Who would have imagined that a machine managed by politicians would over promise what it could deliver.
My point is that there is no outsized payouts. There are no investors because the government legally mandates participation. So you can parse words and say that it isn't a Ponzi-scheme.
Yes it does, there are fixes that are needed. We need another commission like the Greenspan commission we had in 1983.Social Security has a pay as you go problem.
Life expectancy now is 78 years, and women have been increasingly paying into the system (which increases household benefits). That's a lot more to pay out.
Not for everyone. E.g. lower-income married couples, and married couples with one worker, both receive more in benefits than they pay in. And when we include Medicare, everyone receives more than they paid in taxes.In 2010, the system hit a milestone, new retirees expected to contribute more than the expected to collect.
It isn't a Ponzi scheme. Just saying so suggests that you don't understand how Social Security works, or how Ponzi schemes work, or are just using an inaccurate insult because it's politically expedient.My point is that there is no outsized payouts. There are no investors because the government legally mandates participation. So you can parse words and say that it isn't a Ponzi-scheme.
A Ponzi scheme is a fraudulent system where the organizer uses funds collected by the later "investors" to pay off the new "investors." No matter how fast it grows, it is unsustainable. Social Security, in contrast, is a pay-as-you-go system, so current revenues pay for current outlays. Surpluses from the year's collections went into the trust fund. It's been sustainable for about 80 years so far, albeit with a few tweaks.
Given the major demographic shifts since the 1930s (significantly longer lifespans, women working in larger numbers, changes in birth rates) and the lack of adjustments to Social Security, it really shouldn't be a surprise that the system needs further refinements at regular intervals.
The Impact of Life Expectancy on Social Security : FedSmith.com
Suggesting that it says : "And when we include Medicare, everyone receives more than they paid in taxes." Suggests that you haven't read the disclosures.
Last edited by JoeTheEconomist; 07-16-14 at 02:54 PM.
The fact is today's payroll taxes pay for today's beneficiaries. Unlike what most people think, which is my contributions today go to my retirement tomorrow, Social Security is essentially a pay as you go system. Why is there a deadline on solvency? Because the amount being paid out is/will be greater than what's taken in. However, there's nothing which says it must continue that way. That was the point of the link, if I'm not mistaken.
It is? When did I offer any solution? No, my point from the very beginning was that your headline was entirely misleading and that Social Security is not, and theoretically cannot be, going bust.People contribute more to it than the expect to collect from it, and your solution is to throw another 25% more at the system.
Economic returns are not a cashflow measure. Today the system has a negative return, meaning that statistically a worker will not collect his contributions in benefits.
The idea that workers can put 16% of payrolls into Social Security is possible. I don't see them doing it, but maybe future voters will be willing to pay the taxes that we didn't. You never what is possible.