Here is a great Venn Diagram made by the Examiner’s Tim Carney:
This is great, but I think that something is missing in the Social Security side of the diagram. Only in the case of Social Security will people be asked to pay a second time for what they’ve already paid for: all these IOUs in the Social Security Trust Funds. Since the money is gone, taxpayers will be asked to pay once again for the $2.6 trillion in the trust funds — once the program starts cashing in its IOUs — in the form of new taxes or more deficit spending (future taxes, higher interest rates, or future downgrades, or a mix of the three).
More on Social Security’s cost to taxpayers here.
There is one other difference between Bernie Madoff's Ponzi scheme (from which some investors did profit) and Social Security. If the Social Security investor dies before he or she is old enough to collect, there is no return on investment unless a spouse survives. If the investor is unmarried at the time he or she dies, every dime invested stays in the trust to be distributed to other investors.
Reply to this commentLinkReport AbuseNot exactly right...any dependent children or parents can receive benefits, as can divorced spouses
Reply to this commentLinkReport AbuseThanks for the clarification, but there are limited benefits available for the people you mention and only in certain circumstances, i.e., divorced spouses must have been married to the deceased social security recipient for at least ten years. The point I intended to make is that Social Security isn't necessarily the best place to invest our retirement funds. Private investment accounts can be inherited or otherwise transferred. Social Security and Medicare benefits, in most circumstances, cannot.
The estate of an unmarried person with no dependent children or parents or divorced spouse of ten years or more who contributes to social security for 40 years, but dies before he or she is old enough to collect social security and medicare benefits, gets zero return on that investment. On the other hand, if he or she had invested in a private retirement fund for 40 years, that money could be passed on to another family member, a friend or a charity. This is why I don't understand why so many people were adverse to President Bush's suggestion that we be given the option to place our retirement funds in private investment accounts rather than the federal social security trust.
Reply to this commentLinkReport AbuseNot exactly right...any dependent children or parents can receive benefits, as can divorced spouses
Reply to this commentLinkReport AbuseRE: "I think that something is missing in the Social Security side of the diagram."
Something, else, too, that I believe to be rather significant: Once Madhoff's scam was identified, it was summarily shut down. Nobody even thought about "repairing" it. SS has been recognized to be insolvent for decades and, yet, I am still required to keep chucking a piece of every paycheck into the ether. Thanks for that.
Reply to this commentLinkReport AbuseOutside either of the circles are civil servants (including public educators), since neither Madoff nor the SSI system mean much to them.
Reply to this commentLinkReport Abuse"Since the money is gone, taxpayers will be asked to pay once again for the $2.6 trillion in the trust funds — once the program starts cashing in its IOUs — in the form of new taxes or more deficit spending (future taxes, higher interest rates, or future downgrades, or a mix of the three)."
That's not exactly true. We're going to be asked to pay for the government spending we've already received either through higher taxes, inflation, reduced benefits, etc. We're not paying twice for the same thing - we're just pretending we are. The first time, the Social Security money went to welfare, highways, education, defense, earmarks, agriculture, etc. When we "save social security", we're going to "pay a second time." That's only true in the sense that it is politically easier to raise taxes for social security than for government boondoggles.
Reply to this commentLinkReport AbuseDear lord, are we really going to have an election where we run on fundamentally altering Social Security?
Don't get me wrong, the problems in the system are serious and cry out for solutions. I just don't know that it is strategically wise to throw the long ball in an election by attacking Social Security, when Obama is very beatable in the ground game by grinding away at his record, "leadership", and the sluggish economy.
Obama is very beatable. This isn't the time to have our presidential candidates see if they can finally turn Americans against one of the most popular programs in the country. If you try it, and fail, you've just given the Dems a potentially devastating scare quote (they may already have it against Perry.)
Reply to this commentLinkReport AbuseI need someone smarter than I am to answer the following question, which occurred to me as I was reading the article: What if the trust fund had never been touched?
What got me thinking was this -- even when the trust fund existed, it was never invested in productive assets, which would increase the future supply of goods and services. So what would it accomplish? Hold down inflation by reducing the supply of money? Wouldn't the Fed, it attempting to hit its targets, simply have increased the quantity of money by an additional amount, equal to what had been sequestered in the trust fund?
In other words, does a fiat currency really work as a store of value for the government that issues it?
Someone help me out -- I've got a migraine thinking about this.
Reply to this commentLinkReport AbuseAnswer to the short question: no.
The government (including the Fed) can print money as it chooses, bearing the risk of inflation.
Since the social security taxes levied "to put money in the trust fund" were mostly taken from lower earners, and the Fed's lowering of interest rates mostly profited higher earners and financial companies, I think the impact of the trust fund was mainly regressive redistribution and reduction in the demand for real goods.
Reply to this commentLinkReport AbuseThere is not reason NOT to believe that whatever Prez Perry or Prez Romney propose to pass through Congress will be just as inept as Obama's healthcare bill, or Reagan's amnesty bill: neither of those silver bullet solutions prevented innate loopholes from undermining the original purposes of the bills.
(1) In politics, silver bullet solutions always miss what they aim for.
(2) There never was a political solution that lacked loopholes.
Reply to this commentLinkReport AbuseYou don't have to "pay twice" since "the money is gone". The mopney is invested in treasury bonds and yes, you have to pay those down eventually, or pay interest on them at least. They're part of the 14 trillion in debt. So when people quote that 14 trillion, the 3 trillion for social security is ALREADY IN THERE.
Of course "the money is gone!", that's what people do when they borrow money, they spend it. A bond mutual fund owns a bunch of IOUs also, is that bad?
If you consider the 3 trillion in IOUs to be paid by the gov't (most likely by borrowing more money and thus having no net increase in debt), then SS isn't insolvent at all. It will be solvent for decades more. Ultimately it needs to be adjusted to take into account longer life spans of course.
You can't have it both ways. The gov't owes 14 trillion. 3 trillion of that is to social security...but that doesn't count cause SS will never get the money. OK, then it's 11 trillion the gov't owes, right?
There is this idiotic notion that there is supposed to be a lockbox of money somewhere...that isn't how financial institutions work, they loan money out (the so called 'worthless' IOUs), otherwise they don't earn interest on them.
Reply to this commentLinkReport AbuseUmm a mutual fund has the money INVESTED. The invested money GROWS over time.
Socialist security monies are just GONE.
Its a ponzi scheme which is in the process of failing, perpetrated by people terrified of personal responsibility ( aka liberty ).
Reply to this commentLinkReport AbuseQ: What is the difference between the government bonds held by the SSA and the government bonds held by a bond fund?
A: None: the former were paid for by taxpayers, the latter by investors.
Reply to this commentLinkReport AbuseThat's a great diagram, but Carney is wrong, or at least misleading, to say that Social Security is regressive. Taxes are indeed capped--but so are benefits. And the benefit formula is progressive.
Discussion here:
External Link
Reply to this commentLinkReport AbuseFactor in mortality rates, and you'll definitely come up with a different perspective on African-Americans. Particularly men.
(To be sure, the numbers are skewed - the average lifespan is lower in great part because of the mortality rate of the young (crime, etc.,), which means they aren't paying in to Soc Sec their whole lives, but then you get stuff like adult onset diabetes and other things (cancer mortality) that bring the top end down faster than for the general population.)
Reply to this commentLinkReport Abusealso, you don't seem to understand Venn Diagrams.
Reply to this commentLinkReport AbuseThe only difference to me (but it's a big one) is that the victims of Madoff's fraud did not know it was a fraud until the end. But we've all known all along that Social Security is a Ponzi scheme -- that the "trust fund" or "lockbox" is filled with nothing but our own IOUs to ourselves, payable by our future, our children and grandchildren and great grandchildren. We are all co-conspirators in this conspiracy to defraud generations of Americans yet to be born.
Reply to this commentLinkReport AbuseBenefit transfers or not..the point that its a ponzi scheme does not seem to be argued.
Reply to this commentLinkReport AbusePaul Bauersaid "We are all co-conspirators in this conspiracy to defraud generations of Americans yet to be born."
Not all of us. My family has, for generations, told our elected representatives that we objected to their support of the Social Security Ponzi Scheme. The fact that the elected representatives ignored us is certainly not our fault.
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