Guest Post: When Soda Was A Nickel And Social Security Wasn’t Much More

Tyler Durden's picture

Submitted by Vedran Vuk of Casey Research

Every generation scolds the next one down the line and blames society’s ills on the guy up at bat. Considering past policy decisions, this common perspective doesn’t make much sense. Just look at the Great Depression generation, both known for its great character as well as the worst policies of the century. Clearly, older generations did not always make the best decisions.
One of those bad decisions, Social Security, still haunts America today like the grim reaper waiting to take his harvest. It’s strange to think the same men who courageously stormed the beaches of Normandy didn’t have the political courage to dismantle this ticking time bomb. If it wasn’t for WWII veterans, many believe that this article would be written in German. That might be true. But due to an exploding national debt and that generation’s failure with Social Security, we’ll be speaking Chinese sooner than German.
The lack of political will isn’t surprising since most past retirees were net gainers from Social Security while new retirees are net losers. Older folks love bemoaning runaway spending, welfare queens, and handouts. But often they don’t consider their own gains from the welfare state.

As Social Security taxes increased over time, so did the benefits. Essentially, previous generations paid into the system when taxes were low and retired when the benefits were high. A retiree’s maximum tax loss from Social Security in 1940 was $923 in today’s dollars. Compare this to the current maximum of $13,243.

To find the dividing line between net gainers and losers, we created a projection assuming an individual with a salary equaling the top taxable Social Security limit for 45 years (to get an idea of this amount, consider the limit was $3,000 dollars in 1940 and $106,800 in 2010 – both nice salaries). Our test dummy paid the maximum Social Security taxes every year.
On the other hand, upon retirement, he would receive maximum benefits. According to the Social Security Administration, maximum taxation is a prerequisite to maximum payouts. Next, we added Social Security benefits received over 13 years (derived from the average U.S. life expectancy of about 78). Finally, we calculated the difference between taxes paid over 45 years and the payouts received for 13. The results were shocking.

Before 2007, our projected retirees were net gainers from Social Security. 2007 retirees were the first net losers at -$411. By 2011, retirees will be -$40,403 in the red.

In the ‘80s, a Greatest Generation survivor retiring at 66 in 1985 received a net gain over his expected lifespan of $113,350 in 2010 dollars. Just a decade down the road, a 1995 retiree still profited by $67,982.

While welfare is often equated with public housing residents, perhaps nursing home residents should be considered too. These Social Security payments outweigh many welfare handouts. For example, California’s maximum TANF (welfare) payments for a family of three were $9,373 a year in 2005, inflation-adjusted for today. It takes over 12 years of welfare to equal the 1985 retirement net gain. (To be fair, if housing subsidies, food stamps, and other benefits were included, the number of years would be lower.)

So, are pre-2007 retired generations complete bums? Well, not exactly. It depends on how the money would have been spent otherwise. Suppose that instead of paying Social Security, the same amounts had been placed into an account earning five percent a year.

After 45 years starting in 1940 and ending in 1984, this account would have been worth over $297,000 in 2010 dollars. This is $44,000 more than 13 years of Social Security benefits starting in 1985.

Hence, older retirees are bums on a case-by-case basis. An investment-savvy penny-pincher would have lost from Social Security. Without the program, he could have invested privately. But spendthrift retirees benefitted enormously. The responsible saver is punished and the careless spender rewarded – the same old story of welfare retold for an older generation.

[And this note as an afterthought:

How Much Do You Really Pay for Social Security?

The government has pulled a fast one on most people. You pay half the Social Security tax and your employer pays the second half, right? No, wrong. You actually pay both.

Let’s go through this example to understand the point. Let’s say that a person earns $100,000 a year and pays $6,000 in Social Security taxes and the employer pays $6,000. In the eyes of the employer, the person’s services are worth $106,000 ($100,000 salary + $6,000 in Social Security taxes), that’s how much he costs the employer.

Now, imagine what would happen if Social Security taxes disappeared overnight. For a little while, the employer would profit by paying $100,000 for an employee worth $106,000. However, in a free market, prices move toward levels equaling the underlining value. Just like good underpriced stocks will eventually move up, so does the price for good undervalued employees – although, both may not be immediately appreciated.

Eventually, the person’s wages would be bid up in the market from $100,000 to $106,000. Because of this, the employer’s half is actually your half too. Without Social Security, your wages would be close to your value to the employer, in this case, $106,000. So, in reality, the person pays $6,000 in taxes and makes $6,000 less than he would in a completely free market, meaning that the real loss is $12,000 per year.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Comrade de Chaos's picture

check this out:


Tuesday, April 6th, 2010, 12:53 pm

Source: Financial Times

BlackRock, a leading US bond investor, says banks will have to take their share of losses on distressed mortgages before it resumes large-scale purchases of new “private label” mortgage bonds, which are sold without government backing."


now repeat after me, we do not have the socialized RE markets & our Gov does not create future moral hazards by its actions!!!

erik's picture

why this is not gigantic news is beyond me.  if Blackrock says they won't buy until banks take some losses, then mortgage rates will have to climb, or banks will have to take some losses.  either way, that is bearish.

Comrade de Chaos's picture

PIMCO has been reducing it's MBB exposure for a while now. The rest will (must) follow as usual, and one of those summer nights the chair of .. will be getting number of calls. (so much for political independence.... )

erik's picture

Yes, Pimco was selling because the government would soon be out of the MBS buying game.  Well now the government is out.  Why won't Pimco do the same thing Blackrock is doing from here forward and refuse to buy private-label mortgages without govt backing?

Either way, mortgage rates are going up, and housing is going down.  That will make the problems even worse.

I'm placing the over/under on the Fed jumping back into the MBS market at Aug 1st.  Any takers?

Mr Lennon Hendrix's picture

Nice!  I have cut and pasted this convo to send to friends and family; this is very important because everyone is about to lose their shirts thanks to the housing market.

erik's picture

This is related to 2nd mortgages (home equity loans mostly).  Investors (Blackrock) want banks to take their losses on 2nd mortgages.

Blackrock is concerned that they will get screwed in the modification process because the banks are usually 2nd mortgage holders and SERVICERS, which means they will be in charge of the modification.  Blackrock is worried that it will be stuck with unfair losses on 1st mortgages if the banks modify loans in such a way to benefit themselves and hurt 1st mortgage holders.

This is the next big thing.  Barney Frank has already griped about it, but with a pivotal player like Blackrock involved, the stakes become much, much higher. 

Bottom line:  Mortgage rates will continue upward until the government steps back in with more taxpayer screwing bailouts.

erik's picture

Is it purely coincidence that Blackrock was downgraded to sell by Citi last week?  Deutsche downgraded them as well.

I think the flap between 1st and 2nd mortgage holders is growing, and Blackrock is throwing down the gauntlet by saying they will not buy private-label MBS until banks take their losses.

Guess who loses in the end?  The taxpayer, because our beloved government will step in with our money, like it or not.

Anonymouse's picture

Nice analysis.  Clean and straightforward.

Not to complicate it too much, but in fairness, you probably should use different life expectancies for each year.  Since life expectancy is increasing, payout would look a little better for later retirees.

Probably not much though.

dark pools of soros's picture

you are missing the point of that whole 'society safety net' idea


granted it will get ran into the ground, but that is a different point than what you are making

three chord sloth's picture

Why do folks continue to pretend there is a sustainable social safety net, some sort of standard-of-living floor that government can guarantee?

I see no evidence such an animal exists. I see plenty of two, three, four generation Ponzi schemes where the latecomers get stuck with stale beer and pizza crusts and the bill... but I see no systems that are equitable down through the generations. Aw heck... forget equitable... I'd settle for "non-bankrupt", and I still wouldn't find what I'm looking for.

We should face the truth. The overarching theme of the twentieth century was "the search for the stable welfare state". That is what all those "isms" were about. None of them worked. Stick a fork in 'em.

SayTabserb's picture

I think it's possible for a society such as the United States to provide an old age pension and universal healthcare as the basic entitlements, but the priorities of the country have to be rational and well planned. Since 1983 about $2.55 trillion in payments were surplus. With conservative management and real investment (not "investment" in the government itself as further debt), the system would obviously be solvent now. What turned it into a complete Ponzi was that the fund was raided for other priorities, chief among them the growth of the defense/security state. That left only dwindling numbers of workers to support an aging population, which is unfair and which is why it will not last much longer. Had the surplus been invested in the real economy, it would have been good for GDP and far more self sustaining. Still an "ism," but not quite so Old World.

Shameful's picture

rotflol the government, invest wisely and manage properly :)

Might as well ask a monkey to race a car or fly an airplane...sure it's theoretically possible but it's not likely and the crashes and costs would be monstrous.  What's wrong with people making decisions for themselves?

The system was never solvent it was Ponzi from day 1, and ponzi by design.  Lets face it no government could be that responsible.  Find me 1 in history.  And even if "invested" so who would invest it?  GS, JPM? I'm sure they would treat us right.  Or if do it direct I'm sure it could be done with all the skill of a Soviet era planner.  You can believe all you want the system you dream of cannot exist as long as humans are involved. The corruption factor is to high.  Hell they are looking at seizing 401ks now because of the money there.  Governments don't think out that far, it's all about the quick fix and quick loot.  You can wait for a responsible well managed gov that will not loot for genrations and I'll wait for El Chimpo to win the the points standing in F1...think I'll have less time to wait.

SayTabserb's picture

Well, you could be right. CalPers invested in the private sector and that's had some problems.

Shameful's picture

CapPers will go bankrupt, it just came out recently that they are way underfunded.  It's simply not possible to trust the gov with the money.  Would you trust your hard earned money with any gov to invest it better then you?  Or would you prefer to invest it yourself or seek out your own investment advisor?

I'm not in the investment biz, but correct me if I'm wrong isn't the pension money usually referred to as dumb money?

I'm all for people preparing for themselves. Now if you think that the state should be able to loot people to pay for others that's another argument entirely.

SayTabserb's picture

No, I'd rather keep it and do my own planning. I've been self employed for a long time and the amount of money I've poured into that FICA rate kind of makes me sick when I think about it. The return analysis shown in the post confirms me in my thinking. The problem that I guess FDR was looking at is that if you allow an opt-out, the scheme (Ponzi?) falls apart pretty fast. So in order to provide for the elderly who can't put it together, the whole (non-govt) working population has to buy in. But the point is, as I wrote down below, is that the system has in fact fallen below break even, and that means Congress can't use the only part they were interested in, the surplus. So we'll start to hear more arguments about "opt out" etc. whether it will work or not. Because they don't care if it works, only if it creates pork while the SSA sends out checks.

Shameful's picture

Well yeah ponzis fall apart when people wise up.  At that point the only way to keep it going is with a gun to the head.

I don't think you will see an apt out.  My whole gen would giggle hysterically and opt out and the system would collapse.  The only would not allow that, they vote.  What will happen is they will game it with the CPI and print the money out of thin air till we hit the default point at which point the old will be left out in the cold.

Now if they don't do that they will simply kill the old.  They will not drag them into the street, but they will deny any and all healthcare or service.  After all why should the gov like the old?  They are not producing and being taxed, and really the gov sees as nothing more then serfs and wage slaves to afford them their way of life. 

FEDbuster's picture

They like the old, because they vote. 

Means testing for benefits should have started 30 years ago.  Call a spade a spade, social security was a social welfare program not a retirement program.  If FDR had just labeled it properly "Elder Welfare", people would have looked at it as just another entitlement program.  The taxes would have stayed low and no one would have this "I paid into it attitude" when they retired.  The moral hazard was established when workers thought this was a legitimate retirement plan and employers played along, rather than a ponzi scheme government entitlement program.

I have some sympathy for the people whom were duped into thinking they could rely on the government for their retirement income.  Unfortunately there aren't enough Walmart greeter jobs to hire all the boomers that will find out they aren't making it on government subsistence.  Maybe the government should hire them to be greeters at every government office, post office, etc...?

RockyRacoon's picture

I hear you saying that we have a Willie Sutton  style government financial planning here.  It takes from whatever pool of ready cash is available to pay for its profligacy "because that's where the money is."

three chord sloth's picture

Well, one could create a sustainable old age pension program... an individual program mind you, not a whole maintain "x" lifestyle system... if one were to set it up based on percentages and not birthdates. But the healthcare option is right out... it would likely fail the sustainability test, costing 5% GDP first generation, 10% GDP second gen, 15% GDP third, etc. That is just repeating the same mistakes we made over the past half century... a great system for those first in, and a collapsing pile of bills for those who follow.

mikla's picture

Well, one could create a sustainable old age pension program... an individual program mind you, not a whole maintain "x" lifestyle system... if one were to set it up based on percentages and not birthdates.

No.  All pensions are frauds, and should be made illegal.

Pensions are based on actuarial math that attempt to quantify future risk.  They are guaranteeing based on an unknown -- an unquantified future risk.  They are frauds, because this unknown cannot be quantified, and cannot be protected against.

If I promise you a pension annuity, I'm a liar (we both merely pretend the risk doesn't exist).

Thus, like all ponzis, the "ignored risk" becomes real and everyone is screwed.


Sam Clemons's picture

Agree that prioritization would help, but all we've done is created a massive population bubble all over the world by guaranteeing the survival of bums, sick people and the elderly.  Everyone dies anyways.

Additionally, and I will admit it sounds harsh, but the gene pool gets punished by these sorts of programs.  Like all bubbles, the population bubble will crash too, and in much more dramatic and deadly fashion than if we weren't so kind and actually let nature solve its own problems - natural death due to stupidity or laziness.  I guarantee we would have much more productive societies in this case.

Sam Clemons's picture

Junk?  Hah.  Of course in America, people hate the people who try to tell them the truth and love the people who lie to tell them everything is ok.


All I'm saying is that our civilization has become "survival of the weakest," not survival of the fittest.  This applies to companies and people.  I know many people hate the idea of a rugged man surviving on his own in the old West.  I admire that man.

Shameful's picture

Your right of course.  The safety net aside for being immoral because it institutionalizes theft and destruction of property rights is the survival of the least fit.  Look at Michigan and welfare, where there was an incentive to breed without any ability to care for hte children (not sure if it's the same now as it was but I have deadbeat distant family milking the system there).  Watch Idiocracy if you want to see the path we are on.  What will save us is the infeasibility of the safety net system.  There is a lot of death in our future.  With oil and water problems I expect the world population to drop a fair bit of the next 20 years. 

Hear you about the old west.  One of my favorite genres, where a man was a man and was expected to take care of himself and his family.

Sam Clemons's picture

I agree with you on it being immoral and on your historical precedents.  I suppose most people here recognize that their precious "job" or "skillset" would not enable survival in a hand-to-mouth, productive world so they dislike what we are saying. 

Additionally, they are right that it is junk because my post generally does not apply to social security, which this article was about, because that does not aid procreation.

It is not as though I advise any kind of cleansing like Obama's science Czar because that requires mankind to discriminate which generally causes more harm than good.  Nor do I love the planet so much to hate my fellow man.  I just propose removing most "warning labels," and letting nature run its course.

Shameful's picture

The world is a hard place.  Look at it, we have temporarily softened it and in doing so have done a disservice to the young.  They will face a world that is harsh completely unprepared for what is waiting for them.

I'm not for pop reduction.  I think the earth can support more people then now, with the market dictating living standards.  I simply see that those are dependent on social welfare for support are not equipped to do well went that net snaps.  And I expect the net to snap and society to descend into chaos.  In that many will die simply because the supply lines are so short.  If they are cut the cities will be out of food and fuel within days and will turn into violent hungry places.  This is not something I want, indeed it horrifies me, but this is what the signs point to.

dark pools of soros's picture

why do people continue to forget to read what is written instead of what they already believe?

the article ranted about how bad the program was except that for a bunch of years it worked..  sure it was destined to fail but for a lot of reasons.. mismanagement more than just math..and the whole point of the program is/was to keep idiots from becoming old starving idiots..


but most people here just want simple yes/no answers to everything



dumpster's picture

a safety net

jim sinclair

To balance the US balance sheet, gold would have to go to insane numbers. The mechanism is in place to drive gold to incredible numbers.


SayTabserb's picture

Right now (in Feb 2010) the Soc Sec. fund took in about 49 billion and paid out 61 billion. An "on budget" addition to the fund of $12 billion put the cash flow in balance. I assume that the on budget add of $12 bil simply represents a subtraction from the empty "Trust Fund" of $2.5 trillion, roughly. Thus, the system is now underwater since the $12 billion in reality is simply funded through Treasury borrowing. This can only get worse, since the deficit 1) arrived 7 years early and 2) the leading edge of the Boomers is just now starting to draw benefits.  Since the Kongress Klowns now realize the "surplus" is not a piggy bank for bailouts and F-22 building, Soc. Security is not fun anymore. It's a drag, in fact.  Thus, it's extinction will not be far off, leading to the private fund idea discussed here and as proposed by Clinton first, and then followed by George W.

G.Kesarios's picture

What does all of this matter? All these obligations will at one point be written off beacuse no western country can make good on them

Shameful's picture

Ah one of America's oldest and most respected Ponzi schemes!  You will not be able to pry this one out of people's hands, they have grown to dependant.  This is be quite explosive when it and Medicare go up in smoke.  Remember the old vote.

MarketTruth's picture

True, though remember the Medicare PONZI scheme was just robber to the tune of MANY trillions due to the new health care plan. Imagine all the suckers who were forced to give money in to Medicare yet have received zero benefits. Now with the new plan you can kiss all that money you were forced to pay out goodby.

Shameful's picture

Well at my age there is 0 chance I get any of these bennies.  But then I would be jaw on the ground stunned if the dollar survived a decade without giving up at least 50% value from here.  The whole system is going to come down.  I get next to noting out of my tax dollars and that's what I expect.  I pay for crooked cops, lazy and worthless bureaucrats, an insane military, and banker bailouts, so it doesn't surprise me that I won't actually get any "bennies" from uncle sugar.

Hell maybe the system comming down is the most just thing that can happen.

dark pools of soros's picture

for all the supposed deep thinkers here, hardly anyone seems to examine without an already established agenda.  "I'll take care of my money, stay outta my pocket" is the knee jerk reaction to just about everything going on


What about runaway costs of the healthcare and pharma that this captive program (medicare) is forced to dole out??  


So you say there is this huge pile of money that we can't touch unless it is through benefits... so we just find ways to jack up the prices and no one complains that much since it is all rolling outta the medicare payouts...  nice 


medicare dries up... pensions costs skyrocket with the bene's..

the capitalism snake is well past half way eating its tail..

Shameful's picture

The healthcare system in this country has NOTHING to do with capitalism.  Why do we pay 4x as much or more for drugs?  Well that would be the Gov interfering.  Look at the gov with IIRC Medicare C, open corruption.  Look a the FDA and tell me if that is a good system.

We have massive government interference in health care, so the answer is less government now more.  If capitalism is not the way is socialism the way?  Point to me a nation in Europe that has a socialist system that is doing well that is not relying on selling natural resources (won't last forever).  Norway looks great but they are selling their oil and remember only native Norwegians get the good bennies.

Why are healthcare costs so low in th developing world?  Why is there medical tourism is socialism is the way?  I remember just recently a Canadian offcial came to the US for a procude, but I thought the Canda's had a great solcial healthcare net, so why did he come down here?

As to capitalism have you looked at the pricing of LASIK or plastic surgery.  Quality of care has radically increased in the past decade, and prices has come down (without even looking at inflation).  Now this system exists out of the crooked and controlled insurance system so tell me how can they pull of the miracle of lowing costs and improving quality.  The system you hate is crony capitalism, we have not had capitalism in the USA for decades.

velobabe's picture

shame, guess i got to jump in here and ask, why does everybody hate old people? it's like my bf accuses me of hating poor people. of course i don't.

i guess i just don't see this side of america that is rampant in these comments? your young in college, but i guarantee you older people I KNOW are nothing like what is written down here. i don't even know what a pension IRA is. i don't have health insurance cause the whole industry is a scam. nobody really knows what health is, I DO. i have never been to a quack doctor except when i had to, to have a kid and i vowed never to go back. stay healthy, wealthy and wise. yeah an apple a day definitely keeps the doctor away and saves you money. i am an athlete and broken about 12 bones so i give to the ortho's pockets, but that is better than paying into health insurance. pay as you go, skip the middle man. that is probably the way it is in burma, straight cash for everything, no debt, even when your sick or broken. just my 2¢s

Shameful's picture

I don't hate old people.  I hate that old people want to enslave me for their benefit.  I have an amazing relationship with my parents.  I used to spend time going to nursing homes talking to old folks as a kid in junior high.  My dad made sure that I knew every old person still alive from the Old Country and heard their story.  I do not hate the old, but is it fair that they look at me as a meal ticket?  "Shameful I did not prepare for my future.  Infact I left a world of shit for you.  So Now I'm going to rob you, pay up!"  Also I'm a bit jaded having worked around the casino industry and watched these people spend their SS check gambling.  Clearly they need it if they can feed the one armed bandit.

I've talked to plenty of old guys and they KNEW that SS was a scam when they were young.  Admit it to me, hell they even tell me that they know that I won't get it but I have to pay for them.

You mistake my hate for being robbed and enslaved for hate of the old.  If a white man robbed you would you at gunpoint would you resent him because he is white or the fact he is robbing you?  SS can be dressed up any way you want but it's pure theft.  If the system makes in another 40+ years it would turn to plunder a generation.  Institutionalized theft, and noting more.

Master Bates's picture

I completely agree with you.  I'm really tired of the older people that have been living high on the hog with money that they borrowed from us over the years.

All they do is blame "kids today" for everything, when they themselves are the people that created the systemic problems that we were born into.

It makes me mad that so many of them are mean to us, when they're going to be living off of us for the next thirty or forty years after they did everything to sell us out.
Economy going to dip?  Hell, that's okay, borrow from our kids!  30 years down the line, when it causes a depression... we'll all be retired.

I personally believe that it's more the baby boomers fault than anything else.  They've been offshoring our jobs for thirty years, exporting our country's success to China, and in a few more years, they'll be right there with their hands out expecting us to continue to be debt slaves to them even after they've done their best to sell out our generation's opportunity so that they could get some granite countertops and an extra bathroom in the McMansion that they can't afford.

Baby boomers should be eaten by bears.  Or at least stop blaming us for what THEY have done...

Mr Lennon Hendrix's picture

"[T]he older people that have been living high on the hog."

Then you may like this theory I have; baby boomers will continue to try and achieve the 'Mercan dream' (not to mention the emerging middle class in other countries)-they will trade in their hummers for Harley Davidsons.  HOG to double YoY from here on out, I think.

dumpster's picture

the capitalism snake .. yammer

this is not free capital ism  .. it is Keynesian amphomorphic mush.

this form of economics is the cause of war, poverty, unemployment , and what you see as far as the eye can see,

drowning in debt,

so to fix the problem stop digging .

Alienated Serf's picture

 In the late 1930's avg. life expectancy was 62 or so, benefits did not pay out until 65; obviously that led to a low participation rate and short duration of participation.  What needs to be done is to enforce a Life Expectancy Adjustment Index that automatically raises the retirement age, just as COLA is indexed to inflation.  Of course this is not very politically palatable, seeing that senior citizens vote en masse, and I don't think we have the time to phase this in 20 years from now when they could care less, especially not with the boomers still around.

Lets face it, we are going down the road of Greece.  Politics trump math.  We will get to the point of default before any change is made. 

For all I care raise the retirement age to 80, god knows I'll be working off my law school debt until then.  In any event, the spendthrift boomers who are now housepoor, 401k poor, pensionless and unemployed are going to be thankful for a Walmart greeter job.  Senior Citizen poverty epidemic, coming to you 2025.

Also, someone please explain to me the disconnect of older Americans who thought that Obama was going to turn them into Soylent Green, scoff at the Canadian system but think Medicare is the greatest thing ever.  All while ordering cheaper drugs from Canada. 

Raise SS retirment to 75 tomorrow or start building large government funded housing project style nursing homes asap.  At least we would get some construction jobs going....




jmc8888's picture

This guy is so wrong on so many levels it approaches asinine level.


He omits many pertinent facts, thus his test bubble is bursted.

We all know the inflation data he used to surmise this is faulty.  One can guess how wildly off from reality his inflation data is when the errors aren't using a few years, or a decade, but multi-generational. 


Let's see.  When he talks about if a savvy investor had put the same money in the stock market in 1940 he'd of made an extra few tens of thousands, that's a load of sophistry.  Who is a market savvy investor?  Not everyone.   Lots of people who have called themselves 'market savvy' are anything but.  Plenty of dipschmidts made a lot of money thinking they were smart, but somehow picked the du jeuere bubble to place their bets in at the right time, without knowing it. So this guy says, since A savvy investor, let me repeat that, "A" savvy investor could have made more money than in social security, then it would be good for all of us to have that option, or something to that effect.  NOPE. 


This guy also doesn't know FDR.  Because if he DID, he'd know SOCIAL SECURITY IS NOT WELFARE.  The whole fact that he deems social security part of the 'welfare state', shows how clueless he is about social SECURITY.  It was never meant for welfare.  If his side of the aisle considers it such, they're idiots, and no wonder it's crashing.


He also cleverly forgets that since the 1980's, all the surplus....meant to compound so that higher benefits could be paid out in the future....was pulled away.


So as the bubble was blowing and trillions of faux money created, guess what missed out? That's right social security.  But the people that depended on it, didn't miss out on the inflation.  This guy forgets that pertinent point.  Just imagine, if you put your money in the stock market, and took out the gains every year and gave them to charity, my guesses are, from 1940 to 1984, even if you were a savvy investor, you would have ended up with a loss.  NO SCHMIDT!!!  Kind of easy to blame social security shortfalls when we've stolen the surplus for 25 or so years.  Kind of is expected.  So here we are with the piper calling to be paid.


He also forgets another thing about social security that completely skews things.  Amount of Payers IN, Amount of Receivers OUT as a ratio.  Now memory serves correct it was somewhere in the neighborhood of 11:1 people paying IN, as compared to paying OUT.  Demographics have a lot to do with this.  Demographics is now reaching a point of saturation, where the constant burden will explode and then level off, and reach a relative constant additional payers in and out.  So the baby boomers will cause a strain, but then as they die off, as a percentage the next generation won't add as much and the ratio should go back up from I believe it's at 3:1 now, after making a pitstop around 2:1 or so.  


People forgetting such a bubble in population making its way through the system are projecting that bubble to keep going up as if their is an exponential increase in retirees AFTER the baby boom, that simply is not the case. 


Then he talks about 'in a free market' like one ACTUALLY exists.  HA HA HA HA HA

Then he actually believes that employers would raise the wages.  Are you effing serious? This guy is an idiot.  No, what would happen is this.  Your employer noticing that he doesn't have to pay the 6k, and you don't have to pay the 6k, will lower your wages commensurate to what you aren't paying.  You see, to you, you never saw the money in the first place, and the greedy corporation will surely like to cut costs by 12,000 on you, not 6,000.   Your wages would go DOWN, not UP, like this idiot suggests.  The furthest he'll go is say, you won't notice the effects immediately.  Yeah, and we're still waiting for reagomics to trickle down some of that 1980's money we never saw.


This guy is peddling pond scum.  His idea of getting rid of social security is asinine.  It's full of bs, omissions of pertinent facts, and full of wishy washy hope that the free market that we don't have will do the right thing....this time.  I call BS.






Shameful's picture

Wow.  Just wow.  So you must be really counting on those SS checks.  Well your brilliant system is insolvent for all intents and purposes.  Good luck getting your payout.  And if your getting it, well stockpile what you need old man the times they are a changing.

Trial of the Pyx's picture

I thought he did have a point about the surplusses getting siphoned away and therefore not inflating with everything else...not that it would have made the thing work if they hadn't...but it is a good point.

dumpster's picture

you may now come up for air ,,, that rant made me tired ,

off to spend  .s.s. check,, on tacos and beer,

and while at it scout out another for  new dumpster site. 

a supplement to living large  


DoChenRollingBearing's picture

+ 60,000,000

Finally I get to give a tip o' the hat to the dumpster!

I'm 54, and I don't even qualify for S.S!  So, I am just a spectator, rock on!  Crash and burn.  That's what our .gov has given us.


O/T, Shameful, today I went and broke in my new friends Mr. Beretta and Mr. Kalashnikov.  Very liberating.  I may just stay here and NOT go anywhere else to participate in all the fun coming our way.

Older Than Dirt's picture


A reading of the complete Act clearly shows that it was intended to be PARTIALLY a "redistribution of wealth.: "

The Social Security Act (Act of August 14, 1935)  [H. R. 7260]

An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws "

However regarding "Federal old-age benefits", the Act states in Title II Federal Old-Age Benefits - Old-Age Reserve Account:

"It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals.  Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States."

So, even if we allowed that the "excise tax" on employers was to be devoted to the "social welfare" aspect of the Act, the payroll tax on employees was to be:

(1) Funded in "the Account," and

(2) Invested in "interest-bearing obligations of the United States," i.e. Treasuries. 

Neither of these requirements in the Act were carried out. Various Congresses - both "R" & "D" - spent the tax revenues deducted from employees over years. They're still doing it today. So, if you really think that you're paying for grandpa & grandma, it's true only in the sense that this has been the biggest Ponzi scheme EVER! It makes Charles Ponzi & Bernie Madoff look like pikers!

Just for "grins," I downloaded the rates on Treasuries from Federal Reserve's site. Data was only available since 1962. Then, I had to manually input data on income caps, & FICA tax rates from the Social Security site (they're a BIT behind the times technologicaly - no download to a .csv file, e.g.). Averaging the 5, 10 & 30 year Treasury rates & applying it to the taxes withheld (based on 25%, 50%, 75% & 100% of the income cap), the compounded amounts over the period from 1962 to the year I "retired" were significant (big bucks!). Then, I deducted "benefits" from that point & "re-compunded" the balance. I'll be "in the 'black" for a long time. I used only the empoyee tax not the employer excise tax. I figured that was for "social welfare."

I don't want welfare - just what's due to me. That's probably what most "regular" folks that played by the rules want as well!

If the U.S. government can get us going at each other's throats, e.g. young vs old, the game is over! Hell, it probably is anyway. 


fxrxexexdxoxmx's picture

With Lawyers advertising on televison for clients to "win" their disability claims with SSI does anyone actually believe this system is about taking care of the helpless?

It has become a corrupt system that millions currently use to game it for personal profit.

People who have never contributed a single penny get checks today.

I met a man from the former soviet union in 1996. He was getting a check from the feds and was angry that it was so small.

Getting rid of the fraud would make SS & SSI solvent overnight

JR's picture

Thanks for the reminder of this provision which only underscores how the politicians market their legislation without promoting the details, hence clean air act,  climate change (cap and tax), and Obama health reform (more wealth transfer). The first generations after Social Security was enacted all believed it was nothing more than a partial retirement fund for wage earners; most never dreamed that it included this wealth transfer statement nor were they intended to know.

“Then, ‘twixt a vice and folly, turned aside

To do good deeds and straight to cloak them, lied.” From Kipling’s A Bank Fraud

It would be a stretch to say, however, that the bastardization of SS existed in the 1930s to the extent it does today.  For instance, “Aid to Dependent Children (ADC), which the U.S. Congress enacted on August 14, 1935, as part of the Social Security Act of 1935, began as a program limited to dependent children under sixteen who had lost one or both parents, an outgrowth of the underfunded widows' pensions numerous states enacted after 1911.”

My research shows that, according to Encyclopedia of Children and Childhood in History and Society: “Vastly increased federal spending in the 1940s and 1950s generated enough prosperity to make poverty (apparently) disappear, and to encourage massive movements of peoples of all classes and races around the country, and from farm to city or suburb. By the 1960s ADC and other programs ballooned, and ADC became AFDC, Aid to Families with Dependent Children, with caregivers' stipends added. In 1960 AFDC was the largest federal welfare program, with 3,000,000 enrollees. Today it is nothing less than a broad welfare program…

“Well into the early 1970s, the rolls grew at a dizzying pace, due to the growing impoverishment of the lower classes. The age's egalitarianism and individualism encouraged the poor to demand welfare as a right, not merely a privilege, and this, combined with racial tensions, and the growing new conservative movement, led to increasingly fractious criticisms of AFDC. By the early 1990s, AFDC, and the compassionate welfare vision of an earlier era, was increasingly politically out of step with the times. The WELFARE REFORM ACT OF 1996 ended AFDC.”  It was replaced by the Temporary Assistance for Needy Families (TANF) program as described in section 601 of the Social Security Act.

According to Public Benefit Law, Professor Levy, Spring 2001: “Today, the largest welfare program is TANF “which provides federal block grants for state benefit programs for needy families.  TANF replaced AFDC and is the principal component of welfare.  The second major component of welfare is Food Stamps… SSI is a third important federal benefit program that provides federal benefits for the aged and disabled individuals on the basis of need… SSI, TANF, and Food Stamps are supplemented by a variety of other need-based benefit programs.  For example, individuals who qualify for SSI, TANF or Food Stamps are generally eligible for federally funded Medicaid benefits as well.  Additional programs include state general assistance benefits, school lunch and other supplemental food programs, housing and energy assistance, and programs targeted at specific populations.”

And some people still argue that America is not on the road to serfdom, i.e., socialism.