September 14, 2011

The fish weren't biting anyway

Enough of a break for now. I feel that I'm missing out on opportunities to chime in on this Rick Perry "Ponzi scheme" "controversy," and that's intolerable, given the close, quasi-symbiotic relationship which has always (okay, almost never) existed between the Perry Campaign and Waldenswimmer (which is to say, they quoted me at length once; think about it: there will probably come a day when I can say that I was quoted by the campaign of the President of the United States of America. Awesome.)

Anyway, my main complaint about the abuse of such terms as "Ponzi scheme" to describe Social Security is that, as with so many other usages which evaporate into the MediaCloud (TM pending) and become completely amorphous, this perfectly good, sensible term becomes debased and useless because of the lack of precision so characteristic of this dumb-ass country. Social Security is not a Ponzi scheme. It has many problems, chief among them the fatal demographics of this country and the fact that on a cash flow basis (the only basis that counts) Social Security is already in the red, 6 years earlier than forecast in the recent past. So we're hosed.

Still, it's not a Ponzi scheme. Charles Ponzi ran a Ponzi scheme, Bernie Madoff ran a Ponzi scheme. The cardinal characteristic of this species of confidence fraud is that the fraudster, such as Madoff, solicits investments which he represents will be placed in income producing assets. He promises a steady, lavish rate of return. The gullible marks turn over their money. The fraudster then takes this money, skims enough to buy and maintain his chateau in the Loire Valley and waterfront house in Palm Beach, sets himself up with lavish cash flow, and then begins doling out the "returns" (say 12% per year) to the suckers, who are unaware that their own money and that of later "investors" who bought from Madoff on the recommendation of themselves and other suckers is being used to fund these fictitious gains. Then a smart Greek like Harry Markopolis comes along, realizes in an instant that nobody can pay out returns like that, year after year, in a dogshit economy like the United States, and proceeds to bust the con.

That's a Ponzi scheme. It's really beautiful in its simplicity and sheer criminality; the crook gets rich using only what Willy Loman had, "a smile and a shoeshine."

But that's not Social Security. As I listen to more and more of Rick Perry, I am reaching the conclusion that even by Republican candidate standards, this is a pretty dim bulb. His explanation for his charge against Social Security is that younger workers won't receive their promised benefits. Yeah, true; it's likely that those now retired or nearing retirement aren't going to receive all of their benefits either, and for the same reason. The program just doesn't work anymore. Today's retirees (the Boomers, who are reaching Social Security age at the rate of 10,000 people per day) are counting on about 1.75 workers per retiree for their support. In a dead jobs market. With average wages, in real terms, declining. Indeed, the Census just released numbers showing that the average male worker in the United States, in inflation-adjusted dollars, earns less than such a worker in 1968 America. As I said to the research scientist at the Great Southwestern University, that sounds completely believable. 1968 was absolutely an affluent, wonderful time here in the U.S.A, provided you weren't involved in fighting one of the first of the completely useless wars America concocted. Or unless you were Martin Luther King, Jr. Or Bobby Kennedy. Okay, nothing is ever entirely perfect, even if you had a new black Mustang.

Social Security worked fine back then, too. It was easy; the tax was light, the earners were many, the country was rich. None of these things is true anymore. The latest monthly disaster report was just issued by the Department of the Treasury, which confirms the ongoing trend. Total FICA receipts (including disability) were about $43 billion; the outlays, including disability payments, were about $60 billion. The shortfall was made up by payments from the "Trust Fund," which doesn't exist; that is to say, the difference was made up the usual way, by public borrowing, or by having the Federal Reserve pay the interest which the Treasury owes the Federal Reserve on the Treasury bonds held by the Federal Reserve to the Treasury (I just like saying that).

Consider the viability of a system which requires 1.75 workers to support each retiree (many of such retirees are still of working age, actually - such as your faithful blogger here, who is still working - please, no applause necessary), a retiree cohort increasing by 10,000 golfers per day. And all of this is happening against the background of a crap job market, massive unemployment, declining real wages, and a political class who keep reducing the FICA tax (thus hamstringing the funding mechanism further) in an effort to curry favor with the electorate. Rather than ideological rhetoric about "Big Government," the C+ student from Texas A&M should focus rather on the inherent unworkability of this thing (I'm still trying to help, Rick - shucks, I just cain't quiiiiiiiiiitttt you!). But you can't call this "fraud," because the facts are open and obvious. Liberal economists may emphasize the "moral imperative" of recognizing the validity of the Trust Fund (which I have always characterized as a crime scene), others may talk about "tweaking" the system, but it doesn't make any difference in the long run. The money isn't there, it's not going to be there, and as younger voters come into their own, they're going to dump this thing. And who can really blame them?

Social Security is doomed, but not because it's a Ponzi. Because its day has come and gone. Because we'd rather spend a trillion on the military to fight wars to secure our oil supplies. Because we'd rather go on being energy pigs. Because we're a country in name only. Because, fundamentally, we don't give a shit. Because frankly, Scarlett, it's not 1968 anymore.

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