Social Security Follow-Up

Updated : Dec 30, 2019 in Articles

Social Security Follow-Up


For the last couple of years, I’ve had a video
up detailing how Social Security works. I had hoped to show, simply and through logic,
how Social Security is a Ponzi scam run as a government fraud against the people. It
was successful, in that no one has been able to poke any holes in my logic or in the evidence
presented, but I did underestimate the steadfast denial that can take place in the minds of
those who worship the Cult of the Omnipotent State. I had quoted the Social Security Administration
saying, “As long as the amount of money coming in the front end of the pipe maintains a rough
balance with the money paid out, the system can continue forever. There is no unsustainable
progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid
or Ponzi scheme.” I didn’t elaborate, because I thought that
by simply showing how the money goes in and out, and how it behaves precisely as a Ponzi
scam does, would be enough. But incredibly, in comment after comment, people kept saying
they found the quote obviously true, and that the only problem was the government trying
to skim from the top. As long as that didn’t happen, so they say, it could continue forever. How? How can ANYONE think that this could
be the case? The only way to make this happen is to run the system at zero costs. But how
is that even possible? They use all sorts of excuses for why Social
Security has had to increase taxes and decrease benefits. For example, they talk about the
fact that people are living longer, and thus taking more money out of the system. Never
mind the fact that you’d have to live until about 150 to get what you paid into it, once
you account for inflation–if the system even lasts that long. So, what I thought I’d do
is illustrate, not the current Social Security system, but a completely idealized pay-as-you-go
system, a best-case scenario. The first thing we’re going to do is actually
give people what they paid in. If you don’t, then you’re just taxing the young to pay the
old–and, by the way, the over-65 demographic is the richest one in America, so please let’s
not have any more platitudes about old people digging around in the trash looking for a
banana peel to eat. You get what you paid in, but no more. With 0% interest, we’re giving
the system its best possible chances for success. We’re also going to assume that there’s no
inflation. So you can literally, dollar-for-dollar, pay back exactly what was paid in. Again,
this gives our hypothetical system its best chance for success. We’ll take it on a year-by-year basis. Although
individually, you pay into Social Security your entire working life and collect it after
retirement, when looked as a whole it ends up being year after year. So we’re going to
simplify the system to where people pay in one year and get paid the next. And we’re
going to assume a constant population, so none of the excuses about the baby boom being
the reason for Social Security being in such bad shape will apply. We’re also going to
assume no recessions or other economic downturns, another excuse given. This is just the system
in its ideal state. And finally, we’ve got to consider the cost
of this system. Remember, the pay-as-you-go advocates seem to be operating under the assumption
that you can run the system at zero cost: just have the money coming in equal to the
money going out. Well, let’s have our system run by a charity: you have money coming in,
you have the inevitable administrative costs, and you have the money going out. Let’s look
at Doctors Without Borders. If you include the amount they spend on fundraising (which
you should, as our system is going to have to collect the money it takes in as well),
Doctors Without Borders spends about 13% in costs. In other words, if you donate a dollar
to Doctors Without Borders, 13 cents of it is lost to administrative overhead and the
cost of fundraising, with the other 87 cents actually going to help people. That’s a pretty
good rate, but let’s make ours even better: We’ll have a 90% cost efficiency, with 10%
being lost to administrative costs. In 2008, revenues from Social Security were
just over $800 billion, so let’s use that as our starting point. Now it’s the next year,
so the pay-as-you-go people would say that all we need to do is collect $800 billion
and give it to the beneficiaries. But remember: this is only possible if the system can be
run at zero cost, and it just can’t. With our very efficient 10% overhead, we now have
to collect $888 billion, so that when 10% of it, or $88 billion, is spent in costs,
we now have the $800 billion left over to pay our beneficiaries. But now it’s the next year, and our problem
is compounded further! Now, instead of having $800 billion in obligations, we now have $888
billion! So, with our 10% overhead, we now have to collect $988 billion! And the year
after that, it’ll be $1,097 billion! And by the year 2017, less than 10 years later, it’ll
be a whopping $2 TRILLION dollars! Still think it can continue forever? Under
this best-case scenario, the obligations rise to $10 trillion by 2032, $100 trillion by
2054, and by 2076, after only 68 years–about the same amount of time from birth to retirement–the
obligations under our ideal system will have grown to over ONE QUADRILLION DOLLARS! “The system can continue forever”? HOW? There are only three ways: One, cut benefits.
Two, raise the Social Security tax rate. And three: use money from other taxes to bail
out the system. There are NO OTHER OPTIONS. You need the money coming in to OUTPACE the
money paid out, not “maintain a rough balance.” And if you do that, it just becomes another
form of welfare–welfare for the richest demographic in America. That’s the ONLY way. Well, other than letting people fund their
own retirement, that is. You know, in the way that generates actual wealth? And actually
makes for a genuinely secure retirement? We can look after our own futures, thank you
very much, and provide enough charity to help those who can’t–if the government will stop
taking an absurd 16% of our paychecks–and who knows how much of the rest of our tax
money–on a failed Ponzi scheme. In the 2009 report of the Social Security
Trustees, they predicted that spending on Social Security will be greater than revenues
by 2016. This was called “misinformation” and “scare-mongering” by liberals, who said
that the Trustees just must have been wrong. Well, as it turns out, they WERE wrong–that’s
happening THIS year, in 2010! Is this really the system you want to depend on when you
grow old?

100 Comments

  • @Corporatism Exactly, and over-65 is the richest age demographic in America. The poor are being taxed to better the lives of the rich. THAT is the legacy of Social Security.

  • I'm very much opposed to SS, but couldn't it operate on an overhead as large as, or small than, the economic growth ie. the increase in collections of pay roll taxes?

    Not that it makes sense to me anyhow, you get better, or rather – ACTUAL, return in the marketplace.

  • @shanedk But that's because of the assumption that we pay now for the next year.

    If you look like it like investing in your children as slaves for you in the future, it could theoretically operate by your children paying much more than you did, could it not? And their children and so on for infinity? If you allow me to change that assumption, could it not continue to operate?

    Or should I try to get some sleep, haven't slept for 18 hours and still have 5 hours of work? ­čÖé

  • @Visfen We DO. What you get paid from Social Security is dependent on how much you've paid into it.

    In order for your children to PAY more, they'd have to EARN more. How is that sustainable?

  • I agree with your point, but your example is flawed. Why would overhead for one fixed bureaucracy write checks to a fixed population go up every year just because the numbers on the checks got bigger? Since you assume a fixed population, a fixed fee would better fit this example than a fixed percent, which is only necessary to accommodate a growing population. Because of this, I think this is example is too simplified to show the actual risks in SS. Consider more variables, like pop-growth.

  • @blurglide Because it's not a fixed bureaucracy, not a fixed population, and I DID use a fixed percent!

    This was made to debunk the SST's assertion that money in = money out.

  • Why would you assume that overhead would be a constant 10% of revenue? Taking all your assumptions into account (esp constant population), what does the 88 billion in the first year in your example (shouldn't it be 80?) pay for? Now let's say by some miracle the government manages to keep SS alive to 2032 (by taxing the bejesus out of us), what does the 10,029-800 = 9229 billion pay for? What contributes to the 10x overhead between 2011 and 2032?

  • @rader55555 "Why would you assume that´╗┐ overhead would be a constant 10% of revenue?"

    Because that's how it is in any other such venture, whether it's a charity, or a mutual fund, or whatever, the expenses are always a percentage of the overall values.

    Even in an ordinary business you have to worry about this: the larger the dollar amount of the invoice, the more you put into verifying it's a proper invoice and is paid on time.

  • @rader55555 All sorts of things increase, from the liability resulting from mistakes that are made, to the incentive for people to buck the system and evade the taxes as they have to pay more into it, to the inflationary effects it has…there are LOTS of factors involved.

  • @shanedk As a man of science, please provide evidence of these claims at the level that you claimed in the video. It makes sense to me that these might increase marginally, but why 10-fold. That's an insane increase. I'm sure we can get to the bottom of this, there must be some data or plots somewhere on the internet.

  • @shanedk 10.,028/800 = 11.39. The overhead costs in 2034 compared to 2008 increase by a factor of 11.39 (at least 10 times greater) than the initial overhead costs that existed in 2009. Why this 10x (actually 11.39) increase?

  • @shanedk Yes, I know you set it up that way. But why would overhead increase by 10times over that time? Why does managing the funds cost 10times in 2034 as it does in 2008?

  • @shanedk Ok I did, but you're going to have to walk me through it because I don't see it. You say "all sorts of things increase…" but in no place do you explain why managing the funds cost 10 times in 2034 as it does in 2008. Why is this?

  • OK I revive SSI and SSDI I have seizers and memory issues. if you took away ssi what would happens to me, and others like me? Before you take something like that away you have to fix this, and by the way I AM POOR and everyone i know about 8 others that revive ssi are also poor. most every one i have ever met on ssi are poor. just so you know. yes it is upsetting for most because they know that without that income they would be sentence to death.
    so its a touchy subject.

  • @valerytozer If you're poor then you'd fall under the means testing and be covered. And eventually you'd have an account in your own name and no politician could touch it!

  • @headlessmonkey4all No, the government CREATES monopolies and cartels, while the market is the only reliable means of preventing them. Go learn some basic economics.

  • @headlessmonkey4all 'people collecting their own retirerment is not effective. that why SS exist.'

    Tell that to the people in Ron Paul's district who are able to divert the social security tax to a private retirement fund. They're 2.5 – 4 times better off than those in social security. Your logic is flawed.

  • A mix of socialism and capitalism works better than either one in it's pure form. The government meeting the basic needs of the poor citizens, but just barely, combined with somewhat controlled capitalism works in Denmark, for instance. Fear of starving isn't there, nor is there lack of basic health care. For much more than that, one must work and pay taxes.

  • @ndrthrdr1 "A mix of socialism and capitalism works better than either one in it's pure form. "

    PROVE it. We know socialism fails, but can you do ANYTHING to show that more capitalism has EVER been a failure?

  • @skeptictom818 I heard that when Chile privatized their social security it didnt work, is this true? Can you provide a source that talks about this?

  • A Wall Street sales tax on deriviatives and hedge funds, .10% would pay for Social Security and medicare and medicade easily. And slow down the speculation.

  • @waterhead001 "I heard that when Chile privatized their social security it´╗┐ didnt work, is this true?"

    It's not at all true. I covered it in an episode of the Bogosity podcast.

  • @shanedk
    I'll bet if we lived in a purely capitalistic society where you were kidnapped and sold into slavery you'd be singing a different tune.
    Then again I'd suppose you would be happy somebody was fucking you over as long as they could make an extra buck.

  • @ViciousRanger "I'll bet if we lived in a purely capitalistic society where you were kidnapped and sold into slavery"

    If you can be kidnapped and sold into slavery you're NOT in a capitalistic society.

  • @shanedk
    Would you please explain why you don't believe that selling people into slavery for a profit is capitalistic?

  • @ViciousRanger
    Under socialism, No one needs to kidnap you, you are already in a prison.
    Capitalism is a system under which your property rights are respected and any correction/defense in face of violation of them would be considered justified. Thus if someone is captured against his will.. that would be a crime against that person as his property right in himself are being violated. If the violation of his rights are accepted by society, then it is NOT capitalist by definition.

  • @utubehayter
    *correction*
    The only exception is if the person being captured is a convicted criminal and has been sentenced to be captured for a particular crime and for a particular type of confinement and penal labor.

  • @waterhead001
    You will slow down the speculation, but do you know what that will slow down? People like to think that speculation is just meaningless greedy operation, but it has a totally valid and benign market activity. There are consequences much worse than what you can even imagine.
    There are valid things to be attacked on wallstreets, but if you just want to attack them because politicians ran out of your money to deliver on their handout promises.. then you are just a thief.

  • @headlessmonkey4all
    "however people collecting their own retirerment is not effective."
    That is a claim refuted by the entire rest of the world.

    "that why SS exist."
    That is why you think it exists.

    "between inflation and just bad luck, SS is a need"
    Funny how the institution that cause the inflation and increase the bad luck for people is going to provide you with other people's money, robbed at gun point. What a noble and benign system you have!

  • @waterhead001 Slow down the speculation = slow down the formation and expansion of businesses that actually create jobs in this country.

  • @ndrthrdr1
    Government is an abstraction. People exist, not government. So you are saying an abstraction will put food on my table. Please explain how that works

  • @shanedk
    Actually the link is not that direct (which only makes it harder to see). Restricted speculation leads to sharper rises and falls as speculation is a market regulatory function. This will cause panic and increase demand more govt regulation to fix the market, thus causing slowdown in capital build up, economic growth.
    Because it is harder to see, longer in the causality change, hardly any anti-market person will be untangle it and actually identify the real culprit..i.e. them.

  • @utubehayter But even besides all that, without speculators, how are startups going to get seed money, how are other businesses going to get money to expand and grow? That money comes from speculators.

  • @interstate317 OK, in a situation where you have government pushing down interest rates and bailing out losers, I agree, but the solution is to get rid of those government programs, not to restrict speculation.

  • @interstate317 Go to gooDOTgl and paste in the link, then copy the shortened link here and replace the "." with "DOT".

  • @Finnbar01 That's my evaluation as well. It's like they think they can just have government speak and bypass the law of supply and demand.

  • What if government invest and earn profits/interests and the follow up year there will be more money then collected !! Why did not you add that in next year ??
    Is it possible if government is investing productively!!

  • But i don┬┤t think money is gone so easily (as you explained there was billion and now its 0).
    Do you know Europeans mainly Scandinavia is working well with social system unless it should pay for some other bankrupt EU-country (like: Greece) ???

  • Well, now, they're pretty much ALL going bankrupt except for Germany–and Germany might by extension since the euro will get devalued in the process.

  • Yeah but its due to other bankrupt EU-countries not their internal social system like: health care, social security, etc…??

  • What's saved Germany all this time is a sound monetary policy they've had since the '50s. But now with the euro, other EU countries can "export" their inflation to Germany, effectively stealing that wealth.

  • Because govt forced "welfare" turns dependence into parasitism.

    And no system of facilitated parasitism can persist without killing off the host. It is a mathematical certainty that it will collapse as parasites will overwhelm the host that has to produce enough for themselves as well as those parasitically living off of them. Natives of the so-called "welfare systems" are not reproducing even upto replacement levels.. there is a very good reason for that.

  • I'd go even further: I'd say it creates dependence when without it there would be a desire to struggle and improve one's station. Look at unemployment: no matter how far they push out the time limit of the benefits, most people get a job in the last few weeks before the benefits expire.

  • What if citizens knew these all things you said beforehand and work for their living till they are old and are willing to pay tax what┬┤s needed??

  • Then you would not need to collect those payments by means of tax (backed up by jail time and violence). This is the internal contradiction of welfare state.. it cannot exist without violence, it cannot exist without pitching one's burden on another by force. It sows the seeds of destruction for the entire society.
    Heck, if citizens are kind hearted enough to do this on their own, the worst possible thing you can do is setup a "welfare" state around them.

  • "Why do you think effective & uncorrupt welfare´╗┐ system fails???"

    I've never actually seen such a mythical creature.

  • Then they'd opt to invest in the annuity on their own and you wouldn't need to tax people to force them to pay for it.

  • Do you know any websites where I can learn Austrian economics? Like what's GDP, stock markets, how do pyramid and Ponzi schemes work, gold standard, competing currencies, fiat monetary systems, etc.

    I'm kind of economically illiterate!

  • Shane …. why Liberal think raise the payroll could solve the problem? Liberal think that the rich aren't enough contributing to payroll taxes. And why liberal think that gigantic number on unfunded liability are made up figures by right wing?

  • It's just denial. They have invested emotionally so much in their party, their politicians, and their policies that it's like a creationist being confronted with biology.

  • I think that social security spending should be limited on productive term such as road, bridge, nuclear power plant. So the profit come from investment may cover retiree expense, without taking young people income.
    But the problem is government love to spend it on non productive term, such as war, student loan, etc. Because they want to get re-elected. Plus auditing war expenditure is much harder to audit compare to auditing the bridge.

  • Don't hard on them! On contrary, i sad for them. You should make video Obamacare and medicare. I think universal healthcare it's immoral, because government rob money from people who have healthy habit, and gave it to people with bad diet.

  • Why socialist liberal love deny the law of scarcity and unintended consequence? For example: they don't like, when i said Obamacare raise the premium cost. They think that, because of greedy insurance.
    Or blame the health care cost on greedy pharma company. When obesity rate below 15%, the cost of health are much cheaper. How pharma company become suddenly greedy when obesity rate go up?

  • Liberal think that health industry behave like angel when American obesity rate below 15%. Yeees! health industry behave like angel when American obesity rate below 15%, because at that time there is no bankruptcy related to medical bill. Does Krugman and Moore aware of this fact?

  • Shane, I've been recently reading in my Corporate Social Respo. class that patent laws and intellectual property, as it relates to Pharma' companies, are monopolizing pharma. The book also states that Pharma' companies sell their products for a cheap price here, but they charge three times the price in developing nations–the book claims that they're doing this to exploit poor ppl in poor countries. I have no response.

  • I agree, but what they say is that governments in sub-sahara Africa, and in other places, see the prices of pharmaceuticals increase because companies exploit the fact that there are no regulations on wages, environment,business ethics, etc.

  • With population etc. held constant, it makes more sense to keep payouts constant, e.g. $800B. With 10% overhead, people would pay $889B to receive $800B the next year. On average a pillowcase is a better savings account, but it's not the exponential growth you get by assuming everyone receives what they paid in. It's "sustainable theft".

    BTW, the historical budget tables seem to show admin expenses in '08 were 0.9% of tax receipts and estimated 1.1% for '12. So about 1% rather than 10%.

  • Well because, as the book claims, they can exploit people in third world countries much easier due to a lack of oversight, regulation, etc. I claims that AIDS medicine costs a lot more over there, and that companies need to be pushed by NGOs and international govs to cooperate, and lower prices. It gives the Malaria drug Novaris as an example:it's much cheaper here, but so expensive in developing nations, ppl can't afford it.

    I keep hitting these walls where I have no answer to these claims.

  • "Well because, as the book claims, they can exploit people in third world countries much easier due to a lack of oversight, regulation,´╗┐ etc."

    That makes no economic sense. Prices are set by supply and demand, and without any regulations it'd be a MORE competitive environment and that would DROP the price, as more and more companies compete for the business of the poor and try and get it so they can afford as much of their product as possible.

  • "I keep hitting these walls where I have no answer to these claims."

    The answer is, the claims are garbage from start to finish. The ONLY reason for prices being higher there is increased difficulty in bringing the product to market.

  • This is the very same bogosity we just saw with regards to Sandy, with political hacks whining about "price gouging" when it's really the price mechanism making it profitable for people to bring in extra supplies during a time when it is VERY difficult to do so.

  • That makes sense, but these people are using this argument to show that they're discrimination once they sell their products for small prices here, while hiking them up in third wolrd countries. Apparently AIDS victims are denied access to them since they're so expensive. This warrants, as they say, some type of gov. or international intervention.

  • Lol, good point. Since it's a class dealing with corporate social issues, it gets into many legal details that I could not comprehend or refute–not the least of which is patent laws.

  • But that would seem to go against your earlier statement of "a lack of oversight, regulation,´╗┐ etc." Those "legal details" mean that government is getting in the way of the free market.

  • It absolutely does. These authors don't seem to get it,though. I'm no expert, but when they say that the WTO is promoting a liberalization of trade, and that harms people, I can't help but think that a centralized authority–no matter how well intentioned–is not really promoting free trade, even when it lowers barriers and tariffs.

  • "and more companies compete for the business´╗┐ of the poor"

    That makes sense, as usual. But these people in my class, and in these textbooks, keep telling me the opposite, and although the precepts of the free market are well established, I cannot refute the claim by giving an explanation as to WHY prices are increasing in thrid world countries. I dunno anything about the local governments in Sub-Saharan Africa.

  • "I dunno anything about the local governments in Sub-Saharan Africa."

    They're pretty much all completely horrible and tyrannical. For information on specific countries, Google "Index of Economic Freedom."

  • Even the UN's own studies show that free markets are better for the poor. Of course, they bury those studies almost as soon as they're done, but if you dig around you can find them.

  • Yeah, I dunno how I forgot about the Index of economic freedom Of course, last time I whipped it out in an argument, I was told it's a bogus metric, and that's done by a right wing think tank. What can one say…

  • So don't tell them where it comes from. Look up the individual stats for each country and post those. The stats are still valid.

    But yeah, you're dealing with people who will find any excuse to ignore the data.

  • Not only data, but any rational argument that demonstrates the futility of their outdated ideologies. It boggles the mind, honestly. When I see something that refutes my beliefs, whether I like it or not, I tend to give it serious thought. These peopl are absolutely deluded–a fact that has become clear on November 6th.

  • Maybe they keep denying it because they probably don't know how a Ponzi pyramid works. Why don't you do a quick video explaining it for them?

  • LOL this is sooooo bad. Let me correct your math for you. 10% of $800 billion is $80 billion, not $88 billion, so your sheet should look like this:

    2008: $800 billion
    2009: $880 billion
    2010: $968 billion (you're already $20 billion off the mark)
    2011: $1,064.8 billion
    2017: $1886.37 billion

    So your math flub puts you off by $200 billion by 2017 alone. And this is predicated on the erroneous belief that you need an extra $80 billion a year to run the exact same spreadsheets that you did last year. If that was true, no bank could stay in business, and their client base goes through the same population dynamics that SS does.

    Social Security overhead has gone down, BTW. Because of the massive amounts of money in the trust fund, the admin costs are dwarfed to less than 1 percent.

    https://www.ssa.gov/oact/STATS/admin.html

  • Why would the obligations increase over time? I get that some of the money will go to administrative costs but why would the costs keep going up? Who would be getting all of this extra money?

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