The Social Security "Ponzi Scheme" - GRIFTOPIA, by Matt Taibbi

[polichick]

Beginning with then-Treasury Secretary Paul O'Neill, Taibbi writes:

"'I come to you as managing trustee of Social Security,' O'Neill said. 'Today we have no assets in the trust fund. We have the good faith and credit of the United States government that benefits will flow.'

"In other words, Greenspan and Reagan had conspired to hike Social Security payments, justifying it with the promise of building up a Social Security nest egg for subsequent decades, then used up that nest egg on current government spending.

<snip>

"To recap: Greenspan hikes Social Security taxes by a trillion and a half dollars or so, four presidents spend all that money on other shit (including, in George W. Bush's case, a massive tax cut for the wealthy), and then, when it comes time to start playing out those promised benefits, Greenspan announces that it can't be afforded, the money isn't there, benefits can't be paid out.

"It was a shell game - money comes in the front door as payroll taxes and goes right out the back door as deficit spending, with only new payroll taxes over the years keeping the bubble from popping, continuing the illusion that the money never left. Senator Daniel Patrick Moynihan, way back in 1983, had called this 'thievery,' but as the scam played out over the decades it earned a more specific title. 'A classic Ponzi scheme' is how one reporter who covered Greenspan put it."

GRIFTOPIA, pages 50-51
http://www.amazon.com/Griftopia-Machines-Vampire-Breaking-America/dp/0385529953/


So, here we are in 2010 with a new threat to Social Security in the form of a payroll tax holiday, rubber-stamped by both parties.

[tk2kewl]

1. yep...

turns out that the tax structure of the last 40 years was actually a regressive one rather than a progressive one, once they default on those notes.

[dkf]

2. Unless we stop paying all benefits that won't be the case.

Right now the progressive payments of social security are quite significant with the payout going to the lower incomes having an internal rate of return over 4% at the low end and about 1%.at the high end. The majority of people won't even get a t-bill return.

http://www.ssa.gov/OACT/NOTES/ran5/an2004-5.html

[tk2kewl]

3. Since we borrowed from the trust fund for general expenditures

which should be paid by income tax revenues, if we default on that debt we have created a regressive income tax out of social security payments. This is the case because of the cap on SS tax payments. Lower income tax payers pay a much higher percentage of their income into SS.

[sasha031]

4. if and when benefits are cut, the Democrats will get the blame

what will they stand for then.

[robcon]

5. All we have is the promise that the government will pay.

No different for any creditor.

[tk2kewl]

6. unfortunately it is different for other creditors

do you really think the government will default on securities held by the Chinese or the Saudis? I don't doubt that they would default on the ones held by SS, however.

[robcon]

12. 2 responses to this

1. The government can 'print' money to pay any bill.

2. A default, if it somehow occurred, would hit government vendors, not SS recipients, IMO.

[tk2kewl]

14. there will not be a "default" in a legal sense

their will be a law that has SS forgive the debt, which is a "default" in the true sense

[xchrom]

7. recommend

[polichick]

8. Thanks! There have been quite a few unrecs - not sure why. nt

[ProudDad]

9. Maybe this is why...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x14626

They show up on any post that tries to argue for economic Justice or says ANYTHING that might conceivably be construed as criticism of the current Resident...

[polichick]

11. I'll bet you're right - thanks! nt

[ProudDad]

10. K&R

[Blue_Tires]

13. ttt