Is Social Security a Ponzi Scheme?

[amosknows]

Is Social Security a Ponzi Scheme?:

http://money.aol.com/news/articles/_a/bbdp...i-scheme/289221

If it is it's in trouble because the demographics show that the population is aging and that the bottom of the pyramid will not be able to support the top.

[softwareNerd]

It is very similar to a ponzi scheme, since it pretends to take money from people now, keep it in a fictitious "trust fund" and pay it out later, while actually paying the money out right away. Not only is current money given to retirees, but the little that is left over is spent on general government expenditures.

Medicare is a similar scheme, and is in even worse shape.

Unraveling Social security is not that difficult to do, but people claim that it is politically untouchable. I'm not sure it really is so any more.

Unravelling Medicare is much more difficult. The government has created an extremely costly health-care system, and most retired folk would have a real problem paying private rates in the system. We need to get the government out of health-care in general, in order to make this transition.

[Zip]

Too bad the people in charge of them can simply create more money to keep these schemes afloat. If it were a real company perhaps they could go out of business and people would be allowed to look after themselves (the horror!)

[prosperity]

Too bad the people in charge of them can simply create more money to keep these schemes afloat. If it were a real company perhaps they could go out of business and people would be allowed to look after themselves (the horror!)

The underlying principle here is personal responsibility. I was reintroduced to this idea a few weeks ago working with a small business and trying to negotiate a new health insurance plan. While I wasn't suggesting that they cut benefits to employees, the first thing that was mentioned to me was exactly that...in other words, NOT cutting employee benefits.

As is, the company pays nearly 100% of the employee health insurance costs (the only exception being copays).

At this point, the general consensus from the employees is that you cannot take that away because it would be "unfair". Now, the company can do anything it wants, if it is willing to pay for it - and it may be worth it for the employer to do something like that for its employees.

But, when you give someone something and it is perceived to be free, it is difficult to take that away - ever. When you install a feeling of entitlement, it is near impossible.

For Medicare, and Medicaid, you have similar mentalities...though perhaps the elderly don't feel as entitled as the poor. I have witnessed first hand a Medicaid patient in an emergency room demanding services in such a way that you really would think health care was a right and the Doctors were this person's slave.

I don't think there is a strong sense of personal responsibility in regards to these programs. If you ever confront someone on medicaid (especially if they have an explicit entitlement mentality), ask them why they haven't taken responsibility for their own life...watch their expression and get ready for an earful.

Edited December 30, 2008 by prosperity

[Greebo]

Too bad the people in charge of them can simply create more money to keep these schemes afloat. If it were a real company perhaps they could go out of business and people would be allowed to look after themselves (the horror!)

Creating more money devalues the existing money, so it doesn't solve the problem. Creating more money to keep SS and Medicare functional will make the value of the money less, driving prices up more, which will exacerbate the problem, not fix it.

Not that Gov't won't try - evasion is the norm after all.

[D'kian]

It is very similar to a ponzi scheme,

A Ponzi scheme is similar to a pyramid scheme. The scammer pays out old investors with the money from new investors (and takes a cut for himself). It "works" as long as new "investors" keep coming in. When inevitably not enough new "investors" can be found, the thing collapses.

The difference bewteen the two is the pyramid scheme does not pretend to invest the money, while the Ponzi scheme does.

As you point out:

since it pretends to take money from people now, keep it in a fictitious "trust fund" and pay it out later, while actually paying the money out right away. Not only is current money given to retirees, but the little that is left over is spent on general government expenditures.

That's the exact definition of a Ponzi scheme, including the cut for the con artist (in this case the US Federal Government).

And since population growth has slowed down (as always happens with prosperity), there aren't enough new "investors" to keep paying off the older "investors."

America does have a sort of canary, though: Europe. In Europe population growth has slowed even more, in some cases even reversing altogether (that is, the population decreases). Some countries make up for it by allowing large numbers of immigrants in, but that too is unsustainable. Add the permanently high unemployment rate and the generous unemployment and/or welfare benefits paid out, and Europe will collapse long before America does.

That should serve as an object lesson and, perhaps, allow America to rid itself of the Social Security scam before it is too late.

Unravelling Medicare is much more difficult. The government has created an extremely costly health-care system, and most retired folk would have a real problem paying private rates in the system. We need to get the government out of health-care in general, in order to make this transition.

That is a much more difficult problem, and you're right about the solution.

A modest but necessary first step is for people to accept that insurance can't, and should not, cover everything. This kind of all inclusive coverage makes for higher costs and higher consumption rates. Not that people willingly will want to visit their doctors more, but that it does provide incentives for doctors to order every test they can think of, which the patient won't refuse beacuse his insurance pays anyway.