Posted by: James Atticus Bowden | June 7, 2011

Fixing the Entitlement Ponzi Scheme

The entitlements were a tax - and a lie - from day one

The scare number for the day is 534,000.  The average family will have to pay $534k  to pay of the debt of the Social Security, Medicare and Medicaid entitlements.  Oooh, scary.  It will be beyond scary if the ruling elites in Congress insist on keeping the Entitlement Ponzi scheme supported by Federal Law.  They will bankrupt the Nation.

Bankrupting America

Enter the miracle of compound interest.  Presently, every worker and their employer pay 15.3% of a person’s salary for Social Security and Medicare.  Let’s see what that money can do, over time, if it saved – not spent – by the government.

One statistic is that a couple who retired in 2000 will use $330k in Social Security and $240k in Medicare = $570k

Assume an American only made $6 an hour.   And he never gets a promotion, so he makes $6 for 47 years from age 18 to 65, and he puts the money  in investments – could be government bonds – which average 6% a year (one per cent less than the stock market has made since 1790) , then he will have $313, 239,21.   A couple of lifelong $6 an hour folks will have $626k.   $626k > $570k.

A person who is 55 years old today and makes $6 an hour will have $17,883.70 in 10 years – if he retires at 65.

Meanwhile the average family of 4 in Virginia making a total income of $42.5k a year will have over $1.606 million when they retire.  Plenty enough for healthcare and retirement pay.

When they die whatever remains will be left to their family.  It’s their money.  What a concept.

So, here is the obvious point.  Create Social Security/Medicare 2.0.   Now.  Better, is to create move it to 50 states to let them manage it  – as a Constitutional plenary power of states’ rights.

Cut Federal spending to the bone to pay out the benefits needed for folks grandfathered into Social Security/Medicare 1.0 (original Ponzi scheme).  Cut taxes to create more Federal revenue to pay the bill and to supplement the lower income folks who have less than 40 years to build up their nest egg.

The scary number is only a scary number if Congress stays stuck on stupid.   Let’s fix the people who are supposed to represent us to fix the numbers for the future.

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Responses

  1. This analysis may be popular, but it is popular like Sarah Palin is popular — without any regard for the underlying facts. For decades, the price of servicing the national debt has been dramatically reduced by the use of Social Security and related funds as an alternative to even larger levels of borrowing. No effort is made to even consider the value to the nation of that enormous discount in effect for longer than most of us have been alive. The willful ignorance of that factor cannot coexist with an earnest fact-based analysis of the situation at hand.

    Also, there is willful ignorance of the very real costs associated with privatization schemes and other approaches that would drive up rates of extreme geriatric poverty in the United States. By providing all elderly Americans with some sort of social minimum, more young people enjoy the freedom to pursue their own careers rather than act as caretakers to their elders who did not happen to be shrewd investors (or worse yet, simply shrug while watching their parents and grandparents die after an undignified twilight of homelessness and dumpster diving.) Pumping more money into private sector investment accounts may be great for the scoundrels who run Wall Street, but it is no solution for the real problems extreme deprivation among the elderly would impose on our society.

    • The entitlements are the scheme. The shell game – a different scheme – of servicing the national debt with Social Security money came to a crashing halt this year. Social Security paid out more than it took in. So, that political con is over. It is willful ignorance to recognize money taken in the name of Social Security was spent for the earmarks, Planned Parenthood, PBS and other follies both Parties wasted our money on.

      You don’t have numbers to support your claim of poverty. If you love the poor, then invest the money that is taken from them. Furthermore, if you fear freedom so much, then the states can use their plenary powers for the forced taxation and savings. If you fear and are so ignorant of the private sector, then the money could be put into government bonds. The result is the elderly poor will be richer. And, the family will inherit the gain of the lifetime of labor.

  2. You moron, there are good people with the name Ponzi. Why not have the guy that invited the atomic bomb have the bomb name after him, why change the swine flu to H1N1 but why keep using Ponzi?

    In the end Frank Ponzi created a mathamatical formula, just like the same guy that invented the theory of some crap number.

    STOP USING THE PONZI NAME!!!!!!!

    • Thanks for dignifying your prose with name calling. So, are you a Democrat/Liberal or named Ponzi?

  3. You are just as cruel as Madoff.


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