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Archive for the ‘Social Security’ Category

It’s Christmas and Washington Shuts Down

Posted by Steve Markowitz on December 24, 2011

This week saw a flurry of activity between the Congress, Senate and White House concerning the extension of the payroll tax decrease.  On the Left are the Democrats who threw the masses a bone, allowing them to keep more the money that they themselves earned.  On the Right, the Republicans attempted a broader legislation, but fell into a political trap created by the Democrats.  While the Democrats ultimately prevailed in this political battle, extending the tax break for a mere two additional months, the American people lost.

Excessive debt, both private and sovereign, is the key issue facing the economy.  The extension of the payroll tax decrease does not infuse enough cash into the economy to offset the ongoing deleveraging caused by the excessive debt, as well as the hundreds of billions lost on consumer balance sheets due to the depreciation of their largest asset, housing.  In addition, Social Security is already under water and heading towards insolvency on a quickening pace due to the aging Baby Boomers and increasing life expectancies.  The decrease in payroll deductions merely adds to the Social Security debt problem.

Finally, it has been reported by AFP, among others (posting below) that payroll companies will have significant problems with their software in calculating payrolls given the rules included in the bill passed by Congress and signed by the President.   That’s not surprising given the lack of private sector experience for most politicians in Washington.

But, there is good news today.  With Christmas comes the prolonged shutdown of Washington DC.  The Congress and President have skipped town and no additional damage will come out of Washington until next year.

A Merry Christmas and Happy Hanukah to all!


Posted in Social Security | Tagged: , , , , , , , , | Leave a Comment »

1934 Chicago Tribune Predicted Today’s Financial Mess

Posted by Steve Markowitz on October 28, 2011

In 1934 the Chicago Tribune published a profound political cartoon posted below.  As Progressives in the FDR administration started taking America down the slippery slope of bailouts, handouts and the federal governmental power grab, the Tribune cartoon’s author understood where this would lead.
However, it is likely that even FDR could not have imagined the extent of the handouts that were to come.  Keep in mind that when Roosevelt set up Social Security, he also set the age for receiving benefits at 65, conveniently a few years after the then current American life expectancy.  This curious discrepancy indicates that the motivation behind the Social Security program was more related to governmental power than a concern for working Americans.

Take particular note of the conclusion in the bottom left of the cartoon.  We have already traveled a great deal down that path.

Posted in Progressives, Social Security | Tagged: , , , , | Leave a Comment »

FDR’s Social Security Myth

Posted by Steve Markowitz on September 25, 2011

Governor Rick Perry, a Republican presidential candidate, created a firestorm a few weeks ago when he suggested that Social Security was a Ponzi scheme.  While some didn’t like the analogy, it accurately depicted the Social Security program that allows beneficiaries to receive more they put in and is dependent on still more new funds coming in to pay its ongoing obligations.

Perry was attacked more for his overall political views, rather than for the claim itself, a claim that has also been made by some on the Left.  For example, ultra liberal and renowned economist, Paul Krugman, in 1996 wrote:

“Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in.  So it does not look like a redistributionist scheme.  In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in.  Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).” [Emphasis added.]

While the Left castigated Perry, it continues to revere Krugman.  Similarly, the Left views Franklin Delano Roosevelt as the father of modern Progressive thought. . A review of FDR programs tells an interesting story, especially when it comes to Social Security.  In his newsletter this week, economist John Mauldin but FDR’s Social Security program into proper perspective.

In 1935, when FDR created the Social Security Act, the retirement age was set to 65.  At that time, the life expectancy in the United States was 61 years.  That meant the typical American would have died four years before receiving any benefits.  That’s quite a scheme!

Today the life expectancy is 79 years and growing.  However, under today’s laws, Social Security benefits begin in a range of 62 to 67 years.  Using FDR compassion as the rule, that would result in the current age for receiving Social Security benefits to be 83.  How many Progressives who continually invoke the name of Franklin Delano Roosevelt truly advocate his policies?

Social Security was set up by FDR in a way to ensure its survival by paying only a minority those that paid into the program any benefits.  Progressives have since increased the scope of the program by adding to those that are eligible for benefits.  More significantly, the government has not increased the retirement age in sync with growing life expectancies.  Adding fuel to the fire, Cost-of-Living Adjustments (COLA’s) added decades after the program began, ensure that the growing number of recipients are not hurt by inflation.

Social Security is a huge Ponzi scheme heading for a perfect storm created by changes to the Program and demographics.

Posted in Ponzi Scheme, Social Security | Tagged: , , , , , , , , | Leave a Comment »

Leftist Chris Matthews Admits Social Security is a Ponzi Scheme

Posted by Steve Markowitz on September 11, 2011

Governor Rick Perry, the Republican presidential candidate from Texas, has suggested that Social Security is similar to a Ponzi scheme.  That sent the Left into a tizzy.

However, Leftist host of “Hardball“, Chris Matthews, recently concurred with Perry when he asked on his show (see video below): “How does a Republican deal with the fact that it is a Ponzi scheme, in the sense that the money that’s paid out every day is coming from people who paid in that day?

Matthews then went on to offer some refreshingly honest comments about the problems with Social Security:  “But then people started to live past 65.  Even the great Franklin Roosevelt didn’t make it to 65.  In those days, if you made it to 65, you were lucky, you got a few bucks out of Social Security.  Today, lots of people fortunately make it past 65.  They live into their 80s and 90s.  They’re still getting checks.  The system doesn’t work that way anymore.  It’s not as healthy as it once was. So, how does a Republican deal with the fact it is a Ponzi scheme in the sense that the money that’s paid out every day is coming from people who paid in that day?  It’s not being made somewhere.”

It is remarkable that two people with such differing political views, Perry and Matthews, concur on the reality of Social Security.  While it is premature to be too optimistic, possibly some economic reality and common sense is coming to both the Left and the Right side of the political spectrum.  Only by acknowledging problems can solutions be found.

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President Obama’s Social Security Threat

Posted by Steve Markowitz on July 14, 2011

In an effort to pressure Republicans into raising the debt ceiling without agreeing to their demands for government spending cuts, President Obama is in full offense mode.  This week he went on a friendly news network for a supposed interview and said that if the debt ceiling was not increased by August 2, he could not guarantee Social Security checks would be sent out.  The ABC interviewed rolled over and didn’t question this significant assertion.  Not surprising from the Lamestream media.

Lee from New Jersey sent in the question below that should have been asked of the President.  The follow up question would be why the President would not prioritize payments to the U.S. debt holders, Social Security recipients and military personal since even without raising the debt ceiling the Country’s tax receipts are enough to cover these obligations.

It is clear that the President is attempting to pull a fast-one over the People.

Posted in Debt, Social Security | Tagged: , , , , , | Leave a Comment »

Judge Raids Social Security Disability Benefits

Posted by Steve Markowitz on May 23, 2011

The Wall Street Journal reported last week on a story that highlights the corruption of government by Progressives.  This story involves an administrative law judge in Huntington, West Virginia who is either corrupt and/or is totally inept.

David B. Daugherty, a 75-year-old judge, is charged with determining whether or not those applying for federal disability benefits are entitled to them.  Daugherty is one of 1,500 such judges in the United States.  His record reeks of corruption.

Nationally, the Wall Street Journal reports that approximately 60% of those applying for federal disability benefits are granted them.  However in Judge Daugherty’s court for 2010, an incredible 99.7% of those that applied for the benefits were granted them.  Yikes!  In addition, Daugherty is being investigated because of an association with one particular law firm involved with representing clients in his courtroom.

There are nearly 100 other administrative judges nationally who have records of awarding more than 90% of those who apply disability benefits.  They too are being scrutinized.  The system is clearly broken.

The amount of disability benefits have substantially grown over the years.  The greatest amount is distributed through the Social Security Disability Insurance, SSDI, which in 2010 paid out a whopping $124 billion to 10 million beneficiaries.  While disability programs are important for those that are truly in need, the Journal has shown that the program is being abused.  This is a byproduct of government benefit programs.  Forgetting the corruptive nature of these programs in which bureaucrats are responsible for handing out funds, it is also easier for bureaucrats to say “yes” when it comes to spending taxpayers’ money.

We have rapidly become a society that believes it is entitled to all sorts of benefits from the government.  What is lost in this mentality is that the government only gives entitlements to some by taking from others.  As a greater proportion of society receives entitlements, fewer are paying into the system.  We have reached a tipping point where the Country can no longer honor all of the obligations and remain solvent.  As the country attempts to bring back fiscal sanity by cutting the entitlements, the special interest groups fight to protect their own.  It is tough to put the genie back in the bottle.

Posted in Government Handouts, Social Security | Tagged: , , , , , , , , | 2 Comments »

Madoff and the Social Security Ponzi Shames

Posted by Steve Markowitz on December 15, 2010

On the two-year anniversary of the outing of the Bernard Madoff Ponzi scheme, his son Mark committed suicide.  Madoff’s fraud continues ruining lives.

While most Americans are aware of the illegal Ponzi scheme committed by Madoff, many remain unaware of a similar scheme used by the American government called Social Security.  While Social Security is on the road to insolvency, last week the President and Congress included in the “compromise” tax deal a 2% holiday for employees paying into the Social Security fund putting it father in the hole.

A comparison of the Madoff and Social Security schemes that is making the email circuit is posted below.  While presented in a tong and check manner, it is not a laughing matter.

So Simple a caveman could understand:

Why did Bernie Madoff go to prison?  To make it simple, he talked people into investing with him.  Trouble was he didn’t invest their money.  As time rolled on he simply took the money from the new investors to pay off the old investors.  Finally there were too many old investors and not enough money from new investors coming in to keep the payments going.

Next thing you know, Madoff is one of the most hated men in America and he is off to jail.  Some of you know this, but not enough of you.

Madoff did to his investors what the Congress has been doing to us for over 70 years with Social Security. There is no meaningful difference between the two schemes, except that one was operated by a private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges and status in spite of their actions.

Do you need a side-by-side comparison here?  Well here’s a nifty little chart.

Posted in Bernie Madoff, Ponzi Scheme, Social Security | Tagged: , , | Leave a Comment »

The Social Security Fraud

Posted by Steve Markowitz on October 17, 2010

Social Security is the world’s largest legal Ponzi scheme.  It began under the Franklin Roosevelt (FDR) Administration as a forced and self-paid retirement plan for Americans.  It has since become a bloated program heading towards insolvency.  The blame for this disaster falls on the Progressives who have continually expanded its beneficiaries and payments.

In simple terms Social Security’s problem is that people collect more than they put in.  The program has been morphed by Progressives into a huge entitlement, instead of the retirement plan promised by FDR.  Congress continually added to those who could collect benefits.  In addition, life-expectancies increased without proportionally increasing the age at which benefits could be collected; a recipe for disaster.

Instead of addressing the increased life-expectancy time-bomb, in the 1970’s Congress doubled down on a bad bet.  They added a COLA (Cost of Living Adjustment) clause to the Program.  This meant that when a certain basket of consumer costs increased, the benefits paid to Social Security recipients increased by a similar percentage.  On its face this sounds like a reasonable idea.  How could one argue with seniors’ benefits being made whole in the face of inflation?  But like so many government ideas with good intentions, Social Security’s COLA led to unintended consequences.

One consequence of COLA should have been foreseen; increased dependency on government.  There are now 59 million Americans receiving Social Security or Supplemental Security Income.  That means about one in every five Americans receive funds from this entitlement and have come to expect yearly increases, which has occurred every year since 1975 with the exception of last year.  More to the point, now about 20% of Americans are less concerned about inflation and governmental policies that lead to it since they feel protected by the COLA.  Their motivations naturally will focus on personal short-term gain instead of whether Social Security will bankrupt the Country in the future.

A few facts helps understand the extent of the Social Security nightmare:

  • The Social Security Administration says its unfunded obligation is $15.3 trillion, greater than the entire U.S. national debt.
  • The U.S. government does not include its Social Security obligation as debt on the Country’s balance sheet as private companies are forced to do.
  • Peter Orszag, Obama’s recently resigned Director of the Office of Management and Budget, told America in August 2008 not to worry about Social Security since the first year that benefits would exceed revenues would be in 2019.  At the same time he stated that the Social Security trust funds would not be exhausted until 2049.
  • This year, for the first time and nine years earlier than Orszag projected just two years earlier, Social Security is paying out more than it is taking in; the end game for any Ponzi scheme.
  • The Social Security Trust Fund has accumulated $2.3 trillion to make up for shortfalls like the one that occurred this year.  However, they project that it will now run out in 2037, twelve years earlier than projected just two years ago.  Even that estimate does not factor in the continuation of the current economic slowdown that would make this day of reckoning much sooner.
  • While Social Security shows an accumulated surplus of $2.3 trillion, that is but a mirage.  Congress has already spent that surplus for its general fund and has given Social Security in return an I.O.U.  So let see; we have the insolvent U.S. government giving itself I.O.U’s to cover its own obligations.  That is madness, if not downright fraud!  Bernie Madoff is in jail for no more dubious actions.

One would think that the above facts would demand action to stop a train-wreck that is foreseeable and preventable.  But just the opposite is occurring.  Not only is the government ignoring the problem, but Obama and Pelosi suggest adding to it.

Last week the Social Security Administration announced that since inflation was very low in the previous year, there will be no increase in benefits paid out.  Through this announcement they merely followed the COLA law enacted in 1975.  Makes sense, right?  No, not for the Progressives in Washington who have since said:

Nancy Pelosi – Pelosi promised to schedule a vote after the November elections on a bill that would provide one-time payments of $250 to all Social Security recipients.

President Obama – Obama has endorsed the Pelosi plan.

Harry Reid – Announced last week that in the post-election session: “I will be working hard to gain Senate passage for a proposal that ensures that America’s seniors are treated fairly.”  Mr. Reid, why should seniors be treated any more fairly during this recession than other Americans?

By suggesting that we increase benefits paid to Social Security recipients whether inflation goes up or down, these Progressive knuckleheads give new meaning to the con of: “Heads I win, tails you lose.”

Obama, Reid and Pelosi should be well aware of the predicament that the Social Security time bomb has created for America.  This begs the question as to why they continue to march down a path that has no good ending.  The answer rest in one of, or a combination of, the following:

  • They are ignorant and don’t know better.
  • They offer the $250 payment as a bribe for the upcoming elections.
  • The Progressives’ goal is to make more American’s wards of the State so that they become beholding to Progressives in future elections.
  • The Social Security train-wreck will not occur on their watch and they do not care what happens after they retire.

None of these answers are good for America, but they do demand that Progressives be exercised from our government.  Sounds like a good reason to justify the Tea Party.

Let us conclude with the Securities and Exchange Commission’s 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.  Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.  In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.”

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.

Posted in Ponzi Scheme, Social Security | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

Update on the Social Security Ponzi Scheme

Posted by Steve Markowitz on August 13, 2010

The trustees for Social Security have released projections on the funds financial health.  Unfortunately, Social Security is running a deficit this year (paying out more than it brings in) and that is expected to continue for thenext five years.  But, our trustees then soften the blow by indicating that Trust funds are available to pay all planned benefits until 2037.  This conclusion must be taken with a grain of salt given the government’s history of supplying bad figures.  In addition, the assumptions made to reach this conclusion are suspect.  What happens as life expectancies continue to increase?  How about when the Progressives add more benefits to the Program, as they always do?

But there is an even more troubling aspect to the Social Security Trust fund that most Americans are not aware of.  While the fund technically has $2.5 trillion in assets from past surpluses, our government has already barrowed and spent this entire amount from that fund.  What has the Trust fund received in return from Congress?  U.S. Treasury bills.  That’s right, in order to fund our growing deficit, Congress has taken the Trust’s funds and given the Trust IOU’s from the US Treasury.  This allowed Congress to keep spending, while at the same time keeping taxes artificially low. This sleight of hand is at the expense of younger Americans whose standard of living will be lowered as they are forced to pay back the Trust’s funds IOU’s in the future.

The choice going forward is simple to define, but politically difficult to implement.  Either we ignore the problem until the weight of it makes Social Security implode or we quickly cut benefit going forward.  Cutting benefits will require: 1) increasing the retirement age , an appropriate response since we are living longer; or 2) cutting benefits; or 3) lowering the inflation adjustment formula used for cost of living increases.

After talking up the $2.5 trillion in the Trust fund that isn’t really there, one of Social Securities’ trustees said: “The projected trust fund shortfalls should be addressed in a timely way so that necessary changes can be phased in gradually and workers can be given time to plan for them.  Implementing changes sooner will allow the needed revenue increases or benefit reductions to be spread over more generations.”

It would be prudent to heed this trustee’s advice and soon.

Posted in Deficits, Social Security | Tagged: , , , , , , , , , , | Leave a Comment »

The Social Security Ponzi Scheme

Posted by Steve Markowitz on May 12, 2010

Some issues are best expressed through “humor”.

Posted in Government Ineptness, Social Security | Tagged: , , | Leave a Comment »