US companies have large hoards of cash

[RichardJensen]

People "opted" to have fewer children

The problem is life expectancy and the decline of the middle class.

 

This generation (Y) is larger than the baby boom.

 

HOW does Social Security NOT depend upon a continual influx of new investors contributors?

Because people die.

[RichardJensen]

Everyone is assumed to be a beneficiary (upon reaching a certain age), and everyone is a contributor (with certain exceptions) prior to reaching that age.

All insurance works this way.

 

And periodically all insurance premiums need to be adjusted. Nothing is static.

 

The problem is FICA premiums and benefits need to be and have not been adjusted.

[RangerM]

The problem is life expectancy and the decline of the middle class.

 

This generation (Y) is larger than the baby boom.

Not big enough to offset the cost of supporting them.

 

Because people die.

They aren't dying at a rate inversely proportional to the birth rate. The system depends upon new contributors. Without contributors, there are no beneficiaries.

 

All insurance works this way.

And periodically all insurance premiums need to be adjusted. Nothing is static.

The problem is FICA premiums and benefits need to be and have not been adjusted.

And they won't be.

 

And no, all insurance does not work that way. For insurance to work the number of beneficiaries must be significantly less than the number of payers. Without this, you wind up with no insurance at all, but merely a payment plan.

[Ron W.]

The problem with SS is that it has never been treated as what it really is ..... A trust fund, not to be borrowed from.

 

 

Fixed it for you :shades:

[RichardJensen]

Not big enough to offset the cost of supporting them.

Which is due to extended life expectancy, not fewer new wage earners (which was your original assertion).

They aren't dying at a rate inversely proportional to the birth rate. The system depends upon new contributors. Without contributors, there are no beneficiaries.

Your assertion is flawed.

 

The ratio of beneficiaries to participants needs to be static to justify a static premium. The ratio of beneficiaries to wage earners has changed. The premium needs to change, or the benefits need to change.

 

The argument that the system 'depends' on new contributors is inexact. It doesn't address the core issue which is a premium contribution that is unaligned with the ratio of beneficiaries to wage earners.

 

To use an inexact argument to assert that SSI is a pyramid scheme is sloppy.

 

And no, all insurance does not work that way. For insurance to work the number of beneficiaries must be significantly less than the number of payers. Without this, you wind up with no insurance at all, but merely a payment plan.

There are many problems with these statements:

 

1) All insurance operates under the assumption that upon certain conditions any subscriber becomes a beneficiary. SSI is no different than life insurance, in that one can only claim SSI once, as opposed to auto and health insurance, where multiple claims are considered more or less probable.

 

2) For insurance to work the payments to beneficiaries must be roughly equal to the premiums collected.

 

3) It is not 'merely a payment plan' unless all beneficiaries may be expected to claim 100% of their contributed premium per year. This isn't the case, not even with health insurance.

 

And the ultimate problem with your statement above is that it is fundamentally and thoroughly unrelated to the question of SSI. The problem with SSI is simply that the premium and/or benefit table hasn't been adjusted.

 

It's that simple. No need to complicate it.

[RichardJensen]

Fixed it for you :shades:

That is such a fiction.

[RangerM]

Which is due to extended life expectancy, not fewer new wage earners (which was your original assertion).

My original assertion was that the ratio of (future) contributors to beneficiaries is less, not that there are less wage earners. There's a difference.

Your assertion is flawed.

 

The ratio of beneficiaries to participants needs to be static to justify a static premium. The ratio of beneficiaries to wage earners has changed. The premium needs to change, or the benefits need to change.

My assertion is based on the system as it is. Your's is based on what you believe it needs to be, which is how you have to go further by stating....

The argument that the system 'depends' on new contributors is inexact. It doesn't address the core issue which is a premium contribution that is unaligned with the ratio of beneficiaries to wage earners.

 

To use an inexact argument to assert that SSI is a pyramid scheme is sloppy.

And to just assume that you will simply get the electorate to accept the generational transfer of more income (through their personal effort) is, to say the least, unrealistic.

 

It's true that the old represent a significant voting block, however they still can't squeeze blood from a turnip.

 

There are many problems with these statements:

 

1) All insurance operates under the assumption that upon certain conditions any subscriber becomes a beneficiary. SSI is no different than life insurance, in that one can only claim SSI once, as opposed to auto and health insurance, where multiple claims are considered more or less probable.

Life insurance is sold in one of two ways; term and whole. SSI could be equated to whole life insurance, except in whole life insurance, the premiums paid are intended to be returned to the payer. SSI does not work that way. There is no guaranteed benefit. Your assertion is flawed.

2) For insurance to work the payments to beneficiaries must be roughly equal to the premiums collected.

I guess all those who work at the SSA work for free. Same goes for insurance agents, and other associated overhead costs. They just don't count?

3) It is not 'merely a payment plan' unless all beneficiaries may be expected to claim 100% of their contributed premium per year. This isn't the case, not even with health insurance.

Just because they don't claim the moneys this year doesn't mean they don't claim them. As it is (in the current system), the current SS beneficiary receives far more than he/she ever put into the system.

And the ultimate problem with your statement above is that it is fundamentally and thoroughly unrelated to the question of SSI. The problem with SSI is simply that the premium and/or benefit table hasn't been adjusted.

 

It's that simple. No need to complicate it.

I'm stating the way things are, currently. You aren't. Who is complicating it, me or you?

Edited October 30, 2010 by RangerM

[RichardJensen]

in whole life insurance, the premiums paid are intended to be returned to the payer.

Correct, but not entirely correct.

 

In whole life, the death benefit is generally far in excess of premiums paid, or even premiums paid plus a reasonable rate of return.

 

This is because of the law of large numbers, a law which also applies to SSI.

 

I'm stating the way things are, currently.

No. You're not.

 

You say that this is a pyramid scheme. A pyramid scheme, by definition, cannot have a sufficient number of members. However, there is a number of workers, x, which will stabilize SSI. If the current number of workers is, say, .8x that does not mean that the system is a pyramid scheme, as a fixed and determinable number of workers will satisfy the equation.

 

One might as well assert that loans are pyramid schemes, as loans require depositors, and if a bank has too many loans for its deposits, it needs new deposits.

Edited October 30, 2010 by RichardJensen

[RangerM]

Correct, but not entirely correct.

 

In whole life, the death benefit is generally far in excess of premiums paid, or even premiums paid plus a reasonable rate of return.

 

This is because of the law of large numbers, a law which also applies to SSI.

Again, the difference is that life insurance has a (contractually) guaranteed benefit, Social Security is not a guaranteed benefit, as the Supreme Court has ruled. There is no property right to Social Security benefits.

 

You say that this is a pyramid scheme. A pyramid scheme, by definition, cannot have a sufficient number of members. However, there is a number of workers, x, which will stabilize SSI. If the current number of workers is, say, .8x that does not mean that the system is a pyramid scheme, as a fixed and determinable number of workers will satisfy the equation.

I said it could be "equated" to a pyramid scheme, because with greater population, greater numbers of young are required to support the old (beneficiaries). At this time, the ratio of the number of workers-to-beneficiaries is going down.

 

The reason this is equivalent to a pyramid, is the lesser number of contributors is no different than the pyramid scheme's collapse when an insufficient number of new investors are brought in at the bottom.

 

And the Social Security Administration agrees with me that the number of workers per beneficiary is going down. (in this document).

 

 

Quote from the article

 

"The reason we are facing financial shortfalls in the future for Social Security is that current-law tax rates and benefit levels are in sync with each other for a “pay-as-you-go” system with a population that has 3 workers per beneficiary. In fact this ratio has been 3.3 workers per beneficiary in the U.S. from 1975 to today. Why? Because birth rates averaged 3.3 children per woman in the baby-boom era from 1946 to 1965, and close to that level in earlier decades. But since 1970 birth rates have been around 2 children per woman.

 

As these lower-birth generations move into the working ages, the number of workers per beneficiary will drop, reaching a stable level of 2.1 by 2035. It is this change almost exclusively that is responsible for raising the cost of OASDI benefits from the current 4.3 percent of GDP to the long-expected stable level of about 5.8 percent of GDP by 2030.

 

So what can we do, and is the Social Security benefit and financing system sustainable? Well, clearly we can increase the tax income to Social Security from the 2008 level of 4.9 percent of GDP to about 5.8 percent of GDP by 2040 and keep it at that level. Or we can reduce the scheduled benefit levels by about 22 to 25 percent by 2040, and maintain this reduced level. The choice of the mix between revenue increase and benefit reduction is the job of our elected representatives. But the sustainability of the Social Security program structure appears to be little in doubt given the stability of its expected cost after the effects of lower birth rates are fully realized."

 

That is the way things are.

 

One might as well assert that loans are pyramid schemes, as loans require depositors, and if a bank has too many loans for its deposits, it needs new deposits.

The Federal Reserve regulates how much banks are allowed to lend versus their deposits; to avoid inflation. The government doesn't play by the same rules.

Edited October 30, 2010 by RangerM

[BrewfanGRB]

There are all sorts of "problems" with Social Security, none of which cannot be fixed. The problem is the fix is ALWAYS politicized: either Democrats "taxing and spending" or Republicans "gutting Social Security".

 

SS is NOT an investment or retirement plan. It NEVER was intended to be. It ALWAYS was designed to be a mechanism to lessen poverty in the elderly poplulation. The problem is that full retirement age, when SS was introduced, was perceived as OLD...far, far fewer people made it to 65 and those that did, didn't make that much beyond it. Today, 65 is perceived as just the start of another part of your life and life expectancy proves it: If you make it to 65, you stand a very good chance of making it to 80 or 85 and a reasonable chance of making it to 100.

 

Personally, a "perception change" on SS is needed. We need to see it as insuring the elderly do not lapse into poverty. We've strictly correlated "I've paid in" to "I get THIS" and so it sets up any change in the tax rate or benefits to fail. It should be means-based (even more so than now--expanding the taxing of benefits on wealthy beneficiaries, etc). If one is opposed to SS working in this manner, then they are fundamentally opposed to a societal obligation to the elderly. One may BELIEVE caring for the elderly is the responsibility of the "family" but it does not work that way now and regardless, there will always be a poplulation of those who have no one to care for them. Are we really arguing that the wealthiest, 3rd most populous country on Earth cannot care for its elderly?

[RichardJensen]

Again, the difference is that life insurance has a (contractually) guaranteed benefit

That difference has no bearing on the similarity in function.

 

Life insurance and SSI function on the same basic principle: A defined pool of contributors supporting a statistically predictable pool of beneficiaries.

I said it could be "equated" to a pyramid scheme, because with greater population, greater numbers of young are required to support the old (beneficiaries). At this time, the ratio of the number of workers-to-beneficiaries is going down.

 

The reason this is equivalent to a pyramid, is the lesser number of contributors is no different than the pyramid scheme's collapse when an insufficient number of new investors are brought in at the bottom.

I understand. However, consider how broad a net you've cast:

 

One could, for instance, say that the real estate boom was a pyramid scheme, that the dot com boom was a pyramid scheme, that Enron was a pyramid scheme, that the collapse of the auto industry was a pyramid scheme, that the collapse of communism was a pyramid scheme, that the fall of Rome was a pyramid scheme, that the decline of unions was a pyramid scheme, that the Stock Market crash was a pyramid scheme, that the collapse of the British Empire was a pyramid scheme, and so on and so forth.

 

You could even argue that weight loss is a pyramid scheme.

 

If you are going to assert that something equates to a pyramid scheme simply because expenditures exceed income, thus driving the need for new income sources, then you've equated darn near everything to a pyramid scheme.

to avoid inflation.

The overnight rate (among other things) is the means for targeting inflation. Inflation is strongly tied to lending rates. The FDIC, not the Federal Reserve mandates loan to deposit ratios to preserve bank stability.

Edited October 31, 2010 by RichardJensen

[RangerM]

That difference has no bearing on the similarity in function.

 

Life insurance and SSI function on the same basic principle: A defined pool of contributors supporting a statistically predictable pool of beneficiaries.

One is a product designed to serve the demand of a set of willing participants with the guarantee of benefit (upon meeting contractual obligation), the other is implemented by force, with no guarantee of benefit.

 

One is choice-based, the other is force-based. Yes, those are the same basic principal.

One could, for instance, say that the real estate boom was a pyramid scheme, that the dot com boom was a pyramid scheme, that Enron was a pyramid scheme, that the collapse of the auto industry was a pyramid scheme, that the collapse of communism was a pyramid scheme, that the fall of Rome was a pyramid scheme, that the decline of unions was a pyramid scheme, that the Stock Market crash was a pyramid scheme, that the collapse of the British Empire was a pyramid scheme, and so on and so forth.

 

You could even argue that weight loss is a pyramid scheme.

 

If you are going to assert that something equates to a pyramid scheme simply because expenditures exceed income, thus driving the need for new income sources, then you've equated darn near everything to a pyramid scheme.

Pyramids are initiated and/or controlled a single, governing body. None of your examples (except maybe Enron) fall into that category.

 

Just because something isn't intended to be a pyramid (or ponzi) doesn't mean it isn't functionally equivalent.

[RichardJensen]

One is choice-based, the other is force-based. Yes, those are the same basic principal.

They are functionally similar. Your objections to its policies have no bearing on what it is.

 

Should I object because I'm forced to carry auto insurance, even though I have made exactly ONE claim in the last 15 years?

Pyramids are initiated and/or controlled a single, governing body. None of your examples (except maybe Enron) fall into that category.

 

Just because something isn't intended to be a pyramid (or ponzi) doesn't mean it isn't functionally equivalent.

How is SSI functionally equivalent to a pyramid scheme? It is not structured as a pyramid scheme (with each new investor encouraged to solicit other new investors). It is not operationally equivalent to a pyramid scheme, in that there are set formulas in place that require a set amount of income to produce a defined amount of benefits (pyramid schemes do not cap income potential). It is not run as a pyramid scheme, it was not conceived of as a pyramid scheme.

 

Its only *similarity* to a pyramid scheme is that *at present* (although certainly not historically) the fund lacks the income necessary to assure adequate future payouts (current income is still enough to meet current obligations).

[Mark8LSC CE0464]

Keep what I've paid in and let me get the hell out! There is no way SS will be around when I'm retired. Cut me loose, I can fend for myself.

[RangerM]

They are functionally similar. Your objections to its policies have no bearing on what it is.

 

Should I object because I'm forced to carry auto insurance, even though I have made exactly ONE claim in the last 15 years?

You aren't forced to carry auto insurance, because you aren't forced to drive a car. But carrying insurance is a prerequisite to driving that car on public roads (same as having a license). Park your car, drop your insurance, and turn in your tags. No one will put you in jail for failure to carry auto insurance. (or slap you with a financial penalty, as in the case of Obamacare)

 

You ARE forced to pay a percentage of your income to FICA, so they can give it to someone else.

 

If you wish to believe all insurance is intended as an income transfer program, fine. Social Security is welfare by another name.

 

Your objections to that characterization don't change the fact that moneys are transferred from those who earn it, to those who don't.

How is SSI functionally equivalent to a pyramid scheme?

 

Its only *similarity* to a pyramid scheme is that *at present* (although certainly not historically) the fund lacks the income necessary to assure adequate future payouts (current income is still enough to meet current obligations).

 

You answered your own question. Pyramids don't start out as inadequately funded, either. They end up that way.

 

As I said before, just because something isn't intended to be one thing, doesn't mean it doesn't end up that way. The road to Hell is paved with good intentions.

Edited October 31, 2010 by RangerM

[4d4evr-1]

Insurance is socialism

 

you pay into a group and share as needed by the individual

 

any who buys auto, life, medical insurance is in favor of socialism

 

If this is not true please explain how, I really am asking for your thoughts and am open to a different point of view.

[RangerM]

any who buys auto, life, medical insurance is in favor of socialism

 

If this is not true please explain how, I really am asking for your thoughts and am open to a different point of view.

Socialism is state ownership of industry; there is only one U.S. Government.

 

With private insurance, you are free to choose between Geico, State Farm, Nationwide, Aetna, or none at all, depending upon your needs or personal preferences.

 

Sometimes your choices are artificially-limited due to regulatory influences. As has been seen in the case of Obamacare, some insurance companies have simply chosen to exit the market, so in that case there is no choice.

Edited October 31, 2010 by RangerM

[4d4evr-1]

Socialism is state control of industry; there is only one U.S. Government.

 

With private insurance, you are free to choose between Geico, State Farm, Nationwide, Aetna, or none at all, depending upon your needs or personal preferences.

 

Sometimes your choices are artificially-limited due to regulatory influences. As has been seen in the case of Obamacare, some insurance companies have simply chosen to exit the market, so in that case there is no choice.

 

I don't understand, how is a group designed to spread the risk of costs not socialism? If you choose to join a group in insurance then you choose socialism.

 

As was stated earlier in my state I'm required to buy auto insurance in order to drive today, that was not the case decades ago and I bought auto insurance because I could not take the chance of loosing everything because of someone else' mistake.

 

I choose to have life insurance to protect my family against something that might happen.

 

I choose to have medical insurance because I might get sick.

 

I expect to pay more, and hope tp pay more than I get back. I hope my life insurance never pays off but I think it will. I just hope I pay more than I get back because it means I lived longer. The problem with SS is everyone wants more than they paid. That is not the purpose of insurance.

 

Oh yea, the problem with private SS is it could end up like AIG, just not enough funds to cover the costs. You know too big to fail.

[4d4evr-1]

Socialism is state control of industry; there is only one U.S. Government.

 

With private insurance, you are free to choose between Geico, State Farm, Nationwide, Aetna, or none at all, depending upon your needs or personal preferences.

 

Sometimes your choices are artificially-limited due to regulatory influences. As has been seen in the case of Obamacare, some insurance companies have simply chosen to exit the market, so in that case there is no choice.

 

I don't understand, how is a group designed to spread the risk of costs not socialism? If you choose to join a group in insurance then you choose socialism.

 

As was stated earlier in my state I'm required to buy auto insurance in order to drive today, that was not the case decades ago and I bought auto insurance because I could not take the chance of loosing everything because of someone else' mistake.

 

I choose to have life insurance to protect my family against something that might happen.

 

I choose to have medical insurance because I might get sick.

 

I expect to pay more, and hope tp pay more than I get back. I hope my life insurance never pays off but I think it will. I just hope I pay more than I get back because it means I lived longer. The problem with SS is everyone wants more than they paid. That is not the purpose of insurance.

 

Oh yea, the problem with private SS is it could end up like AIG, just not enough funds to cover the costs. You know too big to fail.

[RangerM]

I don't understand, how is a group designed to spread the risk of costs not socialism? If you choose to join a group in insurance then you choose socialism.

So if I shop at a particular store, as opposed to another, am I choosing socialism?

 

I may be chosing whom I associate with, but socialism is a system of government, not a club.

 

As was stated earlier in my state I'm required to buy auto insurance in order to drive today, that was not the case decades ago and I bought auto insurance because I could not take the chance of loosing everything because of someone else' mistake.

I live in your state (N.C.) You are forced to purchase liability insurance as a contract between you and the government for driving on public roads. If you wish to drive your truck on your private farm, noone can force you to purchase insurance. The choice is yours.

I choose to have life insurance to protect my family against something that might happen.

Again, your choice. It's the prudent one, but noone is forcing you to purchase it.

 

I choose to have medical insurance because I might get sick.

Another personal choice.

 

I expect to pay more, and hope tp pay more than I get back. I hope my life insurance never pays off but I think it will. I just hope I pay more than I get back because it means I lived longer. The problem with SS is everyone wants more than they paid. That is not the purpose of insurance.

But people treat insurance that way. With mandated coverages, people expect something for nothing. In our State of North Carolina, our health insurance policies are mandated by law to cover pap smears (one per year). I'm male. I don't need pap smears, yet I'm forced to pay for coverage for them if I want to purchase health insurance.

Oh yea, the problem with private SS is it could end up like AIG, just not enough funds to cover the costs. You know too big to fail.

Good parallel. But remember, as a secured creditor in AIG, you would have been entitled to whatever proceeds could have been garnered through bankruptcy. With the current SS system, you aren't entitled to anything at all.

Edited October 31, 2010 by RangerM

[4d4evr-1]

I will call you a Tar Heel as a fellow North Carolinian, well your from Raleigh so that may be an insult. If you are a Tar Heel, innocent till proven guilty.

 

My point was actually larger that the concept of insurance is socialism, I recognize that it is a capitalist system and you have your choice of suppliers but it is still the idea of spreading risks or all for the good of one. That I may give more than I get monetarily but the security is worth it.

 

Wait a minute, that is it Socialism. Security, Insurance, yep those are the words chosen to name it.

Edited October 31, 2010 by 4d4evr

[RangerM]

I will call you a Tar Heel as a fellow North Carolinian, well your from Raleigh so that may be an insult. If you are a Tar Heel, innocent till proven guilty.

I graduated from NC State in 1992, but it's a fair assumption. Here's a joke for you....

 

What do most Carolina fans and most NC State fans have in common? Neither went to Carolina!

My point was actually larger that the concept of insurance is socialism, I recognize that it is a capitalist system and you have your choice of suppliers but it is still the idea of spreading risks or all for the good of one. That I may give more than I get monetarily but the security is worth it.

 

Wait a minute, that is it Socialism. Security, Insurance, yep those are the words chosen to name it.

Actually, I might equate it more to small-scale communism. Communism is abolishment of private ownership. By purchasing insurance, you are transferring your ownership of personal risk to a collective.

 

But insurance is a product, subject to market influences, and given that it's optional, not really true communism.

Edited October 31, 2010 by RangerM

[4d4evr-1]

I graduated from NC State in 1992, but it's a fair assumption. Here's a joke for you....

 

What do most Carolina fans and most NC State fans have in common? Neither went to Carolina!

 

I will just say congrats on your FB season and we will see in a couple of weeks.

 

Actually, I might equate it more to small-scale communism. Communism is abolishment of private ownership. By purchasing insurance, you are transferring your ownership of personal risk to a collective.

 

But insurance is a product, subject to market influences, and given that it's optional, not really true communism.

 

Since in NC we are required to buy auto (liability to drive) insurance and rates are controlled by the state there are some blurred lines.

[RangerM]

Since in NC we are required to buy auto (liability to drive) insurance and rates are controlled by the state there are some blurred lines.

Definitely. I may be conservative, but even I don't advocate abolishment of all government. That would lead to anarchy. The argument is always where that line of demarcation (between government purview and individual freedom) should be positioned.

 

To me, the purpose of government should be to protect peoples' rights to life, liberty, and property from others' force or fraud. Beyond that, it starts to smack of a nanny state.

[4d4evr-1]

Definitely. I may be conservative, but even I don't advocate abolishment of all government. That would lead to anarchy. The argument is always where that line of demarcation (between government purview and individual freedom) should be positioned.

 

To me, the purpose of government should be to protect peoples' rights to life, liberty, and property from others' force or fraud. Beyond that, it starts to smack of a nanny state.

 

I think that is similar to what most would say, its just where to stop. I don't fly anymore so get rid of the FAA as an example, or the dept of education since I don't have kids anymore. It just comes down to what I think is required or needed. Then when does it pay to have preventative medicine. Should people be allowed to smoke and drive my insurance costs up. The uninsured going to the ER and not paying and then my rates go up so the hospital doesn't go out of business. Some idiot rock climber and getting lost and sending the military to find them, where does it start and stop. Those are big questions.

 

GO HEELS