Not exactly shocking. It's being used as a synonym for "scam," right? -- in the understanding both of those speaking and of their intended audience.
Unfortunately, the postal inspectors know exactly what one is.
2: THEN CAN THEY TELL ME WHETHER THE ONE HAS A BOUNDARY BETWEEN ITSELF AND THE NOT-ONE? AND IF SO, THEN IS NOT THE BOUNDARY A PART, AND THAT WHICH IS BOUNDED A PART AS WELL? AND IF IT HAS PARTS, THEN IS IT NOT MANY, RATHER THAN ONE?
Well, the auditors at the Securities and Exchange Commission definitely don't.
I scheme, you scheme, we all scheme...
Try saying that with a Lisp.
My dad. I had to walk him through what a Ponzi scheme is, and why it's not anything like Social Security, back when Bush was trying to privatize it.
Try saying that with a Lisp.
(defun make-schemer (schemer)
(lambda (program) (run-program schemer program)))
(defconst schemers (mapcar make-schemer '(i you we))
a large number of people don't actually know what a Ponzi scheme is.
Including some with high educational attainment.
Technically speaking, Social Security would be a Ponzi scheme if somebody stole the money and stopped paying out.
9: Or if rates of promised return were so great that there was no practical way to fund payouts without ever increasing numbers of new investors.
9: if somebody stole the money and stopped paying out.
Right. All Republicans are doing is giving fair warning of what Social Security will become if they gain power.
Or if rates of promised return were so great that there was no practical way to fund payouts without ever increasing numbers of new investors.
Reading this I'm inclined to say that it would be a Ponzi scheme if it were an investment vehicle -- in that you clearly aren't investing in either a stock or a bond, you're just giving money to somebody who promises to have the power to collect money from somebody else.
But it isn't an investment, it's a government program. People aren't investing in Social Security through a market mechanism -- they don't invest based on the promised rates of return, and can't make independent decisions to raise or lower their contributions.
Or, perhaps I'm wrong in the first paragraph, perhaps the Social Security trust fund is the equivalent of a pension fund holding bonds.
Well, a Ponzi scheme wouldn't be a scam, it'd just be a really poor idea, if it were disclosed that there was no real investment, just handing out the input from new investors. Full disclosure removes the scam nature.
SS has the full disclosure, and it has the demographics/rate of payments making it actually workable. So, not like a Ponzi scheme at all.
Well, a Ponzi scheme wouldn't be a scam, it'd just be a really poor idea, if it were disclosed that there was no real investment, just handing out the input from new investors. Full disclosure removes the scam nature.
I don't think that's precisely what people mean when they compare SS to a ponzi scheme -- that it's a scam by the government to steal people's money. I think they want to imply that it's unsustainable, and that they would disagree that SS has "the demographics/rate of payments making it actually workable".
I'm not arguing that SS is a scam, I'm just realizing that I would like to clarify the arguments.
-- that it's a scam by the government to steal people's money.
Vote for me and it will be.
I think they want to imply that it's unsustainable, and that they would disagree that SS has "the demographics/rate of payments making it actually workable".
Right, but they're either mistaken or lying about that.
10 is true of social security. Fortunately, unlike in a Ponzi scheme, all workers are required to pay in by law, and the number of workers is increasing.
Put another way, Ponzi schemes work only if a sucker is born every minute, forever. Eventually it becomes too difficult to recruit more suckers and they collapse. social security only requires that some number of taxpayer be born every minute, with the number increasing gradually. Since this is in fact the case, there's no problem.
9 is not true of social sccurity but also is not true of most Ponzi schemes. Typically they collapse occurs before much money is stolen, although a great deal has been redistributed.
There's a pwner born every minute.
Right, but they're either mistaken or lying about that.
But that's an empirical argument, not an argument that it's a category error to raise the question.
Obviously there are lots of people who don't pay much attention who do believe, as an empirical matter, that SS is going to run into a demographic crunch (what's the number that gets thrown around -- 2.3 workers/retiree?).
More 17: That was overly terse. But the comparison to a Ponzi scheme is begging the question -- SS is nothing like a Ponzi scheme in that it's not an undisclosed con game. And it's nothing like a Ponzi scheme in that it's not unsustainable. So the only reasonable response to the comparison is "No it's not." Someone who wants to argue "Yes it is -- oh, it's not literally a scam, but it will inevitably break down because the demographics make it mathematically unworkable", you sit down with and demonstrate that if the economy does badly over the next few decades, taxes will have to be raised slightly to cover benefits, and if the economy does well, they won't have to be, but there's certainly no inevitable breakdown.
Someone saying "It's a Ponzi scheme" won't listen, but not because of an informed, good faith, disagreement about the facts.
I'll explain a Ponzi scheme to 5 of you for just $20 each, but if you each bring me 5 more, I'll explain it to them for $20 each, and to you for free.
But that's an empirical argument, not an argument that it's a category error to raise the question.
Sure. This is like one of those exchanges where someone says "[X] isn't necessarily true," and someone else replies "Whether or not it's necessarily true, it's actually true." If the facts about the world and about SS were different, SS would be more like a Ponzi scheme. In the world we do live in, there isn't a meaningful resemblance.
This thread should provide a nice demonstration of the effectiveness of Republican slogans.
21: Or benefits will have to be cut slightly to be covered by revenues.
Or the money supply will have to be inflated to produce the same nominal effect as a strong economy.
Or we can cut Medicare benefits to reduce the number of surviving Social Security beneficiaries.
I don't endorse all of these, but there are lots of ways to turn C>R into C
Ponzi schemes work only if a sucker is born every minute, forever. Eventually it becomes too difficult to recruit more suckers and they collapse.
I think you're confusing a Ponzi scheme with a pyramid scheme. A Ponzi scheme could be kept going for quite a while with statements sent to investors showing big yields. You just can't have a bunch of people wanting to cash out at once.
First, I don't think a ponzi scheme has to be undisclosed. You can explain all the rules of the game to everyone, with it still being a ponzi scheme. That would make it not fraudulent, but still likely a bad idea to participate in (unless you're one of the earliest participants, possibly). And that, I think, is precisely what's being alleged w/r/t SS.
Second, on the demographics, they only work if you assume we'll keep having immigration. A lot of the same people who call SS a ponzi scheme favor significant restrictions on immigration. And if you just look at non-immigrant birth rates, the demographics start to look must worse, and the program does indeed start to look unsupportable. So: ponzi scheme.
26: Aren't they variants of the same thing? The Ponzi scheme breaks down when new investors aren't putting in enough money to cover demanded payouts. Now, if you can convince people not to demand payouts, that comes slowly, but it's still the same process as a pyramid scheme.
22 is well done. Not as well done as heebie's addition -- about which, by the way, congratulations! -- but still well done.
21 is very good, but just to be clear to 20:
It is a category error, because a Ponzi scheme requires geometric growth (iirc the original Ponzi scheme would have required every living human being to become involved within a small number of iterations) while SS requires just mathematical growth, well within range of the possible.
The reason that people don't perceive the difference in category (other people, not you, NickS) is that we're very bad at large numbers and geometric growth, and so it all sounds big and impractical. I would bet that if you told the average man on the street that the economy needs to create ~2M new jobs every year just to keep up with unemployment, they'd say that was impossible. But it's perfectly ordinary.
Wait, maybe I'm confusing a Ponzi scheme with a pyramid scheme. Let me go look up the difference.
Second, on the demographics, they only work if you assume we'll keep having immigration. A lot of the same people who call SS a ponzi scheme favor significant restrictions on immigration. And if you just look at non-immigrant birth rates, the demographics start to look must worse, and the program does indeed start to look unsupportable
I don't think that's the case -- or at least I've never seen an analysis of a possible demographic future that would make the sort of reasonable fixes mentioned in 21 and 25 unworkable. Have you seen this done with numbers, or just as assertion?
I thought that a Ponzi scheme explicitly said "the money you pay in is being invested for great returns" where a pyramid scheme said "it will be easy for you to convince other people to give you money".
From Wikipedia:
A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish these schemes from Ponzi schemes: • In a Ponzi scheme, the schemer acts as a "hub" for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly. (In fact, failure to recruit typically means no investment return.) • A Ponzi scheme claims to rely on some esoteric investment approach (insider connections, etc.) and often attracts well-to-do investors; whereas pyramid schemes explicitly claim that new money will be the source of payout for the initial investments. • A pyramid scheme is bound to collapse much faster because it requires exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by persuading most existing participants to "reinvest" their money, with a relatively small number of new participants.
33: That was my impression as well. Pyramid schemes play on the fact that everyone is ready to think someone else is the sucker. Ponzi schemes just play on people's desire to get an unusually large ROI.
And wikipedia says E. Messily, supervillian though she is, is right. Pyramid schemes are things like Amway.
I never knew there was a difference between Ponzi schemes and pyramid schemes.
36: If it's a scheme, how come my garage has 15 cases of laundry soap.
Is social security an example of the ogged?
Having sat through an Amway recruitment, the one phrase I remember is "If you make a lot of money, are you willing to let me make a little."
I always refuse to participate in book-mailing campaigns on the basis that they are pyramid schemes. That and I am too lazy to go to the post office.
The money I paid LB to join Unfogged is invested safely though, right?
Because she told me that she would reduce the buy-in by $200 if I got asilon and stanley to join.
39: All I know is, after I sent the President that gift certificate, he went on hiatus vacation.
One of the fundraisers the marching band did in my high school was staffing a concession stand at the big, downtown arena. Basically, we worked for free, and then Aramark cut the marching band a check for some amount of the day's profits. Usually it was for basketball games, but one day we worked during an Amway convention, which I found really quite funny.
Cleaning products? Eff that noise. You guys should hear about the scheme Aramark is running with these concession stands!
Why is 45 a scam in any way, shape, or form?
46: Scheme, not scam. I thought it was a brilliant way of staffing their booths for (probably) less money than it would have cost to pay people a wage and benefits (ha!), while simultaneously giving them a reason to boast about giving back to the community.
But not 100% people like the sign says.
Have you seen this done with numbers, or just as assertion?
I've seen it asserted with numbers. I can't say I've ever bothered to check how well the numbers add up. Although it basically struck me as sensible and probably right (except for the part about a severe restriction on immigration being desirable, or that we should analyze ss's solvency as if that were likely).
50: It doesn't really make sense to me, unless you assume that lack of immigration is going to be fatal to GDP growth (and I doubt that anyone who advocates shutting down immigration does think that). If the GDP is there, the necessary taxes on whatever the working population is shouldn't be exorbitant. If the GDP isn't there, that's not so much about the immigration-based demographics as it is about the terrible economic times.
I don't know anything about the Center for Immigration Studies (looking at their About page suggests that they're more Republican than Democratic, but I don't know that they're reputable at all) but here's a paper arguing that the effect of immigration on SS is fairly small either way.
50, 51: Agree with LB; I'm sure there are scenarios where other assumptions lead to the requirement for minimum immigration levels, but there is certainly nothing necessary about those other assumptions being correct.
Am feeling bad that my "joke" in 12 might in its own stupid way contributed to this trope, so let me say that SS has no more in common with a Ponzi scheme than many aspects of modern economies in general. SS dies with either: 1) the economy overall or 2) the lack of will, belief* and shared purpose (by some significant proportion of the population).
*The "Social Security won't be there for me" has been utterly corrosive in this regard.
Don't you need a worker/retiree ratio that eventually levels off, instead of shrinking forever? How are you going to get that without immigration?
(I didn't read the paper you linked.)
lack of immigration is going to be fatal to GDP growth
Lack of population growth is a problem for GDP growth, yes. It means all your growth is coming from productivity enhancements.
Forever's a long time dude. And immigration only comes into play in that equation under certain assumptions of the age and relative position in their working life of immigrants.
Economic growth can't continue in perpetuity.
58: Some dude said something about that once if I recall.
Also 53.2 -> 58. But there are so many things that are tied to the assumption of perpetual economic growth that SS hardly stands alone a shaving that problem.
My lame library system doesn't have Steady State Economics which I've been trying to check out for a while.
I'm not claiming that SS is any more tied to economic growth than any other program. What makes it more ponzi-like is the fact that people are paying in today, the the expectation of a future payout years or decades from now, and that payout is only going to come if there's economic growth in the interim.
Look, I'm not claiming that's "ponzi scheme" is a good description of SS, just that if someone is naturally predisposed towards disparaging SS, there are reasons that "ponzi scheme" might seem to them to be a good way to characterize it, other than just that they're lying or mistaken, as LB said.
The final object of both Ponzi schemes and pyramid schemes is Spec(Z).
Look, I'm not claiming that's "ponzi scheme" is a good description of SS, just that if someone is naturally predisposed towards disparaging SS, there are reasons that "ponzi scheme" might seem to them to be a good way to characterize it, other than just that they're lying or mistaken, as LB said.
Sorry for ducking out of this conversation for a while.
I think 21/23 are good as a rhetorical position, but I'm still inclined to agree with urple that the comparison isn't nuts (or, to refer to an earlier conversation) is less like a Shibboleth and closer to a literal statement than many.
Consider, the opening sentence of the wikipedia entry on Ponzi Scheme's is:
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors.
LB is focusing on the fact that SS isn't fraudulent, I was inclined to say that it isn't an investment, but I think we could agree that the returns to beneficiaries aren't based on accrued profit.
Reading farther into the wikipedia article, I see that it agrees with LB:
[Similar Schemes] "Robbing Peter to pay Paul": When debts are due and the money to pay them is lacking, whether because of bad luck or deliberate theft, debtors often make their payments by borrowing or stealing from other investors they have. It does not follow that this is a Ponzi scheme, because from the basic facts set out there is no indication that the lenders were promised unrealistically high rates of return via claims of unusual financial investments. Nor (from these basic facts) is there any indication that the borrower (banker) is progressively increasing the amount of borrowing ("investing") to cover payments to initial investors.
I also think that, as a matter of political rhetoric, if someone alleges that SS is a ponze scheme, responses based on the technical distinctions between ponzi schemes, pyramid schemes, "robbing peter to pay paul" and what have you are generally not going to be convincing, and are going to come across as very weak and defensive.
I had a ponzi scheme case once. Scamsters in Utah promised a couple in Nashville that they could refinance their home, give a big check to their ne'er-do-well son, and invest the balance in bonds from Nevis, which would pay a high enough return that house payments would be taken care of for the life of the loan. And so they were, until the feds shut the whole thing down.
LB is focusing on the fact that SS isn't fraudulent
Most of the allegations of "fraud" center around the trust fund, and how it's really just one arm of the government borrowing from another, and alleging that this is all really designed to make the program appear as if it's somehow building up assets for the future when really it's a pure tax and transfer program.
It's too bad "insurance" is such a demonized word, because that concept rarely surfaces in any current discussions of Social Security and is sadly lacking.
It's too bad "insurance" is such a demonized word, because that concept rarely surfaces in any current discussions of Social Security and is sadly lacking.
I believe it is mentioned quite a bit by reformers, in the form of "it's just an annuity, and if you bought an annuity in the private market you could pay much less and end up with much greater benefits than you get from the thieving Social Security Administration."
I haven't checked the math, but I suspect that claim is only true for rich people.
In 69, "reformers" should have been in scare quotes.
So, anyway, back to the title of the OP: what the hell's an "ice scheme"?
ICE scheme undermines community safety
Most of the allegations of "fraud" center around the trust fund, and how it's really just one arm of the government borrowing from another, and alleging that this is all really designed to make the program appear as if it's somehow building up assets for the future when really it's a pure tax and transfer program.
This. To the extent that there is anything substantive, rather than rhetorical, behind the ponzi scheme claims, it's that in practice current retirees are paid in practice by current workers. But that's only the case if Congresss refuses to honour the full faith and credit of the United States, as enacted by Saint Ronnie.
69: That is one of the problems--insurance can be both investment with a pay off, rather than just-in-case insurance, and which if I am "fortunate" I will never cash in. There is an significant element of the latter baked into SS, but I guess it is viewed as just a big political lose to even hint at it.
75: Aw . . . urple had half a Sifu going! (It's bad luck to mention them until after the 6th comment.)
One could argue that funding of the government from SS surplus to provide infrastructure, R&D, education was an investment resulting in GDP growth which is resulting in better returns to SS.
I'd get a savings account, but it's just a ponzi scheme.
Ironically the people most concerned about SS=Ponzi are those who think it's good to invest in pieces of metal whose value is based almost entirely on the fact that other people will pay you so they can have the pieces of metal.
81: But in a pinch you can melt it down and pour it on the head of the asshole exiled true heir to the throne of a foreign land currently under your protection. Try doing that with promissory notes.
Don't you need a worker/retiree ratio that eventually levels off, instead of shrinking forever? How are you going to get that without immigration?
Well, if the worker/retiree ratio shrinks forever, I'm going to be more worried about the extinction of humanity than about Social Security. And pretty much everything else you're saying is equally screwy.
Gold and silver are crazy useful in engineering; we'd use them a lot more if they were cheaper.
Differently nerdly: if GDP won't support our old folks through something as simple as SS, it won't support them/us through a noisier, unsmoothed process. If GDP is the problem, private savings accounts aren't the answer (unle 79 also sounds nonsensical...
How many greeters does WalMart need?
Fewer people would complain if SS were a ponzu scheme.
Their complaints would be muffled if it were a kudzu scheme.
Or a monsoon scheme.
Make it rain, bitches!
6
My dad. I had to walk him through what a Ponzi scheme is, and why it's not anything like Social Security, back when Bush was trying to privatize it.
Actually Social Security and Ponzi schemes do have certain points of resemblance. For example it is difficult to terminate them gracefully.
Just like investment banks and marriages, too.
94: Okay, I gotta ask: In all sincerity, why would you even bother to post that? Does it really strike you as likely to convince anyone here? Or even make anyone think "You know, I don't want to admit it, but James has a point"?
Social Security and Ponzi schemes do have certain points of resemblance.
Napkins and paper towels also have certain points of resemblance. For example, both are absorbant. And yet, a napkin is not a paper towel no matter.
do have certain points of resemblance. For example it is difficult to terminate them gracefully.
Also, from a long way off they look like flies.
For example it is difficult to terminate them gracefully.
Also difficult to terminate gracefully: a marriage (so: Matrimony! Just Another Ponzi Scheme?!); a contract with Verizon for phone, cable and internet services (Your High Speed Internet Access Bundler: Little Better Than a Junk Bond Trader, or a Ponzi Scheme!?); a long-standing habit of reading ill-informed and ill-advised blog comments on the internet, and commenting on said same.
I fully expect that any liberal policy objective whatsoever will now be dismissed and disparaged as a "Ponzi scheme."
Further things difficult to terminate gracefully: Terminators.
96
Okay, I gotta ask: In all sincerity, why would you even bother to post that? Does it really strike you as likely to convince anyone here? Or even make anyone think "You know, I don't want to admit it, but James has a point"?
I sometimes forget how much you guys live in your own reality. For people outside the liberal bubble Social Security and Ponzi schemes do in fact have certain obvious points in common. Which is not to say they are the same thing. Treating comparisons as facially ludicrous is not accurate. Perhaps I won't convince anyone here but I think you guys can use reminders that 80% of the population does not identify as liberal and doesn't think like you do.
I sometimes forget how much you guys live in your own reality. For people outside the liberal bubble Social Security and Ponzi schemes do in fact have certain obvious points in common.
I'm willing to accept this for the sake of argument. Does "both can be difficult to terminate", in the absence of any other information, really strike you as the most salient? I mean, really, that's the best you've got?
For close to 100% of 75 years, social security has not resembled a Ponzi scheme to over 80% of the population.
I was wondering when Shearer was going to show up in this thread.
Social Security and elderly cancer patients on respirators have certain obvious points in common. For example, both can be difficult to terminate.
Yeah, if you want to go after the elderly cancer patients, you need to target medicare.
Richard Widmark's proposed means test never really caught on back in the 1940s.
For people outside the liberal bubble Social Security and Ponzi schemes do in fact have certain obvious points in common.
Oh James, please. If by "people outside the liberal bubble" you mean people lacking in both financial and social capital, then Social Security is the only thing that stands between them and a humiliating and impoverished old age, making license plates at the statehouse prison, perhaps, or picking oakum at the local workhouse. I'm sorry, but for the common folk that you claim to care about, Social Security and the welfare state more broadly, are the best things that ever happened in the past couple of centuries at least. Doesn't matter how many lattes are sipped by however many liberals (a rhetorical distraction, and an irrelevance): bottom line is a social safety net that rescues countless millions from cringing and craven and soul-crushing old-age poverty.
Has Shearer ever actually claimed to care about the common folk? That doesn't really seem like his rhetorical style.
I can never decide if James is deluded, or just trolling. Does he really think he's more in touch with the People, or is he just saying it because he thinks we'll find it annoying?
Actually Social Security and Ponzi schemes do have certain points of resemblance. For example it is difficult to terminate them gracefully neither are in my kitchen.
110: It really doesn't sound like Shearer, does it? The repeated "you guys" rings a too-casual false note as well. Huh.
115
It really doesn't sound like Shearer, does it? ...
That actually was me if you are suggesting otherwise. And I was not intending to claim that I particularly care about the common folk. Nor do I favor making major changes to Social Security as I doubt they would improve matters. But there are similarities between Social Security and a Ponzi scheme and I was a bit startled at the consensus here that they have nothing in common. Which is not to say there aren't important differences between Social Security and a Ponzi scheme as well so a flat claim that Social Security is a Ponzi scheme is at best an exaggeration.
Actually Social Security and Ponzi schemes do have certain points of resemblance. For example it is difficult to terminate them gracefully neither are in my kitchen neither is smaller than a bread box.
Shearer looks to me to be pointing out the same problem I've been talking about from a different angle. Calling SS aPonzi scheme is dishonest and crazy because the salient aspects of a Ponzi scheme are the deceptiveness and the unsustainability, and neither applies to SS. But the right gets a pass on the crazy rhetoric -- there's no penalty for over-the-top bullshit -- and the media and the not-strongly-left-affiliated parts of the electorate are willing to discount the bits they know to be crazy as just the kinds of things Republicans say, while taking any possible grain of validity (SS, like a Ponzi scheme and also like any concievable way of taking care of old people until we develop robot slaves, depends on a sufficient supply of working-age people) as enough to justify the crazy rhetoric. And then uninformed people who see reasonable, well-informed people treating the crazy rhetoric respectfully, start believing even the crazy bits.
Now, I'm wringing my hands over this dynamic because it's incredibly damaging and I don't know how to break out of it, while Shearer's enjoying it because it demonstrates how pathetically out of touch with the common man the liberals he dislikes are. But I'm pretty sure we're talking about the same thing.
like any concievable way of taking care of old people until we develop robot slaves
FFS I've only been back in school for like two weeks. I need time!
Killer robots would probably be easier and quicker. Personal care tasks are very difficult, and if the problem is taking care of old people, well, no old people, no problem. (Admittedly, this is a slightly less appealing solution now that I'm out of my thirties.)
120: Killer robots would probably be easier and quicker.
But you helped elect Obama, that's nearly as effective . </mcmanus>
116: I didn't think anyone was impersonating you. It was more as if you were 2.5 sheets to the wind or something.
Oh, and given that Shearer's around: Obviously, I don't think you'd endorse what I said in 118; you apparently either sincerely think, purport to think, or at least think that other people worthy of respect on this point sincerely think that SS is meaningfully analogous to a Ponzi scheme in a way that makes the analogy neither crazy or dishonest to use.
118: This lays out nicely our area of disagreement. Calling Social Security a Ponzi scheme is a bit of polemic, that's all. In banal ways that have already been explained above, Social Security has attributes that resemble those of a Ponzi scheme. People who are opposed to Social Security are going to seize those similarities and emphasize them.
Sure, "Ponzi scheme" is hyperbole, but it isn't crazy. People genuinely disagree about whether - in "the salient aspects," as you say - Social Security resembles a Ponzi scheme.
(One of the ironies about all of this is that Rick Perry's policy choice would be to renege on past promises, and thus to make Social Security more like a Ponzi scheme.)
Personally, I think Republicans are often indifferent to the well-being of America, and they advocate and pursue policies that have led and would lead to national disaster. Expressing it succinctly and a bit polemically, I think that Republicans are, by-and-large, anti-American.
Now in some literal sense, my view is open to serious dispute - a lot of folks would label it crazy. However, with allowance for a bit of polemic and a bit of hyperbole, I really do believe it.
I'm with 124, but I had been having trouble phasing it.
In banal ways that have already been explained above, Social Security has attributes that resemble those of a Ponzi scheme. People who are opposed to Social Security are going to seize those similarities and emphasize them.
Sure, "Ponzi scheme" is hyperbole, but it isn't crazy. People genuinely disagree about whether - in "the salient aspects," as you say - Social Security resembles a Ponzi scheme.
No. The only thing about SS that resembles a Ponzi scheme (leaving aside 'bigger than a breadbox' and 'not in my kitchen') -- the need for a steady supply of workers putting in, is, as I said above, something it has in common with any other possible way of taking care of old people. Any comparison between SS and a Ponzi scheme that doesn't acknowledge that there's no way to take care of retirees that doesn't have exactly the same resemblance to a Ponzi scheme -- that implies that SS is more like a Ponzi scheme than other methods of funding retirement that don't involve lots of old people dying of starvation and neglect -- is either dishonest or mistaken.
I don't care about whether disagreement on this point is sincere; not everyone who uses the analogy has to be lying. But anyone who's not dishonest on this point is mistaken about the facts.
And I think what you're doing in 124 is exactly the dynamic I'm handwringing over; looking at seriously misleading dishonesty, and dismissing it as just a little hyperbolic polemic.
There are many ways to run a dishonest scam that rely on resembling something honest. Ponzi schemes are the scam that most closely resemble SS.
Calling it hyperbolic doesn't mean I'm not wringing my hands; I think the hyperbole is horribly destructive and has cruel consequences.
I don't think SS resembles a Ponzi scheme any more than any investment whatever resembles a Ponzi scheme. The key difference, between a Ponzi scheme and either of those two, is that in a Ponzi scheme somebody lies to you about what they're doing and steals your money, where in the other two somebody takes your money and puts it somewhere and then later gives you [possibly a different amount of] money.
118
... Calling SS aPonzi scheme is dishonest and crazy because the salient aspects of a Ponzi scheme are the deceptiveness and the unsustainability, and neither applies to SS. ...
You are cherrypicking the salient aspects of Ponzi schemes to fit your argument. One could just as well say the key point of a Ponzi scheme is that it depends on new participants to cover obligations to current participants. And there are ways in which SS is deceptive and unsustainable. Deceptive in that many people don't have an accurate picture of how it works due in part to the way in which the program was setup and promoted. Unsustainable in that early participants got a better deal than current participants who in turn will get a better deal than future participants.
One could just as well say the key point of a Ponzi scheme is that it depends on new participants to cover obligations to current participants.
One could, but implying that that's a point of resemblance between SS and a Ponzi scheme that's not shared by any other means of providing for retirement without leaving old people dying of neglect and starvation is the dishonest (or severely mistaken) bit.
Deceptive in that many people don't have an accurate picture of how it works
Can you name any governmental program, or really anything even slightly complicated, of which you could not truly say that many people don't have an accurate picture of how it works?
Unsustainable in that early participants got a better deal than current participants who in turn will get a better deal than future participants.
Not, in fact, what the word 'unsustainable' means. If it's practical for the program to continue to serve its purpose indefinitely, with only reasonably workable changes in the funding structure, it's sustainable, regardless of whether the first generation of recipients, who got benefits without ever paying in, got a better deal than you or I will.
SS, like a Ponzi scheme and also like any concievable way of taking care of old people until we develop robot slaves, depends on a sufficient supply of working-age people.
I'm not ready to concede this much. There's no reason I can see that the care of old people must necessarily be funded by payroll taxes imposed on working people. Social security taxes could, instead, be imposed on capital gains. Or as part of an estate tax on really big estates. Or we could just take the money for funding social security out of the general coffers just like we do for funding the military or EPA or whatever.
Deceptive in that many people don't have an accurate picture of how it works
Like, say, gravity. Or photosynthesis. Or soccer.
The only thing about SS that resembles a Ponzi scheme (leaving aside 'bigger than a breadbox' and 'not in my kitchen') -- the need for a steady supply of workers putting in, is, as I said above, something it has in common with any other possible way of taking care of old people.
Yes, the (weak) resemblance to a Ponzi scheme is inevitable for any kind of Social Security-type plan. But saying it's inevitable is an explicit acknowledgment that it exists.
Rick Perry isn't going to emphasize the not-taking-care-of-old-people part of his view, but that is, indeed, clearly his policy preference. When Perry says that Social Security is tantamount to a crime, he's saying that he'd rather it - or anything like it - didn't exist.
And as much as it pains me to defend the mainstream media, I think they've reported this. I think people who pay attention to these things understand (broadly) what social security does, how it's paid for and what Rick Perry's position on it is.
135: But the capital gains taxes depend on corporate profits, which depend on working people creating valuable goods and services. It's working people all the way down -- a situation where there weren't enough working people providing enough goods and services to go around would mean that old people would go hungry and neglected, regardless of how the goods and services were transferred.
This is an obvious banality, but the obvious banality is the only point of resemblance between SS and a Ponzi scheme.
LB, I said this above, but maybe not clearly enough: the "ponzi scheme" gets traction because of the particular ways in which SS was set up, and was supposed to fund itself. A lot of people have the impression that the "trust fund" is a bunch of assets sitting around that are supposed to take care of future retirees. When they find out that, no, well, sort of but not really, basically what today's "investors" pay in is immediately distributed to current beneficiaries, and today's "investors" will only get a payout if future "investors" later decide to pay in. If the program is cancelled in the interim, they get nothing. Just like in a ponzi scheme. Being disabused of the false impression that there's some "there" there is what gives people the impression that the whole thing is a big fraud, a ponzi scheme. If it were more routinely described as a pure tax and transfer system, the charge wouldn't have the traction that it does.
139 to 138: It's not just Social Security-like plans, it's any way of taking care of old people.
If it were more routinely described as a pure tax and transfer system, the charge wouldn't have the traction that it does.
This is a little fair, but it elides the degree to which there's no real 'there' there for any financial investment. If I buy stock in IBM and it shuts down, my investment is up in smoke just like the money I put into Social Security is up in smoke if the US Government shuts down. I'd bet on the US Government to outlast IBM.
139: Well, sure, but once you stretch it that far, it's fair to say that our entire system of government is a Ponzi scheme. Without working people to generate corporate profits and a tax base, there'd be no police, no fire department, no public schools, no wars of aggression...
any way of taking care of old people
Well, no, of course. Private savings acccounts, combined with state-funded private retirement homes for those too poor to surive on their savings, wouldn't be described by anyone as a ponzi scheme. Even just turning the payroll tax into a mandatory private savings account from which you couldn't withdraw funds until age 65 wouldn't be described as a ponzi scheme.
More 142: But still, you've described a reason that the crazy and dishonest description of a functioning, practical system as an unsustainable scam persuades people, a reason that it gets rhetorical traction, not a reason that it's not crazy and dishonest. I understand why people draw analogies between SS and a Ponzi scheme rather than between SS and a duck -- it's more like a Ponzi scheme than it is like a duck -- but the comparison is still misleading and dishonest.
143: Right. That's the only way in which SS is reasonably like a Ponzi scheme, the same way everything that depends on there being workers in existence to do the work is.
144: But they'd share all the same points of resemblance to a Ponzi scheme that SS does. They'd depend on the existence of enough workers, producing enough valuable goods and services, to pay for them. If there weren't the productive workers available to support SS, there wouldn't be the productive workers available to pay for the workhouses. People might not make the comparison, but it would be just as valid.
144: they would presumably lack the fact , which I'm seeing as the major point of resemblance, that if the program were cancelled, current contributors would get nothing.
147: If the program paying for retirement homes for people who had outlived their savings were cancelled, current taxpayers/contributors to that program would get nothing. If the economy collapsed for lack of productive workers, holders of financial assets would get, perhaps not nothing, but much less than they bargained for. Same thing.
149: LB, that's not at all the same thing. It's functionally the same thing, but I'm, again, not claiming that SS is functionally a ponzi scheme. It has certain that bear a facial resemblance to a ponzi scheme. Having a system of welfare homes for the elderly does not in any way bear that same facial resemblance.
Colbert on Rick Parry and Ponzi schemes (and climate science and the death penalty).
LB, that's not at all the same thing. It's functionally the same thing
The defense rests.
150: boy, do I not get the argument that it's functionally the same and yet not the same. The salient difference is the existence of a particular marker of not-inflation-indexed currency? Or that SS would be a Ponzi scheme if we let the Republicans break it?
Pwned, pwned.
How about everyone earning SS credits gets a thing like a bond certificate honoring their contribution to America and affirming America's responsibility to them? With a hologram and engraving?
153: I think urple's unintentionally equivocating on what resemblance means. The 'functional resemblance' is what makes the comparison between a Ponzi scheme and SS non-crazy, but it's shared, as I keep on saying, by any means of feeding and caring for old people generally.
The 'facial resemblance', which is what makes the comparison to a Ponzi scheme persuasive, is that from the way SS was originally sold, people who don't pay much attention have the vague but false impression that SS gives them individual ownership of some particular financial asset which will produce their SS payments. If you could clear up that vague but false impression among everyone who held it, there'd be no facial resemblance to a Ponzi scheme at all, and given that anyone who starts paying even a little attention would instantly be disabused, I don't think there's much of a resemblance there.
How about everyone earning SS credits gets a thing like a bond certificate honoring their contribution to America and affirming America's responsibility to them?
If people received US bonds, I think the charge of "ponzi scheme" would entirely lose its force. Even if the program were cancelled tomorrow, you'd still have US bonds. Those bonds would be assets you would own.
Is term life insurance like a Ponzi scheme to you? You put in money, the amount you get out is not simply related to the amount you put in, you don't own a financial asset, and so on?
Not anything that shares any feature of a ponzi scheme is reasonably classifiable as "like" a ponzi scheme. (Including SS.)
In light of 157, I think you should maybe re-read 61.2.
If we denominated SS bonds in fractional claims to a right to support, I think that would work (and be more like long-term bonds than is comfy). It's important that we can't sell them, so not much like bonds.
Mercy; we now assume that a promise from the nation is worthless, but Treasury bonds are real?
Mercy; we now assume that a promise from the nation is worthless, but Treasury bonds are real?
Treasury bonds are a promise from the nation. SS is only a promise to pay for so long as the program remains in effect.
161: Still not working for me. If you spelled out the exact beliefs of someone who thought "Ponzi scheme" was a good description of Social Security, I'm pretty sure I'd still think they were lying or mistaken.
163: Treasury bonds are a promise to pay on which the nation can decide to default. It's individual ownership of a financial asset, sure, which SS isn't, but not every financial transaction in which you give money to an entity in return for a promise to get money under certain circumstances in the future, where you don't own a financial asset, has any resemblance to a Ponzi scheme. See 157.
Went back & read 61. Fundamental confusion, I think, is that SS is not a growth investment, it's a security investment, and a loosely COLA-adjusted one, which for security purposes is better than money. Are all pre-SS citizens dead?
163: Yes, which is why the Republicans Vietnamesque "We have to destroy the village in order to save it." rhetoric is a real threat. Its working is predicated on reasonable continuance like so many, many things in life and government (for instance the government not inflating the hell out of the currency so my bonds* are worth shit (or on preview defaulted)).
If the township decides to quit maintaining the road to my house I won't be able to get in and out and my home value will drop. Perhaps I should sell.
*Which we've established are lacking in Viserys Targaryen-killing power.
163: This sounds crazy to me. Yes, they're both promises; if the problem with SS is that we could change our minds, let's not.
But the point is that SS isn't perceived to be like roads which, yes, we build expections around but we certainly could stop maintaining. It's perceived to be a retirement security system. You work, you pay into the system for your whole working life, you get income in retirement as a result. It's not widely regarded as a simple tax-and-transfer, and people feel decieved when they find out that's, at bottom, all it really is. The fact that only income earners (and surviving spouses) get it, and that your payouts are (loosely) related to the amount you put in, and that you get a goddamn account statement from the social security administration every year, that's drawn up in every respect to look just like it's showing your account balance as if it were just like a 401(k)... all that matters, and people feel deceived when they learn there's not actually any account for me, this whole thing is a smoke screen, if the program ended tomorrow I'd get nothing. All of which makes the charge of PONZI SCHEME resonante with some people.
132
One could, but implying that that's a point of resemblance between SS and a Ponzi scheme that's not shared by any other means of providing for retirement without leaving old people dying of neglect and starvation is the dishonest (or severely mistaken) bit.
SS does not give people paying into the system any legally enforceable claim to future benefits. There are other ways of providing for retirement that convey legally enforceable claims. Of course even legally enforceable claims can become worthless in the event of general collapse but they are still stronger.
134
Not, in fact, what the word 'unsustainable' means. If it's practical for the program to continue to serve its purpose indefinitely, with only reasonably workable changes in the funding structure, it's sustainable, regardless of whether the first generation of recipients, who got benefits without ever paying in, got a better deal than you or I will.
Unsustainable in exactly its current form if you want to be picky. Claims that the program is sustainable because we can just cut benefits are not entirely convincing.
133
Can you name any governmental program, or really anything even slightly complicated, of which you could not truly say that many people don't have an accurate picture of how it works?
My point was the inaccurate picture has been (at times at least) encouraged by advocates of the program.
A very timely post by Alex Tabarrok, including this quote from Paul Krugman:
Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).
So, LB, was Krugman lying or just mistaken?
SS does not give people paying into the system any legally enforceable claim to future benefits. There are other ways of providing for retirement that convey legally enforceable claims. Of course even legally enforceable claims can become worthless in the event of general collapse but they are still stronger.
Present law gives young people a right to future SS benefits. That right could be lost with a change of law, but that's true about just about any legally enforceable claim.
It's true that your IRA or your house can't be taken without just compensation and they can't be taken as part of a bill of attainder, but, still, tax law could change so that you end up with pennies on the dollar.
126
No. The only thing about SS that resembles a Ponzi scheme (leaving aside 'bigger than a breadbox' and 'not in my kitchen') -- the need for a steady supply of workers putting in, is, as I said above, something it has in common with any other possible way of taking care of old people. Any comparison between SS and a Ponzi scheme that doesn't acknowledge that there's no way to take care of retirees that doesn't have exactly the same resemblance to a Ponzi scheme -- that implies that SS is more like a Ponzi scheme than other methods of funding retirement that don't involve lots of old people dying of starvation and neglect -- is either dishonest or mistaken.
The other point of resemblance is the program has large unfunded liabilities and would leave unfulfilled obligations if wound up without an influx of funds. This is not a mandatory feature.
Of course any investment will go bad if society collapses but this doesn't mean there is no difference between investing in a legitimate enterprise and investing in a Ponzi scheme.
142
This is a little fair, but it elides the degree to which there's no real 'there' there for any financial investment. If I buy stock in IBM and it shuts down, my investment is up in smoke just like the money I put into Social Security is up in smoke if the US Government shuts down. I'd bet on the US Government to outlast IBM.
This is deceptive, the US government could outlast Social Security.
Being an IBM shareholder gives you legally enforceable claims against IBM (which IBM cannot unilaterally cancel). Paying money into Social Security gives no similar claim against the US government.
175: OK, so if someone honestly thinks the problem with Social Security is its potential to become a Ponzi scheme, they should be working toward putting into the law more concrete guarantees of future payouts for today's payers. right?
176: Republicans would say this is what Bush tried to do with his proposal for private accounts.
The other point of resemblance is the program has large unfunded liabilities and would leave unfulfilled obligations if wound up without an influx of funds. This is not a mandatory feature.
Well, sure. It differs from a program in which shares of IBM stock were put in people's retirement funds in that there's no obligation on anyone that IBM stock be worth anything in the future. If money stops coming into to IBM, your retirement is worthless and you get nothing, but no one's broken a promise.
So, for any retirement plan, money has to keep on coming in from somewhere throughout the retirement period to pay for the actual goods and services the retirees use, but you're right that only some plans, like Social Security, have an 'obligation' to make that happen. Ownership of financial assets, mostly, there's no such 'obligation' that those assets continue to be worth anything -- they probably will, but if they're not, sucks to be you.
155
The 'facial resemblance', which is what makes the comparison to a Ponzi scheme persuasive, is that from the way SS was originally sold, people who don't pay much attention have the vague but false impression that SS gives them individual ownership of some particular financial asset which will produce their SS payments. If you could clear up that vague but false impression among everyone who held it, there'd be no facial resemblance to a Ponzi scheme at all, and given that anyone who starts paying even a little attention would instantly be disabused, I don't think there's much of a resemblance there.
The Social Security administration sends annual statements detailing your taxes paid and the retirement benefit to which this entitles you (with a disclaimer about possible future changes in the law). This certainly conveys the notion that you have individual ownership of a future benefit and is different from the way most tax funded government programs work.
Being an IBM shareholder gives you legally enforceable claims against IBM (which IBM cannot unilaterally cancel).
Not exactly. Being an IBM shareholder gives you ownership of a certain percentage of the total value of IBM, but there's no legally enforceable requirement that IBM be worth anything. If it becomes insolvent and winds up, you've got nothing.
Comments 178 and 180 actually offend me. I should leave this conversation.
And being an IBM shareholder absolutely, definitely gives you legally enforceable claims against IBM. It gives you a legally enforceable claim to a portion of the corporation's profits. Of course there's no legally enforceable rqeuirement that this be worth anything; corporate equity is a risky investment. So what?
176: This isn't really possible as the system works. Under the law as it is now, you do have a legally enforceable right to your future benefits in that if you retired and your check didn't come, you could sue and get it -- what you don't have is a legally enforceable right that the law won't change. Once you start playing around with individual ownership of financial assets in place of SS benefits, which is the sort of thing the Republicans want to do, you lose the insurance aspect -- the money can't flow from people who die young without dependents to people who need to be supported through a long retirement.
176
OK, so if someone honestly thinks the problem with Social Security is its potential to become a Ponzi scheme, they should be working toward putting into the law more concrete guarantees of future payouts for today's payers. right?
Actually I would oppose this (unless it was somehow funded). State pensions are more guaranteed and I don't think the results have been good.
As I said above I don't think Social Security is perfect but I oppose major changes because all the proposed major changes I am aware of are much worse.
181: So, just like IBM stock could be worthless, SS benefits could be cut to zero. One is not on some abstractly conceptual level more secure as a means of funding retirement than the other, the difference is just in the odds that one or the other will remain valuable or become worthless.
I do think there is a lot lost when no one mentions the "actual insurance part" for those unfortunate enough to become disabled or have their parents/spouses die or not have any retirement assets whatsoever. Given this function I would not expect someone who is fortunate enough to have none of those occur to get out of SS what they put in. I don't think *I* should get as much out of it as I put in barring some unforeseen negative personal event--I have been relatively fortunate. I certainly understand the political disaster of means testing or other benefit remedies, but then tax me more.
Over the next few years I will start winding down my "investment" into term life insurance so I will probably end up getting nothing for that. Shit. If my term insurance were a government program I'd expect the WSJ and other right-wing outlets to begin calling those who die and collect "lucky duckies" (or at least their beneficiaries)--such is the core of the inversion of morality that informs the modern "conservative" movement.
Comments 178 and 180 actually offend me. I should leave this conversation.
This completely cracks me up. Would you like me to promise that I'll be more respectful about the future solvency of blue-chip stocks?
182
This isn't really possible as the system works. ...
I think it would be possible but is a bad idea.
... Once you start playing around with individual ownership of financial assets in place of SS benefits, which is the sort of thing the Republicans want to do, you lose the insurance aspect -- the money can't flow from people who die young without dependents to people who need to be supported through a long retirement.
This isn't really true, you can for example have mandatory conversion to an annuity upon retirement.
185: The other component of 'insurance' in SS is just long life; someone who makes it to their 90s is likely to outlive any savings, but is still going to need to eat. So you can get across the 'insurance' bit without even bringing in dependents or disability.
182: Yes. I also do not think that such a scheme would be a good idea (somewhat per 185) and I did not really think through how one way of accomplishing that would be private accounts. So never mind!
This isn't really true, you can for example have mandatory conversion to an annuity upon retirement.
So, rather than paying SS benefits, essentially an annuity, you could launder the money through a private insurance company? Sure, if wasting the money on another layer of private profit-seeking and bureaucracy made you feel more secure.
It wouldn't actually be more secure, of course. Just as Congress could cut SS benefits, Congress could pass a tax on annuity payments, which would have exactly the same effect on recipients. But the insurance companies would make more money.
I think I prefer the following:
It only looks like a ponzi scheme because the Republicans gave the surplus funds to rich people as tax cuts. We had a choice about this just over ten years ago. One guy wanted to lock away the money to save it for future retirees like you and me, and the other guy wanted to give it away to rich people right now. They were totally upfront, both of them, about this. Which option did you choose?
We can still get that money back, if we return tax rates to 1990s levels on the rich. You in?
Would you like me to promise that I'll be more respectful about the future solvency of blue-chip stocks?
I just deleted a very nasty response to this, that I realized I'd probably regret having posted. Really, I walking away. This is getting too heated. I don't think there's anything more I could add to this conversation anyway.
Sorry if pawned, but...
Don't be afraid
Tyler Cowen is just quoting both Paul Samuelson (the Elder and better) and Paul Krugman using "Ponzi scheme" to describe SS.
Samuelson says it is "a Ponzi scheme that works"
PS, PK, and TC all have arguments like the others in this thread.
But can we stop with the knee jerk tribalism trying to refute every idiocy (or not) some stupid Republican says? It's a waste of time, they are not worth it, and it takes you down to their level.
Fuck Republicans. As Brad D says, the Party must be destroyed. There is nothing else to say.
I think what all of the commentary about private assets being more secure than SS comes down to is that there's no real way to bind the government against changing its mind. We could pass laws abolishing SS tomorrow, so it's not secure.
But on that level, nothing's secure. Any class of assets could be subject to a confiscatory tax tomorrow. Probably won't be, but there's nothing other than public opinion stopping it from happening. The law and the enforcement power of the government can prevent a private entity from doing something, but there's no bigger force that prevents Congress from changing the law and using the government's enforcement powers from doing what it likes. This is a real risk, but it's a risk that's conceptually applicable to everything, not just Social Security payments, and pretending that it's just applicable to Social Security payments is silly.
192: No problem. I have to admit that if you're actually angry about this, we're talking past each other -- I'm not clear on why you would be. If you want to email and try and get it through my head how I've been unpleasant, I'm all ears.
188: Yes, there is that as well, and it brings up some interesting aspects of what is fortunate and what is unfortunate. Living long (if healthy) is fortunate. Outliving your assets is unfortunate.
I'm going to violate my "clapping harder is actually part of making Social Security (and the whole freaking US government) work and say that I have gave doubts that there exists the political will in the country to sustain it through the demographic bubble. Charley has the right formulation in 191 but I'm not sure it will win through.
192 I just deleted a very nasty response to this, that I realized I'd probably regret having posted. Really, I walking away. This is getting too heated.
Are you sure the heat isn't all in your head?
192, 195: I am also puzzled about what is "too heated" about this as opposed to anything else that gets discussed here. And now I'd really like to see the "very nasty response". Pretend that I said whatever LB said and direct it at me.
191.2: But he said "lockbox" ... heh ... heh, heh.
And as long as we talking about entitlements Digby has a ton of great well-sourced details about the consequences of raising the Medicare age to 67. This should be read, even if I am the one linking. Digby should be read.
2. It's brutal on seniors. In fact, it's like a 20 percent cut in Social Security benefits.The Kaiser Foundation says that "Among the estimated 5 million affected 65-and 66-year-olds, about two in three would pay an average of $2,200 more for their health care in 2014 than they would have paid if covered under Medicare."
Of course, this is the President's plan, so go back to detailing stupid Republican tricks instead.
This should be read, even if I am the one linking. Digby should be read.
I promise not to actively avoid reading something I would have read anyway just because you linked it.
Haven't read Digby, but what I hate about raising Med/SS ages generically is that it's hardest on people who have been working the hardest jobs.
Wierdness about taking IBM, or any stock, as the perfect standard of retirement savings: there are companies whose total goal is to eat IBM's market and dance on the wreckage! It briefly looked as though they'd pull it off! So a sensible retirement plan invests in the whole economy. Of course, to invest in sectors that don't even exist yet, you'd want to deal with all employees in an expected retirement year, not just companies that already exist now. Oh look, that's the SS deal.
(To be argumentatively fair, I brought up IBM stock first, rather than anyone who was arguing that Ponzi scheme was a good description of SS. So talking about how IBM stock is insufficiently diversified to be a good retirement plan, while true, isn't arguing against anything that's been said here.)
202.1: Yes, this is part of the aspect of the current program that I wish there was a politically feasible way to change. Sure move SS up to 67 (but not Medicare for God's sake--move that down to 55 and for everyone from 0-21 in preparation for taking over everything--but that's another discussion) for bit-twiddlers and paper-pushers like most of us here, and leave it as is (or even bring it down) for those who have significant physical components to their work. But politically that would kill it. Taken as a class, the relatively privileged in our society have become rotten in our privilege.
Okay. Skimming... T-bonds would make SS-distrusters feel safer? A lot of this argument depends on whether one thinks the US is going to inflate its way out of trouble, or not be able to avoid it, maybe?
Taking next step in buying subsistence/CSA goat farm today. (Arranging soil tests for heavy metals.)
T-bonds would make SS-distrusters feel safer?
The problem with this argument is that we don't have any real SS-distrusters to argue with, at least I don't think so. Urple and Shearer and political football aren't arguing that Ponzi scheme is right, but that it's close enough to reality that people using that rhetoric aren't necessarily dishonest or mistaken about anything. So you can't actually ask them 'what would reassure you', it's one step removed -- 'how would the people we're talking about feel about it'.
This isn't really true, you can for example have mandatory conversion to an annuity upon retirement.
Sparing you the details, pretty much all pension schemes in the UK are compulsory annuities. The state pension may technically be an annuity or not but it works like one. Nobody here complains about this.
200: The Kaiser Foundation says that "Among the estimated 5 million affected 65-and 66-year-olds, about two in three would pay an average of $2,200 more for their health care in 2014 than they would have paid if covered under Medicare."
This seems awfully low to me. I know some people in that age group who had to buy private insurance recently, and it was 5 or 6 times that much. Now, it is certainly the case that some 65 and 66 year olds are still working at jobs with health benefits, so presumably they would be bringing the average down, but still.
Natilo, I see from R Reich's twitter stream that there's some kind of wing-ding in Mpls today. You going/went?
209: I'm not even 100% sure what he's referring to. The Labor Notes conference and the Anarchist Book Fair are next weekend. This weekend is the Cowles Center grand opening, which I crashed last night, sort of. Lotta fuckin' rich people. I saw Mari/yn Car/son Ne/son there, and I thought, "Wait a minute, isn't she dead? I'm sure she's dead. That must just be someone who looks like her." But then I read the Strib article today, and sure enough it was her alright.
Huh, okay, I guess it was this:
http://action.mnfaireconomy.org/page/s/summit-for-a-fair-economy
First I've heard of it.
Dispatch from Minnesota: Great meeting of grass-roots labor, community, faith-based orgs dedicated to taking Am back from radical right.
Yeah, huh. I mean, I'm guessing the people who get invited to this kind of thing are pretty much all folx who make $100K+ per year heading up big social-services non-profits, plus a couple of tokens. Being a white male anarchist, I am rarely tapped for token duty though.
From the website, it looks crashable.
I was in to work at 8:30 to rush through painting a wall, then setting up an open house, now trying to find the energy to change and go home and sleep. I'm not even sure what bus I would take to get to SW HS. The #6, most likely, but that would mean getting over to uptown. Also, what would I say to Robert Reich? "Every time I see your picture, I think about what it would be like to cuddle you?" But I bet he hears that everywhere he goes.
Doesn't the unpredictability of government in the case of SS also apply to IBM stock? I.e. couldn't the US just decide to tax capital gains at 100%? This wouldn't directly affect its face value, but indirectly it would cause a pretty significant drop in value.
195
No problem. I have to admit that if you're actually angry about this, we're talking past each other -- I'm not clear on why you would be. If you want to email and try and get it through my head how I've been unpleasant, I'm all ears.
Your line of argument in this thread that nothing is perfectly secure and therefore everything should be considered equally insecure seems a bit willfully obtuse and the kind of thing that could irritate sensitive souls.
Well, as soon as I re-read 215, I thought to myself, "I wonder if there's a whole genre of Natilo/Robert Reich slash on the internet somewhere?" And, of course, once thought, such musings become reality.
Natilo stepped out of the Holodeck, the smoky scent of a Soho beatnik pad, circa 1958 clinging to his rumpled red and black Starfleet uniform.
"Oh, hello Robert, funny bumping into you here", said Natilo. Lately, their interactions had grown strained, though always crushingly polite. As soon as the quip had left his full, red lips, Natilo knew it had sounded forced, even desperate.
"Not so funny, remember we talked about trading Holodeck slots last week, and then had a thirteen-message email chain on the same topic over the past three days?" Robert replied. Nice to see the years spent on Vulcan after his parents' Starfleet economic research vessel crashed there haven't worn off, thought Natilo.
"Yeah, I guess, I should have expected it. Um, so, what scenario are you going to log into today, anyhow?" Natilo said, realizing as he spoke that this conversation could only end one way.
"I think you know," said Robert, "care to join me?" It was as simple as that. Months of self-denial and endless conversations with Guinan in Ten-Forward over Aldorian ales were as nought. Resigned to the inevitable night of self-loathing, masturbation and tears that would follow this encounter, Natilo followed Robert into the Holodeck, only vaguely interested in the question of who would get to be the walrus today.
217
Actually I think 172 (which I somehow initially missed) better explains why urple might be annoyed. You (LB) have been taking the line that there are no actual similarities between Social Security and a Ponzi scheme and only dishonest rightwing hacks and their dupes would think otherwise. Presumeably urple doesn't like being put in that group.
||
OT: Happy Birthday to me.
I realized that, since I started reading unfogged in 2004, I have now been hanging around this blog for 20% of my life.
Cheers to everybody, it's a good collection of people here.
|>
218.last: I hate being the Eggman.
219: Yes, I've been taking the ferociously unpleasant position that anyone who thinks 'Ponzi scheme' is a good analogy for Social Security is at least mistaken on that point.
218: Oh man, this cracked me up. I've been taking advantage of Netflix's Star Trek: TNG availability and watching at a break-neck speed, so it's extremely vivid in my mind.....
220: Happy Birthday! Dodged a bullet there on the date, eh?
Oh, and yes! Happy Birthday, Nick!!!
217: Nothing's secure, in the sense we're talking about, against government action. I'm not getting the willful obtuseness.
If you look at history since the beginning of the program, SS has been lower risk than almost any other kind of investment, while also serving the necessary insurance function. It's looking risky now, but the only thing that makes the risk is people lobbying for the government to take action and shut it down. If you had the same energy lobbying for the nationalization of the FORTUNE (allcaps. Always allcaps.) 500 those would look risky.
223: Maybe urple is just very defensive about Krugman.
Yeah, I'm really not bothered by "Look, smart guy who you generally agree with used the analogy!" In a specific, limited context, it might have been useful. If you found Krugman saying it was generally a meaningful analogy, I'd think he was mistaken, unless I saw a good enough argument from him to change my mind.
227
Nothing's secure, in the sense we're talking about, against government action. I'm not getting the willful obtuseness.
Some government actions (like reducing the pay of federal judges) are less likely (for various reasons) than other government actions. You don't seem to want to acknowledge this.
230: If that's the argument you want to have about Social Security, I want to have it explicitly on those terms. "The risk you should worry about for Social Security is not that it will become financially unworkable to pay benefits, but that Congress will whimsically shut the program down."
Thanks, everybody.
Also, to try to comment on the argument again, I thought 140 was a good summary statement by urple, and one that I would largely sign on to -- not that SS is a Ponzi scheme, but that there are valid reasons why that rhetorical move sticks ("gains traction" in urple's language).
139 to 138: It's not just Social Security-like plans, it's any way of taking care of old people.
Consider a society in which people's plan for old age was to have children who could support them. That society depends on the continued production of children as a way to support retirees, but it differs from SS in that there's no third party intermediary between the beneficiaries and the next generation of workers. That society would be significantly less efficient at providing security in old age (didn't Megan once pass along a story about somebody explaining why you had to have 8 children to know that you would be taken care of in old age? I'll look for that later) but, it would also be completely transparent -- people have quite a bit of information available to estimate how much support they can get from their children.
The uncertainty created by having the government as an intermediary isn't a tangential issue, it is part of why people get worried about Social Security. Now, I'll agree that the rhetoric, over the last 25 years, of, "who knows if today's children will ever receive any money back from the program" is, itself a way of undermining the program, and needs to be challenged.
At the same time, there are reasons for uncertainty beyond just deceptive rhetoric. It's true that we don't have a collective agreement about what role Social Security should have, in our country. It is, in fact not just in rhetoric, a political battleground. Now, it's also relatively safe, in the medium term. There are a lot of people who will oppose any immanent cuts to benefits, and that's good (see also, CC's 191 at this point).
Is term life insurance like a Ponzi scheme to you?
No, but term life isn't an investment either, it's insurance.
That's still my basic position about Social Security but, thinking about it, I realized that I shouldn't lean to heavily on that position because I like the idea of increasing social security taxes and benefits so that it would come closer to fulfilling the needs of retirement savings.
230: If that's the argument you want to have about Social Security, I want to have it explicitly on those terms. "The risk you should worry about for Social Security is not that it will become financially unworkable to pay benefits, but that Congress will whimsically shut the program down."
That comes close to addressing my position. I'll agree that, for the comparison to a "Ponzi Scheme" to have any bite, it has to include a claim that, under some range of likely circumstances, Social Security is unsustainable.
To put it another way, Bernie Madoff would have liked to keep his scheme running forever. He couldn't, because it wasn't possible for him to keep enough money coming in, so instead he had to go to jail.
Congress is never (for any reasonably likely version of never, not counting TEOTWAWKI) going to face the moment where it's impossible for them to keep enough money coming in to pay Social Security benefits. If they decide not to keep paying those benefits, it will be because they've made the political choice not to, not because they hit the Bernie Madoff moment.
People saying "Ponzi scheme" are implying that there's a Bernie Madoff moment coming, when the real risk is that Congress will make a bad decision. We, as the electorate, can keep Congress from making that bad decision by clapping harder.
Whoops, I spilled my Nehi on the keyboard.
Social Security is social insurance, not an investment as such.
But can we stop with the knee jerk tribalism trying to refute every idiocy (or not) some stupid Republican says?
As Brad D says, the Party must be destroyed. There is nothing else to say.
I'm afraid, assuming present conditions/trajectories project into the future, that this is right. There's just no arguing policy or semantics with so-called mainstream Republicans any more. Now that the party has been completely captured by movement conservatives, we're done with arguments. It's over. They want to destroy the federal apparatus by rendering it so dysfunctional that the electorate will grow to despise government as much as Grover Norquist does. This is what I meant the other day when I said that I'm completely sick to death of progressives/Democrats/lefties evincing outrage over the outrageous things Republicans say. It's time to move on and spend time more efficiently: digging shelters, hoarding food, trying to get decent people elected to high office.
I know that nobody cares. And I'm sorry to rant.
Also, 191 really is excellent. It sort of takes one's breath away reading it, actually.
231
If that's the argument you want to have about Social Security, I want to have it explicitly on those terms. "The risk you should worry about for Social Security is not that it will become financially unworkable to pay benefits, but that Congress will whimsically shut the program down."
Congress won't whimsically shut the program down but might cut benefits because of increasing financial strain on the government as a whole.
Or it might adopt some crackpot alternative.
232: Consider a society in which people's plan for old age was to have children who could support them.
Sure. That sort of plan for old age is included among plans that involve large numbers of old people dying of starvation and neglect. You can have the kind of transparency you're talking about it, but getting it without the piles of bodies is hard.
Sure. That sort of plan for old age is included among plans that involve large numbers of old people dying of starvation and neglect.
Yes, I thought it was obvious that I considered that situation much worse than Social Security.
I was just trying to create an example which had as far as possible on the side of, "whatever resources one has a claim on in old age, that person is personally in a position to exert their claim" rather than being at some remove from a third party (government, courts) who have to be engaged to act on the claim.
Really we're on the same side in thinking that (1) the rhetorical claims that Social Security is unsustainable are, in the vast majority, inaccurate and (2) the fact that the claims are themselves harmful, is a reason to argue against them rather than spending too much time squinting to try to identify scenarios or interpretations in which the claims are defensible.
I still find myself thinking that I can understand where the "Ponzi Scheme" charge comes from (and, again, I think 140 is a good summary), but that isn't to disagree with either of those positions.
206: Urple and Shearer and political football aren't arguing that Ponzi scheme is right, but that it's close enough to reality that people using that rhetoric aren't necessarily dishonest or mistaken about anything.
236: Social Security is social insurance, not an investment as such.
Okay, maybe this is really obvious, or somebody said it upthread in a really clever way that was over my head, but aren't we talking apples and oranges when we compare Social Security to any private scheme, whether pension or con game or whatever? Maybe I'm just being totally naive, but having grown up, as I've mentioned before, in a family where the Sunday dinner conversation with my grandparents was always about how evil Reagan was and how great the New Deal was, I've always understood that part of what we're basing Social Security benefits on is not just the Trust Fund, or future taxation, or fiat money, or anything like that, but rather the fact that if you've worked a certain amount in your life, whether as a cannery foreman or an accountant or a make-up counter clerk or a CTO, you've materially contributed to the growth and maintenance of the entire economy. So it's not really analogous to having 8 children, or buying an annuity or anything like that, because the idea is that you've done your bit for the nation, simply be working and producing value throughout your life, and therefore you deserve to be taken care of in your old age and not thrown out in the gutter like a used condom. All the Trust Fund and FICA deduction stuff is just a convenient way of accounting for the underlying principle.
And of course, as we all know here, what's really at stake in this debate is that the fucking scumbag Republicans and plutocrats DO see us as basically so many used condoms, after we've stopped actively creating value for their stupid corporations. That's what we're fighting against, and that's a message the Democrats would be wise to adopt with all the vigor they used to muster in the old days.
Brad DeLong weighs in:
So they think that Social Security is a Ponzi Scheme--but that, unlike other Ponzi Schemes, it is not fundamentally fraudulent and, unlike other Ponzi Schemes, it is not destined to end in a sudden catastrophic collapse?
This thread continues to be appalling. If conservative want to cook up an accusation that Social Security is like a Ponzi scheme, it's their responsibility to employ all the wealth available to them to convince others that the accusation has merit. The burden of proof, such as it is, is entirely on them and there's no reason to contribute so much free labor to explaining that just maybe, if we tweak the terms a little, and think of it according to this analogy, or maybe that analogy, and so on, that some people might think they have a point.
241: This all looks reasonable.
A large part of what I've been trying to do in this thread is hammer a wedge inbetween "I can see how someone could think [X]" (which is all I think you were ever arguing) and "Thinking [X] is a reasonable thing to do" (which is what I was trying to argue against). Because thinking that SS is meaningfully like a Ponzi scheme can be a reasonable mistake, doesn't make it not mistaken.
242: I couldn't agree more. That's the moral argument behind SS.
I think part of what's confusing here is that the difference between the function 1^x and the function a^x where a is any constant bigger than 1 is confusingly both a difference in scale (you can slowly deform one into the other) and very much a difference in kind (1^x doesn't grow, a^x grows faster than any polynomial).
All investments depend on population growth assumptions. If starting tomorrow no humans reproduced there is no investment that you could buy which would provide for you in your old age. This is the point that LB has been harping on. So when you're comparing different investments you need to allow for normal population growth in all cases.
What makes a Ponzi scheme unsustainable is that it requires adding new recruits at *a faster rate than population growth*. That is, the rate of recruitment over the rate of population growth is larger than 1. For SS the rate of recruitment is exactly the rate of population growth, so it doesn't require exponential growth above the baseline, and just isn't a Ponzi scheme.
To phrase it a little more mathily, Social Security is not a Ponzi scheme, but it is in the *closure of the space of Ponzi schemes*. (That is there's a sequence of Ponzi schemes which converges to Social Security.)
(More accurately, there's a sequence of Ponzi schemes which converges pointwise to Social Security, *but not uniformly*.)
All investments depend on population growth assumptions
I don't know if I believe this. I will concede if birth rate dropped to 0 we would be in trouble, but I am not sure if I believe it for birthrate < death rate if the ratio is small. I at least hope we could get to someplace that we could sustain birth rate = death rate or we are kind of screwed in the long run.
birth rate = death rate is an assumption about the rate of population growth, and you'd expect investments to typically return less in such a world than they do in the world that we live in. Social Security would be just as sustainable in a birth rate = death rate world, but not as lucrative as it is now.
I wasn't sure if by population growth assumptions you meant assumption that population would grow or assumptions on the rate of growth. 250 clears that up.
Upetgi's 248 may be the most natural case I've seen of 'you must be a mathematician: you just told me something absolutely true and completely useless'.
I was hoping for more discussion of SS as being the end-member of highly diversified, low-risk, low-growth investment choices, thus drawing it into the world of reasonable and useful long-term plans. However, as that seems too boring, I drifted away into the traditional world of strong property rights and personal provision for old age and inheritance. Perhaps LB and I fail to be charmed by that view because we've both read Mr. Scarborough's Family, in which a man in the enviable possession of a fine estate goes completely nutso trying to control his heirs' inheritances. At least this novel is actually funny -- depending on your children to support you has a lot more tragedies in its train. I know a few women who were expected not to marry because their parents needed someone at home; this can go badly either as planned, or when the underlying economy changes.
246: I guess I got a little sidetracked from explaining one of my points, which is that I don't think it's just a moral argument. I.e. it is impossible to accurately ascertain the total economic benefit of any individual's work life, therefore, it is useful to provide a social benefit for participating in society that is not solely dependent on how that individual has been compensated throughout their life, because an individual's compensation is unlikely to accurately reflect their exact economic impact, depending as it does on so many factors, many of them quite arbitrary.
I guess you could think of that as redistributive, but in a larger sense I'd argue it's just distributive. The process of going to work for 40 or 50 years represents a net benefit to society that is greater than the sum of the parts. You can't usefully talk about "what if this bus driver had never gone to work, and his or her contribution to society never made", because society is too big and division of labor too complex and overdetermining. And yet, in the aggregate, clearly bus drivers maintain a crucial social function. This, I think, is where a lot of the schmibs approach the question at a pre-intellectual level. They get trapped in a sorites paradox by their preoccupation with the individual's role in society, and are forced into an extreme selfishness, since they can't then admit that individuals besides themselves have any aggregate social value.
A real mathematician retires on a lump of gold and the Banach-Tarski paradox.
That Marginal Revolution post is awesome.
Yglesias: "Social Security Is No More A Ponzi Scheme Than Is Anything Else That Relies On Future Economic Growth".
Shorter Tabarrok: I've got three Nobel Prize winners who say Social Security is like a Ponzi Scheme in the sense that it relies on future economic growth. So there.
I don't read Marginal Revolution often enough to say anything definitive, and I don't know Tabarrok in real life, but much of his work online suggests that he's both a willing liar and a very nasty piece of work, the kind of guy who, when he gets called on his bullshit, digs in rather than graciously or even begrudgingly owning up to being wrong. This is a common academic type, but that's no excuse (nor is having skipped kindergarten).
191 and 248 are both excellent, but in very different ways.
I'm with 245. A very similar complaint surfaced elsewhere recently (I don't recall where) in connection with some other issue over which liberals/progressives were bending over backward to articulate ways in which the conservative position might possibly, if you squint this way, or perhaps that way, at it, make sense.
Oh. It was a link to an exchange several years ago on John and Belle's blog, linked from the recent CT thread on whether Republicans really mean it.
What makes a Ponzi scheme unsustainable is that it requires adding new recruits at *a faster rate than population growth*. That is, the rate of recruitment over the rate of population growth is larger than 1. For SS the rate of recruitment is exactly the rate of population growth, so it doesn't require exponential growth above the baseline, and just isn't a Ponzi scheme.
I had the thought, expanding on my thought in 13, that one proof of the fact that Social Security investment is not a market decision, and which distinguishes it from a Ponzi scheme, is that when the goverment says, "we need people to pay a little more, and accept smaller returns from Social Security" as it did in the 80s participation doesn't decline.
Part of what makes a Ponzi scheme unsustainable is that if incoming and outgoing money don't match up the person running it has few options for managing the problem that don't end up with a run on the money. If they need to reduce payments people will take money out, and then the financial equation gets worse. But for Social Security that isn't the case.
This thread continues to be appalling.
I'm with 245.
I disagree, obviously. I think it's handy to be able to have a conversation to tease out the grains of truth from a bad argument, and I would think that unfogged is a good place for those conversations.
For example, I talk politics from time to time with somebody who used to be a Republican and is now an unpredictable Democrat because he decided the the Republicans had abandoned fiscal responsibility. It's helpful for me to be able to make arguments to him in the form of, "even if you think the stated goals of the Republicans are reasonable here's why their policies won't achieve those ends." To be able to do that it's nice to have really thought through the issues at stake.
I haven't read this thread in much detail, so perhaps this has been pointed out, but the Republican "Ponzi scheme!" agenda is to redirect attention from what government does to what private investment or insurance does, and to find public government functions bewildering and clearly evil, because they're just weird. As though they're not in our vocabulary any longer.
Social Security is not an investment, nor really quite like an insurance policy: it's a tax. It is to that extent in a different category altogether.
I found this Drum post entirely on point. Central passage:
Here's how Social Security works: every month we take in taxes from working people and every month we turn around and distribute those taxes to retirees. That's it. That's how it works, and everyone who actually knows anything about the program knows that's how it works. Taxes come in, benefits go out. And the key to solvency is simple: making sure that those taxes and benefits are in balance.
This is, of course, the way every government program works. Taxes come in, payments to soldiers go out. Taxes come in, payments to NASA rocket scientists go out. Easy!
SS is a tax. Not an insurance or investment plan. Allowing Republicans to rework our understanding of its nature is a mistake. We might as well call income taxes which go to pay for roads and bridges which aren't maintained a Ponzi scheme.
Social insurance is a real, well-defined concept, that accurately describes Social Security. It's not the same thing as private insurance, but it's a thing.
261 was before seeing 260.
To 260.last: I'm sorry. Of course unfogged should be a forum in which to hammer out anything. I hadn't realized you were in conversation with a teetering Republican.
re maybe I'm confusing a Ponzi scheme with a pyramid scheme:
Ponzi scheme + Feeder Funds = pyramid scheme
Financial innovation at work.
I'm just so clever that I can't believe myself. Mom says that if I stay this smart they'll have to let me graduate from fourth grade.
Further to 262, 264: I don't want to go on about this much longer this evening, but I guess I'm wondering whether you think there's value in redescribing SS to the American public at large as social insurance. Rather than as a tax.
We certainly know that "taxes" is increasingly becoming a bad word. I'm not sure it's wise to grant the 'bad word! bad word!' move. But if the public at large really has become drastically confused about the point of taxation (that is, as funding of government programs which benefit all of us, each and every one), maybe we do need to redescribe.
I'm resistant, as you can tell.
Eh, I'm not one for censoring threads, and there's not much else for me to say about this one so I've been staying out of it.
For what it's worth, I don't really see what the Ponzi scheme language has to do with Republican ends and means, except in the sense that calling something a bad name whether or not the labeling is accurate is a common means to political ends. There's lots of grains of truths in discussions of the sustainability of Social Security, none of which require the use of the Ponzi scheme label or even a long discussion of whether that label is accurate.* And using a discussion of the Ponzi scheme label as a proxy for a discussion of Social Security itself doesn't seem very productive, but of course productivity is not, nor should it be, a part of comments threads.
It could be worse. This could be a discussion of death panels.
*Especially if the discussion proceeds from the assumption that it's not accurate. This discussion seems to be about how inaccurate it is, not about why Social Security really is a Ponzi scheme.
267: There's no need to avoid the word 'tax', but 'tax' doesn't describe the program itself, just how it's funded. "Social insurance" isn't a neologism developed in response to Republican attacks on Social Security, it's the term, as far as I know, that conventionally describes programs that work like Social Security wherever they exist.
SS not only relies on population growth, but also productivity growth. Fewer people making same amount of stuff means fewer people can support the old folks through the same tax rate on their production. That's why the whole, "We used to have 40 workers per retiree, now we only have 3, we're dooooomed!" line is misleading. But, like the Ponzi analogy, it might make superficial sense to someone who doesn't think it through.
It's always been a type of social insurance.
Roosevelt's message to Congress on Social Security, January 17, 1935.
Roosevelt on planning for what became Social Security, June 8, 1934.
I met RR once at a fundraiser when he ran for MA governor, I couldn't help towering over him when I was talking- as in, actually leaning towards him & looking down when I was speaking.
269: Yes, I'm aware that "social insurance" isn't a neologism. Perhaps we should make this shift in describing it, then. We would then refer to the payroll tax cut in Obama's Jobs Act proposal as a reduction in the mandatory SS insurance premium.
OT: Is it bad if you value a Congressional seat slightly less that a headline that reads "Republican Takes Weiner Seat"?
And FDR on the third anniversary of Social Security.
Oh, also, my cheat sheet for those speeches, in the unlikely event that anyone actually cares.
This is a problem the NY Democrats brought upon themselves. They could have found somebody whose name would make a better headline.
275's cheat sheet makes me laugh. Of course I care, even though you're too young for me (alas). Very helpful. Thanks.
"Social insurance" isn't a neologism developed in response to Republican attacks on Social Security, it's the term, as far as I know, that conventionally describes programs that work like Social Security wherever they exist.
Agreed. And there's nothing wrong with "insurance," which is preferable to "tax," imo. I like "old age insurance," which I believe is also conventional? Or perhaps "retirement insurance"?
One reason why "Ponzi scheme" gets any traction, I suspect, is that many people think of SS as a savings account rather than an insurance program. That is, they see it as: the govt takes money from you every month, and puts it into a retirement fund to save the money for your retirement, and then you collect on this saved money when you retire.
When anti-SS politicians and pundits point out that SS works like, well, an insurance plan (the govt takes money from you now, and distributes that money to today's retirees/beneficiaries, with the promise that the same will be done for you when you retire, and your future benefits will come from contributions made by future workers/taxpayers), they typically play on people's anxieties about the future by suggesting that the promise of future benefits will be broken. They're the ones who want to break that promise, of course; and they like to call it a "Ponzi scheme" because that's exactly what they'd like it to be (the hardcore anti-SS ideologues would like to abolish SS altogether, which would certainly make it a fraudulent scheme for those currently paying in on the expectation of future benefits). But as LB and others have argued above, it is not inherently a "Ponzi scheme" (unless any and all forms of insurance are "Ponzi schemes," which is ridiculous).
too young for me (alas)
[polite deflection]
279: Ha! Sorry. I tend to enjoy your comments, was my meaning.
I do feel like I've been a bit too harsh. I actually think insurance is interesting and learn from the discussions of how various programs work; it's just the ponzi side that I'm objecting to.
278
When anti-SS politicians and pundits point out that SS works like, well, an insurance plan (the govt takes money from you now, and distributes that money to today's retirees/beneficiaries, with the promise that the same will be done for you when you retire, and your future benefits will come from contributions made by future workers/taxpayers), ...
This is not in fact how conventional insurance works which (if honestly run) does not depend on selling new insurance policies to pay the losses on existing policies.
Realized that I had no idea what the percentages of the various kinds of SS payouts were: 19% disability, 4% young survivors and 77% retirement
270: That might be the case if benefits were indexed to inflation. But we're providing materially more support to the current generation of social security retirees than to the previous one, in real terms.
97: I use napkins made by a paper towel manufacturer. They are nearly identical to my paper towels, except that they come folded and strongly creased in a napkin shape.
I suppose this falls in the "in the big picture Republicans are very evil and so pointing this out means I have Asperger's" category, but urple was 100% correct about IBM and I completely understand why he stormed off. 186 was pretty disingenuous if I may so myself.
For some odd reason, Shearer has yet to describe the United States Marine Corps as a Ponzi scheme although it is also financed on a pay-as-you-go basis.
282: It is, conventionally, how social insurance works. Which is not the same thing as private insurance, but has been around since Bismarck.
288
For some odd reason, Shearer has yet to describe the United States Marine Corps as a Ponzi scheme although it is also financed on a pay-as-you-go basis.
I haven't actually (that I recall) described Social Security as a Ponzi scheme, I have just noted they do in fact (contra LB) have some common features. Which are not shared with the USMC. Whatever benefit provided by the USMC accrues to all US citizens, some of us are not currently paying for the protection of others and being told we will be protected starting in 30 years (or whatever).
I haven't actually (that I recall) described Social Security as a Ponzi scheme,
Now you're just whining.
@278
they typically play on people's anxieties about the future by suggesting that the promise of future benefits will be broken. They're the ones who want to break that promise, of course
Exactly. A republican warning you the SS isn't safe is like someone warning you that your house isn't safe as he's in the process of dousing it with gasoline and trying to light a match. Your house would be perfectly safe if some maniac wasn't trying to burn it down.
287 urple was 100% correct about IBM and I completely understand why he stormed off. 186 was pretty disingenuous if I may so myself.
Can you explain? I'm still utterly baffled by this reaction.
293: Social Security is a political commitment, not a legal obligation. If Republicans take over the government and eliminate benefits, they're not breaking the law or violating a legal contract. This has nothing to do with the solvency of the American government.
If you own IBM securities, on the other hand, you have certain legal rights. (It probably makes more sense to talk about bonds rather than shares in this context, because the value of an IBM share isn't determined by IBM but is basically whatever someone is willing to pay for it; same point.) If IBM promises to pay you 5% interest for 10 years, and then a new CEO takes over and decides he would rather pocket this money himself, that's illegal. Not the same as Social Security.
Now if IBM goes bankrupt and CAN'T pay back its bondholders, your IBM bonds are worthless. And it's much more likely that IBM will go bankrupt than that the US government will go bankrupt. But I believe this is known as "losing the point and changing the subject." I guess you crack yourself up and pretend that your debating opponent is getting his feelings hurt because he thinks IBM is a really good investment -- hardy har har -- but that's just stupid.
LizardBreath is correct in her larger point that there's nothing fundamentally fraudulent or unsustainable about social insurance. That doesn't mean that there aren't important differences between private insurance and social insurance.
I think this discussion is worth having, because it's an important social issue, and most people do not have a very good grasp of the details.
295: I don't see that you're making a different point than LB. The underlying argument, I thought, was that there's no fundamental solvency reason why Social Security has to have problems -- if it does, it's because, as you say, "Republicans take over the government and eliminate benefits". This is a real risk that no one was downplaying, but the point is that it's not a risk founded on whether Social Security as it exists makes sense, and it's a very different risk from the one that referring to SS as a "Ponzi scheme" implies.
295: I think the point you're making there is the same point I made in 194 -- that there's no way for the entity that makes the laws to bind itself so that it cannot change the laws. You do have a legal entitlement to Social Security benefits now, you just don't have a legal entitlement to continue to have a legal entitlement regardless of any action Congress might take in the future; the fact that Congress can change the law means that Congress can change your legal entitlements.
The thing is, though*, while IBM can't change your legal entitlement to anything IBM has contracted to pay you in the future, Congress can change your entitlement to keep your payments from IBM, by changing the tax structure. Privately held assets aren't conceptually safer from changes in the law than entitlements to future government benefits. You can argue that it's more likely that Congress will cancel SS payments than that Congress will pass confiscatory capital gains taxes (or whatever, depending on exactly what kind of investment we're talking about), and I'd agree with you about the probabilities, but both ways of funding retirement are in principle equally vulnerable to future Congressional action.
* And passing by the other point I was making, that IBM stock isn't legally required to be worth anything at any point in the future. Changing the discussion from shares to bonds does change the substance of what I was saying.
296: And this is right about what I see as the fundamental point of the discussion.
Urple's point was that there is a distinction between a political commitment and a legal obligation.
Your response seems to be that the government can do whatever it wants, and when you look at things that way the distinction isn't that important.
Fine, whatever; your insistence on playing down a perfectly valid distinction on the grounds that everything in the world boils down to power relations actually makes me think that you understand perfectly well that the distinction is important. But that doesn't change the fact that 186 was disingenuous and infuriating. No one was arguing about the solvency of blue-chip stocks (to turn your silly argument around, the US dollar also isn't legally required to be worth anything at any point in the future, so what's the difference between the US dollar and IBM stock, except some non-fundamental difference in probability distributions?)
urple was 100% correct about IBM and I completely understand why he stormed off. 186 was pretty disingenuous if I may so myself.
I'll throw my lot in with LB peep and essear. I totally thought urple was making a joke at first with that heated comment.
Urple's point was moving around a fair amount. Nothing wrong with that, but it's not as if there was only one point being addressed.
You're absolutely right that there is a difference between the kinds of commitments IBM (as a private actor) can make, and the kinds of commitments the government can make, because IBM can agree to be bound by the power of the government, but the government has a very different problem with causing itself to be bound by its future self.
But that difference isn't particularly relevant to the actual conversation Urple and I had been having up to that point, which was much more about the requirements for a retirement plan to remain solvent (as you could tell from the fact that we were talking about Ponzi schemes).
To expand on that, there's nothing wrong with Urple wanting to focus on a point that I didn't immediately see as relevant to the conversation, but I'm still kind of puzzled about what pissed him off so much that I thought it wasn't particularly salient.
168 seems relevant to what urple's point was at the time he stormed off. Basically he was saying that if you get an account statement showing a balance of $100,000, most people think that there is actually $100,000 they have a claim to, and they are somewhat surprised to discover that the government could decide tomorrow to pay you nothing. Your response was that if you have $100K of IBM stock, tomorrow it may also turn out to be worthless if IBM goes out of business. He said he found that response infuriating, and you replied "oh did I hurt your little feelings by insulting IBM?"
Eh. At this point, it doesn't seem productive to keep wrangling over what Urple and I were talking about with someone who isn't Urple, and doesn't have internal knowledge of what he thought we were talking about.
We'd been going back and forth over the point you raise for a while by the time he got upset. I would have liked to know specifically what upset him (that is, not comment numbers, but why they were upsetting in the context of the conversation) but given that you don't know that from personal knowledge, I'm not seeing much light shed on it from this conversation.
Best explanation so far of the difference between SS and a Ponzi scheme
I was going to comment but LB has done such a brilliant job that I feel less need to now.
However, I will chime in to say that 299 is wrong, and in an interesting way. Public political committments and legal obligations in the private financial markets are obviously the exact same thing, since our legal structure is a political creation and the private financial market only exists because of public political committments to sustain it. The fact that otherwise intelligent people do not see this, and even grow angry when it is pointed out to them, is just a reflection of the ideological force of capitalist assumptions. It's reification -- people see government promises about enforcing private contracts as "natural", part of the background to the world, rocks or trees. On the other hand, promises made by government in the area of social insurance are strange unnatural things that are by nature "unsustainable". But as LB keeps pointing out this is only because things are politically contested in one area but not in the other.
Of course, private contracts aren't necessarily that enforceable if you're not rich -- there are a whole lot of people dependent on Social Security today because some corporate raider stole their private pension.
I know posting on old threads is partly deprecating, but I don't want to drag this argument into any newer thread, so:
Krugman weighs in on the Ponzi stuff. Not surprisingly, he didn't actually mean SS is a Ponzi scheme.
The fact that otherwise intelligent people do not see this, and even grow angry when it is pointed out to them, is just a reflection of the ideological force of capitalist assumptions.
I don't think this is correct.
First of all, they are not the "exact same thing." As I said in 299, they are the exact same thing once you take the stance that "everything in the world boils down to power relations." Now in some sense everything in the world does boil down to power relations; "the question is, which is to be master -- that is all."
But most of the time we pretend that there is some hierarchy of rules, with some rules being less flexible than others. I think we need to pretend that this is true. Sometimes as a result of this need we get pathologies like worship of the Founding Fathers and the plain text or the original meaning of the Constitution: "oh we can't just *interpret* the Constitution because that will mean that judges will be arrive at any conclusion they want; we have to do something much more *objective* than that." Or "if there is no God, then all is permitted; therefore there God exists." But even social constructivist liberals aren't really comfortable with the idea that there are no rules.
Put it this way, if President Tea Partier gets rid of Social Security in one stroke, LB is not going to say, "Well of course, the government can do whatever it wants, the idea that you have some kind of 'right' to a Social Security check is just ridiculous nonsense on stilts." And neither is anyone else here.
You can pretend that you can completely reduce the question of Social Security's legitimacy to the question of the government's solvency, and I guess it does wonders when no one in the room has any doubts about Social Security, but it looks pretty glib to me.