Max's explication of the social security scheme

Michael Pollak mpollak at panix.com
Sun Feb 21 22:15:00 PST 1999


Max, thank you. I don't believe it, but I think I finally understand. At the risk of further embarassment, let me try to lay out my understandint to see if I've gotten it right.

If the Social security fund invested -- as it never yet has -- in risky assets, like land and stocks and corporate bonds, than it would have assets in which it was "saving" its money. But precisely because those assets are risky, it isn't certain that they would conserve value over time. So it might not constitute savings at all.

If, however, social security continues to be "invested" in government bonds, then it is impossible for it ever to save up a penny. Current claimants will be paid out of current revenues, just as they if they were bondholders. If claims increase one year in the future, and more has to be paid out, then taxes have to be raised, or future revenues borrowed from, *that year.* The only ultimate source of social security funds is the annual production of the economy, a percentage of which can be taxed. So the only provisions that can be made against an expected wave of claims in the future is increasing growth, so that the economy will be that much bigger then, or decreasing debt *for the sole purpose of running it up again* (if it were thought that there was a limit beyond which it would be unhealthy to go)

If I've got this right, then all talk about saving social security has always been a scam, starting at least in my brief lifetime with Moynihan's plan in the 80's. He made a big fuss that Reagan used the money from increased social security taxes to pay general revenues, as if that was a scandal. But if I'm understanding you correctly, what Moynihan was piously holding out for was a Clinton style debt pay-down. Was that what he meant by inceasing the Social Security Fund? And it was just as intrisically false a notion as Clinton's?

For that matter, is the idea of a Social Security "Fund" in itself just a pretty lie?

Your eager, if thick, student,

Michael

__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com



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