The Madoff scandal that has unfolded over the past months will forever be a pockmark on the finance profession; a stark reminder of the failures of human beings and government oversight. It is ridiculous that Madoff was able to run a fund founded as little on reality as Willy Wonka’s fictitious chocolate factory. The only person that can be entirely blamed for that scandal is Bernie Madoff, but there is certainly some culpability on the part of the SEC and other oversight organizations that somehow failed to uncover the largest fraud perpetrated in US history. Bernie Madoff’s scheme may be the largest fraud in the US to date, but, as it turns out, it is not the largest Ponzi scheme. That dubious distinction belongs to Social Security.
By definition, a Ponzi scheme relies upon an inverted pyramid of investors. As the number of investors grows, their money is used to pay off the people below them in the pyramid. Social Security follows the same logic – money citizens are supposedly investing in their own future retirement is being used to pay the people lower in the pyramid – today’s retirees. Therefore, this system will only work so long as the pyramid of population growth remains inverted; if it does not, it will collapse. Well, the population of social security eligible people is now growing faster than the people paying into the system, and this enormous Ponzi – like scheme is teetering on the edge. In 2017, Social Security will reach the critical point at which the pyramid is no longer growing upside down.
Spending in Washington is out of control, and will require a comprehensive strategy to reclaim control over the national debt and the fate of the dollar. That article will be for another day but the point is Congress cannot spend the US into $2,000,000,000,000 deficits and expect social security to right itself. The social security system requires that either people working pay more, that people retired take less, or that the government figures out a way to prevent both options from becoming necessities.
The Social Security tax taken from every paycheck in America is currently insufficient: there are too many retirees in the near future and there is no motivation to fix the problem – all of which spells a collapse of the sort to make Madoff look like a spitball in a hurricane.
A pragmatic approach to fix social security must come from both sides of the aisle in order to gain momentum to pass through Congress. A combination of the following steps would help reduce the problem, although not fix it in its entirety:
Raise the Social Security age to 70 over the next four years, grandfathering those already receiving benefits or within a year of receiving benefits into the system at the current age cutoff of 66. This will delay the influx of 78 million Baby Boomers who are nearing retirement and reduce the total benefits paid.
Currently Social Security is only deducted from the first $102,000 of income. This limit should be done away with and Social Security should be assessed against total incomes.
Benefits should be cut 10% over the next decade – the US (and the AARP) cannot have Medicare, Social Security, 78 million retirees and not be willing to make some concessions.
Allow well-off retirees to defer benefits which would then be paid in full at a later date.
The Social Security trust fund, which is the primary mechanism to offset the short fall, should be invested along the guidelines recommended by proponents of privatizing social security in order to reduce costs and increase the return on investment – in three varyingly aggressive investment schemes designed to improve growth, mitigate market declines and diversify risk away.Both parties must stop dragging their feet at reform and drop ideas that are simply never going to get passed. This includes the Personal Savings Account (privatization) idea, which ultimately will make Social Security pay more to those who need it less.
These steps draw on the good ideas of both parties, and passing any combination of the above would help fix the problem of having many millions of retirees counting on a Ponzi scheme for their retirement. It should also be noted that Social Security is a benefit, not a retirement plan; it is not meant to sustain retirees and Americans would do well to remember that.
Ultimately, it is up to Congress to, for once, make some tough decisions. The problem is that no one seems to want to compromise. The US cannot afford to be all things to all people; citizens looking for that level of government control may be interested in moving to China. It would help if political parties could even come to an agreement on what a successful fix would look like, but every representative and interest group seems to have a different song and dance on the issue. Imagine a Willy Wonka’s chocolate factory in which each Oompa Loompa was on its own program with a unique song. It would be no way to run a Chocolate Factory and it’s no way to run a government. Bernie Madoff may have succeeded in running the biggest fraud in US history, but unless Congress finds a feasible song and dance to buy into, they will go down in history as the culprits behind the biggest Ponzi schemeThe Madoff scandal that has unfolded over the past months will forever be a pockmark on the finance profession; a stark reminder of the failures of human beings and government oversight. It is ridiculous that Madoff was able to run a fund founded as little on reality as Willy Wonka’s fictitious chocolate factory. The only person that can be entirely blamed for that scandal is Bernie Madoff, but there is certainly some culpability on the part of the SEC and other oversight organizations that somehow failed to uncover the largest fraud perpetrated in US history. Bernie Madoff’s scheme may be the largest fraud in the US to date, but, as it turns out, it is not the largest Ponzi scheme. That dubious distinction belongs to Social Security.
By definition, a Ponzi scheme relies upon an inverted pyramid of investors. As the number of investors grows, their money is used to pay off the people below them in the pyramid. Social Security follows the same logic – money citizens are supposedly investing in their own future retirement is being used to pay the people lower in the pyramid – today’s retirees. Therefore, this system will only work so long as the pyramid of population growth remains inverted; if it does not, it will collapse. Well, the population of social security eligible people is now growing faster than the people paying into the system, and this enormous Ponzi – like scheme is teetering on the edge. In 2017, Social Security will reach the critical point at which the pyramid is no longer growing upside down.
Spending in Washington is out of control, and will require a comprehensive strategy to reclaim control over the national debt and the fate of the dollar. That article will be for another day but the point is Congress cannot spend the US into $2,000,000,000,000 deficits and expect social security to right itself. The social security system requires that either people working pay more, that people retired take less, or that the government figures out a way to prevent both options from becoming necessities.
The Social Security tax taken from every paycheck in America is currently insufficient: there are too many retirees in the near future and there is no motivation to fix the problem – all of which spells a collapse of the sort to make Madoff look like a spitball in a hurricane.
A pragmatic approach to fix social security must come from both sides of the aisle in order to gain momentum to pass through Congress. A combination of the following steps would help reduce the problem, although not fix it in its entirety:
Raise the Social Security age to 70 over the next four years, grandfathering those already receiving benefits or within a year of receiving benefits into the system at the current age cutoff of 66. This will delay the influx of 78 million Baby Boomers who are nearing retirement and reduce the total benefits paid.
Currently Social Security is only deducted from the first $102,000 of income. This limit should be done away with and Social Security should be assessed against total incomes.
Benefits should be cut 10% over the next decade – the US (and the AARP) cannot have Medicare, Social Security, 78 million retirees and not be willing to make some concessions.
Allow well-off retirees to defer benefits which would then be paid in full at a later date.
The Social Security trust fund, which is the primary mechanism to offset the short fall, should be invested along the guidelines recommended by proponents of privatizing social security in order to reduce costs and increase the return on investment – in three varyingly aggressive investment schemes designed to improve growth, mitigate market declines and diversify risk away.Both parties must stop dragging their feet at reform and drop ideas that are simply never going to get passed. This includes the Personal Savings Account (privatization) idea, which ultimately will make Social Security pay more to those who need it less.
These steps draw on the good ideas of both parties, and passing any combination of the above would help fix the problem of having many millions of retirees counting on a Ponzi scheme for their retirement. It should also be noted that Social Security is a benefit, not a retirement plan; it is not meant to sustain retirees and Americans would do well to remember that.
Ultimately, it is up to Congress to, for once, make some tough decisions. The problem is that no one seems to want to compromise. The US cannot afford to be all things to all people; citizens looking for that level of government control may be interested in moving to China. It would help if political parties could even come to an agreement on what a successful fix would look like, but every representative and interest group seems to have a different song and dance on the issue. Imagine a Willy Wonka’s chocolate factory in which each Oompa Loompa was on its own program with a unique song. It would be no way to run a Chocolate Factory and it’s no way to run a government. Bernie Madoff may have succeeded in running the biggest fraud in US history, but unless Congress finds a feasible song and dance to buy into, they will go down in history as the culprits behind the biggest Ponzi scheme.
The Madoff scandal that has unfolded over the past months will forever be a pockmark on the finance profession; a stark reminder of the failures of human beings and government oversight. It is ridiculous that Madoff was able to run a fund founded as little on reality as Willy Wonka’s fictitious chocolate factory. The only person that can be entirely blamed for that scandal is Bernie Madoff, but there is certainly some culpability on the part of the SEC and other oversight organizations that somehow failed to uncover the largest fraud perpetrated in US history. Bernie Madoff’s scheme may be the largest fraud in the US to date, but, as it turns out, it is not the largest Ponzi scheme. That dubious distinction belongs to Social Security.
By definition, a Ponzi scheme relies upon an inverted pyramid of investors. As the number of investors grows, their money is used to pay off the people below them in the pyramid. Social Security follows the same logic – money citizens are supposedly investing in their own future retirement is being used to pay the people lower in the pyramid – today’s retirees. Therefore, this system will only work so long as the pyramid of population growth remains inverted; if it does not, it will collapse. Well, the population of social security eligible people is now growing faster than the people paying into the system, and this enormous Ponzi – like scheme is teetering on the edge. In 2017, Social Security will reach the critical point at which the pyramid is no longer growing upside down.
Spending in Washington is out of control, and will require a comprehensive strategy to reclaim control over the national debt and the fate of the dollar. That article will be for another day but the point is Congress cannot spend the US into $2,000,000,000,000 deficits and expect social security to right itself. The social security system requires that either people working pay more, that people retired take less, or that the government figures out a way to prevent both options from becoming necessities.
The Social Security tax taken from every paycheck in America is currently insufficient: there are too many retirees in the near future and there is no motivation to fix the problem – all of which spells a collapse of the sort to make Madoff look like a spitball in a hurricane.
A pragmatic approach to fix social security must come from both sides of the aisle in order to gain momentum to pass through Congress. A combination of the following steps would help reduce the problem, although not fix it in its entirety:
Raise the Social Security age to 70 over the next four years, grandfathering those already receiving benefits or within a year of receiving benefits into the system at the current age cutoff of 66. This will delay the influx of 78 million Baby Boomers who are nearing retirement and reduce the total benefits paid.
Currently Social Security is only deducted from the first $102,000 of income. This limit should be done away with and Social Security should be assessed against total incomes.
Benefits should be cut 10% over the next decade – the US (and the AARP) cannot have Medicare, Social Security, 78 million retirees and not be willing to make some concessions.
Allow well-off retirees to defer benefits which would then be paid in full at a later date.
The Social Security trust fund, which is the primary mechanism to offset the short fall, should be invested along the guidelines recommended by proponents of privatizing social security in order to reduce costs and increase the return on investment – in three varyingly aggressive investment schemes designed to improve growth, mitigate market declines and diversify risk away.Both parties must stop dragging their feet at reform and drop ideas that are simply never going to get passed. This includes the Personal Savings Account (privatization) idea, which ultimately will make Social Security pay more to those who need it less.
These steps draw on the good ideas of both parties, and passing any combination of the above would help fix the problem of having many millions of retirees counting on a Ponzi scheme for their retirement. It should also be noted that Social Security is a benefit, not a retirement plan; it is not meant to sustain retirees and Americans would do well to remember that.
Ultimately, it is up to Congress to, for once, make some tough decisions. The problem is that no one seems to want to compromise. The US cannot afford to be all things to all people; citizens looking for that level of government control may be interested in moving to China. It would help if political parties could even come to an agreement on what a successful fix would look like, but every representative and interest group seems to have a different song and dance on the issue. Imagine a Willy Wonka’s chocolate factory in which each Oompa Loompa was on its own program with a unique song. It would be no way to run a Chocolate Factory and it’s no way to run a government. Bernie Madoff may have succeeded in running the biggest fraud in US history, but unless Congress finds a feasible song and dance to buy into, they will go down in history as the culprits behind the biggest Ponzi scheme.
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