October 3, 2010

Rating of John Loughlin on Social Security: PolitiFact's Truth-O-Meter Earns Itself a "Pants on Fire"

Monique Chartier

The "Truth"-O-Meter in today's Providence Journal rates Congressional candidate John Loughlin's comparison of social security to a Ponzi scheme as "False".

Let's take a look, shall we?

Here's the definition of a Ponzi scheme.

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

Here's how social security works.

The Social Security system is funded primarily by federal taxation of payrolls.

Okay, so the social security system funds the benefits (purported returns) paid to retirees (existing investors) out of the pockets of current employees (new investors).

Social security's revenue situation is even worse than that, however. As of this year, seven years ahead of projections, spending on benefits exceeds revenue, meaning that all of the social security taxes paid by employees and employers IS NOT ENOUGH TO COVER benefits currently being paid out.

So is it fair to say that social security is beginning to lose a "consistent flow of money"? Returning to the definition of a Ponzi scheme,

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

In sum, it pays "returns" to investors from revenue it collects from new investors. It's not pleasant to say, much less address. And there is no imminent threat to the checks of those currently collecting. But social security appears to be a textbook Ponzi scheme. Why are PolitiFact and the Providence Journal attempting to deflect this rather obvious characterization?

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Republicans have wanted to destroy Social Security since it was invented in 1935 . Remember George W. Bush's proposal to privatize it? Had America agreed with him, millions of retirees would have been impoverished in 2008 when the stock market IMPLODED ! !.

Posted by: Sammy at October 3, 2010 11:53 AM

Now Sammy, explain to us your understanding of if 1) Social Security and 2) defined benefit pension programs were impacted by the financial crisis of the past two years, and (if you believe that they were impacted negatively) what steps have to be taken so they can continue to pay out benefits.

Also, do you believe that there is a "trust fund" for social security contributions?

Posted by: Andrew at October 3, 2010 12:06 PM

sammy-I for one don't want to see Social Security privatized.Loughlin only wants an option for individuals to privatize part of their Social security,like the current Federal retirement program.Cicilline lied as usual.

Posted by: joe bernstein at October 3, 2010 1:15 PM

Social Security was admitted by Roosevelt to be a political act, not an economic policy. He may not have known that it was a Ponzi scheme, but it was knowable at the time. It fits the classic Jeffersonian definition of the end of the American republic: when people find that government takes property from some citizens for the purpose of giving it to others.

Social Security is immoral and unAmerican. As such, it must be ended.

And yes, "Politifact" reveals itself yet again to be a Democrat propaganda organ.

Posted by: BobN at October 3, 2010 3:15 PM

Heh, excellent timing. I just posted about this at http://riblogger.wordpress.com

If you look at the birth rates around the time of the baby boomers, you will see that they dramatically drop off with Generation X. The very definition of ponzi or pyramid scheme is that there are not enough people to pay the people who have already paid into the system, and thus, the system goes broke.

Social Security *is* a ponzi/pyramid scheme.

If we want to also get into the government as a criminal enterprise, we can also see how places like NSF and NASA are really just money launderers for Congress. Coming soon.

And Sammy, get your facts straight or stop lying.

Posted by: Patrick at October 3, 2010 5:26 PM

Had to laugh at the assertions made by this column this morning. They trot out the usual suspects to perpetuate the big lie that is our Social security system. Had to laugh at the comments by the Marxist professor of economics. Talk about dumbing down in society.
OK, so if it's not a Ponzi scheme, then give everybody their money, right now.
It won't happen, because it is a Ponzi scheme. The money isn't there.

Posted by: Mike Cappelli at October 3, 2010 8:33 PM

According to USNews:

"The Social Security Board of Trustees report found that program costs will exceed tax revenues in 2016, a year sooner than predicted in last year's report. The trust fund will be exhausted in 2037"

Sure sounds like a Ponzi scheme.

I can't believe they give it a "false". It's worth at least a "Half True". Evne Politifact agrees that SS matches a part of the ponzi definition. They say that because ponzi is an intentional illegal deception, then this doesn't fit and it's just a false. Using this standard, Cicilline deseved a "False" for his "Loughlin wants to privatize Social Security" statements. Politifact is having it both ways.

Posted by: Patrick at October 3, 2010 9:22 PM

Raise the taxable limit on income. We hear talk of raising the social security retirement age when we should be talking about raising the taxable limit. Neither party really cares to fix this very regressive tax.

Here's a little chart for you to contemplate:
Annual Income/ %Soc. Sec Tax
Up to $106,800/ 6.20%
$200,000/ 3.31%
$300,000/ 2.21%
$400,000/ 1.66%
$500,000/ 1.32%
$600,000/ 1.10%
$700,000/ 0.95%
$800,000/ 0.83%
$900,000/ 0.74%
$1,000,000/ 0.66%

A person making $700,000 or more in annual salary pays less than 1% of income as social security tax, collects at the maximum rate and according to actuarial statistics lives longer than lesser paid citizens. This tax scheme is inherently unfair. Neither party talks about this because there is no loophole to serve as a tax dodge as there is with income tax.
It's easy to fix social security. we simply lack the will to do so.

Posted by: OldTimeLefty at October 3, 2010 11:06 PM

Technically, Politifact is right. The economic arrangement of Social Security is similar to that of a Ponzi scheme, but it is fully disclosed, to those who care to look. No deception here, folks. Still: politicians talk about a Soc Sec "trust fund." Unlike a real trust fund, when my daughter tries to collect in 2045, they will pay her and then send her a tax bill to raise the money.

Posted by: William Braden at October 3, 2010 11:29 PM

William, you even say it yourself:

"Social Security is similar to that of a Ponzi scheme"

In the past, Politifact will mark those as "Half True". But for some reason, they just give this one a false.

Posted by: Patrick at October 4, 2010 6:14 AM

William, your rationalization of the Left's propaganda about Social Security is so hair-splitting and meretricious as to be a lie itself.

Sure, the ugly facts about it are obvious to those who know how to look for them. But does the government openly admit how it really works? No, it doesn't. There isn't a single Democrat, and very few Republicans, who will plainly state the Ponzi-scheme mechanics of Social Security. So your claim that "it is fully disclosed" is false.

Your next sentence undermines your own claim: "Still: politicians talk about a Soc Sec "trust fund." Unlike a real trust fund, when my daughter tries to collect in 2045, they will pay her and then send her a tax bill to raise the money." As you point out, they are telling bald-faced lies to the public.

And the government message is beaten into the heads of the public by the Leftist mainstream media in myriad ways: "Trust the government, depend on the government, government tells you the truth, pay no attention to those Tea Party people or the hooligans on 9/12 and 8/28, the government will solve all your problems and anyone who disputes the government's position is evil."

Sounds like it's even gotten through to you.

Posted by: BobN at October 4, 2010 9:52 AM

OTL whined:
"This tax scheme is inherently unfair."

Yawn. You're whining on the wrong blog again. I doubt many would care if you had a valid point, never mind when it's just "wah wah, this isn't fair" that rich people pay hundreds of thousands more into the system than "poor" people.

Posted by: Patrick at October 4, 2010 10:46 AM

The only problem with your left wing mindset is that the benefits do not go up, as they make more money. They pay the same amount of their pay to get the same benefits as anybody else.
There is a maximum to what you can collect. I know how you hate the people who work harder than you are willing to work, thereby making more money for themselves than you ever could. Yeah, let's penalize them for daring to work longer, harder and smarter than you who advocate sucking off the system.

Posted by: Mike Cappelli at October 4, 2010 1:02 PM

Try arguing with the statistics. Obviously, you have nothing of substance to add to the discussion.

Mike Capelli, as usual you are so far off message as to warrant no reply. If you insist on being ignorant, please just go ahead. You are your own rebuttal.

Posted by: OldTimeLefty at October 4, 2010 1:34 PM

Yes, Patrick,
Since OTL (out to lunch), is unable to defend his mindless assertions, it is you and I who don't warrant responses.
That's because he says so.
Like a typical stupid liberal, he demands equality of outcome, despite a huge disparity of input. What a clueless old fart.

Posted by: Mike Cappelli at October 4, 2010 3:06 PM

I'm gonna tell you guys something-my mom,who is 97,worked starting at age 11 until she was 66.Hardly a moocher/looter,and she was an adult ed teacher for 44 years.Guess what-no pension.the regular teachers' unions wouldn't accept adult ed teachers.Scumbags.So she got the remnant of my dad's pension(VERY modest)and social security,and how is that a bad thing?
She grew up in hard circumstances without a father(he died young)and still managed to finish college(the first ever in our family)-I don't want to see people like her on the short end.
I'm no damn liberal,but I think social security turned out to be a somewhat workable program.
BTW-I get a pittance from them-1/3 of what I should because of the windfall elimination provision-and it doesn't apply to our f**kin' members of Congress.

Posted by: joe bernstein at October 4, 2010 3:31 PM

"Obviously, you have nothing of substance to add to the discussion"

Now there's the pot calling the kettle black.

I'd argue, except it comes out to a difference in philosophy. I believe that someone who pays tens or hundreds of thousands of dollars is paying their "fair share" in comparison to someone else paying in thousands. Especially when it's a system where you get back a percentage of what you paid in. So it's not like the "rich" are making a killing on this. According to the government, they're simply holding my money for me for later. They didn't say that they're going to give my money to someone else who paid in less. You want the rich to pay in more, fine, then give them more later. You want the poor to pay in less, fine then give them less at the end. That's the way it works.

Or are you saying that my money is currently paying the people who are retired now, and my payments when I retire will come from the people who are working then? I'm sure you wouldn't say such a thing, because that sounds an awful lot like a ponzi scheme, and we know that social security sure isn't that, right?

Posted by: Patrick at October 4, 2010 4:18 PM

Mike Capelli
How is the chart I provided a mindless assertion? Do you know what an assertion is? What did the chart assert?

Patrick, try reading the Cain-Abel story for starters, then rethink what you wrote.

Posted by: OldTimeLefty at October 5, 2010 6:22 PM
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