NBC Republican Debate @ the Reagan Dome

[Napoleon the Clown]

The problem with Ron Paul as POTUS is that he has very, um, interesting views on the Constitution. Look at his position on leaving civil liberties up to individual states. He basically thinks the 14th Amendment can go blow itself, if there's any logical consistency in his belief structure. He would neither bet a net gain nor a net harm to the GLBT community in the US because he'd be even more impotent than Obama is, especially because the stuff he'd actually do would only reduce federal discrimination and open the flood-gates fully on state level discrimination.

[Darth Wong]

Since the only thing wrong with a Ponzi scheme is the fact that it fraudulently claims to be an investment, yes. What's the problem?

And another problem with Ponzi schemes is that they redistribute funds based on a criteria that people find unfair--i.e., based on who gets into the system first and withdraws their money first. This is the one that is true of Social Security.

That is not why they are illegal. They are illegal because they are fraudulent.

The following is the crux of our disagreement:

Except that the trust fund is an investment scheme that was meant to self-fund Social Security payments to Baby Boomers and which will unambiguously fail to do so.

If a government had a surplus, and used its investment surplus to partially fund its obligations, would that make the entire government into an investment fund?

[Napoleon the Clown]

I never said that he changed his positions, he's consistent in that manner. It's a matter if his beliefs are compatible when examined logically. I argue that they are not. Seriously, Ron Paul is a horrid candidate, if you like civil liberties. Oh, right, and that pesky "No religious tests" thing to apply to government. That's something else the nut believes should be left at a state level.

His beliefs break down as such: The Federal government should be utterly impotent (Okay, slight exaggeration.) The state-level governments should be allowed to do whatever the hell they want because TENTH AMENDMENT! Nevermind the shit that got justified by that historically.

I could go on about what make Ron Paul unfit for office in my view, but if it keeps up I'd be inclined to start a new thread specifically about it rather than risk derailing this.

[Darth Wong]

This is an important distinction. Sometimes, when we say "consistency", we mean "does not change his opinions over time". Other times, when we say "consistency", we mean "his opinions on various subjects are logically self-consistent, ie- they do not contradict one another".

The English language is an imprecise weapon.

[aieeegrunt]

I had to switch from German to English when I was 5 and thirty years later I am still annoyed by this language.

[Gandalf]

We watched this debate yesterday, and one of the most interesting things was the expression on Romney's face whenever anyone else talked. He looked at Bachmann with what looked like amusement. While everyone else would face forward when others were speaking, Romney would turn.

Overall, it was fascinating to watch.

[Lord Zentei]

Then the more precise statement is that his positions show a steady conformity, but are arguably not consequent.

On the latter point (and not saying that I agree with him), my understanding is that his philosophy places his interpretation of what the constitution means above what people think it ought to say; moreover, he prefers to err against federal power than in its favour. To that end, the states rights people point out that the 10th Amendment was never formally abolished, and to give the federal government what they see as a blanket ability to override state power through the 14th Amendment is regarded with great suspicion by them.

[Celador]

It's reasonable to criticize Social Security as something that's worked well in the past because it is similar to a Ponzi scheme in some ways. Recipients of Social Security are used to receiving more than they've payed in (this is the Ponzi-like part), but as long as the workforce is not rapidly growing this won't continue to be the case, making Social Security little more than a forced savings program - one with reliable, though unimpressive, returns.

Perry isn't saying that Social Security is like a Ponzi scheme, though, he's saying that it is one. This assertion is neither true nor responsible.

[Vehrec]

People who invest in the stock market recieve more money than they put into it. The stock market is obviously a ponzi scheme. So are treasury bonds, savings accounts and any other method of savings that accuse interest.

Actually, my lolbertarian uncle really does think that the stock market is a ponzi scheme. So maybe from some points of view on the far right, this all makes sense.

[Celador]

People who invest in the stock market recieve more money than they put into it. The stock market is obviously a ponzi scheme. So are treasury bonds, savings accounts and any other method of savings that accuse interest.

Actually, my lolbertarian uncle really does think that the stock market is a ponzi scheme. So maybe from some points of view on the far right, this all makes sense.

In the words of Nobel Prize-winning economist Paul Samuelson, "A growing nation is the greatest Ponzi scheme ever devised."

The problem isn't really with the comparison, but with assumption that because a Ponzi scheme is bad, things that are similar to Ponzi schemes (in any way) are also bad.

[Darth Wong]

I had to switch from German to English when I was 5 and thirty years later I am still annoyed by this language.

Sadly, it's the only one I know.

PS. I am not counting the tiny smatterings of French and Chinese that I've picked up; they are nowhere near sufficient to actually communicate.

[Master of Ossus]

If a government had a surplus, and used its investment surplus to partially fund its obligations, would that make the entire government into an investment fund?

I might have to know more about the size of the surplus and what they were going to do with it, but I don't think that your scenario is completely analogous to the Social Security Trust. To be clear, the Social Security Trust exists to fund Social Security obligations in the future. Those obligations wouldn't exist in their current state if not for the Trust, so it really is a "pay in now, get paid out later" concept, with the future payments taking on some allegedly determined level. In addition, they've actively loaned out these funds, albeit to the government, in an effort to fund its current operations and also to purchase bonds which will be used to pay future obligations. All of these things make it little different than a pension plan or a retirement fund, albeit one that makes virtually no money and perpetually relies upon payments that they expect will be forthcoming in the future.

[The Kernel]

I might have to know more about the size of the surplus and what they were going to do with it, but I don't think that your scenario is completely analogous to the Social Security Trust. To be clear, the Social Security Trust exists to fund Social Security obligations in the future. Those obligations wouldn't exist in their current state if not for the Trust, so it really is a "pay in now, get paid out later" concept, with the future payments taking on some allegedly determined level.

You've just described virtually every pension and insurance plan in existence, are those illegal or immoral too?

In addition, they've actively loaned out these funds

No they haven't. That's a total misrepresentation of the facts. By that logic my entire 401k is "loaned out" to a variety of corporations since I own their stock.

, albeit to the government, in an effort to fund its current operations and also to purchase bonds which will be used to pay future obligations.

You don't seem to appreciate the fact that US Treasury Bonds are actually a very safe investment. The US government is not going to default on those debt obligations.

All of these things make it little different than a pension plan or a retirement fund, albeit one that makes virtually no money and perpetually relies upon payments that they expect will be forthcoming in the future.

Pretty safe assumption considering three things:

1) There is $2.6 trillion in the trust fund which doesn't get even get used except when the payroll tax revenues fail to meet the expenses for the year. That has only happened recently because of the payroll tax holiday.

2) The US government is fully capable of adjusting the payroll tax to make sure that Social Security is always at least revenue neutral. It's not like the expenses are hard to calculate (unlike Medicare).

3) That $2.6 trillion trust fund is currently invested in very low risk/return investments (read: US Treasury Bonds) and only returning an average of ~2.6%. They could easily double that return with a little diversification.

Sorry but Social Security is in fine shape, it only requires minor tweaks to be solvent indefinitely. The fact that the government is abusing it to rack up debt is unfortunate, but Social Security isn't impacted by it unless the US Government defaults on its debt obligations (a nearly impossible scenario).

[The Kernel]

I think this giant brain bug of the Social Security trust fund seems to come from the idea that they are an extension of the government and not a self-funded entity in of themselves which is a pretty absurd way of thinking about it.

If I had $2+ trillion in US Treasury Bonds I'd be the richest man in the world. The fact that a part of the US government owns them doesn't make them worthless, especially since you can't default on this kind of debt without throwing your entire bond market into upheaval. It's Congress' problem to figure out how to deal with public debt, Social Security isn't responsible for one cent of it anymore than I would be if I bought US Treasury Bonds.

[Master of Ossus]

You've just described virtually every pension and insurance plan in existence, are those illegal or immoral too?

No. Unlike Social Security, virtually all modern pension plans are defined contribution plans, which are fully-funded.

No they haven't. That's a total misrepresentation of the facts. By that logic my entire 401k is "loaned out" to a variety of corporations since I own their stock.

And it is. The question is only whether or not Social Security can be considered an investment. I argue that it can and should be.

You don't seem to appreciate the fact that US Treasury Bonds are actually a very safe investment. The US government is not going to default on those debt obligations.

It doesn't matter how fucking safe the investment is. The question is only whether the Trust Fund should be considered to be an investment.

Pretty safe assumption considering three things:

1) There is $2.6 trillion in the trust fund which doesn't get even get used except when the payroll tax revenues fail to meet the expenses for the year. That has only happened recently because of the payroll tax holiday.

2) The US government is fully capable of adjusting the payroll tax to make sure that Social Security is always at least revenue neutral. It's not like the expenses are hard to calculate (unlike Medicare).

3) That $2.6 trillion trust fund is currently invested in very low risk/return investments (read: US Treasury Bonds) and only returning an average of ~2.6%. They could easily double that return with a little diversification.

Sorry but Social Security is in fine shape, it only requires minor tweaks to be solvent indefinitely. The fact that the government is abusing it to rack up debt is unfortunate, but Social Security isn't impacted by it unless the US Government defaults on its debt obligations (a nearly impossible scenario).

Or when the Trust Fund runs out of money.

I think you've completely missed the point of the argument. Please go back and read the thread. The issue is whether or not Social Security can be described as a Ponzi scheme or not, and that seems to turn on whether or not it can be considered an "investment" or whether it should be viewed as welfare.

I think this giant brain bug of the Social Security trust fund seems to come from the idea that they are an extension of the government and not a self-funded entity in of themselves which is a pretty absurd way of thinking about it.

Social Security is not fully-funded. The Trust Fund will be exhausted in the future, and current levels of payroll taxes will come nowhere close to meeting Social Security's currently-promised levels of benefits.

If I had $2+ trillion in US Treasury Bonds I'd be the richest man in the world. The fact that a part of the US government owns them doesn't make them worthless, especially since you can't default on this kind of debt without throwing your entire bond market into upheaval. It's Congress' problem to figure out how to deal with public debt, Social Security isn't responsible for one cent of it anymore than I would be if I bought US Treasury Bonds.

So would you consider the Trust Fund to be an investment, then, or a normal aspect of government obligations? I'm not arguing that the government should default on its loan obligations, but rather discussing whether or not we should consider Social Security an investment.

[Patrick Degan]

All of that is, quite simply, a lie. Social Security has never promised a greater return to beneficiaries than their contributions into the system over the course of a working lifetime, and it's trust fund is renewed by payroll taxes.

It's payouts are a matter of obligation by law —which means Congress doesn't have the option to simply renege on its agreement with the American people and "run off with the money" anymore than they have an option to repudiate the national debt.

These two ideas are directly contradictory. You cannot hold them at the same time.

Because... you declare that they are? How does the fact that the law mandates payment as an obligation contradict the statement that Social Security does not promise an ever-escalating monthly benefit level to retirees? Or that the Social Security trust fund is renewed by tax contributions? That formulation doesn't even make sense.

If Social Security has not promised a greater return to beneficiaries than their contributions into the system, then the current levels of Social Security benefits are far too high and so we must be able to reduce them or (alternatively) increase the tax rate significantly in order to cover these to a level that is far and above higher than the retiree generation (that you claimed was "never promised a greater return... than their contributions into the system over the course of a working lifetime"). We could also mix-and-match the two ideas that you find so contrary to the entire thing. But we cannot do neither of them.

Social Security benefits are calculated upon the basis of the worker's taxable income since age 21 and the age at which the worker retires. This is part of the law which defines the programme. As of current dating, the average monthly benefit for retirees is around $1150. To meet your Ponzi scheme definition, Social Security would have to be promising benefit levels far exceeding the $1150 average and advertising a figure that climbs yearly by a greater percentage than either the interest level or the cost of living.

So all you have to do to sustain your argument is to demonstrate any policy statement or any alleged promise by the Social Security Administration, congressman, president, or other entity of the Federal Government, by which any such fraudulent promise was made. Otherwise, all you are doing is passing on your opinion that Social Security is a Ponzi scheme.

SSI is no investment scheme, has never been advertised or structured as an investment scheme, and has never promised ever increasing profit to contributors, i.e. taxpayers.

The trust fund has been "advertised" as self-funding Social Security, remember? That's what the entire issue of solvency has been about.

The trust fund has never been advertised as "self-funding" Social Security. Where you get that one from, I've no idea —especially as every American worker pays payroll and withholding taxes, which are for the stated purpose of financing Social Security. The issue of solvency for the Social Security trust fund is no different than for the issue of solvency for any financial undertaking: the necessity to sustain assets over the long term and to adjust the programme structure to adapt to changing circumstances, which is a problem that is recurring in any enterprise.

[Master of Ossus]

Social Security benefits are calculated upon the basis of the worker's taxable income since age 21 and the age at which the worker retires. This is part of the law which defines the programme. As of current dating, the average monthly benefit for retirees is around $1150. To meet your Ponzi scheme definition, Social Security would have to be promising benefit levels far exceeding the $1150 average and advertising a figure that climbs yearly by a greater percentage than either the interest level or the cost of living.

Wrong, because $1150 is grossly in excess of the amount that the average recipient put into Social Security over the years, at least over the course of their receipt of Social Security checks. The benefits were not properly calculated if the goal is to ensure that people get out only what they put in, moron. That's probably the biggest reason why the trust fund is inadequate to cover the shortfall. (There are some other reasons, for instance that Social Security's metric for inflation has been systematically too high, but that is a separate discussion).

So all you have to do to sustain your argument is to demonstrate any policy statement or any alleged promise by the Social Security Administration, congressman, president, or other entity of the Federal Government, by which any such fraudulent promise was made. Otherwise, all you are doing is passing on your opinion that Social Security is a Ponzi scheme.

Demonstrate that the $1150 in promised monthly benefits is the equivalent of what people have been putting into the system. Note that, according to Darth Wong, this is explicitly not true and we in fact shouldn't care about this fact because Social Security is actually a welfare system and should be entitled to give out however the fuck much old people in the US vote to give themselves.

It's also not true according to the Congressional Budget Office, which notes:

While the combined OASDI program continues to fail the long-range test of close actuarial balance, it does satisfy the conditions for short-range financial adequacy

And here.

Over the infinite horizon, the shortfall (unfunded obligation) amounts to $16.1 trillion in present value, 3.3 percent of future taxable payroll, or 1.2 percent of future GDP. These calculations of the shortfall indicate that much larger changes may be required to achieve solvency beyond the 75-year period as compared to changes needed to balance 75-year period summary measures. The measured unfunded obligation over the infinite horizon is increased from $15.1 trillion in last year’s report. If the assumptions, methods, starting values, and the law had all remained unchanged, the unfunded obligation over the infinite horizon would have risen to $15.9 trillion due to the change in the valuation date. Expressed as a percentage of taxable payroll, the measured unfunded obligation over the infinite horizon decreased from 3.4 percent in last year’s report to 3.3 percent for this year’s report. As a percentage of GDP, the measured unfunded obligation over the infinite horizon is the same as was estimated for last year’s report, at 1.2 percent.

So it's over $16 trillion dollars short. I've seen quotes suggesting that, at such rates, it will only be able to pay out 77% or so of its alleged "obligations." Gee... I wonder what happens with private trust funds that pay only 77% of their promised benefits. Any ideas?

It is simply false to assert that Social Security recipients are getting only what they put into the program: they are receiving persistently higher benefits than what they put in, even given investment growth of the Trust on unspent funds, which will eventually run out and leave subsequent generations out of luck (just like a Ponzi scheme).

The claim that Social Security is a Ponzi scheme is also fairly widespread among academic circles, and (at least until recently) among liberals. As notoriously conservative economist Paul Krugman, "Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in)."

Nor is he the first. Paul Samuelson described it as such in the 1960's.

Contrary to your assertion, it is not a fringe position to assert that Social Security is a Ponzi scheme: it is a relevant, meaningful, and descriptive analogy for the program. To claim otherwise is to ignore reality.

Edit: In fact, even Chris Matthews and his commentators seem to agree that it is a Ponzi scheme (at least "in the sense that, the money that's paid out everyday is coming from people who paid in that day").

Your earlier claims that the Tea Party is responsible for this characterization of Social Security is absolutely hilarious. I realize that this is the modern version of the liberal meme where every intellectual concept you don't like can be pinned on Bush (now with 100% more Tea Party), but that makes it no less pathetic. Did Al Gore invent the Tea Party while he was dreaming up the Internet?

The trust fund has never been advertised as "self-funding" Social Security. Where you get that one from, I've no idea —especially as every American worker pays payroll and withholding taxes, which are for the stated purpose of financing Social Security. The issue of solvency for the Social Security trust fund is no different than for the issue of solvency for any financial undertaking: the necessity to sustain assets over the long term and to adjust the programme structure to adapt to changing circumstances, which is a problem that is recurring in any enterprise.

What do you think that it means to be promising to pay out no more than people pay into it over their lives, if not that the trust fund is self-funded? As for your bullshit about how the trust fund has not been advertised as an integral component to self-financing SS, the entire point of the Trust Fund was to put enough away for the Baby Boomers to retire upon without breaking the entire Social Security structure. Let's take a look at Senator William Armstrong, supplementing the Greenspan Commission's findings, shall we?

Reliance on Payroll Tax to Finance Social Security Program

The Social Security system has been based on the philosophy that benefits are financed by payroll taxes, paid equally by employers and employees. The bipartisan package contains a refundable income tax credit for 1984 that would offset the payroll-tax increase. This is a direct violation of this fundamental principle; it upsets the parity between employer and employee contributions and infuses general revenues into the Social Security program. It should not be repeated under any circumstances. In my view, it is essential to maintain the self-financed character of the Social Security program -- both to maintain discipline in managing the system and to protect its status as an earned-right, rather than a welfare program. The self-financed character of the system is essential to prevent moving to a system that conditions benefits based on financial need. Furthermore, to inject general revenues at a time when we have the highest budget deficits in American history, it is very unfortunate and should not be repeated in any form. Americans value the Social Security system as a contributory program, and this is essential to the long-term health of the system.

And for a more modern take, what about Jacob Lew, of the Obama Administration?

Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries.

When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due. We have just as much obligation to pay back those bonds with interest as we do to any other bondholders. The trust fund is the backbone of an important compact: that a lifetime of work will ensure dignity in retirement.

Darth Wong's position was based on an honest dispute as to whether Social Security can possibly be a Ponzi scheme because, in his view, it cannot be seen as investment at all in spite of the massive trust fund which is associated with it. Your position is based on either a farcical or a willful ignorance of the condition of the Social Security Trust and its alleged solvency. Yours is nothing more than a short-run pipe-dream, and your willingness to ignore the obvious and inescapable long-run implications of the situation is dangerous to the country and the elderly who rely upon Social Security in good, albeit mistaken, faith.