No, Elon Musk, Social Security Isn’t a “Ponzi Scheme”
No, Elon Musk, Social Security Isn’t a “Ponzi Scheme”
Right-wing billionaires have long wanted to shred the safety net. Under Trump, they’re using lies and fears over the deficit to debilitate Social Security.
Right-wing billionaires have long wanted to shred the safety net. Under Trump, they’re using lies and fears over the deficit to debilitate Social Security.
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I mean it kind of is lol
Edit: don't take this to mean I am against social security or on Musk's side, but it is
Edit: everyone below here is breaking their neck trying to describe social security without using the word scheme lol
It's really not. A ponzi scheme is an investment scam that pretends you can profit while actually your money is being used to scam other people. And the money obviously ends up going to the guy running the scam.
Social security is a type of national insurance. We all pay a bit into the pot which is then distributed to those who need it. Maybe you'll need unemployment for a while, maybe you'll need care when you're older, maybe you're lucky enough that you'll never need anything. But it's a social safety net for all of us.
And yes most of us don't need it right now, so clever morons like Musk can spin it into "why am I paying for this other guy's unemployment?" That is the real scam, to break our willingness to lend a hand to our neighbors and often to ourselves.
A Ponzi scheme is a fraudulent investment that pays existing investors with money from new investors. The scheme operators don't actually invest the money, and the scheme collapses when it can't attract new investors.
If the United States didn't have younger people to pay into the system, new investors, the "ponzi scheme" collapses.
The US government, the scheme operator, doesn't invest the money it receives. Instead, it hands it to previous investors
Now I'm not against a national insurance or something. But we know even with new investors the SS fund is going to run out.
If the government saved the money it was paid and treated it like a real savings account or treated it like insurance.
But the way it is now, it can't run forever. Just like a ponzi scheme
It IS a scheme, in that it's a system, plan, or action.
It is NOT a Ponzi Scheme because it does not promise investment returns or exaggerate profitability.
It's there to keep retirees & the disabled out of abject poverty, which does not provide returns you can usually see on a balance sheet. Greater good & all that...
I'm not arguing if the system is good or bad. I think there should be a good retirement system in place.
Average person makes 65k in America
SS is 12.4% usually split between employee and employer.
That's 8k a year.
Average SS monthly payment is ~2k
18 to 62 is 44 years of payment.
65k × 12.4% = ~8k per year payment
44 × 8 = ~350k
62 to 78 is 16 years. 2k × 12 = 24k per year
16 × 24k = ~384k
So looking right now if I made average pay, paid SS when I was 18, worked until 62, collected SS at 62, died at 78. I would be looking at a 10% return on my investment
Even more if I live past 78
If I came to you said said. "Would you invest for the next 44 years and I'll give you your money back after and 10% more over 16 years, but I'm going to have to have new people entering my "scheme" to pay you..."
That would be a ponzi scheme.
If the government simply kept the money paid and then paid it back with interest earned loaning it out until time to pay. SS wouldn't be in a crisis.
Social Security is an investment in the health of our society, it's not a financial instrument. You can't pool risk and get predictable returns without cutting corners & dropping high-risk members (hello health insurance industry).
It's not a Ponzi Scheme by definition.
Social Security is an investment
A financial investment?
It's not a Ponzi Scheme by definition.
So you're saying "they" don't define it as a ponzi scheme, so it can't be one?
Gee that's great
It's an "investment" the same way insurance is an investment. We "invest" in social stability. Lots of people never make it to retirement age, for them SS is likely a net loss.
But as a society we like the idea that the elderly don't go homeless if they don't have means of their own. We like that people who lose their jobs don't lose their daily bread. That's why we have social security. And we accept that in some cases we're the ones that end up paying a bit more than we're getting.
You are trying to argue if SS is good or bad.
I agree that the idea behind SS is a good one
Lots of people never make it to retirement age. For them, SS is likely a net loss
A lot of people are living longer collecting SS for longer. One of the reasons it's failing. One of the reasons they keep pushing the retirement age up.
Imagine making ~15k a year. Paying 1k per year for SS. And then never collecting it.
Someone making minimum is paying 1/15 of their pay for SS
These are the people who are absolutely going to need SS
If the business didn't have to pay SS too and could give it to the worker they could pay workers more.
Which helps these people more, increasing wages by 12.4% for 40+ years or hopefully collecting SS when you're 62-67?
If they saved the money and got 4% interest (10yr bond is 4.32%). They would have 200k saved for retirement.
They have been living on $1250 a month. That's 13 years of retirement in 200k.
That's with the government "not helping them"
Using that 200k to buy a house for retirement could even be a better investment than having to rent when retired. But taking it from them to hopefully give it back does have it's downsides.
They system relies on new wealthy investors and for some investors to not collect. You couldn't run a traditional "saving account" like it because it would be a ponzi scheme.
In what way?
However, Social Security, unlike a Ponzi scheme, is not inherently fraudulent, nor does the program promise "investors" artificially high returns with little to no risk, a hallmark of this kind of investment fraud. The report above, for example, shows the administration's transparency about expected returns. source
I would say it shares a key similarity to a ponzi scheme, but has entirely different goals, methods, and results.
Both of them pay initial "investors" with later investors funds. In a ponzi scheme, this is unknown to the later investors so that they can eventually be left holding the bag. But in social security, this is a known commodity, and the thought is that there will always be more people.
Unfortunately, that last part gets a bit nuanced with population decline and growing needs of the elderly. Either way, it's a good system or a good scheme, but it's definitely not a ponzi scheme. Because just like healthcare, even if we don't fund social security, elderly and disabled people are still going to need care and skip out on their bills when they die. So in the end, we're still paying for it but with extra steps and lawsuits.
Along with the other things people have mentioned ponzi schemes don't have a backstop . If a ponz scheme becomes insolvent the scheme falls apart. Despite all the doom republicans like to push on social security insolvency, if it happens it'll just get taken out of the general fund. It'll be hell on budget deficits for a while until congress gets its shit together and raises the income cap and solves this but people will still be getting paid.