Monday, June 1, 2009

Shameless self-link re: Social Security

How to Fix Social Security

Just cause I've been thinking about it more recently, in a "well duh, of course that's what they should do" sort of way. Welcome to people's comments, pro or con, here or on the other post. I figured rather than rant about how we, the taxpayers, purchased the majority share in a failed enterprise with no hope of actual recovery, and how that just solidifies the decline into socialism in the Obamanation, I should focus mental effort on something productive, which brought me back to fixing the largest Ponzi scheme in human history. Comments welcome. :)


  1. SS is similar to “terrorism” and economic stimulus (as you covered in a recent post) in that experts sometimes mislead people on the topic for ideological reasons. People who want privatized Social Security make dishonest arguments:
    1) The system is in imminent danger of failing and paying beneficiaries almost nothing. This ignores that as long as there are people paying in, people will receive benefits commensurate with taxes being paid into the system.
    2) The system does much worse than simply saving your money because of mismanagement. This ignores that this system never saved significant money, so it’s unfair to compare it to a scenario where money is saved.
    3) The system saves its small trust fund in US Treasuries. This is an accounting trick to spend the money b/c US Treasuries are worthless unmarketable paper. I supported President Bush’s attempt to partially privatize (marketed as “personalization”) the program, but I reject the bogus arguments against SS.

    I am not so knowledgeable about macro econ, but I suspect the stimulus and other bailout measures were mostly taking advantage of the opportunity for the gov’t to take more power, just like the PATRIOT act and all the spending that came with the so-called “war on terror”.

    We need a moderate libertarian movement to gently move us away from gov’t involvement in so many areas.

  2. Responses by topic:

    1. The system is is a Ponzi scheme, and like all other Ponzi schemes it is not in danger of failing unless one of several things happen:
    - People demand increasing returns which exceed the money coming in (eg: people living longer)
    - The flow of people paying in does not continue to increase exponentially (eg: birth rates decline, or working population declines)

    Unfortunately for the government, both of those things are currently happening, and extrapolated with current statistics, it projects a significant shortfall. However, if both of those can be corrected (perhaps by importing a significant number of workers to work legally and pay taxes, exporting/eliminating all the ones that don't, and by euthanizing all people on social security when the reach 75, for example), the government could restore the "proper" behavior of the Ponzi scheme.

    Also, note that my plan explicitly allows the government to continue to operate SS like a Ponzi scheme for as long as it wants; the only change would be to make the owed amounts explicit, documented, and accounted for.

    2. I agree, this is a false claim. The system does much worse than saving not because of mismanagement, but because your money is simply taken and given to others. Again, my system addresses this by making your pay-ins to SS explicitly yours (in large part), and stops the government from re-allocating them without creating an explicit debt to the individual.

    3. Agree, this is another false claim: Treasuries are as good as US currency in terms of value (and equally questionable long-term with massive print & spend policies). My plan allows the government to continue to denominate the accounts in terms of US dollars (and pay the inflation rate), so my plan offers no change in this regard.

    On the unrelated note, I totally agree that the various spending programs are nothing more than thinly veiled efforts to consolidate or abuse power for political ends. The country would certainly do better with a liberal movement, but unfortunately I think it's largely a lost cause: there's not enough intelligence left in the voters to break the cycle of abuse, and there's nothing to stop the degradation of the gene pool. The best we can do is fight the trend, with blogs like this for example, and hope that at some point the improbable will happen.