Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

http://www.hoover.org/publications/digest/3512061.html

by chaostheory • 18 years ago

38 120 18 years ago

harpastum• 18 years ago

"In 1964, Barry Goldwater was much reviled for suggesting that participation in Social Security be voluntary. I thought it was a good idea then. I still think so."

A guess why Goldwater was reviled? Voluntary Social Security would be DOA. It doesn't make fiscal sense for the upper class to pay social security, so they wouldn't. That leaves the lower class' taxes going to pay for it--somehow I don't think there's enough there.

Yes, Social Security as is sucks.

No, we shouldn't kick it while it's down.

byrneseyeview7• 18 years ago

I don't understand why it would only make sense for one class to buy into Social Security. If it's a good investment, it's a good investment; 'rich' means less than 'has a particular set of risk/return preferences'.

And I think you validate his point if you claim that social security is only solvent because it redistributes money from the rich to the poor. If the system is unsustainable without giving some people a lower return to subsidize other investors (i.e. soaking the rich to pay off the electorate), it's a ponzi scheme.

mattmaroon17• 18 years ago

Social Security isn't a good investment for anyone and it never has been. It wasn't meant to be. It was meant to prevent our seniors from plunging into poverty because that would have many negative effects on society as a whole.

If you made it opt out, people would fall into two categories. One would be smart enough to manage their own money and opt out because they can get a better rate of return putting it in a money market. One would be too dumb to manage their own money and opt out because they don't want to pay 12.4% extra income tax. Either way, Social Security would be opted out by almost everyone and totally fail to accomplish the objectives it was created for. At least the way it is, it has a chance, assuming it can remain adequately funded.

I'm actually against Social Security (at least in its current incarnation) but recognize the need for some form of it that is forced.

viggity• 18 years ago

SS is supposed to pay benefits in proportion to how much you put into the system (each dollar YOU specifically put in, you supposed to get out). It wasn't meant as a wealth redistribution scheme and so far it isn't a hardcore redistribution scheme. The "rich" are capped at paying 15% of their income up to ~$100k. Not much money from the rich currently goes to the poor via SS (Medicaid is a different beast)

Now, Obama has floated the idea to remove the $100k cap, WITHOUT paying any additional benefit. With the economy in its current condition, he has backed off that idea, but I won't be surprised if he resurrects the idea if we have a quick recovery.

SS is a scam because on average it pays roughly 1% interest per year, versus an 8% average return in stock market. Furthermore it is scam because the government feels compelled to hide half of the money it takes from you by making your employer pay for half of your FICA taxes.

mattmaroon17• 18 years ago

It's not really a Ponzi scheme. A Ponzi scheme pays interest to attract investors so it needs significantly more customers with each iteration. Madoff's infamous one paid out 12% annually, so it needed to grow by 12% each year just to achieve stasis (or it would have if cash outs equaled profits anyway, some years it was probably more or less).

Social Security isn't a Ponzi scheme because it would work perfectly well if the population remained stable over time, or shrank. And it would even be alright if it grew slowly and linearly.

What really throws a wrench in the cogs is when the generation retiring is much larger than the ones still working, especially the one or two before it. This is why the Baby Boomers leaving the work force is so problematic.

The good news (in a sick sort of way) is that our diet and health care are so bad that we save a little due to lifespans actually shrinking. People mistakenly attribute the problem to longer lifespans, but the expectancy of a working-age adult (the only group that matters for the purposes of entitlements) has barely budged since before Social Security was invented, and is now quite possibly shrinking. Lifespan from birth (as it is typically expressed) has risen almost entirely due to lower infant mortality.

chaostheory3• 18 years ago

the main problem with Social Security isn't really changes in population size (though it still is a problem). The core problem of Social Security is this:

"Taxes paid by today’s workers are used to pay today’s retirees. If money is left over, it finances other government spending—though, to maintain the insurance fiction, paper entries are created in a “trust fund” that is simultaneously an asset and a liability of the government. When the benefits that are due exceed the proceeds from payroll taxes, as they will in the not very distant future, the difference will have to be financed by raising taxes, borrowing, creating money, or reducing other government spending."

Basically politicians (of both parties) raid the Social Security fund and just leave IOU notes behind to fund their pork projects. If the money was untouchable and only used for Social Security, the problems we'd see with just population changes wouldn't be nearly as bad... hence (I could be wrong but I feel) this is one of the core arguments that Social Security is a Ponzi scheme.

mattmaroon17• 18 years ago

No, that is entirely incorrect. The government borrowing from SS is no different than them borrowing from the Chinese, either way it has to be repaid. At least this way the interest is going to Americans. Government borrowing itself may be a problem, but it's an entirely separate one.

The kicker is the first sentence. Today's workers pay today's retirees. The payments are designed to ensure a consistent, inflation adjusted standard of living for retirees. If the ratio of retirees to workers stayed the same, the payments would. But when there fewer retirees per worker, workers pay less, and when there are more, they pay more. It's the system's fatal flaw.

The problem now is that baby boomers paid much lower Social Security taxes than us, but they still need to receive the same standard of living that we will. You can see the historical rates here:

http://www.taxpolicycenter.org/taxfacts/Content/PDF/ssrate_h...

They paid a lower % with a much lower cap, even adjusted for inflation. They did so because the retiree to worker ratio was lower. If they paid the same percentage and cap that we do now, Social Security would be sitting on enough money to cover the shortfall in the future.

In 20 years, that ratio will be much higher than today, meaning the workers of 2018 would have to pay far higher taxes still for the system to fund itself. This would, of course, be unbearable (it's already close) so the government will have to seek other solutions, such as borrowing money or printing.

jhancock• 18 years ago

This may be part of the problem. But thats not a ponzi scam. Its just mismanagement.

euccastro• 18 years ago

[Social Security] would work perfectly well if the population remained stable over time, or shrank. And it would even be alright if it grew slowly and linearly.

You got it right but say it backwards. The problem is population shrinking.

The generation retiring is much larger than the ones still working when population has shrunk at some point. Baby Boom wouldn't be a problem in this respect, had it been followed by Baby Big Bang.

mattmaroon17• 18 years ago

You're right, I meant the ratio of retirees to workers, not the overall population. Thanks.

sethg• 18 years ago

But long-term population shrinkage can be accommodated by raising the Social Security tax (an fund-raising option that was not available to Ponzi or Madoff). As long as the generation-to-generation increase in worker productivity is greater than the generation-to-generation increase in the tax, it won't harm the general welfare.

And if that doesn't do the trick then the US can always let in more working-age immigrants.

mattchew• 18 years ago

Social Security isn't a Ponzi scheme because it would work perfectly well if the population remained stable over time, or shrank. And it would even be alright if it grew slowly and linearly.

Only if benefits match contributions. If benefits exceed contributions, you do have a Ponzi scheme, and you have to find ways to funnel increasing amounts of money into the system.

Social Security taxes, as a percentage of income, have risen continuously since the program was started, well before the baby boomers started retiring:

http://www.ssa.gov/history/pdf/t2a3.pdf

tptacek26• 18 years ago

Again: that's not what the words "ponzi scheme" means. You could be arguing that "if benefits exceed contributions, you have a budget deficit", but that wouldn't be as emotionally manipulative, and it would also be boring.

Social Security taxes as a percentage of income were raised sharply in the '80s precisely because the baby boomers hadn't retired.

mmmurf4• 18 years ago

Well, you forgot about the way that benefits are systematically reduced and the retirement age is systematically increased. What about someone who worked hard in his 20s, 30s, 40s, 50s in hopes of retiring at 65 only to see the SS age be increased to 70? Is that security? No, that's a 5 year ripoff.

Now, the SS retirement age is GREATER THAN the average lifespan of African American citizens! You may consider that another "good in a sick sort of way" aspect of the program, but I don't.

pg• 18 years ago

but the expectancy of a working-age adult ... has barely budged since before Social Security was invented. Lifespan from birth ... has risen almost entirely due to lower infant mortality.

This is not true. While it's true that infant mortality rates in industrialized countries have decreased a lot since the 1930s, so have mortality rates at every age.

gislebertus2• 18 years ago

Seems like there's an awful lot of polemical posts on Hacker News lately from Conservative political organizations. Guess they figured out that here they could promote their agenda for free.

Is that really what Hacker News wants to be? A political forum? If so, I'll encourage the folks at Media Matters, Center for American Progress, and Campaign for America's Future to start posting here.

It's bad enough that Conservative political groups are hijacking a startup news aggregator. It's worse that the ideas they're pushing don't work.

Conservatism--the political philosophy promoted by AEI, Hoover, Heritage et al--is the flip side of Communism. With Communism, the purpose of people is to serve The State. In Conservatism, the purpose of people is to serve The Market. Thus, popular New Deal programs such as Social Security are anathema to them.

Both Communism and Conservatism work badly, producing similar effects. Our unregulated Conservative markets have crashed and burned just as badly as the Russians' hyper-regulated Communist markets did. States and countries run on Conservative principles are typically backward and stagnant:

--Mississippi and Alabama have Conservative state governments, and have practically no startup activity. Massachusetts and New York are not Conservative, which makes them capable of spawning MIT and Silicon Alley.

--Conservatives say that the keys to a strong economy is low taxes on rich people and unregulated markets. We've had them for the past decade, just as we did in the 1920s, and just as it did in the 1920s, our economy has melted down. What happened when we had sky-high taxes on rich people, and highly regulated markets? We got the U.S. economic boom of the 40s, 50s, and 60s, and built the world's biggest middle class.

The fact that their political philosophy has produced poor results doesn't give the folks at AEI/Hoover/Heritage pause, however. Just like the old Communists, these Conservatives are now complaining that "Conservatism DOES work! It's just never been tried!" Just as with Communism, Conservatism never fails, it is only failed.

As for the ideas of Milton Friedman that these Hacker News Hijackers are pushing, we may want to read what a Nobel Prize-winning economist has to say about them:

http://www.nybooks.com/articles/19857

byrneseyeview7• 18 years ago

I have seen a lot from libertarians; few from conservatives or Conservatives. Which particular anti-abortion, pro-war, pro-Drug War, traditionalist, or otherwise conservative articles were you referring to?

I think it's really funny that when you see some viewpoints with which you disagree, it is because some big, anonymous agglomeration ("Conservatives!") must be abusing their freedom of speech by saying things with which many HN readers agree (and your solution -- telling an actual big, anonymous agglomeration to push their viewpoints here -- just seems to exacerbate the problem). A few other points:

In Conservatism, the purpose of people is to serve The Market.

What does it mean to 'serve' the market? The market is an abstraction -- you can't make 'it' better or worse-off, though you can do that to participants.

Our unregulated Conservative markets

You're referring to how the unregulated hedge funds produced much worse returns than the highly-regulated commercial- and investment-banking industries -- and how the only safe spot in the current financial turmoil is the highly-regulated, government-created, government-subsidized mortgage industry, right? Right?

Mississippi and Alabama have Conservative state governments, and have practically no startup activity. Massachusetts and New York are not Conservative, which makes them capable of spawning MIT and Silicon Alley.

Has it not occurred to you that you have the cause and effect wrong, here? New York and California can have more abusive governments because even if you pay 50% of your marginal income in taxes, you're still better off starting a startup in CA than in Mississippi, or trading derivatives in New York rather than Alabama.

What happened when we had sky-high taxes on rich people, and highly regulated markets?

Some day, you will be introduced to the term 'loophole'. You will wonder why the three-martini lunch and the company car used to be so common, and are now so rare. You will run the numbers on the Reagan tax cuts and find that the reduction in nominal rates would imply gigantic cuts in total income received, which is not what happened -- and then you'll realize that, in general, tax cuts are accompanied by loophole-closing, and tax increases are accompanied by loophole creation. That's just how things work.

Thank you for linking to Paul Krugman, well-known as the first person to be awarded the Nobel Memorial Prize for his political rants in a popular newspaper, rather than his academic papers. I haven't actually read what the prize committee said about him, but everyone I've met who agrees with Krugman's polemics seems to see the prize as new evidence in their favor, so I am assuming that this is what the award was for. Right?

chaostheory3• 18 years ago

for the record I am not a conservative, nor was my account just created today (specifically just a few minutes ago like your account. Let me guess, your past yc news account was NSX2?).

I just feel that hacker news is a forum for posting a wide range of ideas. If you don't agree with an article you can do one of two things:

1) post a logical counter argument like some people already have.

2) ignore it.

I really hate posts that really have nothing to do with the general ideas that articles convey. it tends to become useless noise.

This isn't about conservatism vs liberalism. This is about US Social Security. Please stick with the subject.

tokenadult2• 18 years ago

"I really hate posts that really have nothing to do with the general ideas that articles convey."

Agreed. You gave us the courtesy of titling the thread in a way that made clear what the thread was about. Anyone commenting here can express one opinion about Social Security or another, preferably with evidence, and then we can all learn something. I just found a link from Harvard

http://www.law.harvard.edu/faculty/hjackson/UnfundedMandates...

mentioning that Congress has exempted Social Security from a law designed to identify programs that set up "unfunded mandates." That's food for thought.

lionhearted3• 18 years ago

In a site populated by hackers and entrepreneurs, you're going to get people with a strong preference for individualism over collectivism - that's the nature of the beast here. People are going to be very free action-oriented, anti-paternalistic, and not too many of us are going to like the government. We've also got the smart people thing going on where we think politicians are numbskills that spend more time politicking than doing anything intelligent.

So you've got that. But past that, it's hard to find intelligent discussion on economics, government, and society, and a bit coming into HN is healthy for the discussion.

What I'm impressed about is that we get practically no political current events here - and that's pretty cool. Most of the ideas we talk about in terms of economics, society, and government are pretty broad, intellectual strokes instead of inflamed stuff. And for the record, I'm all up for talking about market failure, monopolozation, and unfair initial distribution of resources. And we can have some good discussion.

Edit: This was originally a reply to someone who said HN was being invaded by Conservative lobbyists getting free publicity or some such. byrneseyeview replied to the same guy quoting some of it before he deleted it if you're curious as to the gist of it.

tptacek26• 18 years ago

A social safety net isn't "collectivism". "Collectivism" is an emotional button hard libertarians try to push. Agree or disagree with Social Security, but please don't tar "hackers and entrepreneurs" with a single political brush.

JunkDNA• 18 years ago

I would take your point about there not being many political current events a step further. The broad ideas discussed here are some of the most important issues of our day. I might be overstating things a bit, but I think it's safe to say that the HN audience is largely composed of the people who work to propel society forward through their ventures. The readership here are highly educated and are largely "in the trenches" every day solving problems and building the things society needs. These professional problem solvers and hackers are the very individuals I want to be engaging in healthy debate about the virtues of various policies and their impact on business, innovation, and society as a whole.

The problem is when the policy debate degenerates into the standard political name calling and senseless bickering that does nothing to advance intelligent ideas. If any community can keep that to a minimum, it's this one.

dantheman6• 18 years ago

MIT started long before it was in the people's republic of cambridge.

Serving the market doesn't make any sense, the market is letting people voluntary interact with each other.

tokenadult2• 18 years ago

"The present discounted value of the promises embedded in the Social Security law greatly exceeds the present discounted value of the expected proceeds from the payroll tax. The difference is an unfunded liability variously estimated at from $4 trillion to $11 trillion--or from slightly larger than the funded federal debt that is in the hands of the public to three times as large."

The mismatch between the promised benefits that many voters think they have "earned" by "saving" money in their personal "Social Security accounts" and the actual funding capacity of the Social Security system is why it looks like Mr. Ponzi was the designer of the system. The overall societal effect of Social Security as it is currently funded is a massive wealth transfer from the working young to the nonworking old, which is excellent politics but rather poor economics.

mattmaroon17• 18 years ago

Even if it wasn't for the anomalous population boom that is causing the problem, you would essentially be being forced by the government to put a portion of your salary into an investment with a 0% interest rate. Which granted, would look good to a lot of people right now, but is bad financial planning on the whole.

On the other hand, I reject his cries of paternalism for the simple reason that other people's poverty has a negative effect on my life, liberty, and pursuit of happiness. Poor people have incredibly high rates of criminal activity, drug use, etc. Granted, I don't see a lot of retirees selling crack or robbing banks, but the effect it could have on their families, who sometimes they support or sometimes support them, could create a serious ripple down through generations.

Which doesn't necessarily mean I'm for Social Security or forced savings of any kind, but the issue is not nearly so simple as paternalism.

Retric12• 18 years ago

In defense of social security:

It pays significant disability and survives benefits which has little to do with investing and everything to do with insurance. So consider SS as insurance in case of a long life.

Some people will live well over 100 so finding the "correct" amount of money to save is overkill for most people who die far younger than that. If you invested a portion of your savings each year and pooled you money with 10,000 other people your age then paid dividends from that to the survivors you could save less money and still not worry about running out. Granted if to many people lived until retirement age you might need to reduce benefits. Granted you would not be able to give people money at the time of your death but if your single what's the point?

Now the implementation of social security is broken in several ways but minor changes in retirement age will fix the "benefit gap" long before it runs out of money. The basic problem is people are living longer so they need to increase average retirement age. The surplus was also invested in government bonds with terrible long term returns etc, but when you consider how much more important the first 20k/year is over the next you might consider guaranteed benefits even at high cost are worth a lot more than the simple math would suggest.

PS: There are a lot of things I hate about SS, but it's not really a Ponzi scheme.

alecco4• 18 years ago

The current group on the receiving end did pay.

Noam Chomsky wrote a great essay on this non-issue: http://www.chomsky.info/articles/20050601.htm

(Hey, the guy's from MIT, don't down-vote me that much, please! ;)

nihilocrat5• 18 years ago

Chomsky is a pretty hardline radical liberal, so it's fairly likely that an HN reader or two thinks what he writes is pure and utter garbage.

tptacek26• 18 years ago

Once every couple years, a "new" group of people gets all huffy about the fact that Social Security taxes "aren't really invested at all", but rather pay off current retirees. It's a false controversy. That's the intent of the system. The people collecting Social Security today paid for the previous generation's baseline defined benefit retirement.

Social security isn't an investment plan, and it isn't a welfare plan. It's not a sports car either. It's an easy, cheap, intellectually flimsy argument to snipe at it by saying it's bad at being something it isn't intended to be.

mmmurf4• 18 years ago

You may be right, but the intent of the system doesn't really matter. When SS began the tax was 1%, now it's 12.5% and benefits have been decreasing every year.

Sadly, the planners didn't anticipate just how population trends would play out, and so the initial idea -- that everyone pays 1% and then no old folks have to worry about poverty if they choose to retire -- just doesn't quite work out any longer.

The trouble is that people can't really rely on social security for (guess what?) security!

Will congress increase the payroll tax to 30%? Will it decrease social security benefits drastically? Will it fund SS out of general revenue at the expense of other programs? Will American taxpayers decide that SS is worth a middle class income tax rate of 55%?

The answer to all of these things is the same: maybe.

But that's not security. Obama has wisely advocated converting SS into a welfare program, but that hasn't gotten much traction.

The point is, with population trends doing what they are, somthing has to give. When people running for office talk aobut "saving Social Security" they are not honest about the impending outcome of obvious demographic trends. Meanwhile, all of us pay 12.5% of every paycheck into something that will probably offer us ZERO security in retirement.

gislebertus2• 18 years ago

As a long-time entrepreneur, I'm concerned most about a market: are there people able and willing to buy what I'm selling?

Social Security helps with the "able" part, by making sure that no American lives in abject poverty if they're old or crippled.

Before Social Security, this was a big problem. About a quarter of Americans lived in poverty, and about half of old people.

More people with more money to spend means a bigger market for whatever I'm selling. That's why Social Security is good. That's why markets are bigger in places with lots of Social Security-type programs (Europe, the U.S.) than in places without them (South America, Africa).

Social Security also helps make it possible for me to be an entrepreneur. I know that I can take risks and not plunge my family into abject poverty if I'm crippled and can't work.

Why did I write about Conservatism in relation to this article? Because when someone is attacking Social Security, it's almost always as part of a larger political agenda they're promoting: Conservatism.

This article was from the Hoover Institution, a politically Conservative organization that pushes to eliminate New Deal programs like Social Security (not just SS). They also push for unregulated markets, and flat or regressive taxes. So does the American Enterprise Institute. So does the Heritage Foundation.

These groups call themselves "think tanks," which implies objective research. Unfortunately, they aren't averse to pushing false information or abandoning their principles to promote their interests.

For example, For example, the Heritage Foundation sharply criticized Malaysia's government for years. After a consulting firm owned by Heritage's president began representing Malaysian business interests, Heritage assessments of Malaysia turned positive. (http://thinkprogress.org/2005/04/17/money-talks-at-heritage/)

antiismist3• 18 years ago

I'm not sure why you are writing about the Heritage Foundation or "Conservatism": Milton Friedman is a classic liberal (http://en.wikipedia.org/wiki/Classical_liberalism), so it's a strange vicarious ad hominem attack.

His laissez-faire ideas have been extremely influential and have a stunning track record of success where they have been used.

nihilocrat5• 18 years ago

You shouldn't act like terms exist in a vaccuum. Remember that the Republicans and Democrats were on completely different sides of the political spectrum less than a century ago.

Classical liberalism is a doctrine stressing individual freedom and limited government. This includes the importance of human rationality, individual property rights, natural rights, the protection of civil liberties, individual freedom from restraint, constitutional limitation of government, free markets, and a gold standard to place fiscal constraints on government

In a modern political climate these would sound somewhat conservative (mainly 'free markets' and 'limited government'). I think the best modern-day fit would be Libertarianism, which is considered by many to be far-right.

This is why we as a society should really adopt the two-axis means (political compass) of understanding "ism"s. I really hope the public is smart enough to factor just one more dimension into their political analysis, but mass stupidity is always full of surprises.

tptacek26• 18 years ago

I don't think you can, with any intellectual honesty, call Milton Friedman a "liberal" economist without pointing out that you're using a different definition of the term than the mainstream. If he's a "classic liberal", he's also an "anti-progressive".

mynameishere• 18 years ago

Where to start? Sheesh. Markets are "bigger" in the US than South America because of social security? How on earth did you come up with that notion? Besides being completely upside down (viz, social security draws money from the free market) South America most certainly has its share of SS equivilents:

http://www.ssa.gov/policy/docs/progdesc/ssptw/2006-2007/amer...

spkthed4• 18 years ago

It may not technically be a Ponzi scheme but it is in effect. If you're not able to take out what you put in, you're losing money. If you work 40 years, putting in 12% of your salary (companies have to pay it, otherwise it would be part of your salary) you should get all that 12% back for 40 years. Since most people don't live to 108, SS pays very low monthly payments and pays back about half of a lifetime.

If you die however, you don't. Sure there's exceptions but... you can do better on our own. Mutual funds, Money Market accounts... heck, even bonds and CD's would enable you to pass it down. In addition, from 15 on, 12% of your income even if you only make $8 an hour for 52 years and only invest it in something that nets 10% would easily make you a multi-millionaire. You could retire comfortably and still pass it down.

Since we're facing massive shortfalls, isn't that about the same as a Ponzi scheme?

Also, I've been reading this site for probably close to a year. I greatly appreciate having intelligent people post comments. Sites like Digg or Reddit not only have very biased commenters, they also usually only parrot whatever HuffingtonPost or Keith Olbermann said the night before. It's mindless.

Intellectual comments, even if they're not ones I agree with are interesting to read. Kudos to you guys!

tptacek26• 18 years ago

First, the words "ponzi scheme" don't mean "anything where you put X in and get X - n out."

Second, Social Security isn't an investment program. The goal of Social Security is to provide each generation of retirees with a baseline level of income. It has succeeded at this task.

Third, we're not facing massive shortfalls. We raised taxes on the baby boomers in the early '80s to build up the social security trust fund to pay for their retirement. As it stands, social security is a small part of the entitlements problem moving forward --- Medicare has more than 7 times its liabilities in the projected future.

Fourth, this "small payments" thing is a myth. 2/3rds of Social Security beneficiaries derive more than half their income from Social Security; more than 1/3rd of them derive the overwhelming majority of their income from it.

dantheman6• 18 years ago

There is no such thing as a social security trust fund. The government uses that money to fund other programs and puts IOUs in there; that means when more are receiving than contributing there will be a massive tax burden on those contributing they get hit with both their normal SS tax, plus the taxes to cover the shortfall.

spkthed4• 18 years ago

On the second point, that baseline is going to drop much, much lower unless they drastically raise taxes. We have what, 8 years until we start taking out more than is going in.

On the third note, agreed. Medicare/Medicaid have massive problems. That doesn't mean that SS doesn't have problems too. They do have issues with workers taking more out than putting in. The birth rate continues to decline.

On the small payments thing, that maximum SS benefit is what, $1,000 monthly? That is NOT enough to live on. Especially not when you consider the cost of nursing homes, medicine, and all the other costs of living when you are partially or wholly unable to take care of yourself.

I don't know about you but I burn $1,000 just on rent, utilities, transportation and food a month. The fact that so many people put so much of their income in it just shows how misled they've been. That's a scary prospect.

If you make $50k annually averaged out from 15-65 you've put in $300,000 into SS. That's a fairly average income, well within middle-class. If you live until 90 you have pulled out everything you've taken in. If you die sooner, that money is just gone. Most people don't live until 90. Now, combine that with the fact that right now it's 3.5 people supporting one person and it starts to look like a Ponzi scheme.

http://seniorjournal.com/SocialSecurityQ-A.htm

alecco4• 18 years ago

A shame it is impossible to down-vote stories.

patrickg-zill• 18 years ago

SS started as a scam and will end as a scam.

SS was set up with rules based on actuarial tables, used by all insurance companies.

The rules for 65 as the start of collection were because the actuarial tables at the time showed that only about 25% of the population would reach that age. And since white women live the longest, black men were paying for a benefit it was unlikely they would ever receive.

SS did not originally have survivor benefits and disability either, those were added by FDR in the years after SS originally passed.

Unlike either term or whole life insurance, SS pays nothing if you die before your time for payments to start. With term, you would get paid, with whole life, there would be other investment benefits involved, like the ability to borrow against a certain amount of the policy while still alive.

Social Security: The Biggest Ponzi Scheme on Earth (By Milton Friedman)

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