Top Ten Reasons Why Social Security is not a Ponzi Scheme:
1. Ponzi scheme participation is voluntary, unlike Social Security where participation is mandatory for most citizens.
2. Ponzi scheme participants usually receive brightly colored reports telling them how much illusory interest their investments are earning. Social Security participants make do with drab annual reports.
3. When a Ponzi scheme goes bust the perpetrators can be sued for damages. Good luck suing the Feds after Social Security goes belly up!
4. Participants in a Ponzi scheme do not lose their claim against the perpetrators upon death, unlike people who die prior to receiving a check from Social Security.
5. Ponzi schemes usually have few to no solid assets that can be seized by participants. Social Security has endless IOUs signed by Uncle Sam. Continue reading
Having linked last week to some discussion on whether the US is really becoming “Of the 1%, by the 1%, for the 1%”, I was struck by this chart, which I saw a link to this morning, over at Carpe Diem, showing top marginal income tax rates versus percentage of income tax paid by the top 1% of earners since 1980.
However, I thought it would be a lot more interesting if the chart showed the percentage of total income earned by the top 1%, and also showed the total federal tax liability (including Social Security and Medicare) rather than the just the income tax. Luckily, all this information is available easily on line. (Percent of taxes paid. Percent of total income. Historical tax tables.)
Here’s the chart I produced with that data:
That’s a line from a brief but astounding post by Kevin Williamson of NRO, which I’m reproducing in full here:
A little perspective from the debt commission:
“The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. ‘The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans — the whole rest of the discretionary budget is being financed by China and other countries,’ [Alan] Simpson said.”
Three programs — Social Security, Medicare, and Medicaid — consume 100 percent of federal revenue, and everything else is paid for with borrowed money. This is why we cannot balance the budget by cutting military spending, foreign aid, food stamps, etc. There is not going to be a serious project to address our deficit/debt problem without deep, painful entitlement reform, and the longer we wait to admit that fact and get going on it, the worse it is going to be.
So, who’s gonna grab that third rail? George W. Bush tried and got hammered — an example that few if any in Washington are eager to follow.
Indeed. I think if this is going to happen, it’s going to have to come from the people (tea parties, perhaps?), because it seems suicidal for any politician to take it on without considerable popular support.
There has been a fair amount of useless discussion among pundits and Obama administration officials about a Value Added Tax, a National Sales Tax, the mainstay of the crumbling welfare states in Europe. I say this discussion is useless, because Congress would never pass it, as the 85-13 vote in the Senate on an anti-Value Added Tax non-binding resolution indicates.
Today in the Washington Post Robert Samuelson explains why a VAT wouldn’t solve our budgetary woes:
The basic budget problem is simple. For decades, the expansion of Social Security, Medicare and Medicaid — programs mostly for the elderly — was financed mainly by shrinking defense spending. In 1970, defense accounted for 42 percent of the federal budget; Social Security, Medicare and Medicaid were 20 percent. By 2008, the shares were reversed: defense, 21 percent; the big retirement programs, 43 percent. But defense stopped falling after Sept. 11, 2001, while aging baby boomers and uncontrolled health costs keep retirement spending rising.
Left alone, government would grow larger. From 1970 to 2009, federal spending averaged 20.7 percent of the economy (gross domestic product). By 2020, it could reach 25.2 percent of GDP and would still be expanding, reckons the Congressional Budget Office’s estimate of President Obama’s budgets. In 2020, the deficit (assuming a healthy economy with 5 percent unemployment) would be 5.6 percent of GDP. To cover that, taxes would have to rise almost 30 percent.
A VAT could not painlessly fill this void. Applied to all consumption spending — about 70 percent of GDP — the required VAT rate would equal about 8 percent. But the actual increase might be closer to 16 percent because there would be huge pressures to exempt groceries, rent and housing, health care, education and charitable groups. Together, they account for nearly half of $10 trillion of consumer spending. There would also be other upward (and more technical) pressures on the VAT rate.
Does anyone believe that Americans wouldn’t notice 16 percent price increases for cars, televisions, airfares, gasoline — and much more — even if phased in? As for a VAT’s claimed benefits (simplicity, promotion of investment), these depend mainly on a VAT replacing the present complex income tax that discriminates against investment. That’s unlikely because it would require implausibly steep VAT rates. Chances are we’d pay both the income tax and the VAT, making the overall tax system more complicated.
This is a clip of Ronald Reagan warning us of socialized medicine, the very same bill that President Obama and the Democratic Party are trying to ram through congress.
Reagan warns us of how people such as six-time presidential Socialist Party candidate Norman Thomas, and many others, explained how to move their agenda of achieving a socialist state by a Foot-in-the-Door policy of socialized medicine. Which is eerily similar to what President Obama and the Democrats are doing, against the will of the people with their European socialized health care bill.