Social Security is not Ponzi scheme

Enough already with the references to Social Security as a Ponzi scheme. From the beginning it has been a pay-as-you-go government system and never an “investment.” It is social insurance.

Call it socialism or welfare or even a bailout, but don’t call it an investment.

Some people think they can get a better return on their tax money than the government will pay during their retirement years. If it were truly an investment, that would probably prove true (unless you invested with the wrong adviser or we had another depression). But Social Security will provide income if you become disabled, or support your family if you die. That is insurance, not an investment.

Those folks should take a look at a 401(k) or an IRA or even tax-deferred annuities. We have many vehicles for amassing wealth in this country.

To anyone who really thinks Social Security is not effective, I ask them to consider a trade. Would you like to keep all your tax money in exchange for letting my mom and dad live in your guest room?

Don Porter
Overland Park

Social Security is not and never was a Ponzi scheme. I paid into Social Security since I was 14 years old. I am not only entitled to the return of the money I paid in, but the interest I earned for 64 years. Compounded, that’s about five to seven times what I paid in.

Just increase Social Security tax on the big money incomes as President-elect Obama proposes, and we’ll probably be solvent for a long time.

Lloyd Hellman
Leawood

Comments

[Brian Brookbank]

For many years I felt rather strongly that it was incumbent upon younger generations to meet the obligations in the deals that the government made with its citizens. As it is becoming increasingly apparent that we will soon see the day when we simply can not meet those obligations, I have begun to reflect more on the subject.

The reality it is that the government truly is "we the people," and it was not an impersonal actor- "the goevernment"- that made or entered into these obligations. RATHER, it was those who now seek to benefit from Social Security who voted to make the generations after them wage slaves to their retirement.

Since it is simply true that it can not continue forever, why should it not be those who voted to maintain the unsustainable system who bear the brunt of its demise rather than those who a)will never see a penny; and b) who are expected to pay the way of those who voted to maintain the system?

[pmcw]

Let's see, a Ponzi scheme is one where the payouts are made from new funds received - yep, that's how social security works. If you check the Monthly Treasury Statement (MTS), you'll see the social security trust fund has a near zero balance.

To read the truth about social security, which includes links to government web sites to back up all claims, see:

www.nextinning.com/socialsecurity2.php

[NoMoreMrNiceGuy]

But Social Security will provide income if you become disabled, or support your family if you die. - DP

Not 100% correct. It pays limited if you become disabled and ONLY if you are deemed disabled of which they are very inconsistent on defining. Again, lawyers making laws that benefit lawyers. At least their is a cap on what disability lawyers can charge, finally a well enforced regulatory. It pays your family when (there is no if, everyone dies) however it is not T.O.D. and if your children are not minors, then they recieve nothing. Your spouse may receive a pro-rated portion, whoopie. The bottom line is that it should be a volunary system above not the continual scapegoat as to why people have nothing in retirement. Pnzi Shcheme, pay as you go, whatever you call it, the government mandated and controls it, you have no say in the matter. The day Washington can prove they are disciplined, ethical and fiscally repsonsible is the day I would trust them with social security, until then we would be better off handling our own money and retirement or disaster planning. The concept of helping those that can not sustain is one thing, using Social Security as THE plan when you are retired is another. The answer is not to increase contributions rather to lower them and allow the largest percentage of people that are mandated or jialed if we do not (extorted) into paying into something we know is nothing short of an open check book for government. Maybe rather than the .7% of GDP going to a Golbal Poverty Trust Fund to be managed by the U.N., PEBO would be willing to put that money into Social Security?

[Marctnts]

"Just increase Social Security tax on the big money incomes as President-elect Obama proposes, and we’ll probably be solvent for a long time."

Lloyd seems to like Social Security, but proposes the one thing sure to kill it. If the public quits seeing it as a contribution/benefit system and starts seeing it as welfare (which will happen if benefits are no longer tied to contributions), support will quickly dry up. That's why the tax cap works, because benefits are capped as well.

[Richard Carpenter]

While it pains me to do so, I must add my two cents in defense of Social Security. Rather than a Ponzi scheme, Social Security is a welfare program disguised as a retirement plan. Franklin D. Roosevelt’s rational for requiring “contributions” was to give the appearance of it being a pension plan. This was more politics than actuarial science. In 1941, FDR famously told Luther C. Gulick, a member of his committee on government organization, “I guess you’re right on the economics, but those [payroll] taxes were never a problem of economics. They are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

The Language of Social Security taxes being called contributions had singular purpose; they created an ownership mentality with no real aspects of ownership. Congress clearly had this in mind when crafting the law. Section 1104 of the 1935 Act, entitled “RESERVATION OF POWER,” specifically said: “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” In Flemming v. Nestor, the Supreme Court ruled that Social Security is not a protected program. Congress can cut or eliminate Social Security benefits at any time. Social Security is not a pension fund, it’s not a form of insurance, you do not own the benefits; and any connection between what you get and what you paid in as taxes is arbitrary. Your contributions are not contributions they are taxes. Social Security is a tax like any other tax and Congress can spend your “contribution” as it desires without regard to promises made in the 1930s.
In the 1937 U.S. Supreme Court ruling, Helvering vs. Davis, the court ruled: “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.” There is no trust fund, there never has been a trust fund and there never will be a trust fund. Not having a trust fund is actually a good thing. Can you imagine a scenario where federal bureaucrats, lockbox or not, controlled trillions of dollars of real money?
Payroll taxes, like all other federal taxes, go into the general treasury. Social Security checks, like all other federal expenditures, are drawn on the US Treasury. If at some point in time there is not sufficient revenue to pay benefits (despite what is often reported this is by no means a certainty), politicians will be faced with the dilemma of raising taxes or cutting benefits. My guess is that the soak the rich mentality that pervades the Democratic Party will prevail. Increase the taxes on the rich and reduce or eliminate their benefits is a solution that appeals to the masses.
Rather that try to reform Social Security with silly ideas like personal accounts, conservatives should communicate the undeniable facts about the program. I can assure you that this is no easy task. The myth “I’ve paid in” to Social Security has been inculcated to even the brightest of our citizens. The path of the conservative is not an easy one; the candy man on the left is promoting ideas to the gullible that are more attractive than hard work and thrift. The message decrying the concept that about 15% of everything you earn is being given to those who chose not to save for retirement appeals only to those dedicated to individual responsibility. Unfortunately, this seems to be a minority of our population.

[Kate]

Two questions: 1. If the operation is the same, does it really matter whether you call it a Ponzi scheme or a “pay as you go government operation”? B. How did Mr. Porter choose Pub17 as his screen name?