Deep Stupid # 22 The Social Security Ponzi Scheme

I don't get a lot of idiotic right wing hate mail, possibly because I tend to do this when it happens.

But, sadly, I got one recently from a family member.  Here is the full text, mostly in its original formatting.  The whole thing was in the large font of the title, but I scaled that back down to a more normal size.

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  SOCIAL SECURITY NOW CALLED 'FEDERAL BENEFIT PAYMENT'/ENTITLEMENT!
             
    Have you noticed, your Social Security check is now referred to as a "federal benefit payment"?
    I'll be part of the one percent, to forward this, our government gets away with way too much in all areas of our lives, while they live lavishly on their grossly overpaid incomes! KEEP passing THIS AROUND UNTIL EVERY ONE HAS READ IT.....
    SOMETHING TO THINK ABOUT THE ONLY THING WRONG WITH THIS CALCULATION IS THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY COLLECTED THEIR SOCIAL SECURITY!!!! WHERE DID THAT MONEY GO?????????????
    This was sent to me, I am forwarding it because it does touch a nerve in me.
    This is another example of what Rick Perry called "TREASON in high places" !!! Get angry and pass this on!
    Remember, not only did you contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that's close to $220,500.
    If you calculate the future value of $4,500 per year (yours & your employer's contribution) at a simple 5% (less than what the government pays on the money that it borrows), after 49 years of working you'd have $892,919.98.
    If you took out only 3% per year, you'd receive $26,787.60 per year and it would last better than 30 years (until you're 95 if you retire at age 65) and that's with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you'd have a lifetime income of $2,976.40 per month.
    The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had.
    Entitlement my ass, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn't make my benefits some kind of charity or handout!!
    Congressional benefits ---- free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that's welfare, and they have the nerve to call my social security retirement entitlements?
    We're "broke" and can't help our own Seniors, Veterans, Orphans, Homeless.
    In the last months we have provided aid to Haiti , Chile , and Turkey . And now Pakistan ......home of bin Laden. Literally, BILLIONS of DOLLARS!!!
    Our retired seniors living on a 'fixed income' receive no aid nor do they get any breaks while our government and religious organizations pour Hundreds of Billions of $$$$$$'s and Tons of Food to Foreign Countries!
    They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? Imagine if the *GOVERNMENT* gave 'US' the same support they give to other countries.
    Sad isn't it?
    99% of people won't have the guts to forward this.
    I'm one of the 1% -- I Just Did.
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My response:

The email you received about Social Security is nothing but utter bull shit.  As the writer requested, it made me very angry, indeed.  But not in the way it was intended.  Before I get started dismembering it, I'll borrow a phrase from Eugene Robinson:"Tune out the anxiety-inducing percussion and think for a minute." 

Please do that whenever you see anything that looks anything even remotely like this pack of Social Security lies.
First off, median income today is $26,364, and FALLING.  It took me 5 seconds to find this using Google.  I'll save you the trouble.

So the "only" $30,000 cited below is actually quite a bit MORE than what half the population makes right now.  And their prospects are getting worse, not better.

Next, If you had a 49 year career and retired at 65, you started working at age 16.  That meant part time hours at minimum wage, or less, because you had to be in school, right?  Minimum wage 49 years ago was $1.25 per hour.
So let's at least be a little bit honest about the facts, before we start lying with the math.

Furthermore, this pseudo analysis takes an average salary of $30,000 and equates it to exactly $30,000 for every one of those 49 years.  Do you know of any 16 yr old who makes $30K now, let alone in 1963?  Do you see how deceitful this is?

Of that imaginary $892,919.98 you are supposed to have earned in your SS account at retirement, Fully $212,776.5 or 23.8% comes from calculating the future value of those alleged $30K/year earnings you got (in your dreams) before you were 21.  Do you start to see the chicanery that is involved here?

And it gets a whole lot worse.  When I started in industry as a fresh college graduate at age 21 in 1968, my gross salary for the year was about $7000.  What do you think a high school drop-out was making?  Here's a hint.  My first summer job in 1965 was at a factory where I made $1.30 per hour, breathing toxic styrene fumes.   Somebody with a full time job at that wage would make $2700 for the entire year - not even one tenth of the $30,000 that the liar who wrote this nonsense would have you believe, and even far, far less than the liar said he would have paid into SS taxes.

I'm not going to take the time to calculate exactly how far off this big lie is, but here is one more  illustrative data point.  A more realistic work life is 44 years, not 49, (by way of illustration, I retired at age 62, so my meaningful work life was 41 years, not 44, and certainly not 49.)  Let's say my newly graduated college classmate in 1968 got a terrific first job that payed $10,000, not my paltry $7000.  Instead of the $4500 paid into SS that the liar claims, he would have paid only $760.  The SS tax rate that year was 3.8%.

The future value calculation with 44 years of compounding at 5% gives us $2,979.29 for that year's contribution.   The liar's math give us $36,673.5 - more than 12 times as much. 

So, by the time my lucky classmate entered the work force in a meaningful way, the liar has already overstated his SS contribution by about $25,000, and the value in the fund at retirement by another $33,694 for the first year of work.  This is on top of the original $212,776.5 lie.  We're now up to $246,470.70 - just about a quarter of a million dollars worth of non-existent SS equity - right at the beginning of a career.   And the amount of the lie will build for a couple of decades of work life.

And the lies keep compounding in other ways.  49 years ago, in 1963, when I was still in high school, the SS tax rate wasn't the 7.5% (times 2 for employer and employee) that the liar who wrote this used for his calculations.  It was 3.625% each - less than half that rate.  In fact, though the percentage increased  many times up until 1990, it NEVER reached the 7.5% level.  In 1990 it reached the all-time maximum level of 6.2 %. 

I looked that up for you, as well.  It took another 10 seconds.

It's just a detail, but now the SS tax rate has been reduced by 2 percentage points.  Give some consideration to what that does to the future stability of the SS fund.   Meanwhile, do you imagine a median wage earner is saving that $527.28 windfall for retirement?  Or does he use it trying to keep the wolf from the door?

You might also notice that the liar quotes Rick Perry.  Mr. Perry, God bless him, who cannot remember which Federal Agencies he wants to eliminate, has not been endowed with an abundance of intelligence.  Furthermore, someone who has seriously talked about seceding from the Union pretty much forfeits the right to judge what is or is not treason in any place, high or low.  If that is your source material, you're scraping quite a bit below the bottom of the barrel.

By the way, what happens to the SS contributions of those who die is twofold - first, it goes to their spouse as a survivor benefit, and second, it goes to my mother, who is still perking along at age 90.  SS is a lifetime annuity purchased on the installment plan while you are working.  Like any annuity, it pays as long as you live, and -- better than most annuities, there is a survivor benefit.  Furthermore, the payout is guaranteed.  There is no risk.  At least not until this liar and the Republicans he represents take the whole program away from you.

Contrast the reality of SS to the liar's program, where you buy an annuity that pays you $2976.40 per month.   How much would that cost, and where would you get the money?  Most Americans have no savings at all, let alone whatever it takes to buy an annuity that pays over $35,700 per year. Remember this amount is $9000 per year more than the median gross income of the population.   The net present value of a 10 year annuity paying $35,700 per year, assuming a 5% interest rate is about $275,000.  At a more realistic rate of 2%, it's $320,000, so you could expect to pay at least that much for only 10 years of income.

And what do you think might be a good alternative to your safe SS annuity - the stock market?

Since hitting a new all time high of 1552.87 on March 24, 2000, the S&P 500 index has only spent a few days above that level in the intervening 12 years.  It popped above that level twice in 2007, for a few days at a time, topping at 1555.90 on July 16th, and 1565.42 on October 10th.  Currently, it's at about 1370, about 12.5% below these high points.  In between there were two bone-crunching drops to the 700-800 level.   That is where the SS haters want your money to be - so they can take it away from you.

Does any part of this make any sense at all?  I leave it as an exercise for the interested reader to identify and refute the remaining lies.  Oh, hell - here's a couple more.  1) The government will not and cannot ever go broke.  Think about it.  2)  The liar says the governemnt pays more than 5% on the money it borrows.  The actual rate is now is 2.65 percent for 20 year bonds, and under 2% for 10 year bonds.  It's been years since these issues have paid 5%. 

If you have passed this thing on, please follow up by sending this refutation to all who received the lie.

And I urge you to follow Eugene Robinson's advice and engage your critical thinking faculties whenever you see something like this.  The PARAGRAPHS OF TEXT IN CAPS, the trumped-up sense of outrage, the appeal to emotion, the phony math, the blatantly anti-government rhetoric.  Each of these things is a give-away that what you're reading is propaganda, not the truth.  Does it seem in any way patriotic to you to tell bold-faced lies about a successful government program?  Or does hating your government pass for patriotism these days?

Here's the truth.  Social Security is one of the most successful programs in the history of the human race.  As a retiree, I rely on it.  Your surviving parents and grandparents rely on it. You will rely on it, too, if you don't already.  Or unless we allow the liars to take it away.

I'll leave you with a parting thought.  Why does somebody lie?

There's one simple reason.  That person has an agenda, and the truth doesn't fit.  That is it for every lie, always and everywhere.

Fools fall for the lie.  Don't be a fool.

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The note I got back included this:  "I re-read the message sent to me by Name Redacted.  While his numbers may be whacked it seems to me you guys are on the same page. I do not read his argument to be one against Social Security as much as questioning the mishandling of the funds. He mentions that, to him, it is not a "benefit", but rather something he has earned and deserves.  I take an additional implication that had the program been managed rightly there would be no problems with the program.  I also think he was arguing , rather sloppily, that the Congress has mishandled the program while setting themselves up with a better, less costly, program."

Obviously, I couldn't let that stand.   Here is my second reply.

OK, I went back and reread it, too.  Whoever wrote it, whoever believed it, whoever sent it on to spread the lies - these people are not on the same page as I.  They are not in the same book.  We do not even go to the same library.  To borrow your phrase, "No defense of these guys is valid."

You can't just shrug and say the math is whacked.  This is a well thought through and carefully prepared hoax, designed for the specific purpose of invalidating the Social Security program.  It flat out indicated that the program is "a bigger Ponzi scheme than Bernie Madhoff ever had."   This conclusion is based on the hoax - that whacked out math - and it is designed to make you believe the lie that the funds have been mishandled.  The funds are - by law - invested in Treasury bonds - the safest investment on the planet.  They lied, you fell for it, and now you are defending the liars.

The phony outrage on the word "benefit" is simply stupid.  You can see here, under definition 3b, that it is standard vocabulary for "a payment or service provided for under an annuity, pension plan, or insurance policy."  And that's what SS is - an annuity payment.

I have no idea what the perks are for Congress.  One may reasonably question whatever it is they receive.  But in the context of SS, it is changing the subject - a total red herring, presented in inflammatory language designed to heighten your sense of outrage and deflect you from critically thinking about the lies in the whacked out math. And it worked, which is a shame.

That nonsense about foreign aide is stupid, too.  It totals 1.5% of the federal budget - just one tenth of what we spend on the military, as I discovered with another 5 seconds on the Google.

I agree with most of the rest of what you have to say, but those things are all off topic.  The original note devoted 62% of its 498 words to the SS hoax.  The rest is just distraction designed to keep you from thinking things through.

"We're "broke" and can't help our own Seniors, Veterans, Orphans, Homeless."

To say we're broke is one more lie.   As to why we DON"T help our Veterans, Orphans, Homeless, look no further than the Republicans in congress for the answer.   As one specific - and horrific example, John McCain, who has never taken a principled position on any issue, has been absolutely steadfast in voting against veteran's benefits.  Remember the debt ceiling stand off?  Who threatened to shut down governemnt and delay SS and Medicare payments?

"Our retired seniors living on a 'fixed income' receive no aid." 

What is this even supposed to mean?  They receive SS and Medicare.  What is this asking for - welfare?  Do you think for a second that your Republican friends are in favor of that idea?

It's curious that nothing about the SS program, nor medicare, nor foreign aide, nor Congressional perks has changed, but we never saw hate mail like this when the Republicans were in control of the government.   Think about that for a moment or two.

Looking up real facts and truth took a tiny amount of time.  Reverse engineering the phony SS math so I could do it the right way took a bit more.  All that, plus planning, writing, proof-reading and rewriting these refutations has now taken about 5 hours out of my life that I will never get back - all because I have to do your thinking for you. All of that time you bemoan that people waste "looking at their phone apps, computers, and technology gadgets" is spent far better than time devoted to misleading the gullible and corrupting people's understanding with emails like the one you and your friends so thoughtlessly distributed.

You can do better.

The people who concoct these lies can only do worse.