Understanding the Social Security scam
 

In order to understand the Social Security scam you must ask yourself "What is the program supposed to do?" Or in the case of defenders, what is it you believe Social Security accomplishes?

Two of the most common answers are:

1. provide destitute seniors something to live on
2. act as a mandatory retirement savings program for all

Muddying the waters is a standard and brilliant government tactic when it comes to protecting massive programs and Social Security has been no exception. It comprises several different programs at this point so it's hard to pin down a strict purpose.

Let's assume that you believe the main purpose of Social Security should be to give destitute seniors something to live on, i.e. welfare for the elderly.

That's a great idea. Feeding impecunious retirees is a laudable goal.

However, as soon as you frame Social Security as a welfare check for the aged, you realize instantly the implementation is crazy. This "welfare" system is sending checks to Warren Buffett! The majority of the checks are cut to people who are not destitute! And the kicker is that the tax which ostensibly funds the program (it doesn't, see below) is levied on those who can least afford it! It is a system that takes money from the struggling working class and gives it to a class that is mostly comfortable retirees along with a few that are broke.

Social Security as welfare fails miserably. Anyone can see that there is a better solution to feed starving retirees.

So let's try framing Social Security as a mandatory retirement savings program instead. This is where the scam really gets exposed.

The first thing you should know is that Social Security taxes do not fund Social Security checks. This is hard to believe, I know, because we've all been told differently, but it's true. Revenues from Social Security tax are not in any way earmarked, saved, held aside, locked away, or anything else.

The Supreme Court case Fleming v. Nestor (http://www.ssa.gov/history/nestor.html) established that the taxes you pay for Social Security are just another tax and the revenues are not distinct from the general fund. Furthermore, this case established that the government has no binding obligation to pay you one dime of a Social Security benefit. Of course, they promulgate a false sense of entitlement by referring to the debt as an "obligation", but it is not an obligation.

But wait, they are tracking the revenues and outlays and the trust fund aren't they? There *must* be something tying my Social Security taxes to the actual outlays, right? It's all internal accounting shenanigans. Your Social Security Taxes might as well be labelled "The Silly Tax" and the revenues would be as closely tied to SS. It's all part of the charade to keep us complacent about the 15.3% payroll tax. The bottom line is that the govt revenues go into a big pot, and they cut Social Security checks out of that pot, and they make some notes about it for internal accounting purposes. The so-called excess revenues that should be in the trust fund (more on the trust fund below) are just a spurious categorization of general funds.

What this means is that there is no legal or regulatory connection, none whatsoever, between what you pay into Social Security and what you get out of it. [em]Benefit calculations do not take into account the amount of tax you paid.[/em] This should be indication enough that it's not a retirement savings plan. Your Social Security taxes are just another tax. Your benefit is entirely up to the whim of a future congress. They are not bound.

You may think this makes it hardly sound like a retirement program and more like a general benefit or giveaway, while providing cover for an unconnected burdensome tax. And you'd be right.

So much for being a retirement program but it get worse, because there's a "trust fund" myth foisted on the public. The myth serves to perpetuate the notion that it is a retirement savings program. Simply using the word "trust fund" implies as much. It gives people the impression that there is a huge asset ready for disbursement to all the people who paid into it. It implies that your money has been earmarked and kept safe. But that is entirely false.

Instead of real assets, there is a note from Congress that says "We promise that a future congress will continue to fund this program". That's all there is. And the note itself is only there to further the pretense that there is some kind of relationship between your Social Security taxes and the benefit coming to you. But there's no relationship. It's just internal accounting shenanigans.

And these taxes that are disingenuously labelled as Social Security tax are levied disproportionately on the poor. A single mother living on $10,750 a year pays $1500 in Social Security tax, with no way out of it. It's taken right off the top before she can even start making deductions. And since I've already shown this tax for the lie that it is, any reasonable person can see this is outrageous.

The whole thing is a giant smokescreen to enable the government to justify onerous taxes on the poor and middle class and then fund massive giveaways to the rich.

Social Security is often mis-characterized as a pyramid scheme by detractors, but this could only be accurate if there was an actual pile of money resulting from the scheme that will go to the early contributors. There is no such asset.

So, to summarize:

1. It fails miserably when we frame it as a welfare program. It is in fact nearly the opposite of a welfare program, transferring money from the working poor to the wealthiest class of people.

2. If we frame it as a retirement savings program we see that there's no savings happening by any definition of the word.

3. The "trust fund" is a lie, and in fact is a convoluted pretense designed to reinforce a mistaken belief about the relationship between your Social Security taxes and Social Security benefits.


So, what is GOOD about Social Security?

A good number of retirees in penury are able to feed and clothe themselves because of Social Security checks. But this minor good can be achieved in a more effective way, although it wouldn't provide a nice smokescreen for taxing the hell out of the working class. Defending the Social Security status quo requires cognitive dissonance and double speak. The Social Security apologists rely on various fallacious spins.

Here are a some typical apologist positions:

1. The trust fund really is an asset. Just as when you purchase a good, your networth hasn't changed. You now own the good.
response: This is patently disingenuous. The trust fund is more like an accounting of how much you spent on hookers and blow. I'd really like to have one of these apologists point me to the "assets" that the trust fund purchased and how the govt will liquidate it in order to pay my checks down the road.

1.b An extension of the argument above is that if they didn't have a tax surplus to spend, they would just borrow the money, as if spending levels are something that happen in a vacuum. I'll let you work through that prevarication on your own.

2. Without Social Security, there is a moral hazard created for those who would be foolish and not prepare for their retirement.
Response: This is a common defense, but it is a red herring, since Social Security does not save their money anyway, and there are plenty of other ways to address this moral hazard.

3. The number of recipients who need that money for basic necessities is greater than you think.
response: this implies a false dilemma. DUCY? I'll let the apologists hang themseves on this one if they want to try pursuing it.

5. Saving for retirement together as a group creates a safety net,whereas individual retirement savings can be wiped out due to bad luck.
Response: If it was a retirement savings program the apologist might have a point here. But this answer assumes the antecedent because there is no real savings going on. Even so, the individual bad luck problem is easily solved with private annuities. But what if the annuity company goes bankrupt? That's what insurance is for. Hell you could make annuity companies buy a government backed insurance plan similar to FDIC if it makes you feel better, but this group safety net argument is just a red herring. There are plenty of ways to solve it without ripping off the poor.

6. "Hey, canada has a trust fund. don't tell me we can't do it."
response; Canada's trust fund is miniscule compared to ours, and they invest it in a foreign market (ours).


which brings me to

7. We just need to lock up the trust fund with real assets and it will be fine.

response: I have explained before why it wouldn't even be possible to have a trust fund even if we wanted to but I'll recap:

1. Holding onto the cash simply ensures a negative return due to inflation.

2. Investing it in the market ensures government control of industry and creates a huge moral hazard for our decisionmakers, as the investment choices of the trust fund would be the biggest prize available to lobbyists and industry. Furthermore the investment directors have little incentive to do their job well. For an excellent example of what happens when you put government bureaucrats in charge of investing your retirement fund, check out the history of the CalPers fund.

3. Investing it elsewhere (such as in foreign treasuries like Canada does) is not politically feasible, nor is it a safe investment since the US is the safest place for capital (yeah yeah I know it's looking shaky right now). Even if those objections were overcome, we return to the same moral hazard as #2, but in this case we have foreign governments vying for the trust fund prize instead of domestic rent-seekers. Hardly an improvement. And the investment decisions would be politically motivated instead of taking into account what is the best investment, which defeats the purpose.

Bottom line, Social Security is a scam from any angle, and in every case where the perceived goal of Social Security is used as a defense, there is a better way to achieve that goal.

natedogg

Re: Understanding the Social Security scam
 

The only people who defend SS are those who are collecting or about to collect checks.

Everyone I know who is under 35 just assumes this money won't be available to them in retirement.

Unfortunately, the former group votes, while the latter doesn't...

Re: Understanding the Social Security scam
 

You are right on many key points, your post has two fairly large errors in it.

1. Benefit calculations do not take into account the amount of tax you paid.

This is not quite right. If you're talking about the basic pension at retirement, the benefit is a formula based on covered earnings and the contributions are also a formula based on current earnings. This means that the benefits are linked to contributions. I think what you mean to say is that the benefit is not intended or calculated to be be equivalent in value to the contributions you put it, i.e. it is not a defined contribution pension scheme. But everyone knows this, and it doesn't (by itself) invalidate the scheme. It makes it a defined benefit scheme with subsidies between members, which occur all over the place in the private market.

2. "Hey, canada has a trust fund. don't tell me we can't do it." response; Canada's trust fund is miniscule compared to ours, and they invest it in a foreign market (ours).

Well, if the money were not taken from taxpayers it would have to go somewhere else. Whether it is consumed or invested, that money would need to flow into the global market somehow, so I also don't buy this argument that "the market isn't big enough to handle it".

Re: Understanding the Social Security scam
 

Don't forget fraudulent CPI numbers.

Re: Understanding the Social Security scam
 

I anxiously await the reply of the master of the status quo. Good post nate (when isn't that the case?).

Re: Understanding the Social Security scam
 

Here is another way in which it is a tax scheme for the rich:
I think it was 2004, when I was doing some research, and found that the ssi surplus for that year was approx 350b.

The general budget's deficit, after taking out ssi outlays and ssi income for the year from the equation, was about 780b.

See how much of the deficit (350/750) 44.87% was paid for with ssi surplus monies.

The individual paid in 1/2 of that 350b and the employer paid in the other 1/2.

Since the cap is 97,500 (we'll say 100k), anyone making less paid ssi taxes on 100% of their monies and had 48% of those ssi taxes go to paying the deficit.

Those football players making 2m a year, were taxed for ssi on 5% of their gross income.

A football player, with nothing more than a high school education,(many don't go to college now before going pro) only contribute taxes on 5% of the gross to ssi, while a college grad with a computer sciences degree pays out taxes on 100% of his income.

Now, this wouldn't be a problem, if it weren't for the fact that the 2+ trillion dollar surplus that ssi suposedly has, cannot be repaid without congress raising taxes.

So, it's the class of citizens who earn under 97.5k that have been paying for a good portion of the deficit every year.

When Clinton claimed to have balanced the budget one year, it was because there was enough of a ssi surplus that year to pay for the deficit in the general budget.

It's a sad sad day. The American Middle Class has let their representatives [censored] on them without a fight.

Re: Understanding the Social Security scam
 

[ QUOTE ]
Since the cap is 97,500 (we'll say 100k), anyone making less paid ssi taxes on 100% of their monies and had 48% of those ssi taxes go to paying the deficit.

Those football players making 2m a year, were taxed for ssi on 5% of their gross income.

[/ QUOTE ]

They also only get benefits based on 5% of their gross income, so this is hardly a flaw.

Then again, you made contributions to my pension plan on 0% of your earnings and I had to make contributions on 100% of my earnings. ZOMG MY PENSION PLAN IS A GET RICH SCHEME FOR YOU!!!!

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
Since the cap is 97,500 (we'll say 100k), anyone making less paid ssi taxes on 100% of their monies and had 48% of those ssi taxes go to paying the deficit.

Those football players making 2m a year, were taxed for ssi on 5% of their gross income.

[/ QUOTE ]

They also only get benefits based on 5% of their gross income, so this is hardly a flaw.

Then again, you made contributions to my pension plan on 0% of your earnings and I had to make contributions on 100% of my earnings. ZOMG MY PENSION PLAN IS A GET RICH SCHEME FOR YOU!!!!

[/ QUOTE ]

Your thinking is flawed. The ssi surplus cannot be repaid. That's 3 trillion dollars of the 10 trillion national debt that was paid for with ssi surpluses.

I was wrong in my original thread when I quoted 2t, it is 3 trillion.

http://www.yellowstone-national-park...s/ssi-fund.htm

If those making 97.5k were paying into a retirement program, then it would be fair and you would be right.

But that is not the case. The Gov't is using the excess to pay the deficit down before going out to the public and borrowing the rest, with no way to repay it, without raising taxes.

So, by raising taxes, they will be taxing us again to pay back our ssi surplus.

It is also a fact, that all they need to do to keep ssi afloat, is raise the cap on ssi taxes to 150k. ZOMG!! A football player making 2m a year, would have to pay ssi taxes on 7.5% of his gross!

We are fast approaching the day, when there will be no ssi surplus due to the outlays to the baby boomers, and congress will not have the 350b each year in ssi taxes to pay down the deficit. Instead they will have to go out and borrow to pay back the 3 trillion to the ssi fund.

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Since the cap is 97,500 (we'll say 100k), anyone making less paid ssi taxes on 100% of their monies and had 48% of those ssi taxes go to paying the deficit.

Those football players making 2m a year, were taxed for ssi on 5% of their gross income.

[/ QUOTE ]

They also only get benefits based on 5% of their gross income, so this is hardly a flaw.

Then again, you made contributions to my pension plan on 0% of your earnings and I had to make contributions on 100% of my earnings. ZOMG MY PENSION PLAN IS A GET RICH SCHEME FOR YOU!!!!

[/ QUOTE ]

Your thinking is flawed. The ssi surplus cannot be repaid. That's 3 trillion dollars of the 10 trillion national debt that was paid for with ssi surpluses.

I was wrong in my original thread when I quoted 2t, it is 3 trillion.

http://www.yellowstone-national-park...s/ssi-fund.htm

If those making 97.5k were paying into a retirement program, then it would be fair and you would be right.

But that is not the case. The Gov't is using the excess to pay the deficit down before going out to the public and borrowing the rest, with no way to repay it, without raising taxes.

So, by raising taxes, they will be taxing us again to pay back our ssi surplus.

It is also a fact, that all they need to do to keep ssi afloat, is raise the cap on ssi taxes to 150k. ZOMG!! A football player making 2m a year, would have to pay ssi taxes on 7.5% of his gross!

We are fast approaching the day, when there will be no ssi surplus due to the outlays to the baby boomers, and congress will not have the 350b each year in ssi taxes to pay down the deficit. Instead they will have to go out and borrow to pay back the 3 trillion to the ssi fund.

[/ QUOTE ]

That's all well and good, but none of it is relevant to the idea that the poor are getting a raw deal because they make contributions on a greater percentage of their earnings. The distortions created by the mechanics of the system do NOT find their root at the contribution/benefit formula. Consider the alternative: the rich pay based on 100% of their earnings but get a benefit based on 5% of their earnings. This is better?

Re: Understanding the Social Security scam
 

"That's all well and good, but none of it is relevant to the idea that the poor are getting a raw deal because they make contributions on a greater percentage of their earnings. The distortions created by the mechanics of the system do NOT find their root at the contribution/benefit formula. Consider the alternative: the rich pay based on 100% of their earnings but get a benefit based on 5% of their earnings. This is better?"

That's not the way it works. The more you pay in to ssi, the more you get when you retire. So the football player would get more ssi at 62 paying on 150k of his income.

We would not have a problem keeping ssi afloat, if the surplus had not been used to pay down the deficit and the ceiling on ssi taxes had increased with inflation.

The MAJOR problem is: Congress is having to come up with a way of dealing with the fact that they will no longer have 300+ billion in ssi surpluses to pay the deficit, while at the same time, having to come up with billions every year to pay back the 3 trillion ssi surplus.

Re: Understanding the Social Security scam
 

[ QUOTE ]
That's not the way it works. The more you pay in to ssi, the more you get when you retire. So the football player would get more ssi at 62 paying on 150k of his income.

[/ QUOTE ]

So what exactly then is your problem with the contribution/benefit rate?

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We would not have a problem keeping ssi afloat, if the surplus had not been used to pay down the deficit and the ceiling on ssi taxes had increased with inflation.

[/ QUOTE ]

This is your problem, and it is totally separate from the issue of setting contribution and benefit rates.

[ QUOTE ]
The MAJOR problem is: Congress is having to come up with a way of dealing with the fact that they will no longer have 300+ billion in ssi surpluses to pay the deficit, while at the same time, having to come up with billions every year to pay back the 3 trillion ssi surplus.

[/ QUOTE ]

Changing the contribution rate so that it exceeds the benefit cost is the only way to eliminate a funding shortfall.

Re: Understanding the Social Security scam
 

Like just about everything President Bush has spoken of as a "big" priority, he has accomplished nothing. This goes for Iraq, ilegal immigration, social security reform, and energy policy.

You and I are on opposite ends of the political spectrum, but we agree that:

1) the tax is onerous on those who can least afford it, a regressive tax.

2) the "trust fund" has simply been used to pay for other things, to the tune of $1,700,000,000,000 over the period from Reagan to Clinton.

3) cognitive dissonance and double-speak are the lingua francas of American politics.

4) the whole thing is a giant smokescreen to enable the government to justify onerous taxes on the poor and middle class and then fund massive giveaways to the rich.

Re: Understanding the Social Security scam
 

You and I also have varying degrees of overlap and conflict in political philosophies and also both agree that social security is a disaster. The question is: how to fix it?

Wind it up? We could buy annuities for pensioners from private insurers and distribute the remainder to non-pensioners.

Individual accounts? It would clearly eliminate ALL of the intergenerational wealth transfer issues that are associated with a defined benefit plan. The issue is that there would be risk associated with the investment returns, and the pool of assets would strain the market. General market production would skyrocket though.

Privatization? All the obligations could be given to the market to sort out via annities and investment accounts.

Anything else?

Re: Understanding the Social Security scam
 

[ QUOTE ]
You are right on many key points, your post has two fairly large errors in it.

1. Benefit calculations do not take into account the amount of tax you paid.

This is not quite right. If you're talking about the basic pension at retirement, the benefit is a formula based on covered earnings and the contributions are also a formula based on current earnings. This means that the benefits are linked to contributions.

[/ QUOTE ]

Not quite.

Your qualified earnings are the basis for your benefit, but the tax you paid on them is not. This means that your tax could go up or down and your benefit would remain unchanged, or vice versa, your benefit could be modified while your tax remains the same. This is one of the KEY aspects of the scam. It is a subtle and effective way to fool us all into believing there is a connection between the amount of Social Security Tax collected and the amount of benefits paid. There isn't.

Let's say you make 46k
They tax you 7k and call it Social Security tax.
The 7k goes into a pot with everything else they collect.
When you retire, they go back and calculate your benefit based on the fact that you earned 46k, NOT that you paid 7k.
The 7k is forgotten.

Don't forget that I'm not arguing that Social Security isn't a defined benefit program. I'm saying it's not a mandatory retirement savings program and it doesn't even come close to being one, but many people think of it as such. This defined benefit program serves as a smokescreen to justify an onerous and tenuously-connected extra tax on the working poor.

Put it this way: you could eliminate Social Security taxes and raise tariffs to the tune of 800 Billion and year and use THAT to fund SS, nothing has changed. (damage caused by tariffs notwithstanding). You could shuffle around all the ways that congress gets revenue and it wouldn't change anything to do with the Social Security administration.

Does that make sense now? It is a subtle trick but it's central to the scam.

[ QUOTE ]
I think what you mean to say is that the benefit is not intended or calculated to be be equivalent in value to the contributions you put it, i.e. it is not a defined contribution pension scheme. But everyone knows this, and it doesn't (by itself) invalidate the scheme. It makes it a defined benefit scheme with subsidies between members, which occur all over the place in the private market.


[/ QUOTE ]

Again, there are no subsidies between members because there's no black box treatment of the funds nor is there any calculation that relies on the funds that are collected as "Social Security" tax.


[ QUOTE ]
2. "Hey, canada has a trust fund. don't tell me we can't do it." response; Canada's trust fund is miniscule compared to ours, and they invest it in a foreign market (ours).

Well, if the money were not taken from taxpayers it would have to go somewhere else. Whether it is consumed or invested, that money would need to flow into the global market somehow, so I also don't buy this argument that "the market isn't big enough to handle it".

[/ QUOTE ]

Sorry if I wasn't clear. I'm not saying the market isn't big enough to handle the 2 trillion in capital. I'm saying the reasons why it's a bad idea for the US Government to manage a $2T trust fund don't apply as strongly to Canada, the biggest one being that Canada can safely invest in foreign markets and avoid the moral hazard that is presented by the government managing such a large fund and playing favorites with the allocation to rent-seekers. This is all moot and only applies if there was some actual connection between Social Security tax revenues and outlays.

natedogg

Re: Understanding the Social Security scam
 

[ QUOTE ]
Let's say you make 46k
They tax you 7k and call it Social Security tax.
The 7k goes into a pot with everything else they collect.
When you retire, they go back and calculate your benefit based on the fact that you earned 46k, NOT that you paid 7k.

[/ QUOTE ]

I still disagree with you on this. The fact that the 7K is not referenced directly does not mean that the benefits are not linked to contributions.

Consider for example the following 2 pension plans:

Plan A: You pay 2% of pay into the pension fund and on retirement you receive a benefit equal to 1% of your total pay over your career.

Plan B: You pay 2% of pay into the pension fund and on retirement you receive a benefit equal to 50% of your total contributions to the plan.

Based on your logic, one of these plans has benefits linked to earnings and one does not. But they are the same plan.

Re: Understanding the Social Security scam
 

[ QUOTE ]
1. The trust fund really is an asset. Just as when you purchase a good, your networth hasn't changed. You now own the good.
response: This is patently disingenuous. The trust fund is more like an accounting of how much you spent on hookers and blow. I'd really like to have one of these apologists point me to the "assets" that the trust fund purchased and how the govt will liquidate it in order to pay my checks down the road.

[/ QUOTE ]

Actually part of the interest paid by the Treasury department on the national debt goes to the trust fund.

From page 99 of the following linky:

Historical Budget Data

900 Net interest:
For 2007 (in millions)

Interest on Treasury debt securities (gross) 405,866
Interest received by on-budget trust funds –71,574
Interest received by off-budget trust funds –97,722
Other interest –7,306
Other investment income –2,661
Total, Net interest 226,603
(On-budget) (324,325)
(Off-budget) (–97,722)

So it appears that there is an accounting transaction entered for the federal government re-imbursing the trust fund.

Re: Understanding the Social Security scam
 

[ QUOTE ]
1) the tax is onerous on those who can least afford it, a regressive tax.

[/ QUOTE ]

Don't they receive payments from the government when they reach retirement age given they meet all the other requirements?

One major objection (among many) I have with SS is that if you're earning an income your benefit payments are reduced. If you socked the money paid to SS into an IRA it wouldn't matter if you had earned income or not.

Re: Understanding the Social Security scam
 

What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.

Re: Understanding the Social Security scam
 

[ QUOTE ]
What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.

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Is a pyramid scheme a scam before it collapses?

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.

[/ QUOTE ]


Is a pyramid scheme a scam before it collapses?

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Good question - I would say yes. I would also argue that social security is not a pyramid scheme in reality. Funding does come from the broader base to support the top layer. But, if the base shrinks they will either increase the tax, lessen the benefits, or change the age of retirement. Either way, people will still get their checks.

Many budgets and pension plans are similar to pyramids schemes. They rely on a certain amount of money coming in to pay the money going out. That doesn't make them scams.

By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.

Re: Understanding the Social Security scam
 

Changing any of those things makes it a scam, because one generation foots the bill for another generation. My letter from SS every year even says that they expect to reduce my benefits before I retire. Great, I am paying for some granny's benefits who never worked a day in her life, and could easily get by on her inheritance from her late husband, but when I retire after 30-40 years of working, selling my soul to the man, I'll be faced with reduced (if any) benefits?

Sounds like a scam to me.

Re: Understanding the Social Security scam
 

[ QUOTE ]
Many budgets and pension plans are similar to pyramids schemes. They rely on a certain amount of money coming in to pay the money going out. That doesn't make them scams.

[/ QUOTE ]

It is "scammy" though when it is not transparent to all partipants that there is an intergenerational cost shift going on, or when participants are told flat out that their contributions are sufficient to meet plan obligations when they are not, or when the contributions to the plan are not held in trust for plan members. To a certain extent, all of these criticisms apply to SS.

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By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.

[/ QUOTE ]

This is wrong (or, at best, backwards). Capitalism creates growth, it does not "rely" on it to be "healthy". Growth is the end product of healthy capitalism, healthy capitalism is not the product of growth.

Re: Understanding the Social Security scam
 

Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

Re: Understanding the Social Security scam
 

I don't know what makes sense. Any minor modification, much less the major ones you speak of, will surely have a hard time, AARP is one of the more powerful lobbbies.

Re: Understanding the Social Security scam
 

[ QUOTE ]
Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

[/ QUOTE ]

But they all get the same thing out, so it's not intriniscally "unfair".

I guess this question must be answered: do you expect the SS system to redistribute wealth or to defer wealth? In my mind, the primary purpose of pension plans is to defer wealth.

Re: Understanding the Social Security scam
 

There is no guarantee as to what you will get out; future Congresses will decide. Nor is there a guarantee as to when you can get it. Thus the idea that you are putting in X to get out Y is a scam.

The idea of the trust fund is also a scam. The government, in the period from Reagan to Clinton, spent $1,700,000,000,000 of the social security "trust fund" on other things.

And the idea that it is helping those in need is a scam, in that the socail security tax is a regresssive tax that hits those who can least afford it the hardest.

If we define a scam as something that is presented as something other than what it is, social security would seem to fit the definition.

Re: Understanding the Social Security scam
 

[ QUOTE ]
Quote:
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By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.


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This is wrong (or, at best, backwards). Capitalism creates growth, it does not "rely" on it to be "healthy". Growth is the end product of healthy capitalism, healthy capitalism is not the product of growth.


[/ QUOTE ]

Type in 'capitalism is a pyramid scheme' in google and see what you get. I think this is open to interpretation.

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
Quote:
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By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.


--------------------------------------------------------------------------------



This is wrong (or, at best, backwards). Capitalism creates growth, it does not "rely" on it to be "healthy". Growth is the end product of healthy capitalism, healthy capitalism is not the product of growth.


[/ QUOTE ]

Type in 'capitalism is a pyramid scheme' in google and see what you get. I think this is open to interpretation.

[/ QUOTE ]

No it isn't and what you're saying is useless nonsense.

Mos Def has the causative argument exactly right. Would you say that evolution is not "constant growth"?

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
Quote:
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By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.


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This is wrong (or, at best, backwards). Capitalism creates growth, it does not "rely" on it to be "healthy". Growth is the end product of healthy capitalism, healthy capitalism is not the product of growth.


[/ QUOTE ]

Type in 'capitalism is a pyramid scheme' in google and see what you get. I think this is open to interpretation.

[/ QUOTE ]
this site?
http://www.roman-empire-america-now.com/capitalism.html

Re: Understanding the Social Security scam
 

FWIW, I'm not going to criticize the notion that Social Security is a scam, but if Social Security is a scam, that doesn't mean it fits the definition of a pyramid scheme. Pyramid schemes are, by definition, unsustainable. Social Security and other social insurance programs are sustainable and the obligations are clearly defined and predictable, hence why the program has existed for 50+ years and relatedly, will continue to exist into the short to mid term future without any intervention whatsoever -- the 1983 Amendments assured that. Even the so-called "Social Security" funding crisis isn't a death knell for the program, as it can easily be made solvent again through some simple policy changes -- although I'll concede those changes may be unpopular. There is no other pyramid scheme, to my knowledge, which can exist for decades (and soon to be centuries) like Social Security has.

I realize I'm not responding to anyone in particular here, but it seems to be a popular to claim Social Security is a pyramid scheme, which seems pretty far from the truth.

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

[/ QUOTE ]

But they all get the same thing out, so it's not intriniscally "unfair".

I guess this question must be answered: do you expect the SS system to redistribute wealth or to defer wealth? In my mind, the primary purpose of pension plans is to defer wealth.

[/ QUOTE ]

It's defered consumption but otherwise you're correct. Also the EIC is available to many lower income earners which certainly offset their SS contributions. Finally SS does redistribute income:

SS Income Redistribution


If I Bill Gates contributes as much to SS as I do, he should get the same distribution as I do. Don't understand why he should get less. BTW I think this is exactly what will happen in the future, the laws will change and there will be many people who contribute but won't get a dime out of it.

Re: Understanding the Social Security scam
 

I will respond to any questions about my responses from the truly interested. I won't bother to rebut any of natedogg's responses because he plays this game periodically and its a waste of time.

[ QUOTE ]
In order to understand the Social Security scam you must ask yourself "What is the program supposed to do?" Or in the case of defenders, what is it you believe Social Security accomplishes?

Two of the most common answers are:

1. provide destitute seniors something to live on
2. act as a mandatory retirement savings program for all

<font color="red"> 1 is the function of SSI which is administered by the SSA but is not part of Social Security. 2 is a misstatement in that it isnt a "savings program" it is a pay as you go retirement system that happends to be running a small surplus, but close enough to one of the main purposes, which is to provide a basic retirement benefit. </font>

Muddying the waters is a standard and brilliant government tactic when it comes to protecting massive programs and Social Security has been no exception. <font color="red"> utter nonsense, SS is a totally transparent system that isnt at all muddied. The inability of some to understand it isnt a "government tactic".
</font> It comprises several different programs at this point so it's hard to pin down a strict purpose. <font color="red"> It provides several different benefits, but I wouldnt characterize them as different programs, and its not at all hard to pin down their purposes, which are the same as the purposes of private defined benefit retirement programs: to provide retirement benefits to the employee, to provide family and survivor retirement benefits, to provide disability benefits, and to provide death benefits. Real tough to pinpoint.</font>

Let's assume that you believe the main purpose of Social Security should be to give destitute seniors something to live on, i.e. welfare for the elderly. <font color="red"> lets skip this because it isnt a purpose and no one who understands it claims it is.</font>



So let's try framing Social Security as a mandatory retirement savings program instead. This is where the scam really gets exposed. <font color="red"> I cant wait. </font>

The first thing you should know is that Social Security taxes do not fund Social Security checks. <font color="red"> yes, they do. </font> This is hard to believe, I know, because we've all been told differently, but it's true. Revenues from Social Security tax are not in any way earmarked, saved, held aside, locked away, or anything else. <font color="red"> yes, they are. the fact that they are invested doesnt change their nature any more than you putting your personal retirement savings in a bank or custodial account. </font>

The Supreme Court case Fleming v. Nestor (http://www.ssa.gov/history/nestor.html) established that the taxes you pay for Social Security are just another tax and the revenues are not distinct from the general fund. <font color="red"> A gross misinterpreation of Nestor, a contract case, which in part says
"THE TAX PROCEEDS ARE PAID INTO THE TREASURY "AS INTERNAL
REVENUE COLLECTIONS," I.R.C., SEC. 3501, AND EACH YEAR AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND, FROM WHICH BENEFITS
AND THE EXPENSES OF THE PROGRAM ARE PAID. Doesnt sound much like a claim that revenues are indistinct from general revenues.</font> Furthermore, this case established that the government has no binding obligation to pay you one dime of a Social Security benefit. <font color="red"> So what? The government changes the provisions of social programs all the time, and reserving the right to do so is s.o.p. The fact that SS has been changed so rarely is ample evidence that it is working as intended and that political pressures to change it meet strong resistence. </font> Of course, they promulgate a false sense of entitlement by referring to the debt as an "obligation", but it is not an obligation. <font color="red"> semantics. The fact that so many fear that benefits will not be available to them in the future makes it clear that people understand the extent and nature of the "obligation" </font>

But wait, they are tracking the revenues and outlays and the trust fund aren't they? There *must* be something tying my Social Security taxes to the actual outlays, right? It's all internal accounting shenanigans. Your Social Security Taxes might as well be labelled "The Silly Tax" and the revenues would be as closely tied to SS. It's all part of the charade to keep us complacent about the 15.3% payroll tax. The bottom line is that the govt revenues go into a big pot, and they cut Social Security checks out of that pot, and they make some notes about it for internal accounting purposes. The so-called excess revenues that should be in the trust fund (more on the trust fund below) are just a spurious categorization of general funds. <font color="red">No, they arent, and you can spew this garbage 1000 times, it doesnt change what happens. Taxes are collected, proceeds are invested, investments are cashed in, benefits are paid. And ZOMG, they actually account for the transactions, what a scam. </font>

What this means is that there is no legal or regulatory connection, none whatsoever, between what you pay into Social Security and what you get out of it. [em]Benefit calculations do not take into account the amount of tax you paid.[/em] This should be indication enough that it's not a retirement savings plan. <font color="red">Its not anything of the sort. Tell me the tax paid and the year it was paid and I can tell you the benefit. As pointed out in a later post, youre just playing rhetorical games to try and prove an inaccurate claim. </font> Your Social Security taxes are just another tax. Your benefit is entirely up to the whim of a future congress. They are not bound. <font color="red"> already responded to </font>

You may think this makes it hardly sound like a retirement program and more like a general benefit or giveaway, while providing cover for an unconnected burdensome tax. And you'd be right. <font color="red">Anybody who thinks that doesnt know how to think for themselves or has an agenda to push that blinds them to the facts </font>

So much for being a retirement program but it get worse, because there's a "trust fund" myth foisted on the public. The myth serves to perpetuate the notion that it is a retirement savings program. Simply using the word "trust fund" implies as much. It gives people the impression that there is a huge asset ready for disbursement to all the people who paid into it. It implies that your money has been earmarked and kept safe. But that is entirely false.
<font color="red">To the contrary it is entirely true. When you buy a CD from an FDIC insured bank and get a piece of paper, is your investment "safe"? The don't get any safer. SS trust fund assets are invested in special issue Treasuries that gurantee principal...they are even safer than Treasuries available to the public. If the government defaults on all of its obligations we and the rest of the world have a lot bigger problem than paying SS benefits. </font>
Instead of real assets, there is a note from Congress that says "We promise that a future congress will continue to fund this program". That's all there is. And the note itself is only there to further the pretense that there is some kind of relationship between your Social Security taxes and the benefit coming to you. But there's no relationship. It's just internal accounting shenanigans. <font color="red"> more meaningless inflammatory rhetoric </font>

And these taxes that are disingenuously labelled as Social Security tax are levied disproportionately on the poor. <font color="red">Benefits are paid even more disproportionately to the "poor", the system results in a small wealth transfer toward the lower paid </font> A single mother living on $10,750 a year pays $1500 in Social Security tax, with no way out of it. It's taken right off the top before she can even start making deductions. And since I've already shown this tax for the lie that it is, any reasonable person can see this is outrageous. <font color="red"> since youve shown no such thing, the only outrage should be at your lies </font>

The whole thing is a giant smokescreen to enable the government to justify onerous taxes on the poor and middle class and then fund massive giveaways to the rich. <font color="red"> the mind boggles </font>

Social Security is often mis-characterized as a pyramid scheme by detractors, but this could only be accurate if there was an actual pile of money resulting from the scheme that will go to the early contributors. There is no such asset. <font color="red"> At least you admit its mischaracterized, but you dont know what its mischaracterized as...a Ponzi scheme, not a pyramid scheme. It is neither. </font>

So, to summarize:

1. It fails miserably when we frame it as a welfare program. It is in fact nearly the opposite of a welfare program, transferring money from the working poor to the wealthiest class of people.

2. If we frame it as a retirement savings program we see that there's no savings happening by any definition of the word.

3. The "trust fund" is a lie, and in fact is a convoluted pretense designed to reinforce a mistaken belief about the relationship between your Social Security taxes and Social Security benefits.

<font color="red"> A cliff notes of your strawmen and inaccuracies. How quaint </font>


So, what is GOOD about Social Security?

A good number of retirees in penury are able to feed and clothe themselves because of Social Security checks. But this minor good can be achieved in a more effective way, although it wouldn't provide a nice smokescreen for taxing the hell out of the working class. <font color="red"> ORLY, Im sure there are dozens of politicians and policy makers who would love to know your ideas.</font> Defending the Social Security status quo requires cognitive dissonance and double speak. The Social Security apologists rely on various fallacious spins.

Here are a some typical apologist positions:

1. The trust fund really is an asset. Just as when you purchase a good, your networth hasn't changed. You now own the good.
response: This is patently disingenuous. The trust fund is more like an accounting of how much you spent on hookers and blow. I'd really like to have one of these apologists point me to the "assets" that the trust fund purchased and how the govt will liquidate it in order to pay my checks down the road. <font color="red">Sorry I dont have the key to the vault where the securities are held. They will be liquidated the same way every other Treasury obligation is liquidated. When someone applies for a loan their SS payments are taken into account just like any other retirement plan. sounds like an asset to me </font>

1.b An extension of the argument above is that if they didn't have a tax surplus to spend, they would just borrow the money, as if spending levels are something that happen in a vacuum. I'll let you work through that prevarication on your own. <font color="red">Because theres nothing to work through, and you cant support that there is. Spending is spending, if a bill is passed the money will be spent and it will be funded, either by cash flow from taxes or from selling bonds. If there were no SS to buy some of them, someone else would. If you think anyone in the legistlature passes a bill thining "cool, SS is going to buy the bonds to pay for this, so I can vote for it you are simply out of your mind. </font>

2. Without Social Security, there is a moral hazard created for those who would be foolish and not prepare for their retirement. <font color="red"> Any "moral hazard" that exists if you know what a moral hazard is) results from SS's existence and reliance on it, not the opposite.</font>
Response: This is a common defense, <font color="red"> providing core retirement benefits doesnt need a "defense", regardless of your misunderstanding of moral hazards. </font> but it is a red herring, since Social Security does not save their money anyway, and there are plenty of other ways to address this moral hazard. <font color="red"> Again, lets hear them, oh wise one. </font>

3. The number of recipients who need that money for basic necessities is greater than you think.
response: this implies a false dilemma. <font color="red"> no, its a strawman on your part. To the extent that anybody thinks about the issue, there is plenty of information about retirement savings and income levels </font> DUCY? I'll let the apologists hang themseves on this one if they want to try pursuing it. <font color="red"> define what there is to pursue. that some people dont know how many people rely on SS? How does that knowledge impact them? </font>

5. Saving for retirement together as a group creates a safety net,whereas individual retirement savings can be wiped out due to bad luck. <font color="red">A nice bundling of strawman and false dichotomy. It isnt a "savings plan" as noted before, and if it were, since its invested in risk free assets group versus individual risk in investing is meaningless. </font>
Response: If it was a retirement savings program the apologist might have a point here. But this answer assumes the antecedent because there is no real savings going on. <font color="red">You got something right!!! Im in awe of your analysis. </font> Even so, the individual bad luck problem is easily solved with private annuities. But what if the annuity company goes bankrupt? That's what insurance is for. Hell you could make annuity companies buy a government backed insurance plan similar to FDIC if it makes you feel better, but this group safety net argument is just a red herring. There are plenty of ways to solve it without ripping off the poor. <font color="red">since it isnt a savings plan and it doesnt rip off anyone, much less the poor, youve wasted a lot of time solving an non-existent problem </font>

6. "Hey, canada has a trust fund. don't tell me we can't do it."
response; Canada's trust fund is miniscule compared to ours, and they invest it in a foreign market (ours). <font color="red">non sequiter </font>


which brings me to

7. We just need to lock up the trust fund with real assets and it will be fine.

response: I have explained before why it wouldn't even be possible to have a trust fund even if we wanted to but I'll recap:

1. Holding onto the cash simply ensures a negative return due to inflation. <font color="red"> Its not a savings plan for the nth time, and Short term surplus is invested, so you have no point here. </font>

2. Investing it in the market ensures government control of industry and creates a huge moral hazard for our decisionmakers, as the investment choices of the trust fund would be the biggest prize available to lobbyists and industry. Furthermore the investment directors have little incentive to do their job well. For an excellent example of what happens when you put government bureaucrats in charge of investing your retirement fund, check out the history of the CalPers fund. <font color="red">Expand on this, since CalPers is an extremely well run fund with excellent investment management and results. It might make an interesting discussion for another thread, but it isnt in anyway analagous to Social Security, since it isnt limited to risk free investments. It is much closer to a private retirement plan than it is to SS. Whether or not Calpers SHOULD invest in risky assets is a different issue, due to intergenerational transfer of that risk. </font>

3. Investing it elsewhere (such as in foreign treasuries like Canada does) is not politically feasible, nor is it a safe investment since the US is the safest place for capital (yeah yeah I know it's looking shaky right now). <font color="red">ORLY? Abu Dhabi apparently feels differently. </font> Even if those objections were overcome, <font color="red"> there is no objection to overcome </font> we return to the same moral hazard as #2, <font color="red"> that wasnt a moral hazard</font> but in this case we have foreign governments vying for the trust fund prize instead of domestic rent-seekers. <font color="red"> but they cant strawman </font> Hardly an improvement. And the investment decisions would be politically motivated instead of taking into account what is the best investment, which defeats the purpose.

Bottom line, Social Security is a scam from any angle, and in every case where the perceived goal of Social Security is used as a defense, there is a better way to achieve that goal. <font color="red"> botoom line, you're full of merde, like you have been in your many prior rants </font>

natedogg

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Re: Understanding the Social Security scam
 

Mostly insults, which I expected. But there was one section I'd like to address.

[ QUOTE ]
The Supreme Court case Fleming v. Nestor (http://www.ssa.gov/history/nestor.html) established that the taxes you pay for Social Security are just another tax and the revenues are not distinct from the general fund. <font color="red"> A gross misinterpreation of Nestor, a contract case, which in part says
"THE TAX PROCEEDS ARE PAID INTO THE TREASURY "AS INTERNAL
REVENUE COLLECTIONS," I.R.C., SEC. 3501, AND EACH YEAR AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND, FROM WHICH BENEFITS
AND THE EXPENSES OF THE PROGRAM ARE PAID. Doesnt sound much like a claim that revenues are indistinct from general revenues.</font>

[/ QUOTE ]

Thank for your followup quote, it supports my position nicely.

Note how the section states that once congress collects the pile of money (which are all "IRS collections"), it then "appropriates an amount equal to the proceeds". The proceeds themselves are not handled separately.

In fact, Copernicus, you have reiterated *exactly* what I was saying. The monies are collected, and then there's a bunch of internal accounting procedures which are unrelated to the sources of the monies collected, just as I described. The money from Social Security Taxes DO NOT go into the Trust Fund. They go into the general fund and later the Congress earmarks some of that money to fund the SSA. This is a subtle, yet crucial difference. It is the crux of the scam in fact.

Imagine there were no payroll tax, but some other taxes were higher and the IRS revenues still totalled what they do today. What would congress "appropriate" to the SSA? They'd be in the same scenario they are now, with one big general fund and an SSA budget. Would they over appropriate and then borrow back the rest, as they do now?

They wouldn't do that, because there would be no need to maintain the pretense that the SSA is funded by Social Security Tax. Congress would simply appropriate what it costs to fund SSA that year and be done with it.

The tax is misleadingly labelled as Social Security Tax when in fact it's just a generic wage tax and the revenues are general IRS collections just like income tax. Once it is all collected and thrown into the pot together, the congress makes some internal accounting tallies that further the pretense of a relationship between the two.

Returning to Fleming v. Nestor, we see this is true. Nestor found out the hard way that you have no claim to your benefit even though you paid the tax. So much for that. He literally paid into it all his life and got nothing out. Why? Because the benefit is just a giveaway, not a payout from something you paid into like a typical defined benefit.
And the tax is something separate even though it is disingenuously labeled "Social Security Tax".

Lastly, I'd urge you to do what I said at the beginning of my post. The most important thing to do before even beginning to analyze the Social Security program is to clarify exactly what it is you think this program ought to accomplish. What is the purpose(s)?

You dismissed my discussion that many people think of it as a welfare program for the elderly but you yourself have admitted the program acts as a way to perform some redistribution to the less wealthy recipients. Why do we modify the benefit to favor the less wealthy? Is it because the program is supposed to subsidize poor retirees? (aka welfare).

There is no denying that Social Security in some way acts as a welfare subsidy to a certain class.


Once you realize/decide that the program intends to/ should subsidize poor retirees (or whatever else you think it should do), we can begin to address how and why this could be better accomplished in a different way.

natedogg

Re: Understanding the Social Security scam
 

Cop, very good rebuttal sir.

Re: Understanding the Social Security scam
 

nate, great thread. haven't read the case, but how does this

[ QUOTE ]
They go into the general fund and later the Congress earmarks some of that money to fund the SSA.

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fit with the quote from the Nestor case

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AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND

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Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

Re: Understanding the Social Security scam
 

[ QUOTE ]
Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

[/ QUOTE ]

Congress is required to keep an accounting of the monies collected as "ssi tax" and keep a record of the surplus, and the interest the surplus collects when it is given to the general fund to help pay the deficit.

That is why we have a 3 trillion dollar ssi "surplus" which is a total of all surplus monies collected and the interest on same, since it was given to the general fund.

The problem is that there is no way to pay back the 3 trillion dollars without raising taxes.

When congress reports they have a 500 billion deficit this year, they account for that deficit this way (figures are made up for purpose of example)

Payroll taxes 400b
Corp taxes 400b
ssi taxes 600b
total 1.4 trillion

total outlays (including ssi benefits which was 300b, 1/2 of what was taken in) 1.9 trillion

We therefore have a 500 billion deficit. But we really have a 800 billion deficit, because congress took the 300 billion surplus from ssi taxes to use for the general fund.

But that is not what congress reports as the deficit. They report it to be 500 billion.

They then issue IOUs to the ssi fund, which accrues interest. They also issue more IOUs each quarter to pay for the interest on the 3 trillion they already owe.

That is how Clinton supposedly balanced the budget one year. The deficit was less than the ssi surplus that year

Re: Understanding the Social Security scam
 

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Cop, very good rebuttal sir.

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bocablkr, can you tell me why we have a social security program?

natedogg

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

[/ QUOTE ]

Congress is required to keep an accounting of the monies collected as "ssi tax" and keep a record of the surplus, and the interest the surplus collects when it is given to the general fund to help pay the deficit. <font color="red"> Nothing is "given" to the general fund. Treasuries are SOLD to SSA. The proceeds from the sale pay the deficit like any other borrowing pays the deficit. </font>

That is why we have a 3 trillion dollar ssi "surplus" which is a total of all surplus monies collected and the interest on same, since it was given to the general fund. <font color="red">The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest &gt; benefit payments + expenses. Its that simple. </font>

The problem is that there is no way to pay back the 3 trillion dollars without raising taxes. <font color="red">Of course there is. The same way you balance any budget, cut spending (not SS spending, on budget spending) </font>

When congress reports they have a 500 billion deficit this year, they account for that deficit this way (figures are made up for purpose of example)

Payroll taxes 400b
Corp taxes 400b
ssi taxes 600b
total 1.4 trillion

total outlays (including ssi benefits which was 300b, 1/2 of what was taken in) 1.9 trillion

We therefore have a 500 billion deficit. But we really have a 800 billion deficit, because congress took the 300 billion surplus from ssi taxes to use for the general fund. <font color="red"> Use real numbers and then call out anyone who accounts for it this way, because they are lying. Social Security is an off budget item, and official budget deficits are reported without any consideration of Social Security. If a politician wants to lie about it, thats the politicians fault, not SS's </font>

But that is not what congress reports as the deficit. They report it to be 500 billion. <font color="red">wrong </font>

They then issue IOUs to the ssi fund, which accrues interest. They also issue more IOUs each quarter to pay for the interest on the 3 trillion they already owe. <font color="red"> Yup, thats what a Treasury bond/bill, CD, corporate bond etc. is, an IOU. so what? </font>

That is how Clinton supposedly balanced the budget one year. The deficit was less than the ssi surplus that year <font color="red"> Speaking of liars. This wouldnt surprise me, but I doubt he lied that blatantly. Link? </font>

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Re: Understanding the Social Security scam
 

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The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest &gt; benefit payments + expenses. Its that simple.

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Do you know the details of how the surplus is calculated? Is it the present value of all expected contributions plus the trust fund's current balance less the present value of all expected benefits and expenses? Does it take into account current Americans only or is it an open group projection with future births taken into account.

Re: Understanding the Social Security scam
 

[ QUOTE ]
[ QUOTE ]
The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest &gt; benefit payments + expenses. Its that simple.

[/ QUOTE ]

Do you know the details of how the surplus is calculated? Is it the present value of all expected contributions plus the trust fund's current balance less the present value of all expected benefits and expenses? Does it take into account current Americans only or is it an open group projection with future births taken into account.

[/ QUOTE ]

The surplus is those contributions made in the past, that were not distributed as ssi benefits, and "loaned" to the general fund, plus the interest those surpluses have earned.

When I was doing research on ssi, berkley college had a website, which is now down, that showed all these calculations, and showed that by 2017 (I believe) ssi taxes would not be greater than than the ssi benefits that would need to be paid out.

Therefore, congress is going to have to start paying back the 3 trillion each year, to make up the difference.

That's a big difference between being able to tap a surplus of 300b to feed the deficit and now (in 2017) come up with 100b (or whatever it may be) to pay back.

Based on berkley's calculation, the 3 trillion surplus will be used up by 2038 I believe.

In any event, congress has no way to pay back the money, without cutting the general budget or raising taxes.

If you ck one of my earlier posts in this thread, you will find the link that verifies the surplus is in excess of 3 trillion.