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Social Security - A Ponzi Scheme


The Lawrence Journal-World recently published an editorial, "National Divide," linked to President Obama's economy speech given at Georgetown University. The forum users at one point began a sidebar discussion of Social Security.

An astute user, Did_I_say_that, made the comparison of Social Security to a Ponzi Scheme. Is there a legitimate comparison of Social Security to a Ponzi scheme? Let's take a look at the Security and Exchange Commission's (SEC) definition and signs of a Ponzi scheme from their Ponzi Scheme - Frequently Asked Questions page.

What is a Ponzi scheme

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

With only minor changes the above description of a Ponzi scheme can be adapted as a description of Social Security.

"Social Security is an investment that involves the payment of returns to existing investors from funds contributed by new investors. The SSA solicits new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. Social Security attracts new money to make promised payments to earlier-stage investors to use for personal expenses."

Why do Ponzi schemes collapse?

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

Although there is a continuous supply of new "investors" into Social Security, the second reason for collapse - "when a large number of investors ask to cash out" - is occurring now. Baby Boomers are now starting to draw Social Security and the raw number threatens to overwhelm an already strained system.

What are some Ponzi scheme “red flags”?

According to the SEC, "Many Ponzi schemes share common characteristics." Here are some of the warning signs:

High investment returns with little or no risk.

Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.

Some of the first "investors" in Social Security, those retiring in 1960 and having paid in for nearly 23 years, would have made life time contributions of $17,600 (single male, 2010 dollars). This same group experienced individual lifetime payouts of approximately $125,000. The differential has slowly been shrinking. A person retiring in 2010 may only collect $417,000 for his $345,000 contribution. Additional comparisons of individuals and couples may be found in the Urban Institute report, Social Security and Medicare Taxes and Benefits Over a Lifetime.

Overly consistent returns.

Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.

Unlike private retirement programs and investments, Social Security has always provided consistent and typically increased benefits. Prior to 1950 this was accomplished irregularly via legislation. However, in 1950 Social Security recipients were given a 77% increase in benefits and have had a Cost Of Living Allowance (increase) every year since then, with the exception of 2009 and 2010.

Unregistered investments.

Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.

Funds collected from employees and employers for Social security are accounted for in the Social Security Trust Fund. Well, kind of, that is. Actually, anything over and above what is actually budgeted to be spent is put in the trust fund. The trust fund, not subject to SEC regulations, loans money to the Federal government at a conservative interest rate.

Unlicensed sellers.

Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.

Needless to say (yet, I find the need to say it), the government always exempts itself from its own regulations. There is no license to "sell" Social Security ... unless it is a license to steal.

Secretive and/or complex strategies.

Avoiding investments you don’t understand or for which you can’t get complete information is a good rule of thumb.

Here is The Social Security Act of 1935. The list of Social Security Publications could, in and of itself, be considered complex.

Issues with paperwork.

Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.

Issues with paperwork? See above list of Social Security Publications.

Difficulty receiving payments.

Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.

Although there are some examples of late payments, and a few times that all payments were delayed, Social Security has been consistent in its payments to recipients. However, as every senior citizen can tell you, Social Security is constantly held hostage by Congress and payments are continuously the subject of threats. Normally, the threat comes as a warning from the minority party, "They want to cut Social Security and starve grandma." Congress, regardless of party, should not have the power to threaten grandma.

Social Security promises a higher dollar payout for deferring (roll over) retirement.

The Last Word

So, is Social Security a Ponzi scheme that is doomed to crumble in upon itself and leave millions of Americans without promised benefits? A Ponzi scheme? The Social Security Administration states that it has "nothing in common with Ponzi schemes." Imagine that! Doomed to crumble in upon itself as it pays out more than it receives? You bet your sweet bippy!

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Liberty_One 6 years, 5 months ago

I wish I could opt out. I know that there won't be anything left for me when I retire, or anything more than a few crumbs. Why can't I just opt out? This is the cruelest thing you liberals do to us.

jhawkinsf 6 years, 5 months ago

The reason you can't opt out is because as a society, we will protect you, even from yourself. If you make bad decisions and are left penniless in your old age, we will provide services to you. If you become ill, and do not have insurance, we will provide services to you. If you are a victim of fraud or some other abuse, we will provide services to you.
Payments for those services are the cost of living in a compassionate society. Since you cannot opt out of society, you, and all of us, must pay into the system that will ultimately provide those services. Should you really want to opt out, buy yourself an island somewhere.

jhawkinsf 6 years, 5 months ago

As I said, if you don't like the government we have, if they are conspiring to take what's yours, if it's greed is repulsive, then buy that island I spoke of. But if your house catches fire tonight, the fire dept. will come whether you want them to or not. If you walk downtown today and have a massive heart attack, the paramedics will come, whether you want them to or not. If you get in a car accident, the police will assist you, whether you want them to or not.
Get your island or quit your complaining, it's your choice.

jafs 6 years, 5 months ago

Why do you choose to live here, given the many things you hate about our country?

jafs 6 years, 5 months ago


Then find another society, one without a government to bother you.

I think you'll find that very difficult.

jafs 6 years, 5 months ago

The point is I doubt you can find a society (something you like) that you'd want to live in that doesn't have a government (something you hate).

jafs 6 years, 5 months ago

You can "not agree" with anything you like.

But, it seems to me that it's kind of like not "agreeing" with gravity.

If societies have governments, and you want to live in a society, then you'll have to deal with government as well.

Wanting to live in a society with all of the benefits it offers, and hating government sounds like a recipe for unhappiness to me.

Are you happy?

jafs 6 years, 5 months ago

I must be touching on something difficult for you.

That's not at all what I said.

jafs 6 years, 5 months ago


You missed my point completely.

Would you like me to try to explain it to you again?

50YearResident 6 years, 5 months ago

Liberty_one's true colors are showing here.

jafs 6 years, 5 months ago

Living in societies with other people means not being "left alone" - that's just how it works out.

Really, if you want to be left alone, you should move into the woods and build a cabin or something.

Kontum1972 6 years, 5 months ago

you have the freedom to go somewhere else.....

Read: A Man without a country...Edward Everett Hale, mb this will help u decide...if your torn as too what you must do.

jafs 6 years, 5 months ago

That's just silly.

You can emigrate to any country which will accept you.

jafs 6 years, 5 months ago

I thought you didn't make these discussions personal, and speculate about others' motives.

Hudson Luce 6 years, 5 months ago

A couple of reasons exist for having government take care of things we've come to know as "common goods": 1. Sanitary sewers and water treatment, storage, and distribution - they're the reason we don't have cholera and typhoid epidemics anymore; and 2. Streets and roads and highways - back before they were paved using taxes, oftentimes they were in private hands and the owner held an effective monopoly over travel from one place to another - and no incentive to keep the road in good or even poor condition, so it was possible to get stuck in a mudhole and stay stuck until you paid a local farmer to pull your car out with his team of plowhorses. That's a good part of the reason most intercity travel was by boat on the Kansas River, navigable to Topeka, and then by train up until the 1950s. Only with the National Defense Interstate Highway System of the Eisenhower Administration in the late 1950s did the US begin to have paved interstate highways - paid for by tax dollars. Without paved roads, you could just as well forget about travel by car in the winter, or if it rained a lot in the spring.

OK, those are two benefits of considering services as things best done in common, by government... and more can easily come to mind, if you'll think about it briefly...

Hudson Luce 6 years, 5 months ago

Having said this, it's also a fact that Social Security has been administered as a Ponzi scheme, since the failure of the actuarial assumptions on which the system was founded, in the late 1970s. Since then, FICA taxes have gone into the General Fund, and Social Security is now just another unfunded pension obligation of the US Government which eventually will fail.

jhawkinsf 6 years, 5 months ago

The problem with comparing Social Security with a Ponzi scheme is one of intent. With a Ponzi scheme, the specific intent is to defraud. that is not the case with Social Security. When Social Security was first implemented, there were 13 workers for every person receiving benefits. The ratio is now 3:1 and will soon be 2:1. That is not sustainable. We are all living much longer than the average retiree was a couple of generations ago. There has to be an increase in the age in which a person can start getting benefits or a lowering the level of the benefits themselves.
One other point that should be made, the original beneficiaries of Social Security did not pay into the system. They were carried by the next generation, those 13 workers. Each subsequent generation of workers drew upon the labor of the next generation. With the declining ratio of worker to retiree, that has become unsustainable.

jhawkinsf 6 years, 5 months ago

Who's intent are you critical of? FDR and all the congresspeople who passed Social Security back when it started, and add to that every President since and every congressperson since who voted for the system. All of them. All those thousands of elected officials getting hundreds of millions of votes along the way. Or you, with your conspiracy theory ideations.

tomatogrower 6 years, 5 months ago

That is exactly what Liberty_One believes. Of course, when it comes his time to lay down and die, I'm sure he will avail himself of services, as he did when he got his education, as he does whenever he leaves his bunker and drives on roads, as he will if his bunker ever catches fire, or as he will if his wife (if someone could stand to live with him) is raped, and he wants the guy captured. He thinks he is a self made man, an island unto himself, but he is living a delusion. He even thinks that his rich buddies (does he have friends?) created the internet, not tax dollar research. None of his wonderful capitalists would have risked their own money on something most thought was impossible.

The services we have agreed upon is the responsibility of society as a whole, care of the elderly and sick, fire fighting, police protection, roads, education, research universities are just nothing but a burden to this guy who thinks of nothing but himself, except why does he continue to use these services? Does he truly believe he is the only one paying taxes? Does he truly believe he could afford to pay for all of these things on his own?

jafs 6 years, 5 months ago

I have no problem whatsoever letting you "opt out" of SS, provided you don't expect to get any proceeds from it, ever.

jafs 6 years, 5 months ago

I know.

But, if it's there when you could use it, will you simply refuse it?

If not, then you shouldn't be allowed to "opt-out".

I agree, of course, that it's badly structured and should be restructured so as to be sustainable.

jafs 6 years, 5 months ago

Ok with me - in fact, I'd even give you whatever you are entitled to as a result of what you've already paid in, if that applies.

Unfortunately, of course, I don't have the power to make that happen.

just_another_bozo_on_this_bus 6 years, 5 months ago

"Government is not society."

This is a ridiculous statement. Society is comprised of many constituent, intertwining parts. You can pick any one of those parts and say "X is not society." But they are still part of society, just as government is.

Liberty275 6 years, 5 months ago

"if you don't have family to take care of the hordes of money you need to buy the medications and/or the hospital/doctor care you need that you should just lay down and die?

Why not?

jafs 6 years, 5 months ago

Well, it's a bit of a brutal situation, isn't it?

Those with money get to live longer and better lives, and those without suffer.

I suppose some people, perhaps you, would like that society - many of us would prefer a more humane one.

jafs 6 years, 5 months ago

I know you believe that.

But I was responding to Liberty275's comment - "why not just let those who can't afford it just lay down and die?"

jafs 6 years, 5 months ago

That's not what L275 seems to think.

tomatogrower 6 years, 5 months ago

Capitalism was working back in the days when children worked in factories, and how many of them had any medical care? We haven't had your kind of capitalism for a long time, and that's why poor people now live better lives than rich people used to, so your reasoning here is flawed. Do you really think that factories would have stopped hiring children on their own?

Liberty275 6 years, 5 months ago

People with money get lots of stuff people without don't. But what exactly do you mean by "with money"? We are far from rich but we have great insurance. It costs between 1/4th and 1/3rd of our take home pay. We don't have new cars, $100/month cell phone plans, $200 Nikes because we have chose to be responsible about our health.

Humane... yeah, you are really humane keeping people in virtual slavery reliant on a government that cares less for them than I do and that will abandon them just when they need the most help. You are a regular mother theresa.

jafs 6 years, 5 months ago

You're the one who wants to just let the poor die, not me.

Yes, they do. But some things are things that a humane society wouldn't let people simply go without because they can't afford it, like food, housing, and medical care.

How can anybody care less about them than you do, given your suggestion that they should just die?

George Lippencott 6 years, 5 months ago

Well, you are right, as it has evolved. Of course, if the trust fund had not been spent on government largess and unpopular wars it would pay for my social security with money I and my fellow participants paid into it - it did not all go to our predecessors.

George Lippencott 6 years, 5 months ago

Yep, Since we are or will shortly be paying portions of it out of the general funds it could become too expensive very quickly given all the other promises we have made and continue to make.

pizzapete 6 years, 5 months ago

I would have to agree that Social Security is being run like a ponzi scheme. The government probably has another twenty years to continue the fraud before the bubble bursts.

Hudson Luce 6 years, 5 months ago

With the downgrade of US Government debt instruments by Standard and Poors this morning from "Hold" to "Negative", I'd give Social Security and Medicare five more years at most.

Crazy_Larry 6 years, 5 months ago

When the gov't does it it's called a FONZI scheme....ayyyyyyy!

jayhawklawrence 6 years, 5 months ago

Of course people have been arguing about the Social Security system since the beginning. If it is a Ponzi scheme than you would have to argue that almost every insurance program and even to some degree 401K plans have at least some of the same characteristics as Ponzi schemes.

What if they just don't have the money to pay your benefits? What if they were just too big to fail but this time the government didn't bail them out? Didn't that just almost happen?

In the movie,"Its a Wonderful Life", George Bailey is in charge of the Bailey Building and Loan Association. When they misplace a large deposit, the company is in danger of collapse and you know the rest of the story.

The point is that the money was not really lost, Potter had it and he wasn't going to tell anyone because he wanted the Building and Loan to collapse so he could take over the town.

The money that was invested in the Social Security system was transferred out of the system.

That is the bottom line. People who are against the system want it to collapse. They prefer to see that money transferred into large corporations, insurance and investment companies. The people behind this are people like the Koch Corporation who are ideologically against social safety nets such as Social Security. At least that is my impression based on the right wing attacks on Social Security and Franklin Delano Roosevelt. It looks like a strategic smear campaign.

If they can convince us that it is an illogical business model such as a Ponzi scheme, they can convince us to privatize the program and eventually end it.

Imagine the huge avalanche of money they could channel into the markets for corporations to spend on whatever they want. Then you run the risk that the money would be invested in the highest growth economies outside the United States.

I would predict that hundreds of millions of people would not have any money left for retirement if there was no safety net.

The promise is that Americans would have a huge retirement nest egg waiting for them if they give their money to corporate America.

That is just not reality.

jafs 6 years, 5 months ago

Those may be good observations, but it's not a choice between a poorly designed unsustainable public system, and a much too risky private one.

We could re-structure the program so as to be more sustainable, and keep it public.

And, the abuse (in my view) of transferring funds out of the system wasn't done only by opponents of the system. It's been done over time by politicians of both parties, in an attempt to stave off raising taxes (too politically unpopular).

imastinker 6 years, 5 months ago

Insurance is optional. There's a pretty big difference there.

jafs 6 years, 5 months ago

LO, I have some free and unsolicited advice for you.

Please take it in the spirit offered.

These discussions and debates are interesting, and worth having, but on a certain level I wonder if they're distractions from more concrete things worth considering.

For example, the most important concrete issue regarding money (as I understand it) is do I have enough money to pay for my needs and some wants. If the answer is yes, then you're fine. If not, then you need to change something (s).

I doubt you can find another country you'd like to live in without a government, or taxes, so why not do what you can to make yourself happier here?

jafs 6 years, 5 months ago

You can do whatever you like.

But, I'm living quite well, and happy in my day to day life, with enough money and material possessions, don't feel oppressed as you seem to, etc.

We live in the same country, and with the same government.

So, the difference must be one of attitude/personal choices, since the objective realities are the same.

jafs 6 years, 5 months ago

I care about other people also.

And, I do what I can to help others.

Is your life really working well?

jafs 6 years, 5 months ago

Not to me.

But if you're happy and your life works well, I'm glad to hear it.

jafs 6 years, 5 months ago

Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Liberty275 6 years, 5 months ago

Wonderful, the ponzi scheme will implode just after it's supposed to pay off for the money they already took from me. I guess I'll just have to die (as if I wasn't going to anyway).

The worst part about this is that certain members of the left would force us all into medicare from the day we are allowed to be born. Given the co-payments, co-insurance, deductibles, limited coverage, and lack of annual limits on out of pocket expenses, medicare is utter garbage compared to the insurance we pay for.

No thank you, medicare-for-all advocates. On a related note, I prefer not eating out of dumpsters.

tomatogrower 6 years, 5 months ago

I have a question for all of the people who want to get rid of Social Security. What would you do with the old people who need it to live? How are we going to take care of the old and infirm? You give us the impression that you would just let them die or starve to death. Some could keep working, but then you and your children will be competing with experience. Do you have another solution? Or are you really willing to have the elderly living in the streets and begging for a living?

jhawkinsf 6 years, 5 months ago

Upon birth, we all enter into a social contract. We live in a free society, by that I mean one in which we may choose to stay in or we are free to leave. If we choose to stay, the government must protect us. They must keep us safe from foreign invaders as an example. Specific to the U.S., they must protect our freedom of speech, religion, press as well as all other freedoms we have come to expect. That includes protecting us from becoming old and worn out from a life of hard work and then becoming too poor to live within a standard we expect. These are all things the government must do, it's in the social contract. In return, we must obey the rules of society. These might be things like obeying the law. Included in this is paying all taxes that we are legally obligated to pay. We must live within the expectations that society has for all of us. We must work, if we can. We must pay into things like Social Security and Medicare, because these will be used by us all. These are the things we must do, it's in the social contract that we all entered into at birth. The only way to opt out, in a free society, is to leave. You are free to do that anytime. Simply accepting the freedoms given (speech, religion, etc.,) obligates you to the contract.

Liberty275 6 years, 5 months ago

If you were part of the mafia you could force him to buy your lawn mowing services even if he cuts his own grass.

jhawkinsf 6 years, 5 months ago

First, a social contract is different than other contracts. In most contracts, one side gets something and the other side gets something. Otherwise, it's a gift. Let me give you an example of how this social contract works. You get freedom of speech, as evidenced by your posts. The government will defend your right to speech. What are you giving in return? The same is true for your freedom of religion. What are you giving in return? If at age 2, you fell and were seriously injured. You would receive appropriate care regardless of your ability to pay or the ability of your parents to pay.
You can't opt out of any of your freedoms any more than you can opt out of what may or may not happen to you later in life. You may die at age 65 and receive nothing for a lifetime of payments into Social Security. Or you may live to be 105 and receive far more than you ever paid in. Society will provide those services whether you want them to or not, because the overwhelming number of people want it that way (as evidenced by the voting of their elected representatives). It's really no different than the ability to opt out of the turnpike's speed limit, or opting out of your freedom of religion. There is no mechanism to do that, other than opting out of society.

jhawkinsf 6 years, 5 months ago

You really need to look up the writers who influenced our founding fathers. They specifically wrote of the social contract, one in which the head of state (in that case, the monarch) has responsibilities and the people also have responsibilities. All of our rights come with a price tag, that is the responsibility to obey the laws. Again, the problem with allowing you to opt out is that if you did, and then made a lifetime of bad decisions, wound up broke and in bad health, you would still be provided services. Maybe you would refuse them, maybe not, but they would be there for the offing.
By the way, it is illegal to drive drunk on one's own land, even if you never enter a public road.

jhawkinsf 6 years, 5 months ago

There are so many things you can't opt out of; fire protection, police protection, emergency medical protection. I can't opt out of supporting public schools even if I send my kids to a private school. I can't opt out of paying taxes because I don't support wars in Libya, Iraq, etc.. It's the cost of living in our society, and it is a contract that we all must live with. The alternative, if you feel that strong about it is to opt out of this society. Perhaps to a society that provides all the freedoms that the U.S. does but without Social Security.
But what you can't do is accept police, fire, medical protections, accept all our freedoms and then say you will pick and choose which responsibilities you will accept and which you will not.
If you think it is wrong that driving drunk on your own land is illegal, then work to change the law. If you feel strongly enough that Social Security is something you should be able to opt out of, then work to change that law. If you don't want to pay taxes for things you don't like, change those laws. There is a legitimate process, follow it.

jhawkinsf 6 years, 5 months ago

Let me ask you a question. Suppose you were allowed to opt out. You make investments to provide for yourself, but they go bad. The stock market crashes, of a tornado hits your home, or there is an oil embargo that causes prices to soar, or maybe you just go to a bar everyday and drink your retirement money away. Now you're 70 years old and sleeping on a park bench. Should society just let you be? To die in the winter and leave your dead ass where it rests? Is that what society should do? But more importantly is WOULD society do that? Would we let you sleep on that park bench and die of starvation or exposure? No we would not. Would you refuse services? Can anyone guarantee they would not change their mind and accept services after a lifetime of opting out? The answers to those questions are obvious to me. Therefore, you must pay.

jafs 6 years, 5 months ago

The idea of "self evident" or "natural" rights seems quite flawed to me.

If you look at nature, there are no rights like the ones we support in this country.

Animals are born, live and die. The stronger males fight for dominance and get the females. If there isn't enough food, they die. Etc.

The fact is that any "rights" we have in societies come from our organizing them in such a way as to protect them.

jafs 6 years, 5 months ago

In our founding documents, the phrase "self-evident" when referring to rights involves discussion of a Creator who has endowed them upon us.

Do you agree with that part?

The point stands that rights in societies come from agreements to assure and protect them - without that, we wouldn't have them.

Richard Heckler 6 years, 5 months ago

Millions of Americans have lost their retirement funds due to: • Unexpected job losses to outsourcing • The savings and loan scandal during the Reagan/Bush years • ENRON • Dot com fraud • Bernie Maddoff • Home loan fraud during the Bush/Cheney admin which put an estimated 11 million out of work

In essence we never know from one day to the next if we will be employed. As we all know Wall Street investing offers no guarantees of safety.

The best way to explain Social Security is to say what it is. It’s an insurance system that protects your income when you retire or face disability, and provides income to your children if you die.

Politicians want you to look at Social Security as an investment--but it is a form of insurance that guarantees a constant stream of income in retirement or in case of disability, adjusted to protect against inflation, for as long as you live.

Separating Fact from Fiction By Doug Or

It has repeatedly been said by politicians that those who put their money in private accounts are “guaranteed” a better return than they’ll receive from the current Social Security system.

But every sale of stock on the stock market includes the disclaimer: “the return on this investment is not guaranteed and may be negative”--for good reason.

During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953(24 years).

Richard Heckler 6 years, 5 months ago

Social Security can be compared to other types of insurance such as home insurance. You insure your home because if it should burn down, you would not be able to afford to rebuild it with your personal income alone. If your house never burns down, you will pay into the insurance fund and never get a penny back. But fire insurance isn’t a “bad investment” because it isn’t an investment at all. You are purchasing security.

Unlike fire insurance, Social Security inevitably gives most of us our money back. But the fact that we get money back does not change the fact that Social Security is a form of insurance, not an investment. Only the richest of the rich can afford not to have insurance and to rely solely on their own savings and investments to fund their retirement or risk of disability.

Young people must also understand that financial investments are inherently risky. Many investments fail, and when they do, you lose all of the money you invested.

Today’s 25 year olds have only seen the stock market go up, except for one (very large) drop. But you don’t have to go back to the 1930s to see a different picture:

If you put money into the stock market in 1970 and waited until 1980 to take it out, you would have lost money.

There is absolutely no guarantee that stock investors will see the high returns politicians many times imply.

Doug Orr is a professor of economics at Eastern Washington University. He speaks and writes regularly about Social Security

Flap Doodle 6 years, 5 months ago

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jayhawklawrence 6 years, 5 months ago

I completely agree with Merrill regarding Social Security.

However, the argument that American citizens should not be forced to pay for a government program they don't want gets a lot of traction these days.

I think we need to find a compromise for the people who feel this way because there are many. We need to find a way to make social security and health care solvent. Any negotiations regarding social security should also involve health care.

I think some privatization of social security is probably inevitable and I think the security of the funds themselves has to be part of any discussion. It should not be used as a cash reserve for every administration that wants to play games with the budget.

The first two years of the Obama administration were dominated by heated political rhetoric about "Obamacare". Much of the discussion was for political purposes only. It was political theater and it worked for the Republicans in the fact that much of America simply got burned out watching it.

If this is the game plan until the next election it is no wonder the Obama is reluctant to get involved in any meaningful discussion with the Republicans.

I cannot imagine any meaningful discussion that would involve Sarah Palin, Donald Trump or Michelle Bachmann. As long as Republicans take these people seriously, what is the point in starting any discussion.

jafs 6 years, 5 months ago

Only if those people are really willing to forgo the benefits, as you seem to be.

And, if a lot of people get older, and are in bad shape because they haven't been able to save/invest enough to care for themselves, we'd have to let them suffer and die without helping them.

That's the part my father-in-law doesn't like about that idea.

I'm a bit more willing to let people make bad decisions and suffer the consequences, but letting them die is a bit much even for me.

jafs 6 years, 5 months ago


But, you'd really be ok with the government doing nothing to help those who haven't done well for themselves having opted out of SS?

And, you can only help people if you have the resources to do it, as well as the willingness.

So, you opt out of SS, thinking you'll do better on your own - unfortunately that doesn't happen, and you're in trouble when you're older. Your friends and family haven't done much better, and can't offer substantial help.

Then what?

jafs 6 years, 5 months ago

Well, we have a fundamental disagreement about that.

Your second paragraph is exactly why I advocate for re-structuring SS and making it a sustainable system.

But you didn't answer my question.

jafs 6 years, 5 months ago

Ok - you don't want to answer it.

What will happen with Social Security over the next 40-50 years is not known at this point - so your question is equally hypothetical.

Your version is possible, but not certain.

jafs 6 years, 5 months ago

I get it.

You don't want to answer it.

But, it's clear to me that it's a real possibility, and a flaw in your idea.

And, I hope you notice your increasing combativeness in this conversation - that must mean something.

Liberty275 6 years, 5 months ago

"Then what?"

Die 10 years earlier and skip the crappiest part of life. Or work and live within your means. Find a hot 70 year old with money.

jayhawklawrence 6 years, 5 months ago

I am sure that the people that fought against barbed wire and sheep farmers had similar feelings.

Somewhere in the back of our minds we long for the open range and nobody to take what I get and claim as mine.

But we have to adjust to a changing world and societies that fail to adapt to a changing environment will fail.

Too many Americans are not benefiting from the rules as written by either the very wealthy elite or the folks at the other extreme.

Partisanship gridlock is the anti-thesis of adapting to change.

Richard Heckler 6 years, 5 months ago

"merrill, it is not like insurance because you are forced to buy it."

What then do you call auto insurance?

What then do you call homeowners insurance ?


Did the president Bush actually lie to the public about Social Security?

Yes. President Bush has repeatedly said that those who put their money in private accounts are "guaranteed" a better return than they'll receive from the current Social Security system. But every sale of stock on the stock market includes the disclaimer: "the return on this investment is not guaranteed and may be negative"--for good reason.

During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953. In claiming that the rate of return on a stock investment is guaranteed to be greater than the return on any other asset, Bush is lying. If an investment-firm broker made this claim to his clients, he would be arrested and charged with stock fraud.

Michael Milken went to jail for several years for making just this type of promise about financial investments."


jayhawklawrence 6 years, 5 months ago

According to one source, the stock market lost 56 per cent of its value between September 30, 2007 and March 6, 2009, a roughly $13 trillion drop.

The loss greatly reduced or wiped out the retirement savings of millions of Americans. One of the major reasons given for the government bail out of AIG was because it put at risk millions of Americans retirement savings.

If a similar financial crisis wiped out the savings of Americans in a new privatized program, how do you think the American people would react?

I think they would blame corporate America and I think it would weaken our political system in a way that we have not seen before.

George Lippencott 6 years, 5 months ago

I might point out that many Americans do not make a lot of money. Living pay check to pay check is all they have. If the government did not take out SS these people would not invest and would end up wards of the state at the end of their days - or dead in the street as in some countries in which I have served. SS mildly redistributes as the benefits formula returns all contributions more quickly to low income Americans than to higher income Americans - providing a slightly higher standard of living than earned at the low end. Note it does not continue that redistributive effect on the wealthy with incomes above $110K. The whole program was and is to prevent us from facing a large number of destitute seniors. It has worked. One way or another we will pay. LO the market is simply not an alternative to low income people.

George Lippencott 6 years, 5 months ago

Well, not exactly right. In my youth seniors lived out their years with their kids or with friends. There were many poor seniors whose life expectancy was lower because they lacked basics. Do your homework. Not every government activity is unwise.

You would be more credible if you were a bit more flexible and a bit less of an idelogue

Flap Doodle 6 years, 5 months ago

You are obligated to buy auto insurance as a condition of driving legally on public roads. Nobody is being forced own a car or drive on public roads. You may be obligated to buy homeowner's insurance as a condition of getting a mortage. Nobody is being forced to buy a home. merrill's arguments are invalid.

jayhawklawrence 6 years, 5 months ago

I think the conclusion is that it is definitely not a Ponzi Scheme.

Richard Heckler 6 years, 5 months ago

"Social Security Insurance AT Risk for no reason( This would cost taxpayers $4 trillion, add $700 billion to the debt each of the next 20 years, place taxpayers insurance money at risk and wreck the economy)" http://www.dollarsandsense.org/archives/2005/0505orr.html

Perhaps it would be wise to keep a close eye on any political party that feels it is necessary to keep reminding voting taxpayers that it is the party of “less big government”. In fact it may be only political rhetoric.

These actions clearly demonstrate my point.

It's YOUR money! 6 cases in point to be considered and read completely:

  1. The Reagan/Bush Savings and Loan Heist(Cost taxpayers $1.4 trillion) http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

  2. Wall Street Bank Fraud on Consumers http://www.dollarsandsense.org/archives/2009/0709macewan.html

  3. Bush and Henry Paulson blew the $700 billion of bail out money? http://www.democracynow.org/2009/9/10/good_billions_after_bad_one_year

  4. Social Security Insurance AT Risk for no reason( This would cost taxpayers $4 trillion, add $700 billion to the debt each of the next 20 years, place taxpayers insurance money at risk and wreck the economy) http://www.dollarsandsense.org/archives/2005/0505orr.html

  5. Medical Insurance Insurance is COSTING YOU MORE BUT YOU ARE GETTING LESS How much is the sick U.S.A. Medical Insurance industry costing you? http://www.dollarsandsense.org/archives/2008/0508harrison.html

  6. Billions in Over Charges! Why did the medical insurance industry allow their clients to pay what they should have paid? http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062401636.html

Perhaps it would be wise to keep a close eye on any political party that feels it is necessary to keep reminding voting taxpayers that it is the party of “less big government”. In fact it may be only political rhetoric.

Richard Heckler 6 years, 5 months ago

With Social Security Insurance a person gets a return. How about $850 - $1400 a month as a supplement. Not a bad deal. Who is going to say no? Raise your hands.

Wall Street is not a sure thing no way jose' . Neither was ENRON or Bernie or the many more. Then we have had Reagan/Bush and Bush/Cheney killing economies and putting millions upon millions out of work.

With Car,home and medical insurance you may never see any type of return. Just pay out a bundle year after year after year after year. The icing on the cake is when the industry decides they will not pay for one reason or another in spite of all money paid out over many many years.

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