Researcher calls SS a "pyramid scheme".

[ridgeway <riridgew@nyx.net>]

>From the URL below I found the source of the article where William T. 
Harris, Economics Professor at the University of Delaware calls Social
Security "the ultimate pyramid scheme" --- now if you want to quibble
that he didn't use the world "Ponzi", fine go ahead and quibble, the
fact remains that here is given a reference from a published researcher
that clearly gives hard objective evidence that supports the assertion
that Social Security is a Ponzi Scheme!  Please be sure to note that 
in the summary of this debate that it was so documented!!!!!!!!!!!!!
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http://dogbert.kepler-solutions.com/newswise/articles/1998/6/PONZI.UDE.html
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University of Delaware 
17-Jun-98 
Social Security News: Privatization Can't Cure $6.6 Trillion 'Ponzi Scheme'.
Library: BIZ 
Keywords: SOCIAL SECURITY RETIREMENT PRIVATIZATION 
          ECONOMICS INVESTMENTS DELAWARE UD 
Description: Nothing can save 40-something Baby Boomers from getting 
             a raw deal at retirement because they're mired at the 
             bottom of a massive pyramid or Ponzi scheme, according 
             to a University of Delaware economist whose analysis of 
             the Social Security system appears in the new issue of
             Humanomics, an international social science journal
             [ Vol.14, No. 1, January 1998]. 

Social Security News: Privatization can't cure $6.6 trillion 
                      'Ponzi scheme,' UD economist reports 

Contact: Ginger Pinholster, (302) 831-6408, gingpin@udel.edu 

Nothing can save 40-something Baby Boomers from getting a raw deal at 
retirement because they're mired at the bottom of a massive pyramid or 
Ponzi scheme, according to a University of Delaware economist whose 
analysis of the Social Security system appears in the new issue of 
Humanomics, an international social science journal. 

Since 1940, U.S. retirees have received an estimated $6.6 trillion 
dollars more in benefits than they've paid in taxes: an amount only 
slightly higher than the current national debt, UD faculty member 
William T. Harris reports. This amount will rise and peak at more 
than $9 trillion around 2015, he says. 

Privatizing the nation's "pay-as-you-go" Social Security system-or 
funneling a certain percentage of taxes into individual retirement 
accounts-might help offset the staggering imbalance between benefits 
paid versus contributions made to the plan, says Harris, winner of 
four UD teaching excellence awards.  Given the system's huge payoffs 
to date, however, "privatization simply wouldn't be a panacea," he adds. 

"We're talking about the ultimate pyramid scheme," says Harris, 
whose latest study tracks Social Security benefits over a 65-year 
period, beginning in 1955 and projected to 2020. "Those who got 
in early received the biggest benefits for the smallest contributions. 
The rest of us will experience a very poor rate of return on our 
investment for the next 22 years, and those retiring after about 
2015 will get back less than they paid into the system." 

Until recently, Americans have reaped remarkably large rewards from 
the Social Security system because tax rates remained low during 
their working years, and benefits were based on the higher rates 
in effect at the time of their retirement, Harris explains. 
When former U.S. President Franklin D. Roosevelt launched the Social 
Security system 61 years ago, Harris notes, Social Security taxes 
claimed only 1 percent of the average worker's paycheck.
By 1950, the rate rose to 3 percent-compared to a current rate of 
more than 15 percent. Such low tax rates during the first half of 
this century explain why the earliest retirees "received the highest 
rates of return," Harris says. 

The late Ida M. Fuller of Vermont, for example, the nation's first 
Social Security recipient, paid only $44 in taxes for three years 
before she retired in 1940.  Yet, she collected $20,884.52 in 
benefits over the next 35 years, according to Harris. Subsequent 
Social Security recipients enjoyed comparable windfalls.
In 1955, those who retired at median-income levels drew nearly 
$15,000 more in benefits than they paid in taxes, according to 
research by Harris. And, workers who retired between 1970 and 1980 
received the largest payoff, compared to their investment, he says. 

The trend toward soaring benefits peaked in 1980, when the average 
worker drew $145,400 in benefits, "over and above their contributions," 
Harris reports. By comparison, today's 40-something employees, 
who entered the workforce in 1980 when the Social Security tax 
rate was comparable to current levels, "will pay large amounts 
into the system for 40 years and then get 15 years' worth of benefits," 
according to Harris. 

"The large benefits that our parents and grandparents and great-
grandparents have enjoyed for so many years are going to come 
home to roost," he says. 

Currently, U.S. workers may receive partial Social Security 
benefits at age 62, with full benefits payable at age 65. 
By the year 2022, however, the minimum age for full retirement 
will rise to 67, thereby further reducing the lifetime benefits 
paid to most workers, Harris notes. 

Policymakers are evaluating various options for Social Security 
reform. The bipartisan National Commission on Retirement Policy (NCRP), 
for instance, has recommended investing 2 percentage points of each 
individual's Social Security tax into mutual funds. Under the NCRP 
recommendations, taxpayers could decide how to invest their money, 
but full retirement benefits would be withheld until age 70, 
beginning in 2029. Competing reform proposals call for differing 
degrees of privatization, all of which would divert some percentage 
of Social Security taxes into high-yield investments, coupled in 
some cases with higher tax rates and/or reduced benefits. 

To analyze Social Security benefits paid to date, Harris compiled 
data from the monthly Social Security Bulletin and the annual 
Current Population Survey. He also took into account average 
annual mortality and birth rates to tally the number of employees 
who retired each year, as well as the Social Security benefits paid 
to them, starting in 1955. His analysis assumes that each retiree 
reached the average life expectancy and worked continuously from
age 20 to age 65, earning a median income, as defined by the Bureau 
of Labor Statistics. By projecting earnings, tax rates, benefits 
and longevity statistics, Harris also predicted future Social 
Security benefits, through the year 2020. 
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There are other experts I could quote that also support the
assertions that SS is like a Ponzi scheme (aka pyramid schemes,
chain letters, etc...).  For example I (along with many others
in this debate) could give some quotes from Nobel economist 
Milton Friedman if anyone doubts us (see Professor Friedman's
book _Free to Choose_, first published way back in 1979, 
see pages 103-104).

These facts should have been clearly established before any 
debate on reform, values, etc..., was started on Social Security.
That is to say, before a solution to a problem can be 
discussed, there has to be an admission, clear and full
admission, of the problem along with the roots of the problem.
I can't help but be suspect of those that would use 
Mr. Myers --- given his record in the 1983 SS Big "fix", and
then to have him start NOT with a discussion of the actual
economic basis (his area of expertise) of the problems but 
starting instead with "values", smacks of manipulation by the 
organizers of this debate to frame the debate in order to move 
it toward a conclusion that is left of center or at least of 
keeping the SS system more or less as it currently is configured 
as a New Deal income redistribution program than helps the 
liberals keep a grip on political power.  Hummmm???.......
could the Clinton/Gore bunch really be that devious...?????
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