Texas Insider Report: AUSTIN Texas The essence of a Ponzi scheme is that money taken from current investors is used to pay current benefits plus pad the accounts of the scheme creator(s). Thats pretty much how Social Security works including the declining participation factor and the Social Security Administration indirectly concedes the point.
The scheme can work only as long as more & more people pay into the system. The early investors can make out like bandits while the later investors are robbed.
The agency sends regular statements to workers reviewing their income history and projecting their expected monthly benefits at retirement. So far so good … except for the asterisks highlighting the fine print which reads:
Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time.The law covering benefit amounts may change because by 2037 the payroll taxes collected will be enough only to pay about 76 percent of scheduled benefits."
How many people would open a retirement savings account in a bank that told them there was chance they would only receive 76 cents for every dollar they invested?
Yes Social Security deposits are guaranteed by the full faith and credit of the federal government" though it may also be fair to say that today theres more faith than credit.
We are mindful of the concerns of those who think terms like Ponzi scheme can scare the voters. If a politician is going to use the term a little explanation could be useful.
On the other hand voters may be ready for strong language especially when it has a ring of truth.
Merrill Matthews PhD is resident scholar at the Institute for Policy Innovation (IPI).
Texas Insider Report: AUSTIN Texas The essence of a Ponzi scheme is that money taken from current investors is used to pay current benefits plus pad the accounts of the scheme creator(s). Thats pretty much how Social Security works including the declining participation factor and the Social Security Administration indirectly concedes the point.
The scheme can work only as long as more & more people pay into the system. The early investors can make out like bandits while the later investors are robbed.
The agency sends regular statements to workers reviewing their income history and projecting their expected monthly benefits at retirement. So far so good … except for the asterisks highlighting the fine print which reads:
Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time.The law covering benefit amounts may change because by 2037 the payroll taxes collected will be enough only to pay about 76 percent of scheduled benefits."
How many people would open a retirement savings account in a bank that told them there was chance they would only receive 76 cents for every dollar they invested?
Yes Social Security deposits are guaranteed by the full faith and credit of the federal government" though it may also be fair to say that today theres more faith than credit.
We are mindful of the concerns of those who think terms like Ponzi scheme can scare the voters. If a politician is going to use the term a little explanation could be useful.
On the other hand voters may be ready for strong language especially when it has a ring of truth.
Merrill Matthews PhD is resident scholar at the Institute for Policy Innovation (IPI).
