The innumerate and the dead

Tom Maguire has an amusing piece on this NYT article on Social Security. The NYT says, shockingly, that Social Security is in even worse shape than you thought since everyone is living longer, and JOM has good fun with that. But of course it’s a far worse situation for reasons we’ve previously discussed. The Times says that the Social Security “trust fund” will be depleted earlier than anticipated. But what is in the “trust fund”? Shares of Google or, heaven forfend, those of post-Jobs Apple? You should be so lucky.

Social Security is an IOU from the government to you. Its structure is that of a Ponzi Scheme, in which the current payors fund the current beneficiaries, instead of a trust fund like a private sector pension or an IRA for example. What it has in its “trust fund” is another IOU, this one from the Treasury. How does the Treasury fund such an IOU? Only three ways. (1) Taxes. (2) Borrowing, from China and elsewhere. (3) Printing money (these days that’s Borrowing as funded by the Fed’s QE2,3,4,etc.). The Social Security “trust fund” isn’t a trust fund. It’s more like a panicked response to a ransom note: “we’ll get the money somehow, we promise.” Feel better now?

6 Responses to “The innumerate and the dead”

  1. Zachriel Says:

    Dinocrat: Its structure is that of a Ponzi Scheme, in which the current payors fund the current beneficiaries, instead of a trust fund like a private sector pension or an IRA for example.

    That doesn’t make it a Ponzi scheme, but a pay-as-you-go system.
    http://web.archive.org/web/20101110091356/http://www.ssa.gov/history/ponzi.htm

  2. Zachriel Says:

    Social Security is not a Ponzi scheme, but a pay-as-you-go system.
    http://web.archive.org/web/20101110091356/http://www.ssa.gov/history/ponzi.htm

  3. MarkD Says:

    Backed by the full faith and credit of the Federal Government.

    It’s not a Ponzi scheme because the goverment is doing it. Madoff did the same thing.

  4. Zachriel Says:

    MarkD: It’s not a Ponzi scheme because the goverment is doing it. Madoff did the same thing.

    No, Madoff didn’t do the same thing. He promised the principal was invested. It collapsed when people demanded their principal. With a pay-as-you-go system, there is no principal.

  5. Paul Says:

    It’s a tax for the general fund. Save the first two years, when it was a forced insurance scheme, it is just a tax. Even the Supreme Court has ruled so. Fed gov is under no legal requirements. You are taxed in say 1970 dollars, 1980, 1990 dollars and you will get back Federal Reserve printed, near worthless dollars. Sucker dollars. But, hey, sheeple are sheeple and there is a reason guberment skools don’t be teaching no economics.
    Anyway, I don’t pay. Independent trades. Cash. Fiat money converted to gold, silver, guns. Fed gov can’t afford to try me and the tens of millions like me, either. It will cost them ten times what they can’t squeeze from us. ‘
    Plus, the feeling is priceless. Every tax I fail, every fee, fine, permit, license I go with out is a strike, politically, against my fellow citizens, the royalty of gov swine, their mercantilist partners, and the welfare dolts.

  6. Zachriel Says:

    Paul: It’s a tax for the general fund.

    It’s a designated tax, like the gas tax, and like the gas tax, instead of letting the money collect dust, it’s used to pay bills.

    Paul: Fed gov is under no legal requirements.

    Well, it’s a constitutional democracy, so the people can decide how they want to deal with the situation. Under current law, taxes are collected, securities are issued, benefit checks are deposited.

    Paul: You are taxed in say 1970 dollars, 1980, 1990 dollars and you will get back Federal Reserve printed, near worthless dollars.

    Actually, U.S. dollars are very popular.

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