A Ponzi scheme is inherently unsustainable, doomed to blow up, because
of the imbalance between payouts and in-go. There is nothing
inherently unsustainable about a program that "pays returns to
separate investors from their own money or money paid by subsequent
investors, rather than from any actual profit earned." That was the
point of Samuelson's paper ("An Exact Consumption-Loan Model of
Interest with or without the Social Contrivance of Money").
On Fri, Aug 13, 2010 at 6:12 PM, David B. Shemano <[email protected]> wrote:
> Michael Perelman writes:
>
>>> What troubles me is the difference between the rights of bondholders and
>>> the rights of people who have paid into social security. I suspect that
>>> the idea of some will be to tell people that "we" cannot afford to honor
>>> those obligations. If so, it will resemble a Ponzi scheme.
>
> There is no "right" to social security, in the sense that there is no
> contract between the taxpayer and the government. There is no "trust fund" in
> the sense that, legally, the money in the "trust fund" belongs to the
> government and not the taxpayer and the taxpayer has no legal claim on the
> funds. See, http://en.wikipedia.org/wiki/Helvering_v._Davis;
> http://en.wikipedia.org/wiki/Flemming_v._Nestor.
>
> To the extent that we think of social security as a self-funded transfer
> arrangement, then it is a ponzi scheme, in the sense that it "pays returns to
> separate investors from their own money or money paid by subsequent
> investors, rather than from any actual profit earned."
> http://en.wikipedia.org/wiki/Ponzi_scheme. To the extent that we ignore the
> rhetoric of "trust funds" and recognize that the payroll tax is just another
> tax designed to fund current expenditures, I think the ponzi rhetoric is
> misplaced.
>
> David Shemano
>
>
>
>
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