Thursday, July 7, 2011

Social Security, Ponzi Schemes, a Poem and Telemarketing

Jack Lippman

Bernie Madoff and many other scoundrels have carried out “Ponzi” schemes (named after Charles Ponzi, an early perpetrator of such frauds) in which investors reap astounding profits over a short period of time but only after the schemers skim off their profit.  Investors’ profits come from the new money invested by new investors, without whom the money for the astounding returns would not be there.  Without an unending and enlarging stream of new investors, all Ponzi schemes eventually fall apart.

Is our Social Security system a Ponzi scheme, and similarly destined for failure?  Certainly, it is predicated on benefits being payable to retirees out of the invested contributions made by workers during their lifetime.  Increased life expectancy since Social Security began has increased the period during which money is paid out to retirees.  In turn, like any Ponzi scheme, as more and more money is needed for this, and as more people reach retirement age, an unending and enlarging stream of new contributors is necessary.  Without them, Social Security as we know it is destined to fail.  (Without going into it at this time, this also holds true for Medicare, but that is a separate issue because of its relationship to the larger question of government’s role in supporting all health care.)

The unending and enlarging stream of new contributors to Social Security is possible only in an economy where there is continuing job growth.  If there were no unemployment in this country, and the nation’s full time workforce grew larger and larger each year, there would be no problem in funding Social Security benefits for an ever-increasing and longer living number of retirees.  But, as we know, that is not the case.

Imagine for a moment that we achieved full employment in this country by limiting the work week to thirty hours and limiting anyone’s participation in the work force to a maximum of thirty years, with mandatory retirement for everyone at age 50. While this scenario would provide a lot of leisure time, it would not provide sufficient contributions to provide Social Security benefits for retirees.  The present level of unemployment in the United States is a less benign situation, but with the same unfortunate results for Social Security’s funding.

So, should we conclude that Social Security is a Ponzi scheme that is approaching its point of failure?  Unless changes are made, the answer is a resounding “Yes.”

But changes can avoid this outcome.  Perpetrators of Ponzi schemes are crooks intent on personal profit.  The United States Government is not interested in making a profit.  It is interested in the welfare of its citizens and providing decent minimal retirement benefits for them is part of its job. It is well-meaning and has the people’s interest in mind and at heart; hence, there are things government can do which the crooks that run Ponzi schemes would not do.  Here are some of them, and as I mentioned above, they imply change.

1.  Encourage individual investment to supplement Social Security benefits.  While many such “qualified” (tax-favored) plans are available today, such as IRAs and 401K plans, these do not reach down to the level of the ordinary non-union working person.  Often, unemployment causes these plans to be stripped out, with tax penalties.  There has to be some simple mandatory tax-favored savings plan for everybody, where minimal amounts of money can be painlessly squirreled away over the years, remain untouched, and be there to supplement Social Security or be passed on to heirs.  Think back to World War Two’s savings bonds and savings stamps.  IRAs and such can be considered analogous to savings bonds but the program I envision would be more likened to savings stamps, for those old enough to remember them.

2.  Reduce Social Security benefits and increase the age of eligibility for them by a formula which is keyed to the amount of contributions being made by the work force.  This is a painful solution which, if the only change made, puts the burden on the workingmen and women of this country.

3.  Increase the amount being contributed to the program by raising the limit which calls for individual and employee participation.  At present, that limit is $106,800. (This FICA …. Federal Insurance Contribution Act … contribution includes Medicare and other benefits, but is primarily for funding Social Security).  There is no reason why there should be any limit whatsoever on the amount an individual is required to pay into the system.  While an employer’s contribution should be capped, there is no reason why income over $106,800 should not call for an individual FICA deduction.  For an executive earning $500,000 a year, this would mean a contribution of about $38,000 instead of his present contribution of about $8,100, which is matched by his employer.  There are millions of people in this country earning over $106,800.

4.  Finally, if the above changes do not provide sufficient funding for providing decent minimal retirement benefits, the wealth of America should be looked to in order to provide Social Security funding.  We are still the wealthiest nation in the world and since all Social Security benefits are spent in this country, or should be, the general economy should be called on to make certain Social Security is adequately funded.   To do this, increased taxation of the wealthy will have to be implemented.  If that is insufficient, increased corporate taxation should be considered as well. Our economy has made possible their wealth and corporate success and it is only fair that they invest their wealth by guaranteeing the solvency of Social Security through increased taxes, or mandatory bond purchases for that purpose.

I doubt that we will ever see full employment in numbers sufficient to fund Social Security so changes will have to be made.  If the ones suggested above, individually applied or used together, cannot provide adequate funding for decent minimal Social Security benefits for all Americans, I suppose we must conclude that Social Security is indeed a Ponzi scheme. 

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Sid Bolotin

Two weeks ago I turned 78
Closer to vanishing than a year ago
Or, as my number two son often quips:
“Old man, you’re on your way to becoming just a photograph.”
Crystallized each Tuesday as I volunteer at a hospice care center
A sparkling Isness polished by my studies of Zen Buddhism
Today I is
Some tomorrow I will not be
Morbid? Sad? Simply profound Truth?
Where will I be after?
Where was I before I was born?
Is there a why?

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Talking to Telemarketers

Both my home phone and my wireless cell phone are registered with the Federal “Do Not Call” Registry.  It doesn’t work very well however.  I still get loads of telemarketing phone calls, some of which I ignore … but I am reluctant to do that all of the time because I might be losing an important call from someone or a firm whom I want to hear from but which has an unrecognizable 800 type number.  

Most of the telemarketing calls I get are on my cell phone and they always ask for someone named Brian, whom I assume had my number before I acquired it about six years ago.  I always ask that they remove the number from their calling list since it isn’t Brian’s number any longer.  That doesn’t work very well, however, since apparently their calling software is accessed by many different users at different locations and asking one not to call me doesn’t stop the others.  So, I try to make the best of it by chatting with the caller.  Some of the things I say, when they ask for Brian, include:

a.    “You have reached an unlisted number at the Central Intelligence Agency in Langley, Virginia.   You apparently came upon it accidentally.  It is very dangerous for non-CIA personnel to ever call this number.  I won’t report you, so just forget you ever made this call and never do it again.” 

b.    “I am sick of being called by telemarketers.  Why don’t you get a real job, one that is more honorable than telemarketing, like becoming a pimp?  At least that way, you’ll get some respect. Goodbye.”

c.    “Please stop calling me.  Brian doesn’t have this number any longer.  I’m his mother. He is presently serving a life sentence for committing serial ax murders.  Because his accomplices have never been apprehended, I believe the police are routinely checking out anyone who calls his old number, so be careful. By the way, were you involved in the ax murders?  No, don’t tell me. I don’t want to know.”

d.    “Yes, this is Brian but I’m rather busy now.  I’ll be happy to get back to you though.  Just give me your home phone number and your social security number.  What time do you usually have dinner?   That’s when I’ll call you back, okay?  And what was your home telephone number?  Repeat it slowly.”

Believe it or not, none of these really work.  If you have any better ideas, short of getting a new cell phone number,  please let me know.

Jack Lippman

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1 comment:

harvo said...

I found "Sorry, but this number is out of service" works. Otherwise I play a game and see how much of their time I can waste. I've spun their wheels for over ten mintes and just when they think I'll close I hang up.