Why was social security not modeled on a pay-in, pay-out system?

[PingSpike]

So right when some people started paying into SS, some other people who hadn't paid a dime were collecting. WTF? Now we've got a huge retiring population and a smaller work force to cover it...and we're crying about how to fix it. Did no one see this scenario coming? Wouldn't the smart thing to have done is just have the same people who paid in get the benefits at the end? That way when there is a boom in population there is a boom in generated revenue and it properly covers those without running into deficits.

And why the hell are people above say $80k a year (I think) exempt from paying this tax?

Whether you agree with social security or not...don't you have to agree that it was poorly implemented?

And I'm sure there would be people toward the end of their work force b|tching...but they would get the little bit they put in back so who cares?

I guess "pay as you go" is a foreign concept to our government however. Now that I think about it, as soon as a population burst came along and there was a boat load of cash in the social security fund some asshole would probably raid it for political gain and leave the problem for the next guy to clean up. Thats how everything else in our government works afterall.

If you're going to do social programs, fine. But at least fvcking fund them properly. It seems like any retard who could add and had read a history book should have been able to see this one coming.

 

[HalosPuma]

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

 

[PingSpike]

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

Ah. I see, nothing wrong with that really then.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Why? The system above would be a forced savings account basically, rather than a forced community retirement pot.

This system would still rely on some people dying early to cover those who live longer. And if the average lifespan increases they'll either have to increase the tax or push the retirement age further back.

It wouldn't be perfect or fix all the problems with the system, but it seems like it would have alleviated the massive amount of strain that a large population shift (a totally reasonable expectation) would have caused.

I'm not even arguing for or against social security here. Just arguing that I think it wasn't properly setup.

 

[Train]

because if it was pay-in pay out, it wouldnt be socialist, it would be a regular retirement fund. FDR used the great depression to start SS the same way Bush used 9/11 to start a war.

I'm reading a study right now that explains how most of FDR's programs actually prolonged the great depression rather than get us out of it.

EDIT: FDR's Folly

Editorial Reviews

From the Inside Flap
?Admirers of FDR credit his New Deal with restoring the American economy after the disastrous contraction of 1929?33. Truth to tell?as Powell demonstrates without a shadow of a doubt?the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government. Powell?s analysis is thoroughly documented, relying on an impressive variety of popular and academic literature both contemporary and historical.?
?Milton Friedman, Nobel Laureate, Hoover Institution

?There is a critical and often forgotten difference between disaster and tragedy. Disasters happen to us all, no matter what we do. Tragedies are brought upon ourselves by hubris. The Depression of the 1930s would have been a brief disaster if it hadn?t been for the national tragedy of the New Deal. Jim Powell has proven this.?
?P.J. O?Rourke, author of Parliament of Whores and Eat the Rich

?The material laid out in this book desperately needs to be available to a much wider audience than the ranks of professional economists and economic historians, if policy confusion similar to the New Deal is to be avoided in the future.?
?James M. Buchanan, Nobel Laureate, George Mason University

?I found Jim Powell?s book fascinating. I think he has written an important story, one that definitely needs telling.?
?Thomas Fleming, author of The New Dealers? War

?Jim Powell is one tough-minded historian, willing to let the chips fall where they may. That?s a rare quality these days, hence more valuable than ever. He lets the history do the talking.?
?David Landes, Professor of History Emeritus, Harvard University

?Jim Powell draws together voluminous economic research on the effects of all of Roosevelt?s major policies. Along the way, Powell gives fascinating thumbnail sketches of the major players. The result is a devastating indictment, compellingly told. Those who think that government intervention helped get the U.S. economy out of the depression should read this book.?
?David R. Henderson, editor of The Fortune Encyclopedia of Economics and author of The Joy of Freedom

The Great Depression and the New Deal. For generations, the collective American consciousness has believed that the former ruined the country and the latter saved it. Endless praise has been heaped upon President Franklin Delano Roosevelt for masterfully reining in the Depression?s destructive effects and propping up the
country on his New Deal platform. In fact, FDR has achieved mythical status in American history and is considered to be, along with Washington, Jefferson, and Lincoln, one of the greatest presidents of all time. But would the Great Depression have been so catastrophic had the New Deal never been implemented?

In FDR?s Folly, historian Jim Powell argues that it was in fact the New Deal itself, with its shortsighted programs, that deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. You?ll discover in alarming detail how FDR?s federal programs hurt America more than helped it, with effects we still feel today, including:

? How Social Security actually increased unemployment
? How higher taxes undermined good businesses
? How new labor laws threw people out of work
? And much more

This groundbreaking book pulls back the shroud of awe and the cloak of time enveloping FDR to prove convincingly how flawed his economic policies actually were, despite his good intentions and the astounding intellect of his circle of advisers. In today?s turbulent domestic and global environment, eerily similar to that of the 1930s, it?s more important than ever before to uncover and understand the truth of our history, lest we be doomed to repeat it.

 

[piasabird]

It would be cheaper to let the old folks starve or live off their children.

 

[MisterCornell]

Social Security was meant to be a political payoff for FDR. It was more convenient to have "something for nothing", i.e. instant benefits being paid out to those who had paid nothing into it.

 

[Engineer]

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Cap for 2004 was $87,900.

Cap for 2005 is $90,000

 

[charrison]

When there were 20 worker to each retired person, this was an easy sell. It was low cost and high return(for those that got it).

Today there are few workers for each retired person. This is making it a high cost and low return and much harder to sell.

 

[DragonMasterAlex]

Originally posted by: charrison


When there were 20 worker to each retired person, this was an easy sell. It was low cost and high return(for those that got it).

Today there are few workers for each retired person. This is making it a high cost and low return and much harder to sell.

Not to mention that at the time most people were expected to go tits up before collecting. Damn medical science for keeping people alive longer! If not for the meddling of scientists Social Security would be just fine!

Jason

 

[sandorski]

The Crash of '29 likely had a great affect on how SS was formed. The Stock Market and Banking System collapsed, I'd think that no one had confidence in them at the time. Another reason was that no one probably thought that a Baby Boom was going to happen, the source of the problem.

 

[digitalsm]

Originally posted by: Train
because if it was pay-in pay out, it wouldnt be socialist, it would be a regular retirement fund. FDR used the great depression to start SS the same way Bush used 9/11 to start a war.

I'm reading a study right now that explains how most of FDR's programs actually prolonged the great depression rather than get us out of it.

EDIT: FDR's Folly

Editorial Reviews

From the Inside Flap
?Admirers of FDR credit his New Deal with restoring the American economy after the disastrous contraction of 1929?33. Truth to tell?as Powell demonstrates without a shadow of a doubt?the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government. Powell?s analysis is thoroughly documented, relying on an impressive variety of popular and academic literature both contemporary and historical.?
?Milton Friedman, Nobel Laureate, Hoover Institution

?There is a critical and often forgotten difference between disaster and tragedy. Disasters happen to us all, no matter what we do. Tragedies are brought upon ourselves by hubris. The Depression of the 1930s would have been a brief disaster if it hadn?t been for the national tragedy of the New Deal. Jim Powell has proven this.?
?P.J. O?Rourke, author of Parliament of Whores and Eat the Rich

?The material laid out in this book desperately needs to be available to a much wider audience than the ranks of professional economists and economic historians, if policy confusion similar to the New Deal is to be avoided in the future.?
?James M. Buchanan, Nobel Laureate, George Mason University

?I found Jim Powell?s book fascinating. I think he has written an important story, one that definitely needs telling.?
?Thomas Fleming, author of The New Dealers? War

?Jim Powell is one tough-minded historian, willing to let the chips fall where they may. That?s a rare quality these days, hence more valuable than ever. He lets the history do the talking.?
?David Landes, Professor of History Emeritus, Harvard University

?Jim Powell draws together voluminous economic research on the effects of all of Roosevelt?s major policies. Along the way, Powell gives fascinating thumbnail sketches of the major players. The result is a devastating indictment, compellingly told. Those who think that government intervention helped get the U.S. economy out of the depression should read this book.?
?David R. Henderson, editor of The Fortune Encyclopedia of Economics and author of The Joy of Freedom

The Great Depression and the New Deal. For generations, the collective American consciousness has believed that the former ruined the country and the latter saved it. Endless praise has been heaped upon President Franklin Delano Roosevelt for masterfully reining in the Depression?s destructive effects and propping up the
country on his New Deal platform. In fact, FDR has achieved mythical status in American history and is considered to be, along with Washington, Jefferson, and Lincoln, one of the greatest presidents of all time. But would the Great Depression have been so catastrophic had the New Deal never been implemented?

In FDR?s Folly, historian Jim Powell argues that it was in fact the New Deal itself, with its shortsighted programs, that deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. You?ll discover in alarming detail how FDR?s federal programs hurt America more than helped it, with effects we still feel today, including:

? How Social Security actually increased unemployment
? How higher taxes undermined good businesses
? How new labor laws threw people out of work
? And much more

This groundbreaking book pulls back the shroud of awe and the cloak of time enveloping FDR to prove convincingly how flawed his economic policies actually were, despite his good intentions and the astounding intellect of his circle of advisers. In today?s turbulent domestic and global environment, eerily similar to that of the 1930s, it?s more important than ever before to uncover and understand the truth of our history, lest we be doomed to repeat it.

My favorite is slaughtering 500,000 pigs and burying them, while millions starved.

Or tilling under crops while millions starved.

Or I could go on and on about the assinine things FDR proposed and did.

 

[Hayabusa Rider]

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Explain what hyperinflation is, and how it would occur with SS.

Do you understand the terms you are using?

 

[3chordcharlie]

Don't forget that the major problem was the system isn't very robust WRT errors in forcasting population demographics. If not for the large 'baby-boomer' cohort, or if birth-rates had been maintained, then a little bit of fudging rates probably could have fixed the system without too much pain for anyone.

The rather unusual demographic makeup of the mid-late 20th century 'west' is a large part of the reason that SS-like programs are in trouble in most nations that have such programs. Lack of political will to address the problem (in any of a thousand different ways; cancel it/adjust rates or benefits/etc) back in the 40's, or even as late as the 70's or 80's is the major reason that the systems now face drop dead dates with little hope of miraculous recovery.

As usual, politicians weren't willing to stake their careers on something as un-sexy as SS reform through this period, and the result is a BFM that we all get to deal with.

 

[Infohawk]

Originally posted by: 3chordcharlie
As usual, politicians weren't willing to stake their careers on something as un-sexy as SS reform through this period, and the result is a BFM that we all get to deal with.

Isn't bush starting to?

 

[Tommunist]

Originally posted by: HalosPuma

Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

I don't see this happening - it would be an awful decision for our economy.

 

[HalosPuma]

Originally posted by: WinstonSmith

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Explain what hyperinflation is, and how it would occur with SS.

Do you understand the terms you are using?

No politician is going to default on the SS promise. To do so would mean they would be thrown out of office the next election or even recalled. So what does one do? The same thing that has been done since 1913 (Fed created) and in much greater force since 1965 (off gold standard) - have the Fed create money from nothing. (i.e. US sells trillions of dollars of treasuries to the Fed for which the US gets trillions of dollars). That fiat money is just like the money we use today, except there is more of it in circulation which means the purchasing power decreases.

The classical definition of inflation is an increase in the money supply.

 

[3chordcharlie]

Originally posted by: HalosPuma

Originally posted by: WinstonSmith

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Explain what hyperinflation is, and how it would occur with SS.

Do you understand the terms you are using?

No politician is going to default on the SS promise. To do so would mean they would be thrown out of office the next election or even recalled. So what does one do? The same thing that has been done since 1913 (Fed created) and in much greater force since 1965 (off gold standard) - have the Fed create money from nothing. (i.e. US sells trillions of dollars of treasuries to the Fed for which the US gets trillions of dollars). That fiat money is just like the money we use today, except there is more of it in circulation which means the purchasing power decreases.

The classical definition of inflation is an increase in the money supply.

The government isn't allowed to 'have the fed print more money'. That was the whole point to creating 'the fed'

 

[Spencer278]

Originally posted by: HalosPuma

Originally posted by: WinstonSmith

Originally posted by: HalosPuma

Originally posted by: PingSpike
And why the hell are people above say $80k a year (I think) exempt from paying this tax?

I guarantee you I'm paying SS tax. I think the amount of your salary that is taxed is capped at $80K.

The result will be hyperinflation. The politicians in office will not admit to the people - most of whom are ignorant - that SS is a ponzi scheme and there actually is no money in SS. Instead, they will have the Fed purchase an immense amount of US Treasury bills to create money from nothing and use that to pay for SS. Sure, people will receive their payments, but in greatly depreciated dollars.

Explain what hyperinflation is, and how it would occur with SS.

Do you understand the terms you are using?

No politician is going to default on the SS promise. To do so would mean they would be thrown out of office the next election or even recalled. So what does one do? The same thing that has been done since 1913 (Fed created) and in much greater force since 1965 (off gold standard) - have the Fed create money from nothing. (i.e. US sells trillions of dollars of treasuries to the Fed for which the US gets trillions of dollars). That fiat money is just like the money we use today, except there is more of it in circulation which means the purchasing power decreases.

The classical definition of inflation is an increase in the money supply.

I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

 

[3chordcharlie]

Originally posted by: Spencer278
I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

That's a common layman's definition - but actually, that's a 'price increase'. HP is quite correct - inflation is the devaluation of currency due to there being more currency in circulation.

 

[Spencer278]

Originally posted by: 3chordcharlie

Originally posted by: Spencer278
I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

That's a common layman's definition - but actually, that's a 'price increase'. HP is quite correct - inflation is the devaluation of currency due to there being more currency in circulation.

I'm sorry your the one using the common definition. In econmic terms inflation is an increase in general price levels. See this thread.
http://forums.anandtech.com/me...y=y&keyword1=inflation

 

[3chordcharlie]

Originally posted by: Spencer278

Originally posted by: 3chordcharlie

Originally posted by: Spencer278
I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

That's a common layman's definition - but actually, that's a 'price increase'. HP is quite correct - inflation is the devaluation of currency due to there being more currency in circulation.

I'm sorry your the one using the common definition. In econmic terms inflation is an increase in general price levels. See this thread.
http://forums.anandtech.com/me...y=y&keyword1=inflation

I'm afraid you're actually wrong on this one. General prices don't change if there's no change in either amount of currency, or 'velocity' of currency (how quickly it changes hands). Price changes for one good or another are not 'inflation' they are price changes.

 

[HalosPuma]

Originally posted by: 3chordcharlie
The government isn't allowed to 'have the fed print more money'. That was the whole point to creating 'the fed'

Wanna bet? The whole "not having government create money" was already covered in Article 1, Section 8, Clause 5 - Congress shall have the power ... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Thomas Jefferson firmly opposed a national bank since its fiat money would corrupt the nation and bring about its downfall. How right he is. Look at the billions of dollars that Congress authorizes for all of the federal government's projects. There is no way that could have been done if we were stayed on a silver and/or gold standard.

 

[HalosPuma]

Originally posted by: Spencer278

Originally posted by: 3chordcharlie

Originally posted by: Spencer278
I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

That's a common layman's definition - but actually, that's a 'price increase'. HP is quite correct - inflation is the devaluation of currency due to there being more currency in circulation.

I'm sorry your the one using the common definition. In econmic terms inflation is an increase in general price levels. See this thread.
http://forums.anandtech.com/me...y=y&keyword1=inflation

You're very wrong. Inflation is not an increase in the general price levels. An increase in the general price levels can be sympton of inflation, but is not inflation. Sadly, Keynesian economics, which is taught in every university, confuses this issue to the point where people do not even understand the basic economic concepts. This allows the bankers and politicians to keep the general public confused and allows them to stay in power.

INFLATION: increase in the money supply
DEFLATION: decrease in the money supply

It's really that simple.

 

[3chordcharlie]

Originally posted by: HalosPuma

Originally posted by: 3chordcharlie
The government isn't allowed to 'have the fed print more money'. That was the whole point to creating 'the fed'

Wanna bet? The whole "not having government create money" was already covered in Article 1, Section 8, Clause 5 - Congress shall have the power ... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Thomas Jefferson firmly opposed a national bank since its fiat money would corrupt the nation and bring about its downfall. How right he is. Look at the billions of dollars that Congress authorizes for all of the federal government's projects. There is no way that could have been done if we were stayed on a silver and/or gold standard.

And after the depression (at least it was after the depression in canada) the federal reserve became an arms-length organization with a mandate WRT inflation, that sets their own rates; the government can borrow as much money as they want at those rates, but the fed is free to increase the rate if borrowing is considered out of hand.

It definitely is not as simple as 'the government tells the fed to print more money'.

 

[Spencer278]

Originally posted by: 3chordcharlie

Originally posted by: Spencer278

Originally posted by: 3chordcharlie

Originally posted by: Spencer278
I think inflation is defined as an increase in price which may or may not be caused by an increase in the supply of money. For example when OPAC decides to bend us over the barral more and raise oil prices that can cause inflation.

That's a common layman's definition - but actually, that's a 'price increase'. HP is quite correct - inflation is the devaluation of currency due to there being more currency in circulation.

I'm sorry your the one using the common definition. In econmic terms inflation is an increase in general price levels. See this thread.
http://forums.anandtech.com/me...y=y&keyword1=inflation

I'm afraid you're actually wrong on this one. General prices don't change if there's no change in either amount of currency, or 'velocity' of currency (how quickly it changes hands). Price changes for one good or another are not 'inflation' they are price changes.

Sure they do when either the demand for a product increases you get inflation in that product if that product is an important part of many products you will get inflation. Like labor or oil prices. A reduction in supply has the same effect.

The Consumer Price Index and PPI another price index is used to measure inflation because inflation is a change in prices.