IS the US Economy a Ponzi Scheme?

It's a question that comes up a lot when one tries to make sense of your posts and sort out what your position is supposed to be.

I never said that, nor did the Social Security Trustees make any such claim in their 2011 report. You are attacking strawmen of your own invention.

And the Social Security Administration updates its outlook every year and has since aknowledged and corrected estimates in previous reports that turned out to be inaccurate. They are clear that they are dealing in estimation and prediction, and routinely update their outlook as conditions change, and moreover are honest and straightforward about identifying when previous estimates turned out to be wrong and why. That honesty being the entire reason that you even know about the deviation from expectations in 2010, in the first place.

Your accusation that the Social Security Administration is in the business of systematically, intentionally overstating the health of Social Security is silly - they have every interest in not doing that, and no record of such. The inaccuracy in 2010 was caused by an unexpected surge in energy prices in 2011 - you are, apparently, claiming that they did know that energy prices would surge, but instead released estimates ignoring that, in order to misrepresent Social Security as better-financed than it truly is? Why on Earth would they do that?

Or, again, what in the hell is your position? On the one hand you aren't disagreeing with anything that the Social Security Administration has said - indeed, you rely on their own reports for your claims about them here - but on the other hand you keep insinuating that their output is somehow wrong or overstates the financial health of Social Security. Which is it? Are you just so committed to disagreeing with me that you will persist in such even when you do not disagree with anything I've said?

The difference is that we have transparent, professional, accountable systems for calculating and publicizing these numbers, while the CCP operates in an opaque, unaccountable fashion. There is also the fact that high Chinese officials have explicitly admitted as much.

At no point have I suggested that any cultural or racial differences in the leaders themselves are the issue - I am sure that American officials would fudge the numbers just as much, if they didn't operate in a system that makes such both very difficult to do, very easy to detect, and very costly to be caught doing. It is becoming very tiresome, your tactic of always responding to strawman positions.

Of course, that's true of all politicians. The difference is that the opaque, unaccountable CCP system allows Chinese officials to distort economic statistics with total impunity, while the transparent, accountable US system makes such very difficult and risky. So we see it happen all the time in China, and essentially never in the USA.

So after all of those baseless accusations of racism or cultural chauvinism that you invented to throw at me, it turns out that you pretty much agree with my position. Maybe next time I say something that you do not disagree with, you can just skip the part where you attack some strawman of my position and go directly to the part where you agree. Again, it seems that you are trying to invent things to dispute me about even when you agree with everything I've said.

It's not that huge in the context of a program with trillions in assets that pays out nearly a trillion bucks per year.

Moreover, the error in question - failure to anticipate an unexpected upward shock in a highly volatile market sector - is indeed small. The main error here seems to be your ignorance of the error bars around those estimates (which is understandable, as the standard press releases are aimed at the statistically-illiterate mainstream and so do not cite them). A hundred billion either way was actually within the confidence intervals for the estimate in question. I.e., there was no actual "error," just statistically illiterate audiences who make the silly, basic error of imagining that the numbers in the estimate are supposed to be exact outcomes with negligible statistical variations going forward, and so imagine that the Social Security Administration was "wrong" when the numbers don't come out exactly right.

That is why they release updated estimates every year.

It would need to fall outside of the relevant confidence interval in the first place.

 

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Questioning my motivations, asserting you opinions as to why I went to Brazil or calling me senile, etc. is not likely to help you "sort out my positions". They have been clearly stated, as far as all but you are concerned, for 7+ years, with essentially no change.
Here you make a more rational approach:

I.e. to learn which POV (of stating two) is mine you should not make comments about me, but ask as you do above. Unfortunately, (2) is either your misunderstanding of what I have written or simple pure fabrication, I.e. I never have rejected ANY of SS´s data or statements, (except a few years after they were made and proved out to be terribly false). For example back in 2009 when SS claimed it would be 2017 before collections of the SS tax would not cover the required SS pay outs, I accepted that. In fact it was part of my basis for calling SS a "Ponzi scheme" as like all Ponzi schemes, SS takes money from Peter to pay Paul. When in mid 2010 that "no gap until 2017" proved to be very false I posted:

So my position is & has been your alternative I have marked as (1) i.e. I never do (or have done) your alternative (2) which is only your fabrication or misunderstandings of my posts – nothing I have ever posted. I will now note however that my “using money from the general taxes to buy back some of the bonds it gave SS earlier” is wrong as Treasury´s interest paid on those bonds did cover the gap between collections and pay out thur 2011, but probably sometime in late 2013 will collections with the interest fail to do so, as pay outs are rapidly climbing for several reasons (three at least) while collections from Big Mac job salaries, that replaced factory salaries, are less and the average interest rate the trust fund get is now rapidly decreasing (about half what it was a few years ago - thanks to Fed´s ultra low interests rate policy).

No I´m not making “strawmen.” I agree that SS did not make that false claim in 2011. Then even the SS was admitting, when the data for 2010 was in, that its “not before 2017” claim made in 2009 was false - a 148 billion dollar error! (148E9 was the gap in 2010), but made in 2010 another SS statement about it, which later also proved false. I.e. SS claimed in 2010 that gap was a one time anomaly but that too was an error as it occurred again, even larger, in 2011 and will again in all future years, growing ever larger, according to the CBO. (Eventually the gap between pay out and collections will be at least 20% of all paid out. It was only 4% in 2011.)

To pay the claims in 2013 or 2014 at the latest, SS will need to cash in some bonds in the trust fund. The it is all downhill for the trust fund as each year holding fewer bonds it collects less interest.

I said all governments tend to be as optimistic as they can be. Yes you may take that as a statement about the government agencies too; however, you will need to explain to me why it is not in SS interest to error on the optimistic side, if they make an error. But the record is that they always do, and AFAIK all the SS errors, like the two I just mentioned, have been to portray SS as more healthy than it is.

The “inaccuracy” that later in 2010 proved to be a 148 billion dollar error, was the prediction made in 2009, after the recession, which started in last half of 2008 was well known - Perhaps SS assumed the recession and still continuing slow growth was an “anomaly” too that would soon be over. If so, that is the third SS error in three years (2009 til 2012). Do you still insist (as in your now red text above) that there is no record of SS making errors?

 

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First of all, I will thank you not to introduce edits into material your quote from me, at least without explicitly indicating such.

You have repeatedly asserted that the Social Security Administration is either dishonest or incompetent in this thread, and go on to assert later in that very post that the Social Security Administration has a clear interest in erring on the side of overstating the financial health of Social Security.

That is not the defining characteristic of a Ponzi Scheme. Under your nonsense defintions, pretty much all forms of government spending are "Ponzi Schemes," as is pretty much any business.

A Ponzi Scheme is, by definition, a fraudulent investment scheme. Social Security is not an investment scheme, nor is it fraudulent, and so your ongoing attempt to tar it as a "Ponzi Scheme" is an exercise in bullshit. It does not share any of the objectionable qualities that "Ponzi Scheme" connotes.

And - again - that is exactly how the Trust Fund was designed to operate. It is not supposed to last forever. It is only supposed to cover the extra costs of the Baby Boomer retirement. Why do you keep invoking the planned, expected extinguishment of the Social Security Trust Fund as some kind of harbinger of doom, and failing to respond to my repeatedly pointing out that such is planned and expected? That's a troll tactic.

Because their primary interest is in the financial health of Social Security, and overstating such means that voters and politicians are not going to give them as much concern and funds as they will end up needing. If anything, it is in the interest of the Social Security Administration to understate the financial health of the program, so that voters and politicians will be motivated to devote more resources to it. If they systematically overstate the financial soundness of the system, then they are likely to get caught out without enough funds to manage it, and a lot of anger from voters and politicians who they'd told everything was fine.

You're going to have to go ahead and produce actual evidence of that claim, if you expect me to take it seriously. You have presented nothing that would justify such a sweeping conclusion.

If you'd actually read the reports in question, you wouldn't be dashing off speculations about what "perhaps" happened. The subsequent reports analyze the previous estimates and show exactly where they went wrong and why. And the revision in question had nothing to do with expectations about the recession as such - it was a failure to anticipate a sudden, large increase in energy costs (which surged ahead of what their expectations for low economic activity would have suggested at the time).

I never said that. I said there was no record of the Social Security Administration intentionally, systematically overstating the financial health of Social Security. Exactly as you quoted, there - so why on Earth are you trying to showhorn in a strawman immediately after that?

If you cannot produce any evidence of the Social Security Administration intentionally overstating the financial health of Social Security, then I expect you to retract any such claims, and forswear them until such a time as you can at least try to substantiate them.

I also expect you to cut out all of the inane strawman responses to me. You're producing multiple strawman responses every day lately, and appear to be doubling down on this tactic in the face of repeated complaints about such. Persistence in such a pattern will merit a complaint for trolling.

 

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Just to say its fraudulent is an inadequate definition.

A Ponzi scheme is one in which old investments have to be paid off with new investments...because there is no real positive yield.

In other words, it can survive only as long as it continues to grow.

 

I was simply listing some basic, necessary features to meet the definition of "Ponzi Scheme," as it relates to the question of Social Security, not venturing a complete definition there. There are indeed additional necessary features, primarily that there is no actual investment occurring at all (this is implied in "fraudulent," but I agree merits some additional specificity).

And since the US workforce will continue to grow for the forseeable future, what does that tell us about the applicability of the term "Ponzi Scheme?"

 

Yes I did insert "(1)" & "(2)" into your post telling two mutually conflicting things you claimed I said for clarity in my reply to identify which I was replying too. I did say the (1) but never said the (2) - that was either just you misunderstanding what I said of fabrication. Please tell where & quote me saying

I did, on 5/28/10 say SS´s 2009 statement was wrong but they were then admitting that it was. I only pointed out this error (and 1 or 2 more) in past three years as you effectively said they were not to be doubted.

Also I did not :

Here is what I said, IN ONE POST, not "repeatedly":

Just as many Including Jack Welsh, former CEO of GE, and many others are questioning the recent upward revision of last month´s only 96,000 jobs created to 140,000 jobs were created and the drop in unemployment for 8.1 to 7.8 just weeks before the election. Those numbers may well be correct - I don´t question them. What I said COULD BE QUESTIONED, was in fact false, SS claim made in 2009 that turned out in 2010 to be wrong by 148 billion dollars! Errors like that (4% of the total SS payout, something built on well known demographics and the mainly the unchanging salaries of jobs in the economy) should, like insurance companies future projections, have no more than 1 % error.

 

So your defense is that you are using Weasel Words? Awesome.

By the way, Jack Welch is an idiot who has made himself a national laughing stock with his "unemployment trutherism."

 

Nonsense & a "red herring." Carcanno was not stating that the number of jobs would not grow, but that that the SS tax collection might not grow rapidly enough (and they are not for the last 5 years with drops of >1% each year and 7,8% total drop in purchasing power since 2007) It is purchasing power of SS´s tax collections that is important as the SS pay outs are adjusted by purchasing power (as CPT measure it). Ponzi schemes die when the intake is no longer is growing fast enough to cover the out go promised.

 

No I just don´t like for you to always be telling what I said instead of quoting me or "cherry picking" one sentence out when the very next sentences limit and otherwise qualify it. Again, for the umpteen time QUOTE MY POST, don´t assert what I said. If you did that, most of the time I could just ignore you, but when you put words in my mouth, I must waste time with reply: "I never said that..." Please post where I did."

 

You are disputing the assertion that the US workforce will grow for the foreseeable future?

Carcano can speak for himself. He does not need some bully who cannot even spell his username correctly to speak for him.

 

That's pretty rich considering that you are pretty much the worst offender at such things here. You strawman me in essentially every response, and took it upon yourself to redefine Carcano's statements in your post immediately before that one. You are the very last person who should be complaining about this.

The issue is that those subsequent sentences contradict the earlier ones. That's why your output is a hash, and why I keep asking you to square those circles: which you then respond to with these sorts of hysterics and accusations. Get a fucking grip.

I stand by my descriptions of your output, and see no need to waste my time compiling explicit demonstrations of such. I am confident that any third parties reading this exchange will find my descriptions accurate and fair. This is just you trying to weasel out of any responsibility for your own speech.

And, again, given that you are a serial offender at strawmanning and misrepresentation, I find your attempt at mounting some high horse on this issue hilarious.

Anyway, nobody is forcing you to respond to anything. Please go ahead and follow through on your hollow threat to ignore me. I dare you.

 

No, I even agree it would but that is only one factor in determining the collections of Social Security via the SS tax on salaries. The factor that these salaries have been dropping by more than 1% annually in purchasing power (which is what SS must pay out with the CPI annual adjustments) is much more important -completely negating the much smaller effect that the work force is growing, not to even mention the fact the the "participation rate" is dropping for last 15 years as seen here:

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If those who have dropped out were counted, in last four years (During just Obama´s first term), the unemployment rate is 10.7% and increasing. (Graph & 10.7% data from: http://www.fool.com/investing/general/2012/10/09/why-are-so-few-people-working.aspx)

 

So when you called that assertion "nonsense," you were... what? Lying? Mis-speaking? Bullshitting?

It is the primary factor - if the workforce were not growing, the situation would be dire indeed.

That's a short-term blip due to the recession. Are you predicting that median real income is going to decline by 1% annually on the time horizon in question here (now through 2075)?

Because nobody reputable will agree with that.

Moreover, the latest data shows median real household income increasing by about 2% over the past year.

http://www.anthonyworlando.com/2012/09/02/chart-of-the-day-real-median-household-income-2000-2012/

You have provided no substantiation for that assertion. You haven't even cited what the rate of workforce growth is (hint: it is not "much smaller" than the 1% effect you invoke).

That is because the Baby Boomers are retiring - exactly what the Social Security Trust Fund was created to cover.

Are you asserting that said decline will continue apace after the Baby Boomers have moved out of the workforce? Again, I do not see where you are going to find reputable support for such a proposition. If not, then what is the relevance? It's looking like you are just throwing whatever scary-sounding facts you can find at the wall to see what sticks, with no coherent reasoning connecting them.

 

No the retired generally are not part of the work force so do not enter into the calculation of the participation rate. You could imagine that a billion more people were retired in the US and that would not change the participation rate.

Also note the participate rate started to fall a decade (back in 1998) before the first Baby Boomers retired. So unless you believe in "backwards causality" Baby Boomers are not the cause of the falling participation rate, nor is the recession that started in last half of 2008. See graph of participation rate in post 132. While not the only cause, the policies of GWB (sending jobs to Asia thus making it harder to find a US job) is the main reason why the participation rate started to fall, and Obama has not been able to make as many jobs as needed to keep up with the growing potential labor force.

 

Obviously you do not know how those BLS statistics you are quoting are defined.

The labor force participation rate is the percentage of people 16 years or older defined as "employed" or "unemployed" relative to the total non-institutional civilian population (i.e., excluding the military and prisoners). The definitions of "employed" and "unemployed" likewise count everyone over the age of 16 who is either working or seeking work. There is no limitation on old age or retirement in any of the relevant definitions. The labor force participation rate is simply the fraction of Americans (over the age of 16) who are working or looking for work, as a percentage of the number of Americans over the age of 16 who are neither institutionalized nor active-duty military.

Here are the relevant definitions:

http://www.bls.gov/bls/glossary.htm

Under the BLS definitions used to produce the graph you posted, such an event would dramatically reduce the labor force participation rate.

You could add a billion kids under age 16 without changing the rate, or a billion soldiers, or a billion convicts. But you can't add any retirees without changing the labor force participation rate. The CBO has stated that the main cause of the reduction in labor force participation rate over the past 12-ish years is the aging of the Baby Boomers.

There are plenty of Baby Boomers who started retiring around then. "Retirement" doesn't mean "reached age 65" or "started collecting social security," you realize.

The oldest Boomers would have been in their mid-50's around the year 2000, which is plenty old enough to retire if you've done well enough in your career/retirement savings.

So you disagree with the assertions made by the CBO, that the aging of the Boomers is a major driver of decline in the labor force participation rate since circa-2000?

Because they have all of the relevant data and capable statisticians.

You have provided no substantiation for that assertion.

 

Yes there are many definitions there, but not one for "workforce" or for "Participation Rate." You are telling me that regardless of age if not in some institution, including jail or armed services, you are part of the workforce that BLS uses even if 90 years old, bind and unable to walk, etc. - that does not seem to me to be a reasonable definition of workforce, but you never can tell how the government may define things as. I assumed that once one permanently retired and did not work for pay, you were not part of the workforce. I guess I should have searched as the government also does not include food or fuel in the inflation index and they clearly are major costs people pay.

 

It is called the "labor force" and the "labor force participation rate." Just like it says right at the top of the graph you posted above, and just like I wrote repeatedly in the post you are responding to. The definitions are in that link, under "L."

Do try to keep up.

People under the age of 16 are not counted.

As long as you are working or looking for work, yes. Otherwise, you are not in the labor force, and so go in the "total population" column that is used to calculate the participation rate.

Simply counting all adults who are working or looking for work is the most reasonable, obvious definition available. Why exclude workers above a certain age, if they are working or seeking work?

I can, and I just told you in my last post. The government publicizes definitions of these terms for exactly this reason.

That is correct. But you are still part of the population, and so you still figure into the computation of the labor force participation rate.

Nobody is saying that people who are retired are part of the labor force. The point is that the labor force participation rate is the percentage of the total adult population - including retirees - that is working or looking for work. Excluding, again, the military, prisoners, etc. So when a person retires, he leaves the labor force but remains in the civilian population, and that pushes the labor force participation rate down - because that's one more person who is in the population, but not the labor force.

The labor force participation rate is not the unemployment rate, or the underemployment rate, or whatever else it is that you want it to be. It is simply the proportion of the civilian, non-institutionalized adult population that is currently working or seeking work.

And, again, the CBO has done the analysis and concluded that the main driver of the decline in labor force participation rate since ~2000 is due to retiring Boomers.

You should have simply read the list of definitions I gave you, starting with the one for the title of the graph you provided.

And you should also stop repeating your lie about inflation statistics excluding food and energy. That is not true, and you have been told as much dozens of times over years now. Why do you persist with this blatant, well-known lie, even after being repeatedly pointed to correct information?

 

Again thanks for that link. My misunderstanding was based on less precisely defined terms - more of a "gut feeling" that someone who cannot find a job but wants and badly needs one and has only recently giving up, after perhaps a year of seeking employment is, despite BLS definitions he is unemployed, which I can algebraically express this using the BLS´s defined terms as follows:

LF = "The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary."

UP = "Unemployed persons: Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed."

For convenience I add: EP = Employed Persons

Thus, from first BLS definition above, in more mathematical terms: LF = EP + UP or

UP = LF - EP

The government can not play games with EP but when someone ceases to look for a job after they have been looking for more than a year with no success the government says they are neither unemployed nor part of the labor force. (That keeps the above equation balanced.) I.e. both UP and LF decrease by one. This seems to be an accounting trick to me. They could very much want to work, badly need a job to avoid losing their home in foreclosure, etc. but society with exported factory jobs now has none they can do. So like some dirt government does not want to be seen, they are swept under the clever "accounting rug."

IMHO, a more honest accounting would keep them as part of the potential labor force so without a job they increase the UP numbers. That is what my "gut feelings" tell me. By BLS definitions, I was never UP as I never sought a job. APL/JHU was forming a new group to study "controlled fusion" for US navy and I was only grad student at JHU working on plasma physic for my PhD and less than a year from getting it. They came to talk to me about joining the new group. To see if the pay they were offering was fair, I did check with researchers at NBS who were investigating exactly same physics as my PhD research, and wanted me to join their small group, but they could only offer GS12 pay and I was growing tired of that area, so told APL: Yes, I will come to work in the new group when I graduate and stayed there for 30 years. (Until I met, in Mexico, a beautiful Brazilian PhD, university professor.)

BTW, that "creative accounting game" is how unemployment fell to 7.8% for 8.1% with only 114,000 new jobs created when ~250,000 are needed to keep even with population growth. I think that drop means more than 114,000 discouraged workers gave up seeking a job as 114+114 < 250. An honest accounting would show unemployment is rapidly rising* but that fact cannot be forever hidden as US is still a consumer based economy and with ever smaller fraction of population working the cost of food stamps and disability claims (some false) will keep growing.

* Honestly defined unemployment probably grew by much more than 228,000 (twice the jobs created) to make the 0.3% drop in officially defined unemployment.

 

So you are still attempting to pretend that the demographic trend of retiring Baby Boomers does not exist at all, and simply account all movement out of the labor force as "honestly" unemployed. And the way you go about this, is simply by rejecting the actual labor force statistics and instead using ones that you simply make up, according to your "gut feelings."

This is ridiculous. It's the kind of thing that Stephen Colbert does as a parody.

The fact that you would issue this as a direct response to having the actual data and analysis presented to you, can not be seriously interpretted as anything other than a troll tactic to simply duck the facts the keep running with your fixed agenda regardless.

Suffice it to say that you have now squandered so much credibility here that nobody is going to be fooled.

Meanwhile, I'm still waiting for you to admit that you are lieing when you assert that "government inflation statistics" exclude food and energy. You have been corrected on that deception many, many times now - and it is time for you to admit that you are wrong, apologize for repeatedly misleading, and cease misbehaving.

 

I may have not called them by the usual name, which I believe is "core inflation" but that is a "government inflation statistics," which exclude food and energy I am almost sure. If I´m wrong, please give some link or evidence, other than just you saying so, which shows my error. When I want to refer to the "government inflation statistics" that includes food and enery, I normally say the CPI, consumer price index. I work almost entirely from memory so it is possible I have these two backwards, but don´t think so.