Guest Post: The Generational Injustice Of Social (in)Security

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Forcing young workers to pay into a Ponzi Scheme is generational injustice on a vast scale.

Why should young workers pay into a retirement system that will give them nothing, a system that will dissolve in insolvency long before they're old enough to retire? This is a question that Max Keiser posed in our conversation on Peak Retirement, and I think it deserves an answer.

I think the core issue here is the generational injustice of pay as you go social programs, which boil down to unsustainable Ponzi schemes. As I noted yesterday in The Problem with Pay-As-You-Go Social Programs (November 5, 2013), all pay as you go programs funded by payroll taxes--Social Security and Medicare in the U.S.--are only sustainable if the number of workers rises faster than the number of beneficiaries, because it takes multiple full-time workers' payroll taxes to fund each beneficiary.

As I showed yesterday, it takes about ten low-wage (and hence low-payroll tax) workers to fund one retiree. At this rate, Social Security's 57 million beneficiaries (on its way to 70+ million as the Baby Boom retires en masse) would need 500 million workers paying into the system for it to be sustainable.

It takes only a few high earners (those making $85,000 or more annually) to fund one retiree, but there are too few high earners to support the system (13 million workers earn $85,000 or more, while beneficiaries will soon top 60 million).

While the number of beneficiaries will soar for the next decade as 60+ million Baby Boomers retire, the number of full-time jobs has stagnated, as this chart shows:

If the system doesn't change, the young workers currently paying payroll taxes to fund their elders' retirements will get little to nothing out of the system. This is ordained by two trends: demographics and the end of (paid) work. Global Reality: Surplus of Labor, Scarcity of Paid Work (May 7, 2012).

A huge cohort of retirees requires an even larger cohort of workers to support its retirement in pay as you go systems. This is what renders Social Security a Ponzi Scheme: a Ponzi Scheme only works as long as the number of new marks is substantial enough to pay the promised riches. Once the number of marks declines below a threshold, the Ponzi Scheme implodes.

The soon-to-be 70 million beneficiaries of Social Security would need roughly 210 million full-time workers earning decent money to sustainably fund their benefits. The U.S. economy is short about 100 million full-time jobs, and given the end of work realities I have often covered here (just type end of work into the custom search box on the main blog page), the number of full-time jobs with decent pay may well decline sharply, even in "good times," i.e. periods of expansion.

We can expect widespread destruction of paid work as technology creatively destroys one sector after another.

Why should young workers pay into a retirement system that cannot possibly offer them any benefit? The conventional answer is a lie: "Social Security is essentially eternal and will be here forever."

The other conventional answer is pure self-serving, self-justification by retirees: "We wuz promised." Well guess what, Boomers (I am 59 and a Boomer), things change in pay as you go systems. When the number of full-time workers falls to 2-to-1 or less and the number of retirees drawing benefits skyrockets, the system is no longer sustainable, regardless of what was promised by feckless politicos and their toadies.

The Social Security system could be made sustainable, but it would take radical reform. The constituencies that would oppose these reforms are among the most political powerful in the nation, so there is no chance these would ever be aired, much less approved:

1. Eliminate Social Security benefits for double and triple-dippers, i.e. those drawing pensions from other private or government sources. Re-engineer Social Security into a system for those with no other retirement benefits or pensions.

2. Tax all income, not just earned income. Lower the total Social Security tax from 12.4% to 10% but apply it equally to all income. Why should someone earning $1,000,000 pay less a percentage than someone earning $10,000? Why should I pay nothing on $100,000 I skimmed in a stock trade? Lower the tax but tax all income. Simple, fair, no loopholes.

3. Ditch the bogus Trust Fund of lies and set up a real Trust Fund that is outside the Federal Budget and Congressional avarice. Any surplus (i.e. when taxes collected exceed benefits paid in that year) would go into a true Trust Fund that uses the cash to buy Treasuries, other government bonds and AAA corporate bonds. This fund would thus help keep interest rates low, and the interest generated by the bonds would be real, not borrowed.

Congress would not be allowed to appropriate the Trust Fund for any purpose (bridges to nowhere, discretionary wars, etc.). It would be managed by trustees elected by the citizenry.

With a true Trust Fund, young workers would actually have some hope that the fund would still have real assets to liquidate to fund their retirement.

Radical transformation is necessary if Social Security is to become something other than a massive wealth transfer scheme from the young to the elderly.

Forcing young workers to pay into a Ponzi Scheme is generational injustice on a vast scale. Self-serving justifications of the status quo by those benefiting from this transfer of wealth should be outed for what they are: justifications of exploitation, avarice and injustice.

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youngman's picture

The young folk have to pay for the social security of old folks..also their health care....nice job....and who do they vote for...the politicians that think this is a good idea...goes to show how bad our schools are

semperfi's picture

our schools are for the most part indoctrination camps

Joe Davola's picture

Simple, fair, no loopholes.

Oh yeah, that'll happen.

flacon's picture

My older brother has a degree from THE accredited Ivy Leage University, and a pH Dee from another accredited Ivy Leage University. He is incapable of understanding that Social Security is a ponzi scheme. He is also incapable of understanding our monetary system. 


I think that he has a set of beliefs that would leave him a hollow man, gutted and empty if he was to admit to the truth. For him it's better to belive a lie that he enjoys than to believe the truth that crushes his divine visions of the annointed.

therevolutionwas's picture

I hear you.  I have inlaws, very intelligent, but you can see them mentally shut down when you try to give them a differnt opinion.

Freddie's picture

Tooth Fairy Syndrome.  I think most libs suffer from it.  They are conditioned like Pavalov's dogs from TV, Hollywood, NY Times, academia and their slimy friends and colleagues.

InTheLandOfTheBlind's picture

not unique to libs... kinda prerequisite for the human existence

FredFlintstone's picture

My father is very intelligent and very conservative, but clings to the vision of technology solving our energy problems and the hope of unlimited growth for our economy. He joked that all he cares about is that his Corvette will have enough fuel for the remainder of his life. He does care about the future of his children and grandchildren, but has no answers and cannot admit that perhaps his generation may have had it wrong.



Withdrawn Sanction's picture

CHS is wrong to think you can make the SS system "fair" (whether by simplicity, loophole elimination, or magic).  It is a transfer mechanism, nothing else. It takes by force from one set of people, and (after a skim) gives to another set of people.  In short, it robs Peter to pay Paul.  Such a system will always be unfair because it is based on robbery.  That is also why it will implode.

macbone's picture

You are aware that the people who are "robbing" you have paid into the
system all of their fucking working life, aren't you?
This site is interesting but at least half of the comments
Are batshit crazy. "Obamacare" is straight up intergen robbery. Social
Security is a fixable mess though lord knows the gang of thieves in
Washington today are clearly beneath the task.

savedbyfreethought's picture

Owners (property owners/ business owners) don't send their children to school because they know it's a waste of time, instead they tend to keep their children near them so they can learn  how to do business in the real world, only cluesless slaves send their children to schools where the teachers will work them until they are fit to service the owners. 

That's why schools are and always will be indocrination camps. After all slaves are by defintion not owners of their children but no matter what they will always put their children through the same sort of subjugation they themselves went through because in their mind they think it's the only way to succeed financially but in fact it's very rare for sucessful people to come from such background.

Sean7k's picture

How can anybody be so stupid as to even consider this argument? Do you think old people didn't pay into SS when they were young? In money that had more value then then the crappola you contribute now? Was it the old people that declared SS a tax? No, try Supreme Court. How about ACA, is this not a ponzi scheme as well? 

Attempting to create generational warfare is pure zionist bullshit. Unless you are one of their paid bloggers, how can you be so moronic?

Carl Popper's picture

It is clear there are generational winners and losers with SS.

Why should only those ten or more years from retirement have to take all the benefit cuts?

If there is generational warfare then it is clear my generation and beyond are not winning.

Sean7k's picture

Why is it clear? Because of governmetal projections of benefits? You believe what the State tells you? Blame the people, not the system of rule that brought this monster into being? Not willing to say that Fascist Delano Roosevelt was a zionist patsy? 

How does anyone "win" in a debt enslavement society? You want to complain about THIS injustice? Thus allowing media peopagandists to rule your thoughts and motivations? Do you enjoy being a fool? 

Your complaint is with the creator- government. Want to end injustice? End government.

Professorlocknload's picture

"Want to end injustice? End government."

 Classic! Comment to end all others. ++

SpykerSpeed's picture

"You believe what the State tells you?"

No, I believe what economics shows me.  And it's showing me a bunch of old people who are skimming money off the backs of millions of young workers.

Social Security, Medicare, and Medicaid must all be ended.  And they will be.  Young people will shrug and get paid in cash & Bitcoin.

Sean7k's picture

Economics shows you that people didn't pay into the fund? Really? It shows that wages that have been stagnant since the late 1970's, where these generations made more money, in greater numbers are living off of you? I always felt Keynes was the penultimate scam, but you must have discovered another, unless it is just your feeble mind has been polluted with  a substandard education?

Withdrawn Sanction's picture

In 1940, Ida May Fuller of Ludlow VT, became the first person to receive a SS check.  She paid in $24.75 to the system.  Over her (long) retirement lifetime, she pulled out over $22,000 from the system.  The current generation of retirees will not be as "lucky" as dear old Ida.

Sean7k's picture

Which has what to do with this argument? Cherry pick data much?

Jean Valjean's picture


What difference does it make that people "paid into the 'fund'".  Are you one of those that thinks there is a 'fund' somewhere?

The above comment is correct.  Young people will shrug and form a different system (black market) for their labor.

Sean7k's picture

One, SS is a contract and if I have to honor the contract to pay taxes, the government has to honor the contract to pay SS. Otherwise, we throw out the entire government (which is fine with me). Two, my argument is with generational warfare or can you not read? Division is a typical Statist tool to keep the people from looking at the real problem and it is being employed here. Three, if you can read alittle, you will see I have stated SS is paid from general revenues. Four, the above comment is not correct, if it refers to a future action that has not been demonstrated. Five, if you want to comment, please do so intelligently.

StychoKiller's picture

"What do you give government that's taken everything?"

"Dreams Come Due:  Government and Economics as if Freedom Mattered," by
John Galt, ISBN:  0-671-61159-3, Simon & Schuster, 1986

"Intelligent" people have known about the Pyramid scheme known as Social Security for quite a while...

malek's picture

One the government makes the rules so it can allow itself to not honor the contract.

Two your "generational warfare" is just a beautified version of "We wuz promised."

Col_Sanders's picture

The people are the government - funny thing about a representative republic.

So my complaint is with the people - the "Boomers" and those who came before them who "created" this beast, and continued to feed it over the years.

And sorry, but stupidity isn't an excuse when any fifth grader should have been able to do the math and figure out it wasn't sustainable.

Jean Valjean's picture

I am a people.  And I am not the government.  In fact, I feel unrepresented, even when I vote.

Sean7k's picture

Please give an example where people are the government. There is a difference in saying something and actuality. The Constitution was designed to limit democratic influence- this is why only one part of one branch was democratic. This was the intention of the framers, see "An Economic Inerpretation of the Constitution of the Unted States" by Beard.

Blamng the people, when the ruling elite are the only ones with the influence to determine government, is just imbecilic.

Finally, socialism and fascism are never about sustainability, they are about control.

ATM's picture

It didn't become a tax because a court said so. It has always been a tax and the benefits have all only been a promise. How can anyone suggest otherwise? 


ACA is one more scam of promised benefits, forced payments and an empty bag when it is done.

Sean7k's picture

No, the court made it tax. Before, it had been sold as a contribution into accounts for each ndividual. The SCOTUS determination made it a tax paid from general revenue, placing it behind debt payments in priority. It also removed any personal claim. 

See, Fleming v Nestor

MachoMan's picture

The SCOTUS demanded that SS be a tax (thereby creating law) or simply interpreted the law as stating such...

InTheLandOfTheBlind's picture

being sold as not a tax and being not a tax are two distinct things... if i were you, i would ponder on that distinction and do some self reflecting of why you were too stupid to realize it before the scotus decided to tell you.....  sorry for the hostility but you are kinda being a dick

Sean7k's picture

Why? Because the SCOTUS decided to make the law what they wanted to? Like in so many other decisions before and after? Perhaps you should contemplate the workings of totalitarian government? Try reading the "Rape of Justice" by Mullins.

I'm being a dick? Fuck you, you miserable piece of zionist scrotum. If you lack the ability to translate propaganda pieces like this one, then you need to be shocked.


InTheLandOfTheBlind's picture

why? - because it would be good for your mental health... you might want to take your blood pressure medicine and i think your insulin is low.. and to allow you to troll some more - what the hell do you mean by translate proganda and being shocked?  nothing shocking about any of this... i am smart enough to realize that most anti-zionist are as much shills as the zionists they claim to argue against...  i am sick of you anti-tribal tribalists... hypocrites is the nicest thing anybody can say about your type...  

Sean7k's picture

Why is it good for my mental health? I should contain my frustration and let it eat at me? I should welcome your insults or other's stupidity? Why would I have medicine? Medicine is usually for morons that lack any real medical education or dietary restraint. Insulin is a function of diet, how would you know my diet? 

If you can't defend your argument, making an appeal through empathy is just...typical propaganda bullshit and sad. 





InTheLandOfTheBlind's picture

judging by your tone and language, it already is eating you... but go ahead and rail against those that never stood against you... i am sure that helps... seriously man, if you are let me get under you skin for what little i have said, i would suggest a hobby...  and what was my argument other than you being a dick, which you keep proving over and over again... other than that all i said it was on you for believing that the aca wasn't tax before scotus told you... that is all... keep railing against those windmills...  those aca death squads wouldn't even need to worry about you.  and my counselling fee can be paid in bitcoins or silver....  no paper please

Sean7k's picture

You might want to read for comprehension, my reference to SCOTUS was concerning SS. Typical of the youngsters, can't read. You must be king...

HoleInTheDonut's picture

Why would I have medicine? Medicine is usually for morons that lack any real medical education or dietary restraint.

Why would you be disappointed to hear SS is a ponzi scheme?  Believing in SS is usually for morons that lack any financial education or personal finance discipline.

Sean7k's picture

How is that quote relevant to your comment? Where did I express disappointment? Do you read what you type? Or just let your brain hemmorage on the keyboard? Because Headbanger has an exclusive on that.

monad's picture

ACA is the data collection for technofeudal slavery. From cradle to grave if you're not quota the State tells you you're being shipped to Adak but instead they harvest your organs and mulch. If your profile deviates from your assigned station, you get reassigned to Adak. You may have to fuck your doctor regularly so they don't designate you unfit. When you exceed the universal standard age of usefulness, you are assigned to the wonderful, free "retirement village".

CrashisOptimistic's picture

FYI, ZH, the item never discussed about Social Security is how profoundly racist it is.

Minorities are now a majority of the workforce.  They pay the most into Soc Sec, which funds present retirees, who are overwhelmingly white.


Black folks simply do not have the same life expectancy.  I didn't make those rules.  It's simply true.  They won't collect.  They pay in and they don't collect.

THIS . . . is the ugliest part of SS.

rubiconsolutions's picture

@Sean7k - Sometimes a cigar is just a cigar. Social Security is in fact a Ponzi scheme with all the attributes thereof. When you "contribute" to Social Security by way of FICA taxes where does that money go? To the general fund and current recipients (read Helvering v. Davis and Flemming v. Nestor). And when you are old enough to collect it where will that money come from? From those paying FICA taxes at the time. So in fact it is generational theft. And by the way, you don't contribute a dime to Social Security. Nobody does. It is stolen from you by way of immoral direct taxation. Right now the unfunded liabilities of Social Security is $16.7 Trillion. Medicare is underfunded roughly $87.7 Trillion and Medicare Part D (the relatively new prescription drug program) is underfunded $22.1 Trillion. How is that not generational theft? Someone is going to pay the bill and it will be the next generations that do so either by increased taxation or forfeiture of the money that was stolen from them through currency debasement and reduced benefits.

Sean7k's picture

Social Security now goes to the general fund, however, it used to go to the SSA to be invested (treasuries) and earn interest. This money was used by Congress(thus the promissory notes for this debt), which depleted the fund. The court rulings allowed the State to sidestep this inconveniet problem. 

The money to pay for SS will come from the general fund, that is funded by current tax revenues, because that is how government repays debts to itself. I don't contribute because it is stolen? Then I guess I don't pay any taxes. What a moron.

Underfunded numbers are just that, underfunded numbers. As long as Congress prioritizes SS over miltary spending, SS will get funded. This has nothing to do with generational theft, IT HAS TO DO WITH STATE THEFT. Same as GM underfunding a pension plan and dumping it on the taxpayers.

The problem is you are supporting a divisive piece of propaganda that misdirects the blame from the State to arbitrary citizen groupings. All government is a ponzi scheme, but it depends on a populace that is divided and ignorant. This article reinforces that meme. IF you can't see that, then you probably will be comfortable when Clinton gives you a cigar.

rubiconsolutions's picture

@Sean7k - "The problem is you are supporting a divisive piece of propaganda that misdirects the blame from the State to arbitrary citizen groupings." So individual citizen groups bear no responsibility what so ever? It's all the states fault? The state has no more power than the citizens allows it to have. And people in this country across the board have given government almost unbridled power by continuing to elect then reelect the same people over and over again. Ida May Fuller bore no responsibility at all for robbing her children and grand children when she, er, contributed $24.75 to the system and drew $22,288.82 in lifetime benefits?

And yeah, you don't contribute. To contribute implies doing something of your own volition and willingly. You contribute to your church. You contribute to a charity. You DON'T contribute when you pay taxes. At least if you're a normal person. You do so because a group of people with a monopoly over the use of force tells you to pay them or else you risk losing everything you've worked for, perhaps be imprisoned. It isn't a contribution when a gun is being held to your head. 

Finally, you said - "it used to go to the SSA to be invested (treasuries) and earn interest." You have got to be kidding. And where does this so called interest come from? The creation of more debt that's where. Government can't create interest except through stealing it from you and I. Government creates nothing.

StychoKiller's picture

[quote] The court rulings allowed the State to sidestep this inconveniet problem.  [/quote]

Apparently, you don't understand how the Court System works.

The Supreme Court examined the facts and the Law(s), then explained them, they DID NOT

give the State anything new.

Give a look-see to these:

Saving Social Security, Part 1:
Part 2:
Part 3:
Part 4:
Part 5:

malek's picture

 it used to go to the SSA to be invested (treasuries) and earn interest

When the federal budget is constantly running a deficit, your stated belief turns into a pure bookkeeping fiction.

DOT's picture

I don't think you need a qualifier in front of "theft". The money is stolen after those to be robbed are numbed by propoganda. The money is then turned over to political allies and used to consolidate and increase the power of the elites. Taxes is taxes and the sheeple don't have a say in how they are spent.

Generational conflict is a result of government planning.

RSloane's picture

One of the insidious elements of Obamacare is the wholly made up projected revenue streams from young people who they thought would immediately sign up for Obamacare. They were not expecting so many to say....."yeah go ahead and fine me".

NewAmericaNow's picture

Many have been fooled to believe they must participate in Social Security. That is entirely untrue. It is voluntary and you can opt out at any time.

Freddie's picture

Most of those young people voted for Hope & Change so let em eat cake.  I'm gettin mine.

The young better pay and the seniors & baby boomers better go visit Obama's death panels. 

These oldsters need to become Soylent Green.

"Soylent Green - it's people!" "Some of them even went to Woodstock!"  "Damn you!"  "Damn you all to hell!"