Is Social Security a Ponzi Scheme? | Casual Historian
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"New Deal or Raw Deal", by Burton Folsom Jr.
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"The Forgotten Man", by Amity Shlaes
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Sources
Payers to Beneficiaries Ratio
www.ssa.gov/history/ratios.html
2029 Viability Estimate
www.ssa.gov/oact/trsum/
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Saying Social Security is Ponzi Scheme would be an insult to Ponzi schemes
🤣🤣🤣
Ponzi was an unsung genius! What was "awful! Horrible! BAD!!!" is perfectly respectable business practice now. He was the real man of the future.
well since the Government says it legile, it must be........
6:00 so... Social Security is not a Ponzi Scheme.
It's Worse.
Clarify
@@lobstered_blue-lobster well i thought the context would be obviois.
You can detect a ponzi scheme and avoid it, unlike SS which you're forced into.
fun fact: the picture at 3:16 was one of many soup houses that Al Capone ( yes, that Al Capone) to help unemployed people.
Al Capone ran Chicago better than the goblin in modern times
Every generation gets less than the ones before.
not true, yet and the next generation will see their SSA payments go up as the boomers die off.
Thanks for the info here. Much appreciated.
Most of the definitions of ponzi scheme that I see out there do not make any distinction as to whether or not the scheme involves actual investment. The only important factor appears to be "Do payouts to older investors come from the newer investors?"
By that prime factor, yes, Social Security is a ponzi scheme.
Other than that, good video.
I think there is a difference between ponzi schemes and pyramid schemes.
Just privatize it like they did in Scandinavian countries.
oH, bUt aRen'T tHeY SOciAlisT?
@@kingdomofbird8174 I love that argument!
People have been saying Social Security is going to crash since the 90s. Every few years, they update what year it's going to run out. You, out loud, say that the SSTF will be paying out more than it takes in by 2029. But the graph you show shows it starting in 2011, 7 years ago, which obviously did not happen. In 2015, Pew Research said the Disability-insurance side of things (this is different from the Retirement-side) would run out in 2016. It didn't. The SSA said THAT would run out in 2022, but has since updated that to 2028. Currently, as stated by another commenter, the combined trust funds will be depleted by 2034 if no changes are made and current trends hold.
BUT. Even they are calculating in something that you seem to have forgotten. The baby boomer generation was the largest increase in population in US history. They were paying into a system that very few people were taking out of - and that extra cash was invested into those trust funds. Generation X, Millennials, and so far Z, are NOT larger than the Boomers, in fact depending on which source you look at, they're either the same or smaller. More people will not be drawing out of Social Security than putting in - the "pay in" side of the graphs you show will not be getting significantly smaller into the future.
The SSA itself projects that as a percentage of GDP, Social Security costs will rise by 1.1% over the next 75 years. SEVENTY FIVE YEARS. The idea that Social Security is going to collapse by 2029 is fear mongering BS, that's no better than the "dollar will collapse, buy gold now!" commercials aimed at scared old people. The people who peddle this have a financial incentive to make people believe Social Security is a ponzi scheme or will collapse any day, so privatize now! Also lower my payroll taxes, since that's the main source of SS funds, not the relatively small chunk that comes out of your paycheck...
Sources: www.pewresearch.org/fact-tank/2015/08/18/5-facts-about-social-security/
www.ssa.gov/oact/trsum/
No one knows. No one freaking knows. What if SS is privatized like many limited govt. folks want? That would throw a wrench into plans. What if an unexpected tons of babies are born in the couple decades? Like, people all just start randomly and incoherently deciding to have four kids? I agree that we shouldn't buy into all the fear, but to pretend we have any concrete idea is ridiculous. Let's first try to predict the next recession. /s
The exact details over how quickly Social Security could possibly run out of funds is debatable, but that wasn't the main point of the video. It was, as the title suggests, asking if Social Security is a Ponzi Scheme, and I gave the arguments for why and why not. The rest is simply contextual dressing.
It does, however, stifle growth and make medical costs worse. I can't imagine being the poor fuck doctor that has to pay 35% fed tax, 35% state tax and 15% social security tax. That's fucking stupid as shit! 85%! That's 85% he can't invest in stocks, bonds, etc.
So you wonder why there's so few doctors and so many corporations? THAT'S WHY! Employees get absolutely FUCKED in this country! I pity all of you. I may do so from my ivory tower, but at least I care at all. The politicians don't get angry, because THEY DON'T FUCKING CARE ABOUT YOU! I get angry because I think YOU are the backbone of this country, not me.
I have no illusions as to what I'm about. I don't lay down roads or put up telephone poles. I am a stock trader and I run a corporation SPECIFICALLY to avoid the INSANE TAXES you poor bastards SUFFER! I build solely for my family and no one else. I don't think I should be punished, but I think you should be punished less.
Socialism is a cancer and it hits employees the hardest, ALWAYS! Fuck the leeches at the bottom. What about the middle class? What about the people THAT BUILD THIS COUNTRY!? So you tax the doctors 85%, then wonder why your leg surgery costs 300k. You will ALWAYS foot the bill for your "good intentions"-- you, the middle and lower classes, you the voters.
Well ss runnkng out if money does blt mean that it stops paying out benefits, because it still recieves revenues from patroll taxes etc. To keep ss going they simply have to balance revenue and income. Which they already are doing and have been doing by underestimatinf the inflation rate. This doesent mean that we wont recieve any benefits after 2034 just that we will recieve less than promised, that is the fraud we are talking about. The government wont be able to fullfill its obligations through the current system. Personally i think it would be simpler and better to let everyone save their own money how they please...
Hey, this is a stupid idea. The reason why their original projection is wrong is not purely because of fear mongering. Yes, I agreed that to a certain degree, that was part of the intention. But the fact that SS funds have not collapsed yet, is not suggesting that the problem is not there. If you do know better, you know that they have increased the age to receive benefit multiple times in a row. To make a fund sustainable, you can either increase the revenue, which happened but to a limited degree, or decrease the cost (by increasing the age of receiving the full benefit). In the long run as baby boomers retire, the Payers to Beneficiaries Ratio will lower even further. At some point, we may expect that minimum age to be increased to 70, 72, 74, 76 and then it is hypothetically sustainable again, BUT as good as nothing.
The issue is the extremely limited means of investing social security surpluses in a special government bond ( Typical returns 30% less than a regular treasury bond will return after inflation). Meanwhile investing in the market would have returned roughly inflation +8%. A mix of bonds and equities with a targeted rate of 5 or 6% above inflation would have done a lot to improve returns and extend the length of the fund. Even giving the market rate for government bonds would have vastly extended the life span of social security. You also do not need to solely invest in federal government bonds, municipal and school bonds would produce better returns and put more money in our communities.
I understand your argument, but I think there are some very important differences between a ponzi-scheme and social security:
1) Social security never pretends to be anything that it's not. It doesn't pretend those paying into it will get their money back with a profit, while a ponzi-scheme does.
2) Social security has a very different purpose than a ponzi-scheme. Social security is intended to provide a safety net for those who are in poverty, lost their job, etcetera.
Simply said, ponzi-schemes take money from suckers with the promise of earning those same suckers a massive profit, while not being able to deliver because they are not actually investing.
Social security on the other hand, takes money from everyone, with the promise of returning (some of) the money if, and only if, they run into financial trouble and need help.
You can argue about whether or not the government should provide this safety net (I personally think they should provide a very royal safety net), but I don't think comparing it to a ponzi scheme is totally fair.
Well, as I said in the video, Social Security does not strictly fit the definition of a Ponzi Scheme, but we should still be concerned about the fact that is has some of the same structural flaws.
I'm not sure it has the same structural flaws though. Ponzi-schemes fail if the bottom layer is no longer being replaced, I don't see that happening with social security. As long as new people enter the workforce (which they will), social security can continue to exist. The real flaw of a ponzi-scheme, in my opinion, is that it pretends to make a profit without investing a single penny, which is of course impossible. Social security doesn't have that flaw, because at no point is the goal to make a profit. The goal is to redistribute wealth, which it does and can (and hopefully will) continue to do forever.
I recognise that the tax-base is shrinking, but we can compensate with higher productivity and higher-taxrates. We're doing both of those things.
@@wiet111 Don't see it happening? It's happening NOW! There aren't enough millennials and Gen Xers to possibly pay for the baby boomers! This system is going to collapse in 10 years time when all the boomers and some Gen X are taking out funds that the millennials and Gen Z have no way to pay for
@@AdamSmith-gs2dv True, we're running into some problems. However, they're manageable. In a ponzi scheme, you need ever more people to sustain the scheme. In social security, we can handle a diminishing tax base. Sure, taxes might have to rise a bit and people might have to work a bit longer, but that's perfectly reasonable.
As for social security collapsing in 10 years, where did you get that stat? I'd be interested to read the source.
@formerib it's a critical distinction. Ponzi schemes can never work. Eventually, it will necessarily collapse.
Social security can work. It doesn't need to collapse. That's a very important distinction.
Interesting take, Grant. The 128 to 1 ratio you mention was also because people used to live only a few years after they retired, collecting only a fraction of the money they had contributed. Longer lives and the drastically reduced ratio of payers to collectors is exactly why immigration into the United States is critical to support the aging baby boom generation. Immigration is why we aren't losing population the way Italy, Japan and Germany are. I know I'm off topic a bit but, as you indicated Grant, this subject has many tentacles. Thanks for the primer.
As bad as it may seem it still pays benefits. You can find a government job that doesn’t pay SS and pay into the alt plans or move out of the country. We all know there is unfairness on “both” sides of the system. Can’t blame one without the other...
I actually Im leaving my country for this same reason to a emerging market
Social Security benefits are paid in exactly the same way that the government spends on anything else-by crediting somebody’s bank account. Social Security cannot be any more financially constrained than any other government program. Only Congress can establish a financial constraint.
Does it count as investing if you're just buying your own debt?
Why no mention of employer match contribution?
It is.
It’s worse than a ponzi scheme🤣🤣🤣
what? I was under the impression that there is a 3 trillion dollar SS surplus in the trust fund.
Tyler Young that's just the amount of cash we've got,we lost out more than we take in,we could solve that by eliminating the cap on wages subject to payroll tax,so a guy making a million isn't only paying the SS tax on his first 127,000 dollars or so
Your correct.it.is not a Ponzi Scheme it.is a Tontine Scheme LOL
No.
You have to revisit your facts sheet. When Social Security was created it supposed to serve about 1/2 of the work force. It was a self-funded system, rather than what we have today. The Trust Fund is projected to run out in 2034 not 2029.
I'm going to repeat what I said to another comment.
"The exact details over how quickly Social Security could possibly run out of funds is debatable, but that wasn't the main point of the video. It was, as the title suggests, asking if Social Security is a Ponzi Scheme, and I gave the arguments for why and why not. The rest is simply contextual dressing."
Why chinas model is better economic zones dedicated to capitalism and controlled areas of government for state needs so they can actually accomplish shit also you need music in the background dude muse en scene will help soo much
only if you want the elderly and that will be you one day to be in poverty and stuck away in some hole in the wall, trying to get food and shelter, maybe you want that, do you?
Social security works good in Norway
Without social security people would spend less and that would mean fewer jobs. Would you rather buy cheaper car or risk starvation. You would probably buy a cheaper car. Privatizing social security could still work but its just not what is done. People could live off from their savings and investments when economy turns bad. They can buy an insurance. They can relay more on labor unions or employers. States could have their own social security systems. But for various political reasons system is what it is.
I agree that Social Security is tantamount to Ponzi Scheme, but here's the kicker, this is a reflection of a capitalistic economy that is built upon the idea of everlasting exponential growth. Everlasting exponential growth is a little unrealistic so I'd say this isn't just a problem with Social Security but the entire system as a whole.
I think we have different ideas of what Capitalism is. Your assertion that it is built upon the idea of everlasting growth implies you are coming at it from a Marxist/Materialist point of view, believing that it is based on a particular mode of production. In most other circles, especially among those who identify themselves as capitalists, Capitalism refers to a system of private ownership of the means of production and voluntary exchange. Marx definitely would have sided with your definition, and it was socialists who coined the term, but it has since been appropriated, and the definition I pose it what you will find in most dictionaries.
Semantics aside, my point still stands, there is a problem with systems that are built upon the idea of everlasting growth. I think this is a wider problem than Social Security.
it already happen in China
Keynesian economics is the problem and no. Social security isn't Capitalistic by any means.
"Everlasting exponential growth is unrealistic"
We get it you are a luddite who wants a stagnant economy.
Maybe the undocumented/non-citizens of this country be given the opportunity to be naturalized and pay into the system.
Raoul Simon most already do,some don't though but even then it wouldn't be that much.
Our social security system may not be perfect, but nobody seems to have any better ideas, so what can you do? Privatization has been a disaster in other areas of the government, and it's not likely to work for social security either.
“Privatization doesn’t work” while most of us work at private enterprises 🤣
@@todoldtrafford, apparently you have never been denied a claim by private insurance or lost your military job to low paid civilian contractors.
Robin Marie one insurance company doesn’t represent all. You can always change regulations in the private sector.
I joined the military during the Clinton administration, just before they started privatizing all non-combat military occupations. I saw for myself the low paid subcontractors who had no motivation to do a job and do it well. Because I was a logistics specialist, I saw how much more money was spent by contracting out jobs that were once held by military personnel. Privatization does not work. It is a waste of taxpayer money.
Robin Marie it’s called an ira or 401k. Returns are better despite the pandemics and recessions