What does 10,962,532 represent? The number of current social security disability recipients as of 04/2013

 

April was the 195^th straight month that the number of American workers collecting federal disability payments increased. The last time the number of Americans collecting disability decreased was in January 1997. That month the number of workers taking disability dropped by 249 people—from 4,385,623 in December 1996 to 4,385,374 in January 1997. - 10,962,532: U.S. Disability Beneficiaries Exceed Population of Greece, cnsnews.com, 05/07/2013


Link to the CNS news article appears below:

http://cnsnews.com/news/article/10962532-us-disability-beneficiaries-exceed-population-greece

Your tax dollars at work!

Social Security: can one lose a lost horizon?

Certain politicos are currently shaping a political argument that Social Security is an item that should be excluded regarding any debt reduction/debt ceiling negotiations. That Social Security’s mere existence is of benefit to the “greater good“.

‘Senate Majority Leader Harry Reid, D-Nev., attacked the bill as a "radical plan to kill Medicare and Social Security," and said House Republicans needed to know it was dead‘. (1)

Don’t reduce benefits but reduce benefits?


The fall back position of those advocating no reductions in Social Security benefits is that any changes to Social Security, if they must occur, the changes should come in the form of raising the retirement age qualification [which in fact is a reduction in benefits]. (2)

The history of don’t reduce benefits but reduce benefits.


When Social Security was first proposed by Franklin Roosevelt the plan would be completely voluntary. The plan is no longer voluntary and hence the voluntary benefit became a coercive state mandated benefit. However, one would only be taxed at 1% of the first $1,400 of income. Sorry, today the tax is 7.65% of the first $90,000.

Then again, your contribution would be tax deductible and hence some other tax relief would be gained. Sorry the contributions are by and large no longer tax deductible.
At least their would be a Trust Fund and the Social Security contribution would be sequestered and not part of the general operating fund. Under the Lyndon Johnson Administration the Trust Fund corpus was moved to the general fund and subsequently spent.

Well, at least the future income derived from Social Security would not be taxed. Ops! Under the Clinton Administration the retirement income proceeds of Social Security became taxable of which 85% can be included as income based on the total income of the recipient.


Who created a plan that doesn’t reduce benefits but reduces benefits?


Was Social Security just so much pie-in-the-sky dreamed up by the public who wanted a secure retirement? That in the end the public outcry for retirement security was just so much populist blather? Sorry, no. The public demanded no such plan. Really? Oh yes, almost every state-run retirement plan in the world is a concoction of politicos and by no means a grass root phenomena. That’s right, state run retirement plans are the brain child of politicos. (3)


Why were we not warned of a plan that doesn’t reduce benefits but reduces benefits?


Due warning was given. How so? W.R. Williamson, Travelers Insurance Company actuary testified before the House Ways and Means committee in 1935 explaining how the plan would incur deficits. That a major burden of deficits would be passed onto [in his 1935 actuarial estimate] to those in 1965 or 1980. (4) (5)



Can one lose something that was lost in the first place? Can one consider value lost where no value exists?


Exactly who values Social Security the most? If Social Security checks can not be sent out 08/02/2011 without raising the debt ceiling exactly where is the value to James and Jane Goodfellow? Is the value increasing debt? Increasing debt can be considered “value”? (6)

Arguably the “value” of Social Security is an illusionary political value of, by, and for the politico. How so? By convincing James and Jane Goodfellow that value exists, and that somehow, someway a concrete, sustainable, and asset based value is being taken away [that indeed represents value] politicos merely extend and pretend the illusion of Social Security.

Notes:


(1) Boehner pulls out of White House debt talks. msnbc.com, 07/22/2011, http://www.msnbc.msn.com/id/43851666/ns/politics-capitol_hill/

(2) The red-hot debate over raising the retirement age, cnnmoney.com, 08/02/2010
http://money.cnn.com/2010/08/02/news/economy/social_security_retirement/index.htm

(3) Carolyn L. Weaver, The Crisis in Social Security: Economic and Political Origins, (Durham, NC.: Duke Press Policy Studies, 1982), p.33.

(4) Statement of W.R. Williamson, Assistant Actuary, Travelers Insurance C0., Hartford, Conn., House Ways and Means Committee, January 1935, pp.1013, 1014.

(5) Statement of W.R. Williamson, Assistant Actuary, Travelers Insurance C0., Hartford, Conn., House Ways and Means Committee, January 1935, p. 1014.

(6) Obama: Debt Ceiling Impasse Threatens Social Security, Veterans, Medicaid Checks. ABC news, 07/12/2011,
http://blogs.abcnews.com/politicalpunch/2011/07/obama-debt-ceiling-impasse-threatens-social-security-veterans-medicaid-checks-.html



　





　

USA Today: Is Social Security an investment Ponzi scheme?

' Q: Is Social Security an investment Ponzi scheme?


A: The Social Security system is under intense pressure as its method of taking current workers' contributions to pay for current retirees is under strain. And it's that method, which often draws criticism for resembling a Ponzi scheme.

Before we can decide if Social Security's structure qualifies it as a Ponzi scheme, a quick definition is in order. A Ponzi scheme "is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors," according to the Securities and Exchange Commission.

Some investors think that the fact that Social Security pays existing investors with cash collected by new investors makes it a Ponzi scheme. But that's not true, says Jack Coffee, professor of law and securities law expert at Columbia Law School. "This is less a question and more an aggressive assertion," he says.

Social Security is not a Ponzi scheme because it wasn't an intentional fraud, he says. In fact, the system has worked as expected since its creation in the 1930s. What's happening now is that, like many corporate pension plans, Social Security is running the risk of being underfunded as obligations grow faster than contributions. But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.

Changes are certainly needed to keep Social Security working to reach the goals it was established to meet, he says. Either benefits will need to be curtailed or the government will need to kick in funding, he says. But again, it's not a Ponzi scheme, but a retirement system where the demographics have changed, he says. "It's a system where almost everyone agrees needs reform." ' - Matt Krantz, USA Today (1)



What about this depiction of Social Security? Is it accurate?

Regarding the Ponzi scheme portion of the article it tries to delineate between intentional fraud and good intentions. Let us revisit Coffee's statement:

'Social Security is not a Ponzi scheme because it wasn't an intentional fraud, he says. In fact, the system has worked as expected since its creation in the 1930s. What's happening now is that, like many corporate pension plans, Social Security is running the risk of being underfunded as obligations grow faster than contributions. But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.'

Examine this statement: "...it wasn't an intentional fraud".  Is the statement including an implicit assumption that fraud existed but it wasn't intentional?

Examine this statement: 'But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.'

Are those statements accurate? Regarding "...Social Security wasn't created with this aim" one needs to revisit the 1930's and the arguments put forth by the politicos through the mechanism of government for the enactment of Social Security. Yes, there was no populous movement for Social Security creation. That is, Social Security was a politico creation not a voter movement for the creation of a government sponsored retirement scheme. Hence the creation and aim were clearly politico driven. (2) The "....adequate for a long time" assertion is questionable because the arguments clearly included congressional hearings in which discussions of "inadequacy" occurred by Travelers Insurance Company Actuary W.R. Williamson (3)

Coffee's "wasn't an intentional fraud" and "wasn't created with this aim" are questionable statements. That is, arguments regarding funding with one generation paying for the next generation were clearly given and debated by politicos in the 1930's regarding Social Security. (4)

Upon Further Review

Coffee also states "....government will need to kick in funding". Government produces nothing that the private sector would not have produced if a transfer payment had never been made from the private sector to establish the public sector. Hence how does the entity "government" kick in funds? The answer is: it doesn't. Only the transfer payment from the private sector can increase funding with government merely acting the part of transfer agent.

Coffee goes onto say "But again, it's not a Ponzi scheme, but a retirement system where the demographics have changed....". This statement appears to assume that changed demographics were an unknown-unknown. Once again one must visit the 1930's and examine the politico arguments surrounding social security. In point of fact, demographic changes were in fact discussed and warnings were given regarding the changing demographics in the future.(5)

Finally Coffee states the obvious or does he misstate the obvious when he says "....Social Security is running the risk of being underfunded". The term underfunded carries with it the implicit assumption that a fund exists and that that fund may not be adequate. What fund exists that is underfunded?  No fund exists. (6)

Notes:

(1) http://www.usatoday.com/money/perfi/columnist/krantz/2011-06-21-social-security-ponzi-scheme_n.htm

(2)  Carolyn L. Weaver, The Crisis in Social Security: Economic and Political Origins, Durham, NC: Duke Press Policy Studies, 1982, p.63.

(3) Jim Powell, FDR's Folly, Chapter Thirteen, How Did Social Security Contribute to Higher Unemployment, pages 173 - 186.

(4) Ibid

(5) Ibid

(6) Dr. Donald Boudreaux, George Mason University, More on the ‘Trust-Fund’ Fraud, 03/16/2011,  http://cafehayek.com/2011/03/more-on-the-trust-fund-fraud.html

And About that "Lock Box" and Social Security.........

The video above is brought to you courtesy of Dr. Donald Boudreaux, Economics Department, George Mason University. An excellent two minute lesson regarding the wonderful world of social insurance and economic security. (1)

Yes, social insurance and economic security, that fun filled world of impossible promises brought to you by politicos past and present. Yes, those propositions based on "the way things ought to be" which are magic pixie dust carried in the pockets of forest nymphs in the economic pretend world of politicos.

Ah, Boudreaux is merely exaggerating to make a point. There has to be a lock box! There has to be value in that lock box! Where is that lock box and lets go inspect it!

OK! Off to see the wizard of lock boxes!

Social Security: There is No Trust Fund, Only IOU's - Don Luskin, Capitalism Magazine, April, 11, 2005

On Tuesday, President Bush had the most bizarre cabinet meeting any president is ever going to have. It was a meeting with an actual cabinet. A filing cabinet. A filing cabinet in Parkersburg, W. Va., to be precise.

Strange? Yes. But then again this is a very remarkable filing cabinet. By one way of looking at things, it contains $1.7 trillion dollars. But by another, it contains nothing at all.

Of course I'm taking about the filing cabinet in the offices of the Bureau of the Public Debt that holds the assets of the Social Security Trust Fund.

After the meeting, President Bush declared, "a lot of people believe that the Social Security trust is -- the government takes a person's money, invests it, and then pays it back to them upon retirement... It doesn't work that way. There is no 'trust fund,' just IOUs that I saw firsthand..."

In other words, there's nothing there.

The president's opponents were quick to look at it another way. Democratic congressional leaders Harry Reid and Nancy Pelosi said the same day, "It is simply wrong to suggest that the Social Security Trust Fund does not exist, or that the securities held by the Trust Fund are merely pieces of paper. For a president to even suggest that the federal government might, for the first time, default on a security backed by the full faith and credit of the United States unnecessarily misleads American workers..."

Who's right? Is the president right, that the Treasury bonds held by the trust fund are "just IOUs"? Or are the Democrats right, that those bonds are sacred obligations of the United States, just like any other Treasury bond?

Is the president raising valid concerns about the way Social Security is financed? Or, as the Democrats charge, is he threatening to default on the nation's debt?

Both the president and the Democrats are right in their own ways. But that means, necessarily, that both are wrong. I told you it was a remarkable filing cabinet.

Here's the truth about it.

The Democrats are correct that the Trust Fund's cabinet holds actual Treasury bonds, and those bonds are every bit as real as the Treasury bonds you probably have in your IRA or brokerage account. Those bonds -- the Trust Fund's and yours -- are backed by the full faith and credit of the United States, and a default on any of them would be an unprecedented and unthinkable catastrophe for our country.

And nothing whatsoever that President Bush has said should be construed as a threat to default on those bonds. So don't worry -- at least not about that. Period.

There's one very important thing, though, that makes the Trust Fund's Treasury bonds different from yours. You aren't an agency of the US government, but the Trust Fund is. That means when you invest in Treasury bonds, they represent a debt owed by one party to another -- in this case, the government to you. But when the government itself invests in Treasury bonds, those bonds represent a debt owed by one party to itself.

You can't owe money to yourself. What would it even mean to borrow 20 bucks from yourself today and promise to pay it back to yourself on Tuesday?

Here's another way to think about the problem. Social Security is a commitment by the government to make payments to people in the future. The Trust Fund exists, supposedly, to secure that commitment by setting money aside today -- so that in the future, the money doesn't have to come from taxes, borrowing, or spending cuts. Fine -- in principle. But when that money is invested in Treasury bonds, those bonds themselves will have to redeemed in the future, and the money to do that will have to come from taxes, borrowing, or spending cuts.

Of course that makes the Trust Fund's Treasury bonds no different from yours or mine -- they all have to be repaid someday from taxes, borrowing or spending cuts. But my point is that when the Trust Fund holds them, it doesn't accomplish anything. Whether the Trust Fund holds Treasury bonds or nothing at all -- or for that matter, whether or not the Trust Fund exists -- to pay benefits in the future, the government is going to have to tax, borrow or cut spending.

So in that sense, President Bush is absolutely correct when he says "There is no 'trust fund.'"

That makes the Democrats wrong when they fret that Bush's statement amounts to threatening to default on government debt. Think again about the 20 bucks you lent yourself. Suppose you refused to repay yourself when Tuesday rolled around -- is that a default? Would you sue yourself to recover the money you owed yourself?

In other words, since the existence of those Treasury bonds doesn't really affect the government's wherewithal to pay benefits one way or the other, then it would make no difference whatsoever if the Trust Fund simply surrendered them, or for that matter tore them up and threw them in the ocean.

Given Dr. Boudreaux video depiction and Mr. Luskin's analysis, we must give equal time to the forest nymphs and their pockets of pixie dust. Who better to reply then Jacob Lew director of the White House's Office of Management and Budget!

"When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due." (3)

Ah ha! We write I.O.U's to ourselves! Suppose we could call these I.O.U'S written to ourselves a real "Lew Lew". Ops! Spell check corrects it to: a real "Lou Lou".

Notes:

(1)http://www.xtranormal.com/watch/11226537/?listid=18148621

(2) http://www.capitalismmagazine.com/politics/social-security/4190-social-security-there-is-no-trust-fund-only-iou-s.html?print

(3)http://www.usatoday.com/news/opinion/editorials/2011-02-22-editorial22_ST1_N.htm?loc=interstitialskip

Social Security Insolvency

Social Security's huge unfunded future entitlements leading to a bankrupt plan has grabbed many headlines in the past several years. However, it can be difficult to put your arms around such a monster of an issue.

Dan Mitchell of the Cato Institute has put together an eight minute video that makes the issues much more understandable. You will be surprised how many countries around the world have already adopted plans to solve their particular unfunded retirement plans. The most interesting example is Australia which solved their retirement funding plan some twenty five years ago. Link to the video appears below.

Saving Social Security with Personal Retirement Accounts

http://www.youtube.com/watch?v=DRh5zKleh0I&feature=player_embedded#!

Social Security: old allies become new enemies

In the study of Social Insurance and Economic Security its been a known-known, stretching back to the 1970’s, that general increases in life expectancy and future life expectancy of the group representing a population blip (baby boomers) spelled danger regarding the future insolvency of Social Security. Today this known-known has finally become a mainstream topic regarding Social Security insolvency.

Focusing on the topics of life expectancy and the population blip of baby boomers, regarding Social Security, one must remember that this topic, political-economy enemies of Social Security regarding insolvency, were once political-economy allies of Social Security‘s supposed solvency. How so?

At the advent of Social Security in the 1930’s the benefits were payable at the recipients age 65 whereas the average life expectancy was age 61. Hence a marginal amount of recipients existed while a large amount of contributors existed to maintain the cash flow that generated benefits to recipients. Life expectancy has increased over the years in a gently sloping fashion, yet year after year life expectancy marches on at a an ever increasing rate. For example, life expectancy in 1935 was 61.7, 1940 was 62.9, 1950 was 68.2, 1960 was 69.7, 1970 was 70.8, arriving some 35 years later at 77.8 in 2005. (1)

The gently sloping increase in life expectancy from 1935 to 1970, an increase of 9.1 years over 35 years, left social security appearing long term solvent as the group generating tax revenue for benefits was still larger than the recipient group.

By 1985 life expectancy had reached 74.7 and the recipient group was now living 13 years longer than the 1935 group and the size of the group was growing ever larger. Now life expectancy was becoming the enemy of Social Security long term solvency. Enter the baby boomers.

Those sixty four million children born between 1945 and 1964 became an ally to the supposed long term solvency of Social Security. (2) By 1985 most if not all of the baby boomer had entered the work force. This mammoth group replenished and expanded the group generating tax revenue for the ever expanding and ever longer living recipient group. Hence the baby boomer group through sheer numbers and increasing incomes, lead to increased Social Security revenue which temporally continued the facade of long term solvency regarding Social Security.

Therefore, what is now the mainstream topic of Social Security future insolvency, life expectancy of the recipient group and the sheer increase in the numbers of recipients caused by aging baby boomers, publicized as the enemies of Social Security solvency, were once upon a time the allies of the facade of long term Social Security solvency.



(1) http://www.infoplease.com/ipa/A0005148.html

(2) http://en.wikipedia.org/wiki/Baby_boomer