Social Security Grandchildren

Retirement Policy
05/26/10 - EconLog by David Henderson

[edited]  A friend of mine retired at 65 and went to register at the Social Security office.

Clerk:  Do you have any children under age 18?
Friend:  One. Why do you ask?

Clerk:  You will get an extra monthly payment until the child turns 18.
Friend:  This must be pretty rare. In my case, I couldn't get pregnant, and so we adopted when I was in my late forties.

Clerk:  It's not at all rare. Many grandparents in this area adopt their grandchildren.

Are you 20 to 45 years old? Then, you are paying 12.4% of your real salary into Social Security to support current benefits being paid out. I hope you don't mind losing that money, because the above Social Security policy puts little value on it. Your politicians will not adjust the rules to eliminate the above gaming of the system.

You probably will never see a return on these taxes you have paid or will pay. The "Social Security surplus" is a piece of paper at the Treasury that totals up the amount of Social Security taxes collected but not yet spent on Social Security. But, that money has already been spent on other things.

That money has been spent each year out of the general Treasury fund. It isn't there. There is no gold, stocks, or anything of value there. There is only an IOU, a promise from the government to repay to itself the money owed to future retirees. Only higher deficits or much higher taxes on your children can supply that value.

Amazingly, this is like an insane person saving up for his children's college education. He puts $100 each Friday into his savings account. Each Monday he takes out that $100 and spends it on food and entertainment, but he carefully records what he has borrowed from the "college fund".

When his kids are 18, he tells them that he saved $50,000 over the years. He only has to pay back what he took out, or borrow the money in the name of the children. Are they happy at that result?

This has been justified over the years with the slogan "we owe the money to ourselves, so why not spend it now?" OK. Now, in your retirement, pay yourselves back.

Ponzy Schemes Like Social Security
01/01/09 - Easy Opinions

There is nothing real in the "trust fund". There is only a political promise to find the money somewhere that has already been spent. This is 300 times bigger than the Bernie Madoff fraud of $50 billion. It is a gigantic Ponzi scheme pretending to be a sensible government program.

Ponzi Schemes Like Social Security

Speaking of Ponzi Schemes
12/29/08 - BusinessAndMedia by Donald J. Boudreaux, Chairman, Dept. of Economics at George Mason University

[edited] Social Security is like the "investment" Ponzi scheme of Bernard Madoff, so Americans should stop being duped.

Many pols and pundits assure us that this program is a great financial deal for ordinary Americans. But in principle, Social Security is identical to Mr. Madoff's fraudulent scheme.

Neither scheme generates wealth through productive investments. They only transfer wealth from newer 'investors' to older 'investors.' Such schemes appear brilliant as long as enough new 'investors' come on board – either by being duped by Mr. Madoff or by being coerced by Social Security. This is a dangerous illusion.

You may not believe this warning. You may think that 435 congressmen and 100 senators would surely not continue to support a program that will end in pain for millions of individuals.

Government policy led to sub-prime loans, a bubble in housing prices, and a damaged economy and recession, despite many warnings along the way. Those same politicians vote for borrowing and spending far beyond any ability to tax. Their policy was and is "so far, so good" as they gain re-election through whatever promises they feel like making.

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Investing with Bernie Madoff

CBO:  What Are US Treasury Trust Funds?
The bonds in the Social Security Trust Fund, and all Treasury trust funds, are promises, not assets. They are as good as other government bonds, which are also promises but not assets.
  The taxing power of the government is in doubt. The promises of the government are so large that all of its bonds may lose some or all of their value, including the bonds in the Social Security and other "funds". The bonds are a promise, but they don't help to pay for themselves.

The Biggest Promises Win
They promise anything to get elected.

Seduction and Politics
Politics is like a romantic first date.

We Guarantee It
A government guarantee is a blank check on your personal account. They will make good on the promise with your resources, and the next even bigger recession.