This Blog Has Moved!

My blog has moved. Check out my new blog at

Your Ad Here

Saturday, January 22, 2011

Social Security Cashflow

State comedians talk about the "Social Security Trust Fund" as if it were something tangible. There's nothing there. It's just a stack of paper IOUs. There are no real assets.

Social Security is a huge cash cow for the State. For nearly every year of Social Security's existence, "Social Security taxes collected" exceeded "benefits paid plus expenses". Like all Ponzi scams, Social Security was tremendously profitable initially.

In 2010, for the first time, "Social Security payouts" exceeded "taxes collected". The "Social Security crisis" is not deferred to the future, when the "trust fund" is exhausted. The crisis is in the present, because State thugs are no longer profiting from the Social Security Ponzi scam. There will be increasing inflation as the "trust fund" is paid out.

Suppose government bureaucrats printed $1T of money and stored it in a warehouse. Would there be inflation? No. If they spent that $1T, then there would be $1T inflation.

Suppose the government collects $1T in taxes and stores that $1T in a warehouse. What would happen? There would be $1T of deflation.

The US government has debts in its own money. The US government's Social Security trust fund is denominated in its own money. A budget deficit is inflationary, with inflation equal to the amount of deficit. A budget surplus is deflationary, with deflation equal to the surplus.

The Social Security Trust Fund is deflationary. It allows inflation to occur elsewhere, without people noticing. As the Social Security Trust Fund is spent, this will cause inflation.

If any private insurance business operated like Social Security, they would be shut down for fraud.

Social Security payments are a tax. There is no contract between taxpayer and State. At any time, Social Security benefits could be reduced. A benefit cut via inflation is guaranteed.

The "Social Security Crisis" is not 10+ years in the future, when the "trust fund" is exhausted. The crisis is right now, because payouts exceed revenue. Social Security is no longer a cash cow for State parasites.

The bank bailout law was "bipartisan". Most voters opposed it, but politicians from both parties voted for it anyway. They said "Nyah! Nyah! We're smarter than you! It's an emergency! If you don't like it, that's too bad! I'm the master and you're the slave!"

Similarly, suppose politicians from both parties supported slashing Social Security and Medicare. Elderly voters would be SOL, even if they were willing to vote as a bloc to keep it.

Why are Social Security and Medicare politically untouchable? It isn't because politicians fear reprisal from elderly voters. It isn't because they feel obligated to keep their promise. It isn't because they care what happens to elderly people.

Social Security and Medicare are a huge cash cow for the State. That's the reason they're politically untouchable. If elderly voters got robbed, then current workers would say "WTF? Why am I paying these huge Social Security taxes? If my parents got robbed, I'm certainly getting nothing."

Politicians get to appoint their friends/donors to high-paying jobs administering Social Security. There are Social Security offices in every state, so there's plenty of pork to distribute!

I did an interesting calculation. I calculated my personal Social Security taxes paid. I calculated my parents' benefit. The Social Security taxes I have paid are more than my parents' benefit! If I cut out the middleman of the State, I could directly pay for my parents' retirement, and have money left over!

If I didn't have to pay a crushing tax burden, I could more easily save for my own retirement. Without a crushing tax burden, I could easily save salary to raise seed capital for a new business. I estimate that the State steals my savings via inflation almost as fast as I accrue new savings!

Social Security is a tax. It is not a contract with government bureaucrats, where they promise future payouts. They can change the benefit anytime, either outright or via inflation. A default is statistically guaranteed.

Social Security and Medicare are a huge cash cow for the State. Like all Ponzi scams, it will have an ugly end. A default is guaranteed. It might be a gradual default via 20-30% inflation, or an outright default.

Social Security and Medicare are treated as sacred. Current workers would refuse to pay, if current retirees got cheated. The Federal government probably isn't going to exist 20 years from now. Current workers 50 and younger will probably never get anything. The inflation-adjusted return of a Social Security "investment" is really lousy.

Social Security isn't an investment. It's a tax that you must pay or people with guns will come to kidnap and torture you.


Anonymous said...

I got injured at work to the extent that I needed months to heal.

I went to the State funded doctor who out and out refused to get involved. Despite paying high taxes including social security, I got nothing back in terms of healthcare.

My place of work could not fire me because of my injury and so a group of managers started to bully and harass me until the workplace came so unbearable I had to leave.

Because my State funded doctor was useless I did not have a straightforward claim for government welfare benefits.

So I got injured at work, lost my job and could not claim government benefits despite paying high taxes for many years.

I had to live off my savings and pay private health care practitioners. My savings would have been much higher without the burden of taxes.

What a complete and utter rip off?

I paid taxes presumably for healthcare and benefits in the even of need, but I got nill back and have to use my own savings.

Buy saving is hard and takes years given high taxes.

Where did my money go?

Sammi said...

This is interesting. One could test then, if votes really matter in USA.

Set up a website and sign up younger people to vote as one block for anyone who makes it possible for them to voluntarily leave social security. (I would immediately sign up, because I want to stop paying now.) They would sign a waiver that assures they are never to receive more than they paid in already.

Such a block should have no success, no matter how many youngsters it has in it, - because, as you are pointing out, the existence of SS is for 1)cash cow 2)pork positions 3)inflation obscuring device (not true, because there are no funds, all funds are spent already).

No politician will then be able to work-out a voluntary exit from SS for his constituency, which would confirm there is no democracy in US and votes do not matter.

Any socialist system must necessarily collapse if there is voluntary exit from it, because those most abused (fed into the system) would be exactly the ones wanting out. No robbery or theft or slavery can exist if there is a voluntary opt-out. The only ones left are always robbers, thieves and masters themselves!

Anonymous said...

Great post! I also computed my SS taxes and compared to benefits that I may theoretically be eligible to receive. The conclusion is the same as yours. I will never be able to get my money back. Another interesting point is that the difference in projected benefits for somebody whose taxable income is $5000 and $100,000 is only ~$500 dollars per month. In other words, those who pay into social security 20x times can only expect their benefit be 20-30% higher. Roughly speaking I will be entitled only to benefits in the amount that I will pay in social security taxes during 5 years of work. The bad thing is that many people do not realize how Social Security taxes deprive them of their income and still think about government as if it was some kind of philanthropical uncle. I do not feel sorry for them - they deserve to be molested by Uncle Sam.

This Blog Has Moved!

My blog has moved. Check out my new blog at