to a funding imbalance, as was recognized in the Reagan years (!), adjustments had to be made to extend full solvency.
Such adjustments once again need to be made and they are not daunting. In fact, the costs of the high-end Bush tax cuts are about analogous to the shortfall in Social Security over 75 years, as both are about 0.8% of GDP. And do not be misled by the insolvency arguments: full benefits can be paid through 2036, at which point the trust fund is exhausted. But at that point, courtesy of pay-as-you-go, the program can still pay 75% of scheduled benefits.
Now, forgive me if I get a little bit spiritual: as I've written before, Social Security was designed to "create a strong link between the aged and the working-age population -- today's workers create the capital, the technology, and the wealth that will support tomorrow's generation. Embedded in its formulas is the notion that those of us who came before, whether they were teachers, accountants, homemakers, mail carriers, barbers, cashiers, or lawyers, have built up the productive capacity of our nation.
When the children of these workers come of age (along with new immigrants), they will earn their living from this infrastructure while also making their own contributions. As they do so, we will peel off some portion of their earnings to provide pensions for their forebears, just as those forebears did for their own predecessors... Social Security is thus an elegant collaborative solution to a universal challenge."
Maybe some people don't want to accept the fact that we're all in this together, but... we are. So unless you want to be sending a crisp Alexander Hamilton into the Treasury, don't be talkin' any of this stuff anymore... capice!?
This post originally appeared at Jared Bernstein's On The Economy blog.
“In comparing the high-income tax cuts to the Social Security shortfall, we wanted to illustrate the hypocrisy of Members of Congress who argue that the tax cuts are affordable but Social Security is not, even though their cost is the same.
http://www.offthechartsblog.org/mcardle%E2%80%99s-still-wrong-on-social-security-and-high-end-tax-cuts/
As I recall, there was a story the other day that NOW 1.75 people pay FICA for each recipient. In the 30s it was SEVERAL HUNDRED payees per recipient!!
But Treasuries are regarded among the most secure investments on earth. They’re backed by the “full faith and credit of the US.” You don’t have to believe that, of course, but I don’t see how you can think that equities markets are somehow more secure. When there is trouble in the markets, money floods out of equities and into Treasuries, because they’re considered safe. People in the market believe that they will be paid back the money they deposit into Treasuries. That’s why the return is low, the risk is low. If you invest in market funds, take a look at how much of those funds are in Treasuries. Chances are, the funds that make up your 401k are investing, in part, in Treasuries. If you invest in individual stocks, look at the company’s statements and see how much money they have in Treasuries. Why are the Treasuries you invest in with your personal retirement funds more secure that the Treasuries the SS administration invests in? If the best corporate money managers on earth believe in the full faith and credit of the US, believe that they’ll be paid back what they’ve deposited into Treasuries, what do you know that they don’t?
RUSSERT: Well, Senator Obama had said that he had -- would have everything on the table for Social Security [SIC!!!] , and now he’s limited that, as well. So all of them can be scrutinized. But I think, Chris, the important thing for voters who are watching this, it’s more than just a game of primary versus the general election. They’re waiting for leadership.
MATTHEWS: OK.
RUSSERT: And if you’re going to make tough decisions as a president, you have to answer tough questions. What are you going to do? Show us how you’re going the lead us. Everyone knows Social Security, as it’s constructed, is not going to be in the same place it’s going to be for the next generation, Democrats, Republicans, liberals, conservatives.
MATTHEWS: It’s a bad Ponzi scheme, at this point. Yeah
[WTF???????? IS MATHEWS SAYING???]
Read more: http://newsbusters.org/blogs/noel-sheppard/2011/09/13/flashback-2007-tim-russert-and-chris-matthews-agree-social-security-b#ixzz1Xsbek5xS
There are certainly potential problems with Social Security, like demographic shifts, or the political danger that the general fund (whose contributions are somewhat progressive) will steal the money from Social Security. But calling it a Ponzi scheme is no different from saying 2+2=5.
This is getting repetitive. FDR knew what he was doing when he insisted on using payroll taxes to fund it, and when he signed the bill providing for that said something like "there, now they can never take it away".
The Republicans assaulted the program from day one and as usual they have repeatedly called it defamatory names and referred to it as something other than what it is . It was not designed strictly as a senior retirement program as the Republicans morphed it in to as a tactic to set a divide between the senior and the youth . It does retire seniors while making jobs available for the youth . That was the reason the French youth rioted when Sarkozy suggested raising the retirement age . SS is as much for the youth as it is for seniors . The working youth pay taxes and spend while the seniors pay taxes and spend . Exactly what a sick economy needs .
There wasn't anything wrong with SS during the Reagan years and isn't today . They just wanted to increase the amount in the SSA account to hide over spending which is continued today . Which means the reported deficit is a fictitious number .
http://www.ssa.gov/oact/progdata/assets.html
Social Security if funded by TAXES, correct?
Do you know of a nation where no one pays taxes ? Only a thief tries to live off what others pay taxes for .
It's another relic of the 1930s, can't meet its obligations, must grab even more from those working.
If we were in this together, we would sell our collective assets to put the program on a sound footing.
Repubs believe social issues should be resolved at the local level, and by freedom of choice on when/where/how to give.
"Reflecting this hubris, benefits were recklessly expanded, by 13 percent in 1968, 15 percent in 1969, 10 percent in 1971 and a staggering 20 percent, in a political bidding war between President Richard Nixon and congressional Democrats, in 1972, for a total benefit surge in 1967-972 of 71.5 percent. Annual cost-of-live-adjustments (COLAs) insulating benefits from inflation, also enacted in 1972, began in 1975."
The result was a fourfold assault on the system. Higher benefits and longer lives for those already collecting, lower births and fewer economic prospects for those paying in.
As a result, for many boomers the retirement years are looking far from secure. Things are also grim for those under 50, as they will certainly not get out what they paid in; but they are in peak earning years and have time to adjust. As for anyone under age 30, many of them have inherited the worst of all possible worlds: the need to have to save for their own retirement, a terrible job market, student loans for degrees in fields that aren't economically viable, and a government that will compel them to bail out their elders. Samuelson's incredibly optimistic assumptions must read like a fairy tale to them.
This is the Paper Read it for Yourself,
http://www.iza.org/de/calls_conferences/pensionref_pdf/panel_stiglitz.pdf
I want the FREEDOM to manage my own money, myself.
And I'm sure you worry all the time about the fact that all the other countries of the world who also hold US Treasury bonds (along with the millions of American companies and individuals who hold them) are holding nothing but pieces of paper!
In reality, a treasury bond is not nothing. It is an investment like any other. Did you really think that the government should just pile up dollars forever, waiting to use them?
First off, I didn't want them to TAX me in the first place. But since they have, pile up versus spend and borrow and now we pay interest, I'd take pile up.
They find both equally distasteful.
I want the FREEDOM to manage MY money, myself.
As for giving, again, I accomplish that at the local level through church, and habitat for humanity.
Repubs are decent too, we just want individual freedom to live, work, and give as WE see fit. Oh, and we also understand there isn't a money fairy.
Does anyone really buy into that anymore.
A few weeks ago we had the catastrophic debt ceiling crisis.....I for one, felt NOT in it, not in it at all. We're taught, told, punished and forced to live with our " credit issues ", live within our means...and those means are getting leaner and leaner, for " most " of us. Decisions we have to make, purchases we don't make, vacations we don't take.
But the congress, senate, the President even, squabbling like five year olds over who gets the shiny red firetruck, and then closing down the house while they all run off for their vacation time, yeah, well earned!!
They are like a pack of rabid politicians falling over one another in some power struggle that benefits no one!
How dare them discuss or even put social security on the table...that belongs to " us ", yes, " we the people..." oh, that's right, they already have touched it!!!
They've taken every single penny we've given them and put us in hole we can't climb out of thinking somebody somewhere is going to throw us a magic rope to climb out.
I know, I know, a few more years, maybe things will be looking better. The thing is, for many of us, a few years is now, this is our life and we all only have so long to live it.
Out of many, one.
We are one nation, under God, indivisible - with liberty and justice for all.
For all these folks who want what the 'Founding Father's" wanted, they sure have a funny way of selectively looking at things.