RE: Re: Re: [Pen-l] PK on the Madoff Nation

["David B. Shemano" <dshemano@xxxxxxxxxx>]

Raghu writes:

>> In other words, Soc Sec is a Ponzi because many people have a mistaken
>> idea of what it is?? I am not sure I follow your reasoning here.

A mistaken impression of the scheme is an element, not the element of a Ponzi scheme.  Ponzi schemes provide better returns than state lotteries, but state lotteries are not Ponzi schemes, and one of the reasons is that lotteries do not pretend to be anything other than what they are.

>>And in what way is the "nominal business activity" of Soc Sec a sham? Are
>> people not getting their benefit checks?

People receive checks in Ponzi schemes - if they didn't, the scheme won't last very long.  As the old joke goes, when you jump off the top floor of a 100 story building, things appear fine when you pass the 50th floor.

>> > Element (3) is arguably met, because the scheme can only work to the extent that the
>> government can collect enough money from new contributors into the system and that
>> will end soon enough based upon existing levels of taxes and benefits.  The only way
>> to argue that element (3) is not met is for the government to admit that social security is
>> not an independent fund and payments are made from general tax revenues (but there
>> is no legal requirement), but then the program loses all of its aura.
>> 
>> Why does the program "lose all of its aura" if it is based on tax
>> revenue? And what exactly do you mean by "no legal requirement".
>> Unless the Ayn Rand faction of the Republican party succeeds in its
>> program of reducing Soc Sec, I don't see why the benefits will stop
>> being paid.

Of course the benefits will stop being paid.  "Entitlements" make up an increasing larger share of government budgets.  Eventually that trend will stop.  We might all be dead by that point, but the trend will eventually stop.  Some governments will default.  Others will inflate away the obligations.  Others will switch over to 401(k) type plans.  Maybe we can reach a point where we all so wealthy that one taxpayer can support one or more beneficiaries, and I really hope that happens, but I am way to skeptical to think the odds are good.  I live in California, where the voters of a bankrupt state continually vote for large bond measures, apparently upon the assumption that they can get immediate benefits while the taxes are pushed far into the future, by which time they will be dead or have moved to Nevada or Arizona.  I am not optimistic about our ability to manage social security and other entitlements.

David Shemano

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