The Social Security Scam, errr, Scheme(?) - Part 1

Posted On: Wednesday - July 25th 2018 9:28AM MST
In Topics: 
  History  Global Financial Stupidity  US Feral Government  The Future  Healthcare Stupidity  Socialism/Communism

Per Peak Stupidity's post on "Peak Rich Old People last week, there should be some follow up on this, one of the biggest of Big-Gov's schemes to "help the people".

A Man of the People, seen before he "gave us" the SS scam:

That's Franklin D. Roosevelt, one of the biggest instigators of the American welfare state - was he just the Franklin-the-Baptist to Lyndon B. Johnson in that respect? (oops, that would make LBJ into Jesus, and I don't want to think about that ...) Social Security was put into law more than 8 decades ago, in the mid-1930's. This man, as President, did not make the laws, as we should all know. However, he was one of the more powerful presidents, arguably* the most since the Founding, excepting Lincoln, and none have been more since then. This man presided as administrator of the executive branch (supposedly, that was all) during Great Depression 1.0**, and most of WWII. It was > 12 years going on 16 when he died - I wasn't there but I'm pretty sure we were better off with Harry Truman.

Because of the terrible state of the economy during the bulk of the 1930's, Roosevelt could push lots of welfare schemes on an easy-do-dupe population. The causes of the depression can be discussed (see there's ANOTHER post) later, and whether this man had anything at all to do with ending it or postponing the end of it, also. There were real problems and people in very bad shape, and this one was going to be, if anything, a "no-cost" (hahahaa) deal for the government, aka, the tax-payers. There's no reason that private "social insurance" plans could not have been implemented, but it's one area, due to the long-term trust required for a business to work, that people felt Big-Gov should do the job. Yeah, more on this trust a bit later.

Now, a long-term reader would probably know that this blogger is/was (lots more in the past before the site formatting/scripting started to suck) a big reader of Just about ANY kind of financial scheme, Big-Gov or Big-Biz, is called a Ponzi scheme on ZH. They do go a bit overboard in that sense, as a true Ponzi scheme is planned from the beginning to be (there's that word again!) unsustainable. That means that only those getting in at the beginning come out ahead financially, as there's no wealth generation, or not enough, to cover those suckers joining later on. I don't give any of the Socialists much credit, but for SS, I don't think the plan was for it not to keep running - Big-Gov shuts down NOTHING (look under Start, Head). The problem is that the unseen future changes to the demographics of the American population would eventually turn it into not just a Ponzi scheme, but a mandatory Ponzi scheme. Nobody has to join AmWay, right, or (one of my favorites) the un-youtube-able classic scene from The Office about a pyramid scheme? If you work, officially, not as an illegal alien, you are put into this plan from DOLLAR ONE.

Back in the 1930's life expectancy was not as high as nowadays. This is due to smart guys and scientific advances and is IN NO WAY an effect of Big-Gov, which has a major NEGATIVE effect financially and otherwise. People died on average at 65 years of age. Therefore, even with plenty of old (usually) ladies living to 80 and collecting a decent sum, there were a number of others to match that were forced to pay in, yet died before collecting a penny. That situation has changed drastically, not a bad thing at all! It's just not good for this plan of retirement at 65 with a reliance on the US Gov't with a nice account with your name on it.

That brought up just a short aside, about SS, but not the monetary aspect. The politicians of that day promised that "No, this SS NUMBER will not be any kind of national ID number." See, we were a more free country back then, as a) privacy was still an understood concept and respected, and b) the politicians at least gave lip service to the idea of no "Papers, please!" (Part 2 and Part 3) totalitarian government, yet nowadays nobody blinks an eye at giving his life story to The State. See, promises from some of those individuals may have meant something to them, but an individual doesn't run this scheme. It's a few million gov't muck-mucks and bureaucrats that may have told you something 20 years ago, but that means nothing to anyone now. Your SS card is appropriately named, and sure enough is the most basic form, YET, of a national ID number. If any number is gonna' be tattooed on your forehead or set into a chip, the 9-digit SS # will be first. In a way this does relate pretty well to the post, in that again: more about promises and trust in a bit.

The baby boom generation was a big boon to the SS scheme, as the large numbers of young people entering the work force in the mid-'60's through early '80's, and not retiring for 40-odd years after, paid in lots of money for all those years. In case you don't get a paycheck, it's 7% off of the 1st buck through over $100,000 now, and your employer (which might be you) pays an equal amount in. Keep in mind, your employer's payment may as well be yours, as he could have given you that amount in pay otherwise. Yeah, so things went swimmingly for a good while there, even with the longer lifespans of people retiring then and already retired, but now we've got loads of people wanting to collect some of "their" money.

Here's a graph of the ratio of payers to payees over the years. Yeah, it's all projected from ~ '15 on, so you can't trust more than 10 years of that. Demographic data is pretty good, but I don't think America, much less social security, will be around then in the same form.

The next part of this discussion will cover more of the big-time accounting on the SS mandatory-scam, one big trick in budgeting in 1998 or 9, and the problem with trusting the government to "be there to help you."

* Hey, that's what the comments section is for - arguments.

** There's that gloom and doom that we all love.

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