Re:Profiles of the Jobless: The 'Mad As Hell' Millennial Gen...
by diogenescynic on Monday September 12, 2011 @01:05PM
(#2988012)
"The beauty of social insurance is that it is actually unsound. Everyone who reaches retirement age is given benefit privelleges that far exceed anything he has paid in...How is it possible? It stems from the fact that the national product is growing at compound interest ... More important, with real incomes going up at some 3% per year, the taxable base on which ebenfits rest in any period are much greater than the taxes paid historically by the generation now retired.
Social security is squarely based on what has been called the eighth wonder of the world--compound interest. A growing nation is the greatest Ponzi game ever contrived."-- Paul Samuelson
Re:Profiles of the Jobless: The 'Mad As Hell' Millennial Gen...
by anamax on Tuesday September 13, 2011 @11:26PM
(#2994759)
Except that demographics change. We've known that the demograhics were going to make SS untenable for decades.
> Everyone who reaches retirement age is given benefit privelleges that far exceed anything he has paid in
That's not actually true of folks who max.
"Earned" maybe, but the relevant question is the relationship between the payments and the benefits. For some folks, it's a good/great return. For others, it's a lousy return.
> the money is invested (albeit in government debt at low interest rates), and even now (well, maybe not with that idiotic payroll tax break they enacted) more money is going in than coming out.
The problem is that current cash flow isn't the right way to determine whether such schemes are economically sound.
For example, Ponzi schemes have good cash flow initially.
The right way involves balancing the current "contributions" against the NPV of the benefits "promised".
No, I'm not saying that SS is a Ponzi scheme. No one is forced to participate in a Ponzi scheme and the only folks who lose money in a Ponzi scheme are folks who bought into the promise.