Category Archive 'Social Security'

10 Jul 2010

Saturday, July 10, 2010

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James Carville’s own poll finds that 55% of Americans believe Barack Obama is accurately described as a socialist.

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Red China’s People’s Daily says that the Taliban are training monkeys (macaques and baboons imported from the jungle) in Waziristan to use AK-47s, Bren guns, and trench mortars against US forces whose uniforms the monkeys are being taught to recognize.

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Democrat Financial Reform Bill includes racial and gender quotas for US financial industry.

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With the Social Security system soon to go broke, even democrats are talking seriously about raising the retirement age to 70. (Talking Points Memo)

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San Francisco (America’s longest and most impressive exercise in misgovernment) regulated pot brownies and grudgingly tabled a proposal to ban the sale of pets other than fish.

17 Dec 2008

How to Punish Bernie Madoff

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Holman W. Jenkins Jr. swats away the predictable outcry for more regulation, and observes that when one finds oneself with a problem involving lemons, one should simply make lemonade.

Where was the SEC? Such is the plaint lofted in the wake of the Bernie Madoff scandal.

Huh?

When has the Securities and Exchange Commission ever found a fraud except by reading about it in the newspapers? …

What makes the Madoff story interesting, though not evidence of systematic failure of the regulatory or legal system, is that Mr. Madoff and some of his clients had dealt on a basis of trust for more than a generation. True Ponzi schemes, in which early investors are paid a “return” out of funds deposited by later investors, tend to falter at the first market downturn. Waning investor enthusiasm dries up new funds required to pay off earlier investors. The scheme collapses.

In all likelihood, Mr. Madoff was not running a pure Ponzi scheme, but had real assets. He was operating a blind pool, in which investors had no real idea what they owned or how it was performing, relying on Mr. Madoff who reported metronomic returns, brooked no nosiness into his methods, and seemed always willing to pay off investors who wanted to withdraw their money.

He may have been casual from the start about what money he used to pay withdrawals. It is almost inconceivable, though, that he could have built a true Ponzi scheme to a height of $50 billion, in which there were never any real assets, just his superhuman 40-year juggling act to ensure new investors were recruited as needed to provide funds to meet withdrawal requests from earlier investors.

If so, he is a genius who should immediately be put in charge of the Social Security and Medicare trust funds.

17 Oct 2008

Saving Social Security

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A good animated commentary from Reason TV:

4:05 video

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Hat tip to Glenn Reynolds.

26 Nov 2007

What’s Wrong With Social Security?

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Megan McArdle, in the Atlantic, identifies a number of the economically distorting impacts of Social Security.

The real problem with the Social Security system: not that it is bankrupt, but that it encourages people to make extremely bad decisions about providing for their future.

It starts with childbearing: social security systems seem to exert downward pressure on birthrates, in effect undermining their own actuarial base. Social security socializes the benefits of childbearing in providing for retirement, but no one has yet figured out how to socialize the main cost, which is turning your life choices over to a screaming pre-verbal dictator. People are thus tempted to free ride on the childbearing of others, and the more generous benefits are, the more they seem to free ride. This is one reason that Social Security, which used to have more than 30 workers for each retiree, now has only three, headed towards two.

Social Security also encourages people to leave the workforce earlier than they otherwise would. People are healthier than ever at 65, but while in 1950, almost half of all men over the age of 65 worked, that number is now less than 20%. This appears to be highly correlated with the spread of defined benefit pensions such as social security, which offer no advantage to delaying retirement. Indeed, Social Security perversely penalizes anyone who takes early benefit but continues to work, docking a third of their earnings.

Finally, Social Security discourages private savings. This is terrible for two reasons. If future fiscal problems force the government to reduce benefits, the people who didn’t save enough because they relied on those promises will be made much worse off than they would otherwise have been.

The other problem is that Social Security is not a productive investment. Privately saved money is mostly lent to corporations that mostly use the money to do things that make the economy more productive, such as R&D and capital equipment upgrades. Social security “contributions” are lent to the government, where they are mostly spent on things that could not be remotely described as improving our economy’s productive capacity, such as farm subsidies.

Via Hal_10000, who adds:

The hilarious thing is the response from the liberals. Everything McArdle says is supported by economic research. You will find no economist, for example, who will dispute that Social Security cause earlier and more costly retirements. But the liberals, as they do on everything related to Social Security, stick their fingers in their ears and scream, “Nah! Nah! Nah! Nah! Nah! I am not listening. FDR was great! You hate old people!”

The biggest problem with government is people focusing on what programs purport to do rather than what they actually do.

There is also the problem with liberals’ worship of the State leading them to believe that the kind of thing which leads inevitably to economic disaster in the private sphere (for example, a Ponzi scheme) will work out differently if undertaken by government.

Ultimately via the Barrister.


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