Why Social Security IS NOT a Ponzi Scheme

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From ANDREW SULLIVAN
The Dish

[Here's the counter to conservative bullshit. See also: The Real Ponzi ~DS]

A reader writes:

What a silly argument made by Indiviglio. If a Ponzi scheme is “an economic arrangement where the money paid into the system by later entrants is paid right back out as benefits to earlier entrants,” that pretty much describes any form of insurance. The defining characteristic of a Ponzi scheme is that it is unsustainable, because it requires, like a chain letter or Amway, a geometrically increasing number of participants to deliver the promised returns.  (Amway stays afloat because most participants pay in a little – or a lot – but withdraw without ever receiving any return.) Neither insurance nor Social Security requires a geometrically increasing number of participants so long as the system is funded based on sound actuarial principles.

Another parses further:

Having represented the victims of actual Ponzi schemes in court, I feel compelled to point out an important distinction between Ponzi schemes and Social Security: a Ponzi scheme is just that, a scheme. The definition provided in Zaid Jilani’s dictionary omits this important component. The participants are kept in the dark about how the benefits are obtained. Thus, a Ponzi scheme is not really an economic “arrangement” in the sense that the participants have agreed to it. By contrast, we all know (or should know) how Social Security works. It is more akin to something else, namely an insurance program where the insured event (reaching the retirement age) is guaranteed (barring premature death).

Another:

Cry out! The Social Security benefit cut on the table in the debt limit talks

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From JOAN McCARTER
DailyKos.com

Here’s some deficit reduction talk to make your eyes glaze over.

WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

While that might “save” the government perhaps $220 billion, it could cost the nation’s seniors dearly. This is a shift to what’s called a chained CPI. The National Women’s Law Center explains what that means [pdf] for the people most reliant on cost of living increases.

Social Security benefits are adjusted annually to account for inflation—when the cost of living increases, benefits automatically increase so that their purchasing power does not erode over time. Shifting to the chained CPI would mean a cut in Social Security benefits for current and future beneficiaries, compared to the benefits

A Brief History of Attacks on Social Security

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From TED MARMOR
New Deal 2.0

As Obama’s Fiscal Commission prepares for its June 30 hearing, New Deal 2.0 invited leading thinkers to participate in our Social Security’s Fiscal Fitness series, which examines the soundness of the program, its relationship to the federal deficit, and the vital role it plays in America’s economic future.

The National Commission on Fiscal Responsibility and Reform set up by President Obama claims both that reducing the projected federal deficit should be a major national objective and that Social Security should be considered as one potential source of relief either through reducing benefits or enhancing revenues or some of both. That much is simply a fact.

But this commentary is about ideology. It is to remind readers that the same attacks on Social Security have been going on — in different guises — for at least four decades. The stagflation of the 1970s, precipitated by the oil crisis of 1973-74, provided long-term, ideological critics of social insurance an opportunity

Rosalind Peterson: Take Action! Social Security Alert!

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From ROSALIND PETERSON
Redwood Valley

There are currently seventeen [8], bills pending in either the U.S. House of Representatives or the U.S. Senate that are related to changes in Social Security [1-2].  This staggering number of Social Security bills, now being considered in various committees, where amendments will be added or the bills changed, shows how determined many elected officials are in either privatizing or killing two of the most beneficial programs to protect the public ever created (with the exception of the U.S. EPA and our Clear Air and Water Act Laws).

President Obama and members of the U.S. House and Senate have placed Social Security and Medicare on the chopping block in ongoing debt ceiling negotiations.  In these secret negotiations, far away from public enlightenment or debate, deals are being cooked-up to undermine, cut or privatize these important and highly beneficial programs.

The income cap, for example, in Social Security should be increased so that the rich pay their fair tax share of these costs.  Instead more payroll tax holidays are planned allowing the rich to escalate their riches by paying less in taxes.

Social Security: Their numbers are bullshit, they’ll steal us blind, please pass this on!

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From MANNY GOLDSTEIN
Democratic Underground

OK, by now we all know that the Social Security Trust Fund will be depleted in 26 years, and only a portion of benefits will be paid after that. Actually, that “known fact” is pure BS, a product of cooked numbers. What they aren’t telling you is that this projection assumes that over the next 75 years, the US economy will grow at a far lower rate than it has in the past. (They weren’t expecting us to check the calculations, were they?)

Since 1960, US GDP growth has averaged 3.2%. Even in the decade before the 2007 crash, which included a recession and jobless recovery, GDP growth averaged about 3.0%. However, in creating its publicized projection, the Obama administration assumes that the future US economy will grow at a rate of about 2.1%, much lower even than the 2.9% rate in 2010, which most of us would agree was a tough year for our economy. Even in this very pessimistic projection, Social Security is still able to pay more than 75% of promised benefits after 27 years. (Note that we need about 2.5% growth just to break even with our increasing population.)

And what if the economy stays the same as in 2010, and we continue to lurch forward at 2010′s 2.9% growth rate? The same projection showed that at a 2.9% rate, the Trust fund would remain flush with cash as far as they projected (75 years).

So, unless the US economy is about to get even worse than today and stay that way, Social Security should pay full benefits for our lifetimes and beyond.

If you believe otherwise, then the bad guys have already won: they now have a pretext for stealing you blind

Charles Hugh Smith: The Fraud at the Heart of Social Security

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From CHARLES HUGH SMITH
OfTwoMinds.com
Mendocino

To understand the fraud at the heart of the Social Security Trust Fund, we start with a very simple fact: cash can only be spent once.

There are two frauds at the very heart of the Social Security system, and I am going to describe and source them in detail. After spending a number of hours poring over public data from the Social Security Administration (SSA), The U.S. Treasury and the Congressional Budget Office (CBO), and additional hours searching the Web for other published analyses, I can state with some authority that there are no published analyses or accounts of Social Security which incorporate the actual outlays and receipts from fiscal year 2010 in a context which includes the Social Security Trust Fund.

Michael Laybourn: Keep your filthy hands off our money

From MICHAEL LAYBOURN
Hopland

I just listened to Ross Murray on KZYX  rake the polititians and media over the coals while explaining why Social Security has nothing to do with the national deficit. Very well done Ross, glad you are in there still getting enraged about the state of American politricks.

The “National Commission on Fiscal Responsibility and Reform”consists of 6 Republicans; 6 Democrats and 3 CEOs …. has been dubbed as the “Catfood Commission” because its goal appears to be cutting benefits so drastically that retirees will only be able to afford to eat pet food.

The “bipartisan” deficit reduction commission — appointed by President Obama and led by millionaires — just made their ideas public recently. With ideas are simply ridiculous.  They recommend to Congress cutting Social Security benefits and raising the retirement age. (Well, naturally, this commission of millionaires didn’t focus on raising taxes on the wealthy or even raising the cap to pay into SSA.) Or getting out of wars we can’t afford.

And …the mainstream media’s is picking the chant up with warnings: Deficit, deficit deficit . CNN, Washington Post, Time Newsweek, Atlantic, Reuters, LA Times, everyone. All of a sudden everyone is talking about the deficit: We need to fix it.

In defense of Alan Simpson (Catfood Commission)

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From GLENN GREENWALD
Salon

The President’s Deficit Commission is designed to be as anti-democratic and un-transparent as possible.  Its work is done in total secrecy.  It is filled with behind-the-scenes political and corporate operatives who steadfastly refuse to talk to the public about what they’re doing.  Its recommendations will be released in December, right after the election, to ensure that its proposals are shielded from public anger.  And the House has passed a non-binding resolution calling for an up-or-down/no-amendments vote on the Commission’s recommendations, long considered the key tactic to ensuring its enactment.  The whole point of the Commission is that the steps which Washington wants to take — particularly cuts in popular social programs, such as Social Security — can occur only if they are removed as far as possible from democratic accountability.  As the economist James Galbraith put it when testifying before the Commission in July:

Your proceedings are clouded by illegitimacy. . . . First, most of your meetings are secret, apart from two open sessions before this one, which were plainly for show.

Securing Social Security While Increasing Benefits

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From THE AMERICAN PROSPECT

TAP talks with Rep. Ted Deutch about his plan to save Social Security

Yesterday, the Social Security trustees released their annual report. Though they announced the program will be able to pay full benefits through 2037 (and 75 percent of benefits through 2084), critics immediately tried to spin it as evidence of the program’s failures. “The reports released today again sound the alarm that spending on Social Security and Medicare is on an unsustainable path,” Republican Rep. Dave Camp said. While progressives are reluctant to privatize or support benefit cuts, protecting Social Security over the long term will require them to propose other solutions.

Yesterday, TAP caught up with Rep. Ted Deutch, a newly elected Democrat from Florida who has recently introduced legislation that creates a new measurement of inflation that more accurately reflects seniors’ cost of living and guarantees a $250 dollar payment to Social Security recipients if there is no upward cost-of-living adjustment. Perhaps most controversial, it gradually makes the Social Security tax apply to all wages — currently, any wages above $106,800 are exempted from taxation. While experts I spoke to suggest that this package would ensure long-term solvency, the political viability of the plan is a different question.

William Greider: If President Obama Thinks There’s Room for Austerity with Social Security, He’d Better Get Ready For A War

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From CROOKS AND LIARS

William Greider has been writing about economic issues since the 1960s, and is best known for his book Secrets of the Temple: How the Federal Reserve Runs the Country. He’s been warning us that the Obama administration intends to cut Social Security (this video is a year old):

What’s extraordinary about this assault on Social Security is that a Democratic president is leading it. Obama is arm in arm with GOP conservatives like Wall Street billionaire Pete Peterson, who for decades has demonized Social Security as a grave threat to the Republic and has spread some $12 million among economists, think tanks, foundations and assorted front groups to sell his case. If Obama pulls the deal off, this will be his version of “Nixon goes to China”—a leader proving his manhood by going against his party’s convictions. Even if he fails, the president will get some protective cover on the deficit issue. After all, he is targeting Big Government’s most beloved and trusted program—the New Deal’s most prominent pillar.

Obama’s initiative rests on two falsehoods spread by Peterson’s propaganda—the notion that Social Security somehow contributes to the swollen federal deficits and that cutting benefits will address this problem. Obama and his advisers do not say this in so many words, but their rhetoric implies that Social Security is a big source of the deficit problem. Major media promote the same falsehoods. Here is what the media don’t tell you: Social Security has accumulated a massive surplus—$2.5 trillion now, rising to $4.3 trillion by 2023.

Hey, Catfood Commission: 86% of Americans Would Not Reduce Social Security

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From FIRE DOG LAKE

In a poll just released today, Time provides results that show Americans staunchly opposed to cuts in Social Security, Medicare or healthcare, but in favor of cutting spending on the wars in Afghanistan and Iraq. With Alan Simpson and the Catfood Commission so determined to cut Social Security and Medicare, we can now state that they are going directly against over 80% of citizens in this effort.

The question posed was “If Congress and the President had to reduce spending, which of these areas would you reduce spending?”  The areas included were Social Security, Medicare, wars in Afghanistan and Iraq, education, unemployment compensation for people out of work and looking for jobs, healthcare, Medicaid (which provides health care for low income families)  and defense spending other than the wars in Iraq and Afghanistan.  Here are the results for these questions:

Category	Would reduce, %	Would not reduce, %
Social Security	12	86
Medicare	16	82
Wars in Afghanistan and Iraq	55	41
Education	17	82
Unemployment compensation for people out of work and looking for jobs	34	63
Healthcare	28	68
Medicaid, which provides health care for low income families	20	77
Defense spending other than the wars in Iraq and Afghanistan	46	50

The full poll can be read here.

Michael Laybourn: The Real Facts About Social Security

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From MICHAEL LAYBOURN
Hopland

This letter from FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 hit the internet a couple of years ago and I answered it. Maybe we need to do it again…

The letter starts:
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program.  He  promised:
1.) That participation in the Program would be completely voluntary,
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the independent “Trust Fund” rather than into the general operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other government program, and,
5.) That the annuity payments to the retirees would never be taxed as income.

ML A: Wrong. Originally, President Roosevelt called for “social insurance.” He envisioned a plan through which workers would contribute and provide for their own future economic security. He specifically disdained the idea of reliance upon welfare. The original SSA embraced the idea of Social Security being an insurance program under which a group of individuals were insured against identifiable risks: disability and old age. Workers paid for their own insurance.

The original 1935 statute paid retirement benefits only to the primary worker. Many types of people were excluded, mainly farm workers, the self-employed, and anyone employed by an employer of fewer than ten people. These limitations, intended to exclude those from whom it would be difficult to monitor compliance, covered approximately half of the civilian labor force in the United States.

This had to change of course: In 1939, the 1937 Federal Insurance Contributions Act (FICA) tax was amended in three important ways:
1. The widowed, nonworking spouse of a someone  entitled to an old-age benefit also became entitled to an old-age benefit.
2. Survivors (widows and orphans) became eligible for a benefit. This feature was very popular among the millions of elderly Americans hard hit

The Bullshit Lies of Alan Simpson about Social Security

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From FIREDOGLAKE

[...] Let me elucidate some of the ways that Simpson is wrong about Social Security:

SIMPSON: It’ll go broke in the year 2037.

FACT: The Social Security program faces a modest long-term financing shortfall of tax revenue and interest on Trust Fund assets. The Social Security Trustees estimated in 2009 that the Old Age, Survivors, and Disability Insurance program will continue to add tax revenue to their Trust Funds up to 2016. The Trust Funds will continue to grow because of interest earned through 2023, at which time total assets will be $4.3 trillion. Subsequently, Social Security will gradually draw down all reserves before the end of 2037, if Congress takes no action whatsoever, it will have sufficient resources to pay about three-quarters of scheduled benefits. Hardly “going broke.”

SIMPSON: All of them have to do with stabilizing the system, which we are told is insolvent, it’s paying out more then it’s taking in.

FACT: Social Security is currently running a surplus. In 2009, an estimated 94 percent of Social Security tax revenues were spent to meet current expenditures (benefits and administrative costs). The surplus tax revenues, along with interest credited to the Trust Fund, contribute to a growing Trust Fund balance.

SIMPSON: It’s 2.5 trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been setup.

FACT: The interstate highway system was built in the 1950’s when Social Security’s income and outgo were equal. The build up of the trust fund began after 1983 when Congress consciously chose that route as part of the 1983 amendments.

SIMPSON: When I was your age there were 16 people paying into the system and 1 taking out and today there are 3 people paying into the system and 1 taking out.

FACT: This is the same misleading information that Bush used to sell his privatization plan. The 16 to 1 ratio is a figure plucked from 1950, the year that social security expanded to cover millions of farm and other workers. All pension programs that require a period of employment for eligibility show similar ratios at the start or when expanded because all newly covered workers are paying in, but none of them have yet qualified for benefits. By 1955, the ratio was 8 to 1 and by 1973 the ratio was where it is today…

More here.
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America: Speak Back and Derail the Drive to Cut Social Security and Medicare

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From FIREDOGLAKE

Next weekend will feature another milestone in the drive to cut Social Security and Medicare. The organization America Speaks will be hosting a series of 20 meetings in cities across the country. They will ask the people at these meetings, a cross section of the nation, to come up with proposals for dealing with the country’s projected long-term budget deficit.

The way the problem is outlined for these meetings virtually guarantees that most of the participants will opt for big cuts to Social Security and Medicare. The results of this song and dance exercise will then be presented to President Obama’s fiscal responsibility commission on June 30th, which will use it as further ammunition for plans by its co-chairs to gut these programs.

The rigged deck approach should come as no surprise. America Speaks is largely funded by Peter G. Peterson, the investment banker billionaire who has been on a decades long crusade to gut these programs. In recent years Peterson has redoubled his efforts, committing more than a billion dollars to a wide variety of groups in addition to America Speaks. To advance his agenda Peterson has even set up a fake news service, the “Fiscal Times.” To fill the staff, Peterson’s son hired a number of reputable reporters who were displaced by the collapse of the newspaper industry.

The “Federal Budget 101,” the guidebook for the discussion, follows a predictably shoddy path. The book discusses the budget in almost complete isolation from any larger discussion of the economy. There is virtually no discussion of the ways in which the budget fosters growth, for example by funding education, research and infrastructure; nor the way in which the pattern of growth affects the budget.

For example, the booklet never discusses the extent to which the economic mismanagement that allowed the unchecked growth of an $8 trillion housing bubble contributed to the debt that is its central concern. The downturn caused by the resulting economic collapse will eventually add more than $3 trillion to the country’s debt according to the Congressional Budget Office’s projections.

The booklet also neglects to point out the extent to which the long-term budget disaster story is driven by our broken health care system. If per person health care costs in the United States were the same as in any other wealthy country, we would be looking at enormous budget surpluses in the long-term, not deficits…

More here.
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More “Whacking The Old Folks” – Social Security On The Line

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From OPENLEFT

[...] This is really important. They increased the Social Security tax on working people, gave the money out as tax cuts for the wealthy, created deficits on purpose to defund government, created a huge debt mess, and now the next stage of this plan is to gut social programs.

This is what the Deficit Commission is about. Tax cuts for the rich and military spending caused the borrowing and raising taxes on the rich can stop it.  But the plan was to force a perception of a debt emergency to stampede people into accepting a dismantling of government that works for We, the People, and provides for us, empowers us and protects us.    This is the confrontation of  plutocracy vs democracy.  We can’t let them get away with it.

What can you do?  Visit Social Security Works, get on their mailing list or follow them on Twitter.

Get mad.

And get informed.
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From FIREDOGLAKE (video)

Each time the Catfood Commission holds its secret meetings, Alex Lawson of Social Security Works has been outside with his camera, shooting video of the closed front door as FDL runs a live stream on our front page. The Washington Post wrote it up recently.  As committee members go in and out of the room Alex asks them questions when he can and yesterday he had an exchange with Alan Simpson that was…well, extraordinary.

Simpson is apparently a graduate of the Bobby Etheridge school of charm. Alex Lawson was incredibly respectful and polite as the crankly Simpson berated, interrupted and cussed him. Simpson has been a long-time supporter of rolling back the New Deal, and when asked about cuts he would recommend to the President and Congress on CNBC, Simpson said  “We are going to stick to the big three,” meaning Social Security, Medicare and Medicaid.  His sentiments haven’t changed.

CJR’s Trudy Lieberman recently ran down Simpson’s history of delicate statements on the subject of Social Security.   He is equally decorous on camera with Alex, who clearly knows a great deal more about the subject than he does.  Simpson starts from the premise that the Treasury will default on the bonds issued to the Social Security trust fund, because all the best people apparently know that it’s better to default on America’s senior citizens and plunge them into poverty than it is to default on, say, the Chinese.

Despite Simpson’s assertions, raising the retirement age to 70 IS a benefit cut.  It would put an estimated 1.5 million  senior citizens into poverty.

Whacking the Old Folks

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From WILLIAM GREIDER
The Nation

In setting up his National Commission on Fiscal Responsibility and Reform, Barack Obama is again playing coy in public, but his intentions are widely understood among Washington insiders. The president intends to offer Social Security as a sacrificial lamb to entice conservative deficit hawks into a grand bipartisan compromise in which Democrats agree to cut Social Security benefits for future retirees while Republicans accede to significant tax increases to reduce government red ink.

Obama’s commission is the vehicle created to achieve this deal. He ducks questions about his preferences, saying only that “everything has to be on the table.” But White House lieutenants are privately talking up a bargain along those lines. They are telling anxious liberals to trust the president to make only moderate cuts. Better to have Democrats cut Social Security, Obama advisers say, than leave the task to bloodthirsty Republicans.

The president has stacked the deck to encourage this strategy. The eighteen-member commission is top-heavy with fiscal conservatives and hostile right-wingers who yearn to dismantle the retirement program. The Republican co-chair, former Senator Alan Simpson, is especially nasty; he likes to get laughs by ridiculing wheezy old folks. Democratic co-chair Erskine Bowles and staff director Bruce Reed secretly negotiated a partial privatization of Social Security with Newt Gingrich back when they served in the Clinton White House, but the deal blew up with Clinton’s sex scandal. Monica Lewinsky saved the system.

Any recommendations require fourteen votes, and Obama has at least five loyalists who will protect him—Senators Dick Durbin and Max Baucus, Representatives Jan Schakowsky and Xavier Becerra, and former SEIU president Andy Stern. On the other hand, if Obama really wants to make a deal, these commissioners will very likely support him.

The people, once again, are kept in the dark. The Obama commission will not report its recommendations until after this fall’s elections—too late for voters to express objections. Both parties assume they can evade blame by holding hands and jumping together.

What’s extraordinary about this assault on Social Security is that a Democratic president is leading it. Obama is arm in arm with GOP conservatives like Wall Street billionaire Pete Peterson, who for decades has demonized Social Security as a grave threat to the Republic and has spread some $12 million among economists, think tanks, foundations and assorted front groups to sell his case. If Obama pulls the deal off, this will be his version of “Nixon goes to China”—a leader proving his manhood by going against his party’s convictions. Even if he fails, the president will get some protective cover on the deficit issue.