Tuesday, December 18, 2012

Social Security - the Ponzi scheme unmasked

Are you depending on Social Security (not to mention Medicare) to fund your declining years?  If so, I can only wish you good luck, because you're going to need it!  I've long been amused by those who froth at the mouth and insist that they paid into the 'system' for years or decades, and now they're 'entitled' to the benefits they 'paid for'.  Well, I hate to have to tell you this, but you've been conned.  You didn't invest in a future benefit - you paid a tax.  That tax is gone down the usual gigantic hole of government suck and fail.  It's paid for wars, buildings and fat-cat civil service benefits - but it's bought you nothing except politicians' promises . . . and we all know what those are worth.

We've known for years - smart people have known for generations! - that Social Security is a house of fiscal cards.  It's been used by the US government as a cash cow to be milked at will, without regard for the interests of those who depend on it.  The powers that be (particularly those on the left) have blithely insisted on the existence of a so-called 'Social Security Trust Fund' on which we can depend.  Now Megan McArdle demonstrates clearly how empty that fund - and government's promises - have always been.  Here's an excerpt.

... reasoning by analogy from a US government trust fund stuffed full of US corporate bonds to a US government trust fund stuffed full of US government bonds is really popular.  But if these two cases are actually parallel in the way that is implied, then a third case would also be parallel: a US corporate pension fund stuffed full of the bonds of that corporation ...

Such a pension fund would, of course, be illegal.  And for good reason: we recognize that it is not, in fact, a pension fund.  It’s a promise by the corporation to pay its workers at some later date, not a funded pension plan.  The company can call this anything they want—trust fund, pension plan, Ponzi scheme—but whatever we call it, we’d recognize it for what it is: a meaningless accounting fiction that does not in anyway enhance the security of worker retirements.  And if, say, Verizon tried to fund its pension plan this way, liberals would hit the roof.  Because we recognize that a pension fund full of third-party securities is not, in fact, very much like a pension fund full of securities issued by the same entity—corporate or government—that owes you the pension.

. . .

All of which is to say that this “trust fund” doesn’t bring anything to the party; if the company can pay, they will, and if they can’t, the workers get bupkis.  Which is why the government has very sensibly forbidden companies from funding their pension plans this way.  Funding corporate pensions with company bonds leaves retirees with nothing but a claim on the future sales of that corporation, which is to say, exactly what they had before you implemented the “trust fund”.  And funding social security with special, non-tradeable US bonds leaves beneficiaries with no more than the claim they already had on future tax revenues. 

. . .

If the SSA stops writing checks, it will be because the US government is out of money.  And if that happens, good luck waving those bonds in the air.

. . .

... the Supreme Court ruled in Flemming v. Nestor that the government can take away your benefits any time it wants to.  You have no legal rights to your Social Security benefits; you enjoy them at the pleasure of the US Congress.

The special-purpose bonds in the Social Security “trust fund” do not change this fundamental reality.  Those bonds are owed to the Social Security Administration, not to individual beneficiaries,  and you are not a shareholder of the Social Security administration.  Since Flemming v. Nestor, you’re not even a creditor of the Social Security Administration.  You’re just someone that they may or may not write a check to occasionally, as directed by Congress.  Unlike a private company, Congress can decide at any time to cut benefits, and a judge will simply sigh and suggest you start hunting for sales on Fancy Feast.

There's much more at the link.  Bold print is my emphasis.

If your progressive and liberal friends try to insist that "Social Security is healthy and doesn't need fixing", tell them to read Ms. McArdle's article.  You'll have the last laugh . . . even if it's a hollow one.



Billll said...

This would explain why members of congress aren't on SS but rather a special gold-plated retirement plan all their own.

Stuart Garfath said...

'A special gold-plated retirement plan all their own'.

This is exactly what all Australian Federal Government Politicians are on.

They have vastly different schemes (rather an appropriate word I think) than Joe or Jane Citizen are compulsorily enrolled on, whether they like it or not.
Those Australians with a working brain are furious at this inequity, but when they are questioned about this, the pollies just flip us the verbal 'bird', and retire overseas at their whim, taking everything they have legislated into their bank accounts, with not a care for those who are saddled with their unconcionable debts.

Australia is sick of this, we've had enough of this feather-bedding, and the next election will demonstrate as much.