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Your source for news affecting the U.S. Social Security Administration
Copyright Charles T. Hall
Labels: Financing Social Security
posted by Social Security News at 7:00 AM
I agree that the author used provocative language -- which, after all, is what all authors do -- but why WOULDN'T a responsible newspaper publish this?The author points out that Social Security (1) is part of the larger federal budget, (2) is not insulated from the government's need to balance taxes and spending by non-governmental resources (e.g., investments in non-governmental stocks and bonds, like a corporate pension fund would hold), and (3) is subject to the same deficit/macroeconomic pressures as other governmental programs.In fact, whether or not you like the language he uses, that's EXACTLY the sort of important explanations that our newspapers should be publishing.
Many people have lost sight of the fact that Social Security is a social INSURANCE program, not an investment program, not a pension plan, etc. Like all insurance plans it, at least partially, relies on the contributions of those who do not suffer covered losses (loss of income due to death, disability or retirement). At the time it was enacted it only covered retirment and the life expectancy was much lower. While the contribution rate has been increased it has not been increased enough to cover the changes in coverage and life expectancy. The rate is currently 6.2% and probably needs to be higher if Americans don't want lower benefits.
It is Ponzi scheme in that people that paid in early and now getting benefits are going to get far more in benefits than what they put in than people now working.Madoff's problem that was he couldn't print money like the government can.
A Ponzi scheme has a promise of current return on investment which is paid by secretly paying only the earlier investors with the later investors' money, until it collapses. Social Security is insurance--no promise of a current return. benefits are paid under preset conditions which are publicly available to all who care to check,and anyone who meets the conditions receives the payments without regard as to when they began contributing.
http://en.wikipedia.org/wiki/Ponzi_schemeOne reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – commonly reinvest their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) – they simply have to send statements to investors showing them how much they earned by keeping the money,Social Security StatementsPromoters also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, in exchange for higher returns.Delayed Retirement Credits the scheme will collapse under its own weight, as investment slows and the promoters start having problems paying out the promised returns2041
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