Thanks, Andy — and you’re right that the fraud prosecution as the remedy for a Ponzi scheme comes first, and that, therefore, my definition was incomplete.
Yet the fact that Ponzi schemes are so egregious that officialdom’s only remedies are to a) shut them down immediately, b) as you note, prosecute and “incarcerate their designers, often for decades,” and c) use the funds that the scheme collected to make partial restitution, suggests that the analogy between Social Security and a Ponzi scheme is in no way apt.
The solutions are part of the definition of the problem. I’ve never heard of authorities trying to “reform” a Ponzi scheme. The fact that Social Security is salvageable with reform, then, is evidence that it is not a Ponzi scheme.
Further, another one of the hallmarks of a modern Ponzi scheme is that each victim of the scheme believes that his principal is held in a segregated, individual account, earning a return.
This belief was held by Bernie Madoff’s victims, and is at the heart, too, of the new Full Tilt poker allegations. In reality, the Ponzi money is commingled with others’ money to pay off previous victims.
It is fraud that bridges the difference between the perception and the reality. And it is the outright fraud that constitutes the Ponzi scheme.
Social Security does not attempt to perpetrate a similar fraud, or any fraud at all. Everyone knows — or should know — that his funds are commingled with others’ funds. Social Security is not a collection of private investments whose principal generates individual income streams for the future. Social Security overtly redistributes money, with today’s workers paying for today’s elderly benefits.
And everyone knows — or should know by now — that the problem has a long-run mismatch between revenues and expenses.
Therefore . . . Social Security is not a Ponzi scheme. The public cannot be outraged at a perpetrated fraud, when no fraud has been perpetrated.
Social Security is a government program, and a popular one, that needs reform if it is to achieve its goal. In a Ponzi scheme, the only goal is to perpetuate the fraud to enrich its designers.
"Social Security overtly redistributes money, with today’s workers paying for today’s elderly benefits."
I'm afraid I'll believe that when I no longer see people saying "I paid into the system all my life and now I want my money back." If they understand all they did was pay for the people before them, they would never say that.
Reply to this commentLinkReport AbuseThey also condemn ATMs because robots are going to steal their heart medicine. Old people (and here I include baby boomers) are delusional, paranoid, and selfish.
My generation (GenX) will pay for the boomers SS benefits. We will not see any benefits ourselves, unless we impose horrible burdens on our children. Unfortunately, the boomers are too stupid to realize that "none of the reform plans on the table will touch people over 55" -- so they refuse to let any meaningful reform happen. The boomers aren't content to financially cripple GenX, they want to crush their grandchildren too - all out of a delusional paranoia.
Reply to this commentLinkReport AbuseWhat is a ponzi scheme? Isn't it where money is put into a fund in the hopes of getting something in return while the money is in the end swindled for other purposes without your knowledge or say-so? Of course!
I just described social security!! Politicians in Washington have wrecked Social Security and I at the age of 34 do not intend on seeing a penny of it!! It's a joke!!
Reply to this commentLinkReport AbuseWhere to begin...
How about that paper the Soc. Sec. Admin sent me every year (until last year) that laid out how much I paid in and exactly how much I'd be getting. Is it supposed to be obvious to me and everyone else that that was a lie? And if so, does that lie constitute fraud, or is it not a fraud because we were all supposed to know the gov't was lying?
Reply to this commentLinkReport AbuseIt actually doesn't say how much you'll be getting. It clearly states it is providing an estimate, which is in no way binding.
Reply to this commentLinkReport AbuseOh, so when the govt says they estimate I'll get $26,000/yr (or whatever), it's not really a lie at all if I end up getting $0/yr because it said on there somewhere that it was an estimate?
Reply to this commentLinkReport AbuseThat's right. If they specifically say it's not guaranteed (which they do), that's exactly what it means. You can't really accuse the government of lying in this case - they are outright telling you that it is just an estimate.
This is not at all unlike a 401k estimator which you find on almost any broker's website. It gives you an estimate of the future value of your 401k, but it certainly doesn't guarantee anything.
Reply to this commentLinkReport AbuseMan, I would love to meet you and hear you expound on a wider variety of issues.
So, let's say you go to the garage and he estimates it's going to cost $350 to fix your car, but when you get there he hands you a bill for $14,000. Hey, it was just an estimate, right?
But hey you say it's just like a 401k estimator. My 401k estimator allows me to pick various growth rates...2%...4%....etc. so I can see what they'll do with my money. But you say that if I go to get my money out of my 401k and that low growth bond fund of 2% I signed up for yielded negative 100%, well, hey, just an estimate.
Oh, and one more thing. Have you ever heard Democrats excoriate Republicans for even suggesting they might privatize Soc. Sec.? In 2008 they really went hog wild with that when people lost 30% in one year (but have since gotten most of it back). The Dems said it was unconscionable to privatize social security to put our retirement savings--and that's what they called it--at such risk. Now Dems (and some Reps) are saying, "okay, you aren't going to lose that 30% by not privatizing Soc. Sec....you are going to lose 100%. " But hey, don't be mad...it was just an estimate.
In other words, calling something an estimate doesn't give you license to knowingly lie.
Reply to this commentLinkReport AbuseBy the way, I'm not arguing that the govt can or ever will pay me anything more than $0. I'm sure they won't. I'm saying that we should stop the "estimate" bs and close the thing down. I'm just saying let's be honest about it finally, and call it what its turned out to be: welfare.
Or maybe we should just keep "estimating" to hundreds of millions of people that they'll be fine. How on earth does someone think this way?
Reply to this commentLinkReport AbuseOnce a quarter I get a statement from my 401K, they state how much money I have in the account and they give an estimate of how much I will have by retirement age and how much monthly income that will generate.
Which therefore proves that there is no difference between SS and a 401K.
Reply to this commentLinkReport AbuseThe only reason SS is not a fraud is because the Establishment says it isn't.
How many people think that they are not contributing to their own retirement when they pay into SS?
How many people know that they are paying for someone else's retirement, and that somebody else will pay for their own?
Reply to this commentLinkReport AbuseJust because a person thinks that they're getting back what they paid in, doesn't mean the government perpetrated a fraud. In fact, the government has been very explicit, since the inception of Social Security that it very much IS NOT an investment vehicle, but rather a social program paid for by taxing workers.
And, it just wasn't the Executive and Legislative branches that have articulated this reality. In 1960, there was a very famous case called Flemming v. Nestor (a case about denying Social Security benefits to someone who was deported), in which the Supreme Court held that Social Security was not property (investment), and as such, it was not protected by the takings clause of the Fifth Amendment. If it was an investment vehicle, the government quite clearly could not take it absent due process.
In fact, in the law that allows government to withhold SS taxes - the Federal Insurance Contributions Act - that withholding is quite clearly defined as a tax.
Moreover, just recently, we had a robust national debate about voluntarily privatizing Social Security participation and replacing it with a personal investment account. That idea was rejected, pretty convincingly by the same people who (you claim) now believe are only getting back what they paid in.
I believe that phrase is much more a figure of speech than it is evidence of government fraud. And, irrespective of the fact that some people believe what you assert they believe, the government has been crystal clear about the reality of Social Security. It's not property.
Reply to this commentLinkReport AbuseUtter nonsense.
Crystal clear??? So when the Social Security Administration used to send that paper every year showing exactly how much I "contributed" each year, and how much I'd take out in retirement each year, you would say that was a crystal clear statement being sent to all tax paying Americans that Soc. Sec. was only ever a tax, and not some kind of retirement plan?
I mean where on earth did all these people get the idea that they would be getting their money back when they reviewed that statement each year (not to mention when they listened to everyone in govt talking about SS)? Silly rabbits!
Hey, you're right. I mean if they were just reading the 1960 Flemming decision--which is free to anyone that wants it-- they wouldn't be so confused.
Reply to this commentLinkReport AbuseYes, the statement. I'm glad you brought that up. I happened to have one of mine handy (from 2009). This is what it says (in party)...
"In 2016 we will begin paying more in benefits that we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits.....
How many "Ponzi Schemes" tell their "victims" that they're running out of money to get the "scam" going much father, and in fact give their victims a drop dead date?
There's another section in that Statement that's titled "How Your Benefits Are Estimated".
Do you have any "investment" statements that call their payout "benefits", or are they called earnings, you know, in your world, and stuff.
Again, the government can't be held accountable for the financial illiteracy of its citizens. If the stupid American public can't bother to read their annual statements, or are too stupid to understand them, doesn't mean the government is pulling a "fast one".
Reply to this commentLinkReport AbuseIf unscrupulous left wing politicians are pulling a fast one by telling the "stupid American public" that their SS contributions are "in a lockbox", or that the SS fund is perfectly solvent no need to worry about your future, or that SS is not a redistribution program but rather a "solemn promise", should they be held accountable for their demogogic lies?
Reply to this commentLinkReport AbuseI'm not sure what you mean by "holding them accountable". If you mean prosecuting them for bearing false witness, and we start doing that with everyone in politics, we won't have anyone in politics left.
But, irrespective of the campaign & political rhetoric of some politicians, the plain language of the law that began Social Security, and the laws that either modified or amended Social Security, and the statements that have been issued by SSA to its participants have pretty clearly described what Social Security is and how it works.
Just because some politicians or politicians say hyperbolic, untruthful or "demagogic lies", doesn't mean that a program that has been around for more than 70-years is a criminal enterprise.
And, despite what some politicians say about the financial solvency of SS, the Social Security Administration has said - for some time - that the program is headed for a proverbial cliff unless something is done.
BTW - with respect to ALGORE's lockbox comments (which were idiotic, but for other reasons), he didn't say we had a lockbox for Social Security, but rather that we needed a lockbox for Social Security. Why did he say this? Well, because it wasn't a secret to anyone who was (even loosely) paying attention that Congress had been for years raiding the Social Security Trust Fund to ease current year deficits.
Reply to this commentLinkReport AbuseTry to understand this basic concept. Perry (and others) used the term "Ponzi Scheme" as a METAPHOR. No one is suggesting that it is literally a crime that should be prosecuted. EVERYONE is saying that it is a Ponzi scheme in the sense that it is (a) pay-as-you-go and (b) unsustainable given how much will be paid in and how much will be paid out.
Get over taking the Ponzi metaphor literally and start addressing the substantive issues. In case the issues are unclear they are:
1. SS is no more or less than a redistributive scheme.
2. SS is a pay-as-you-go scheme.
3. Under any reasonable projection, if SS taxes and benefits stay the same, SS will taken in only a fraction of what it will pay out. In other words, barring reform massive funds will have to get transferred from the general fund into SS.
Before you shriek at us, why don't you acknowledge these facts to the electorate?
Rhetorical question.
Because if you do acknowledge these things to the electorate, you are GONE.
Reply to this commentLinkReport AbuseBTW, I love the disingenuity and innuendo in "I don't know what you mean by holding politicans accountable".
What is so confusing about how you hold politicians accountable?
It's called an election.
If they lied to you, or if they underperformed, you vote them out.
That's how you hold them accountable.
At least that's how we do it in a democracy.
LOL.
Reply to this commentLinkReport AbuseScott,
Ever notice how the Dems go insane at the mere suggestion of allowing young people to invest their own savings rather than put it into Soc. Sec? Did you note the reasoning they used in 2008 (and every other time they have ever argued it)?
They said "Look what happened to the market this year! People lost 30% (most recovered in 3 years) of their retirement. This is why its nuts to have people rely on their investments for retirement. Their money must stay in Soc. Sec. where its safe so they can get the retirement they are counting on."
Where on earth would anyone get the idea listening to that that they ever had any reason to see a dime of what they were putting in Social Security?
Let me ask you--do you have any problems with ending Social Security all together and just putting whomever needs it on the public welfare rolls? If so, why?
Reply to this commentLinkReport Abuse"Let me ask you--do you have any problems with ending Social Security all together and just putting whomever needs it on the public welfare rolls? If so, why?"
No, I wouldn't have any problem with that, at all. Of course, I'm not a 70-year old SS recipient.
Here's my problem: The way things get changed in this country is by winning elections - and more specifically - winning those elections in a large enough fashion that a mandate is perceived to have been given by the American electorate.
Also, you must have campaigned on a particular platform that expressly included whatever specific initiatives there are that you want to enact.
If Perry would have said: "I'm deeply troubled by Social Security's looming insolvency and what that insolvency means to current benefit recipients and future benefit recipients", then I wouldn't have had a problem - and more importantly, he wouldn't have had a problem, or at least as big a problem. He had an opportunity to portray himself as a serious, earnest guy who has serious, earnest ideas. He missed it.
Thus far, we haven't heard any ideas about how he is going to "fix" social security, and in fact one can take his writings as an indication that he doesn't want to fix it, he wants to end it. That's political suicide unless remedied, quickly.
Social Security is an explosive issue. Addressing it is fraught with peril for any candidate that takes it on. The best way to handle an explosive issue is by turning the heat down in the room. Perry, thus far, hasn't demonstrated ANY ability whatsoever to do just that. Instead, he uses the most bombastic, most incendiary and most decisive language possible. Yep, it plays GREAT in Texas and to the conservative base. It is also, unfortunately, toxic in a general election.
When you write a book, or give debate answers that describe the most popular American social program in the history of American social programs as a Ponzi Scheme and an unconstitutional criminal enterprise, you are in fact writing your opponents campaign commercials for them. It's politically IDIOTIC, especially considering that it likely to alienate one of the only TWO demographics that the previous Republican presidential candidate won.
Perry has to prove to me that he can make a persuasive and compelling and SUCCESSFUL argument to people who aren't already predisposed to agree with him. If this Social Security issue is a window into what his campaign future promises, it's going to be a very long 2012.
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