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Killing The "We Paid Our Taxes; We Earned Our Benefits" Social Security Ponzi Meme
Submitted by Gary Galles of the Ludwig von Mises Institute,
“We paid our Social Security and Medicare taxes; we earned our benefits.” It is that belief among senior citizens that President Obama was pandering to when, in his second inaugural address, he claimed that those programs “strengthen us. They do not make us a nation of takers.”
If Social Security and Medicare both involved people voluntarily financing their own benefits, an argument could be made for seniors’ “earned benefits” view. But they have not. They have redistributed tens of trillions of dollars of wealth to themselves from those younger.
Social Security and Medicare have transferred those trillions because they have been partial Ponzi schemes.
After Social Security’s creation, those in or near retirement got benefits far exceeding their costs (Ida Mae Fuller, the first Social Security recipient, got 462 times what she and her employer together paid in “contributions”). Those benefits in excess of their taxes paid inherently forced future Americans to pick up the tab for the difference. And the program’s almost unthinkable unfunded liabilities are no less a burden on later generations because earlier generations financed some of their own benefits, or because the government has consistently lied that they have paid their own way.
Since its creation, Social Security has been expanded multiple times. Each expansion meant those already retired paid no added taxes, and those near retirement paid more for only a few years. But both groups received increased benefits throughout retirement, increasing the unfunded benefits whose burdens had to be borne by later generations. Thus, each such expansion started another Ponzi cycle benefiting older Americans at others’ expense.
Social Security benefits have been dramatically increased. They doubled between 1950 and 1952. They were raised 15 percent in 1970, 10 percent in 1971, and 20 percent in 1972, in a heated competition to buy the elderly vote. Benefits were tied to a measure that effectively double-counted inflation and even now, benefits are over-indexed to inflation, raising real benefit levels over time.
Disability and dependents’ benefits were added by 1960. Medicare was added in 1966, and benefits have been expanded (e.g., Medicare Part B, only one-quarter funded by recipients, and Part D’s prescription drug benefit, only one-eighth funded by recipients).
The massive expansion of Social Security is evident from the growing tax burden since its $60 per year initial maximum (for employees and employers combined). Tax rates have risen and been applied to more earnings, with Social Security now taking a combined 12.4 percent of earnings up to $113,700 (and Medicare’s 2.9 percent combined rate applies to all earnings, plus a 0.9 percent surtax beyond $200,000 of earnings).
Those multiple Ponzi giveaways to earlier recipients created Social Security’s 13-digit unfunded liability and Medicare’s far larger hole. And despite politicians’ repeated, heated denials, many studies have confirmed the results.
One recent study of lifetime payroll taxes and benefits comes from the Urban Institute. For Medicare, they calculated that (in 2012 dollars) an average-wage-earning male would get $180,000 in benefits, but pay only $61,000 in taxes — “earning” only about one-third of benefits received. A similarly situated female does even better. The cumulative “excess” benefits equal $105 trillion, with net benefits increasing over time.
The Urban Institute’s calculations revealed a different situation for Social Security. An average-earning male who retired in 2010 will receive $277,000 in lifetime benefits, $23,000 less than his lifetime taxes, while for females, their $302,000 in lifetime benefits approximates their lifetime taxes. And things are getting worse. By 2030, that man will be “shorted” 16 cents (10 cents for women) of every lifetime tax dollar paid.
While those results resoundingly reject “we earned it” rhetoric for Medicare, the Social Security results, with new retirees getting less than they paid in, could be spun as “proving” Social Security is not a Ponzi scheme. However, that would be false. The reason is that Medicare is still in its expansion phase, as with Medicare Part D, piling up still bigger future IOUs. However, Social Security has essentially run out of new expansion tricks, although liberal groups are pushing to apply Social Security taxes to far more income as one last means of robbing those younger to delay the day of reckoning. That simply means that we are being forced to start facing the full consequences of the redistribution that was started in 1935. That is, the current bad deal Social Security offers retirees is just the result of the fact that it has been a Ponzi scheme for generations, and someone must get stuck “holding the bag.”
In fact, perhaps the best description of the current Social Security and Medicare situation comes from Henry Hazlitt, long ago, in Economics in One Lesson:
Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.
Social Security and Medicare’s generational high-jacking has become “the third rail of politics” in large part because seniors want to believe that they paid their own way. But they have not. They have only paid for part of what they have gotten. The rest has indeed been a Ponzi scheme. And as Social Security is already revealing, the future cannot be put off forever, however much wishful thinking is involved. Some are already being forced to confront the exploding pot of IOUs involved, and it will get much worse.
The supposedly “most successful government program in the history of the world,” according to Harry Reid, has turned seniors into serious takers. The fact that some of them are now starting to share the pain caused by those programs does not contradict that fact. It just shows the dark side of the most successful Ponzi scheme in the history of the world.
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Better re-check those figures ADR, 'cause the benefit you receive depends on what you paid in. Spouses who did not work much or at all can get ONE-HALF of their spouses benefit; not an equal amount.
And, so what? "SS might be an entitlement just like food stamps is an entitlement. Long as you meet the qualifications you're entitled to benefits." You suckered me to read further than I knew I should, then you finally prove you know nothing.
Your response supplied no factual basis, just personal attack, so we'll assume you know nothing.
Average person living in the US at the lowest income levels, including each non-citizen resident, has access to more handouts than retired US Presidents had pre 1958, that is numbers 1 - 34 Washington up to Eisenhower who received no pension benefits. Many had to work after office to make a living or died broke like Grant.
No monthy check for housing, SNAP benefits or that scam Bi-Polar disability diagnosis.
We are much more "generous" with other people's money now days. We have "progressed".
Good thing we have the Fed to "stabilize prices." We wouldn't want to see deflation in anything but wages. I hope we continue to repeat the mistakes of the first Great Depression and continue the current Great Depression for another decade. /sarcasm.
How long are The People going to get sucked in to Blaming and being PO'd at another Group of The People, be it like this, where its the Young vs the Old, Women vs Men, Hard Hats vs Hippies (the 60's diversion) before WE All realize the Tactic being employed ...go ahead and Blame your fellow man while TPTB Elite are robbing us ALL to the Bone ... If there was No CAP on SS Payroll Deductions there would be a huge Surplus and/or lower FICA Tax
"Social Security benefits have been dramatically increased. They doubled between 1950 and 1952. They were raised 15 percent in 1970, 10 percent in 1971, and 20 percent in 1972, in a heated competition to buy the elderly vote. Benefits were tied to a measure that effectively double-counted inflation and even now, benefits are over-indexed to inflation, raising real benefit levels over time."
LOL, did a Neo-Con write this article? He is actually going by the government data known as CPI? Wow.
That being said Social Security will come crashing down Madoff style, except no one will go to jail.
I don't see any menton that some people die before age 65 and get nothing back. That must balance out some of the people who get more than they paid.
C'mon man, no one here gives a shit about small-caliber here. You're monkeying with a ZH meme fer crissakes!
WRONG WRONG WRONG. Everything here is viewed out of context.
What is Social Security? Answer. It is an extra ordinary protection paid for with money from the publics treasury. A PRIVILEGE. A TAXABLE privilege. It is NOT insurance and it is NOT a contract as contract would involve a PROPERTY RIGHT. YOU have no property in a PRIVILEGE that can be modified or taken away at the will of the legislative body that created it NOR do you have ANY PROPERTY in the public's treasury.
WHERE do you ignorant sheep think the State and federal governments got the power to use your wage as a unit of measurement to calculate the excise taxes withheld from your paychecks? WHO gave the feds the power to interfere with the obligation of contracts and at the same time MOOT the federal constitutions requirements that ALL direct taxes on property MUST be apportioned?
I hate articles like this. OFF POINT BULLSHIT. We are dealing with WAIVERS of both CONTRACT and PROPERTY via State/federal cooperation through the federal COMPACT CLAUSE. WTF. Does NO one understand what has transpired? Does NO ONE understand HOW the courts of Law and Equity were REMOVED from the entire equation? ANYBODY?????
and if gov reneges on that privilege there would serious repercussions. but everything is a privilege by your reasoning, including the money you deposited in the bank (for legal purposes your savings account is considered a loan to the bank, and if that bank loses the money your redress is to get in line with the other creditors) the problem from a contractual pov is that many many riders have been attached to the original document, because the states werent doing a very good job of taking care of the disables and handicapped people. SSI is the 800 lb gorilla in the room the retirees portion of the fund is manageable esp since COLAs are designed to basically starve you out the longer you live (it was always this way) we're a culture which rewards productivity, we have little tolerance for aging for infirmity. other countries take better care of their elderly, even though they are poorer than america. this really is no country for old men or women
First no one ever asked a senior if they wanted to contribute to Social Security; we paid a significant amount in to it our whole working lives; not as an option. The partial fix it to put all government employees, to include but not limited to, Congressmen, Senators, the President and all other government employees into the above mentioned programs. One of the many reasons that these programs are not liquid is that the government officials are the very ones that stole the liquidity.
The SS money went towards dirty wars. Which is high irony if you read that last sentence.
The FED owes SS at least $3 Trillion. That is not a ponzi scheme thats a theft.
Every few years our national politicians roll out some massive Ponzi Scheme merely to keep the masses quiet; to keep the rich, very rich; and to insure another 20 years of political control. Unfortunately for them, Obamacare seems to be shitting the bed a little early and will probably not have the life of SSI and Medicare. Hell, it might even hurt some Democrats in elections. However, the real point is, why do we keep falling for this crap? Are we really this stupid? We keep buying the snake oil. I think that the only thing that will turn this nonsense around is a huge economic depression, AND it could be very close by.
Let me tell you kids something you do not grasp.
As long as Government lasts they are going to be taking your money. There is nothing you can do about it.
You had better be getting this form of Government to promise you SOMETHING for the money they take because that is the best deal you are Ever going to get.
Do you really believe that if the Government dropped SS they would stop taking your money, they survive off of that money. They will just call that SS deduction something else only you will not even get a promise.
Interestingly, the article doesn't say anything about interest earned on our contributions. I'd like to see the calculation done to include our contributions, our employers' contributions, and a reasonable real rate of return on those contributions. Then we can logically discuss a payout and an end to the SS scheme.
If I make a lowly $35k a year and then there is a $5k a year contribution to the SS from me and my employer. And this continues for 40 years with no increase in wages. And at 5% interest that figures out to around $670,000.00. Paid out at $1200 a month. That's over 40 years of retirement payments.
It's more the disability and medicaid programs, include the medicaid prescription plan that is breaking the system.
other than the fact that interest rates are .15% max on desposits right now.
ADR - that's not the point. We made our contributions over the last 40 years, not just this year, so the current interest rate isn't important. But a "real" rate is, meaning a rate over inflation.
Just look at the ROI for SS contributions for an average salary and for a person who maxes out their SS. The person with an average salary gets a 75% higher return on their investment. (This can easily be confirmed with the .gov SS calculator.) That means that those with higher incomes subsidize those with lower incomes. Therefore, this is not an investment, and not insurance. It is, at least in part, an entitlement.
Uh, those with high incomes only pay on part of their earnings, not all.
And there is a maximum monthly benefit payout also ding bat. What he is saying is that someone who maxed out their contributions doesn't make out as well as the person who did not.
Still paying Social Security amd Medicare taxes? I'm 72 and my wife is 66. We have a small business...a very small business. For the past 25 years as a sole proprietorship we have paid the full 15.3% tax for SS & Medicare, unlike those who are otherwise employed by some company and only pay 7.65%, yet we receive the same amount in benefits as those who paid half the taxes that we did, and, we continue to pay those taxes.
I would have greatly preferred to have been able to invest those funds and been responsible for my own healthcare and retirement funds. BUT, I DIDN'T HAVE THAT CHOICE!
Perhaps we should rely on personal responsibility. You didn't save, too bad. I shouldn't have my money stolen to support others. Perhaps if my money wasn't stolen I would use some of it to help people I want to help, instead of being forced to support the leaches sucking off the system.
I've paid tens of thousands of dollars in car insurance on 19 years. Never made one claim. My money went to pay for irresponsible people, and most of it actually went to pay lawyers. Why do you have to pay? Well because the government says you have to and if you don't, somebody you hit at 10 miles per hour in a parking lot will claim life threatening injuries and use a lawyer to take everything you have.
Over $150k has been paid by my employer and I over the past decade for my health insurance. The biggest use of that money was the birth of my son that cost the insurance company $10k. The rest went to pay for others and once again a league of lawyers.
My tax dollars are taken to fund the will of the league of lawyers than inhabit Washington, so they can get rich without really doing much at all. My tax dollars support the government that supports the outright theft of whatever wealth I have left to keep Wall Street going. The Ponzi Scheme of all Ponzi Schemes.
One thing we can learn from the Japanese, even with how screwed up they are, is personal responsibility. One reason why that country has gone down the tubes is that they have been infected by the responsibility of someone else virus. In Japan each store is in charge of keeping the sidewalk in front of it clean. It is the responsibility of a restaurant to pay it's servers and not rely on the generosity of others to pay them with tips. Effectively a forced tax on patrons. Tips are still voluntary, but try to get a good meal in a restaurant where you didn't tip a server in America. Japan used to have honor and personal responsibility. There is still a feeling of that left, but the country is far different today than when I first starting going there twenty years ago.
Leave it to people to decide whether or not to help people. Abolish the central authoritarian government and let local government handle the needs of people. A small group will always be able to take care of themselves better than a few trying to take care of the many. Liberals and progressives can't do this, they can;t give up on the idea of central control. Perhaps that is because they believe nobody will help anyone unless they are forced to do it. I believe this comes from the sociopathic self centered tendencies of most progressives. They have created a system to where they do not have to part with theirs, as long as they can steal enough from others to cover the tab.
I don't want to pay a dime towards refilling a welfare queen's EBT card on the first Friday of the month. In a just society I wouldn't have to. If I felt that a person truly needed help, instead of taking it just because they are lazy and expect it, I would help. I'd take in my Grandmother if it meant I wouldn't have to pay FICA taxes. I even filled in the potholes in front of my house because the city couldn't be bothered to do it. I even did a better job than they would have done because I care about the suspension in my car.
You paid your taxes. You earned your benefits. And, then Jamie Dimon, Loyd Blankfein and Janet Yellen came in and stole it. Now they are arming the DHS, FEMA and the TSA to kill you M'Fers. Die die die to the pensioners and the elderly planned for you they have.
SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS
Inmate of the open-air prison run by lunatics and populated almost entirely by zombies is seeking pen-pal because God gave Eve to Adam … and Aldous Huxley gave someone to Winston Smith.
For mutual support in these trying times, am seeking fellow non-zombie intelligent, open-minded, and well-informed inmate for discussing topics of mutual interest, such as:
Historical Revisionism of WW1 and WW2 per Harry Elmer Barnes, 1889–1968;
John Kenneth Galbraith as a two-handed economist;
Bankers v. The People going way back to Andrew Jackson;
contemporary Capitalist Crisis as predicted by Karl Marx;
1984, Alice in Wonderland, and The Wizard of Oz as works of history;
Newspeak, shunning, strawman, etc. as effective social controls;
zerohedge.com as island of sanity, albeit sorely lacking collegiality; and
identifiable weaknesses in the prison system which might allow its escape.
SOS SOS SOS SOS SOS SOS SOS SOS SOS SOS
Where were you when they were handing out trillions of dollars to the richest banks and richest banksters in the world? Why is it ok to give them trillions of dollars for nothing but not ok to give granny a few thousand after she paid into the system for 40 years?
Recalculate this based on compounded interest at the 20 year treasury bill rate across the lifetime of beneficiary payments into the system.
I have half a dozen friends that paid in until they died in there late fifties. They will be glad to know they will getting such a great return.
Their widows/wiowers WILL be glad.
Can't upvote your comment Papasmurf due to the italics, but I certainly here you. That "dollar" you paid in back in the 60's would purchase about a dime today; any comparison of paid-in/benefit is pure propaganda w/o the conversion.
While US Government looting of the Social Security trust fund has resulted in the practice of using SS payments from the young to fund the benefits of the retirees, the system was not started that way, nor was it presented to the American taxpayers that way. Americans pay into the Social Security trust fund with deductions from every paycheck. It is a separate deduction, because technically that money remains the property of the taxpayer, entrusted to the US Government for retirement investment. In the 1980s, Social Security withholding was increased to build up a cash surplus to deal with the expected flood of baby-boomer retirees, but starting with the Clinton administration, the Federal Government "borrowed" that cash to balance the Federal budget and now they cannot pay it back. The US Government is already in a state of economic default, having defaulted on every American who paid into the Social Security trust fund.
So we are starting to see a flood of obvious propaganda articles trying to convince America why it is okay to stiff the retirees of their Social Security money, like it is a good thing that the government has embezzled their retirement savings. This is part of a larger propaganda campaign to build public support for reducing/ending more social programs, consisting of bogus claims that people on food stamps are eating lobster and filet minion, and bogus calls into radio stations by people claiming to be proud they are living high on the hog on public assistance while they spend all day smoking pot. As one who actively participates in local assistance programs for the hungry, the vast majority of them are hardly living comfortable lives. Indeed the food stamp money only lasts three weeks out of the month for even the most frugal family.
The money-junkies are desperate. The Ponzi-scheme isn't Social Security, but the federal reserve, and it hovers at the edge of collapse. As the possibility of invading Iran to support the Petrodollar and global use of the US dollar recedes, the rush is on to loot the American people by any means necessary; to strip them of their last penny before the whole shebang collapses and the money-junkies skedaddle to other lands with their ill-gotten gains.
Maybe todays retirees should have made more of a fuss when the politicians promised lower taxes and more benefits then at the expense of spending thier SS savings. They didnt so they collectively own the consequences. Welcome to a Republic.
You forgot to mention the cash that was in SS was looted beginning in the early 80's and replaced with IOUs(worthless). If you want to cut spending and stiffing those who DID pay in, start with welfare, those that haven't done shit for their "benefits"
It was LBJ who started the looting.
This should be no surprise to anyone over 50. I am 50 and I remember well the discussions I had with my peers in highschool about how we were never going to see our SS money, because we were the tail end of the baby boom
QUESTION: I have been under the impression that if the government would keep its paws off SS, it would be self-sustaining. For example, during the Clinton years, didn't they rob the SS trust fund of two trillion dollars that of course was never paid back? If they would quit using SS as a slush fund, wouldn't SS be a viable, good program?
Also, was SS always for people with disabilities too? So many attorney advertise that they will help you get disabilty - I wonder what an accurate estimate is of how many draw SS disability who don't really qualify.
QUESTION: I have been under the impression that if the government would keep its paws off SS, it would be self-sustaining. For example, during the Clinton years, didn't they rob the SS trust fund of two trillion dollars that of course was never paid back? If they would quit using SS as a slush fund, wouldn't SS be a viable, good program?
Also, was SS always for people with disabilities too? So many attorneys advertise that they will help you get disabilty - I wonder what an accurate estimate is of how many draw SS disability who don't really qualify.
Leave Social Security the fuck alone. Stop hammering away at it assholes.
Okay, we've paid in since 1963, at first not so much but later a lot. We've received checks for about 5 years. They cover our groceries and some household expenses.
Cut us off now! It will be okay. But let us stop paying in, for God's sake, and let every young person stop paying in, and stop promising benefits to them; everyone doing the promising should have his/her tongue cut off.
Let older folks who still are working either buy insurance or start saving like crazy, and stop paying into the ponzi system, or continue paying into the ponzi but with a contract (given them in advance so they can make the right decision for themselves) regarding what they'll receive.
This won't completely solve the problem(s) but the solution should start right now with whatever steps can be taken by those who are willing. And government should be forced to go along, for once.