Home Politics 2020 Candidates Offer New Government Ponzi Schemes

2020 Candidates Offer New Government Ponzi Schemes

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Authored by Gary Galles via The Mises Institute,

Seeing the Democrat debates has reminded Americans just how much of campaigning is promising something-for-next-to-nothing in attempts to buy electoral support. But when you think about historic Democrat bragging points, like Social Security and Medicare, that is not surprising. They have long been “something for you today partly at someone else’s expense tomorrow” programs. In other words, they have been partial Ponzi schemes from the beginning.

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While there have been many attempts to deny and confuse voters about the Ponzi-ness of those Democratic signature programs, the reason they are partly Ponzi schemes is very simple. After Social Security’s creation, those in or near retirement at the time got benefits far exceeding their “contributions,” which lasted for very few years. Giving those “excess” benefits over costs to the start-up generation meant that those resources would have to come from later generations of “players,” just like Ponzi schemes.

Every time the program expanded, another partial Ponzi scheme of excess benefits over costs was created for the initial group of beneficiaries, again inevitably at the expense of later generations. Another started when Social Security benefit levels doubled between 1950 and 52, and when they were raised 15 percent in 1970, 10 percent more in 1971, and 20 percent more in 1972. Another started when disability and dependents’ benefits were added in 1960. Still more were started when Medicare was added in 1966, and each time its benefits have been expanded (e.g., Medicare Part B, only one-quarter funded by recipients and Part D’s prescription drug benefit, only one-eighth funded by recipients).

So how has the modern Democrat party built on its proud legacy of such Ponzi schemes? By adding new ones.

Obamacare was also a partial Ponzi scheme, with a slightly different mechanism. Its policy to “limit premium variation based on age” forced insurance companies to under-charge those older, requiring them in turn to over-charge those younger. That bad actuarial deal was why younger people had to be forced to buy coverage (or were bought off by extending how long they could stay on their parent’s coverage). The consequence was that the coerced subsidy from the young allowed older recipients to get more than they paid for, which necessarily imposed an added burden on the next generation. Those near retirement age would also escape most of the future tax increases that would be part of funding it, adding to the inter-generational redistribution.

This January 30, over 200 Democratic co-sponsors returned to the older style of Medicare Ponzi scheme when they introduced the Social Security 2100 Act. It would increase all retirees’ benefits (including current retirees who would pay nothing toward the boost) and increase the inflation (over)adjustment for benefits, picking future high-income earners’ pockets to pay for the vast majority of it.

“Medicare for all” is also a partial Ponzi scheme. People are to get free medical benefits. But they must be paid for by income or other taxes. So what happens to those currently older? They get benefits for the rest of their lives while paying little in income taxes, since they are generally beyond or near retirement age. That excess of their benefits over their costs will again require imposing greater burdens on the earnings of those in the future.

That makes it important to remember that Democrats who are now promising a new something-for-next-to-nothing deal at the expense of later generations are from the same Ponzi party that in earlier years, promised those then older a great deal by sticking you with that tab and now defend those policies as their greatest hits.

However, while Democrats have historically led the charge in creating and doubling down on Social Security and Medicare Ponzi schemes (and scaring senior citizens into voting for them out of fear Republicans might put a stop to them), do Republicans offer serious hope for improvement? Some do, since many of who have publicly objected to such expanding Ponzi schemes have come from the libertarian leaning wing of the Republican party. But that subset doesn’t dictate Republican policy. And political history is not very encouraging when it comes to preventing the pillage of future generations. For instance, Social Security passed the House, 372 yeas to 33 nays, and the Senate, 77 yeas to 6 nays, before the conference report was passed on a plausible deniability preserving voice vote, which hardly shows either unified or effective opposition by Republicans. The benefit increases in the early 1970s resulted from a bidding war between Richard Nixon and Legislative Democrats to buy senior citizen votes. George W. Bush was the ramrod for the Medicare, Part D, expansion of unfunded liabilities. And when have you heard President Trump propose anything that would confront the unsustainable status quo in either Social Security or Medicare?

In fact, what seems to have dictated both parties’ policies, though to different degrees, is that present voters are willing to steal from future generations, many of whom do not yet get to vote, or are poorly informed or involved in the political process. That is, so long as the intertemporal redistribution is presented as “really” a noble and reliable political compact. So being clear that Social Security and Medicare are, at least in part, ignoble and unreliable (because they are unsustainable) political compacts of a sort we would put people in jail for if they did it in the private sector, may be the first small step toward any true hope of reform.

via zerohedge

4 COMMENTS

  1. Here is my issue with these people running for the presidency…
    Nearly all of these candidates are already lawmakers, several for many years.
    During their campaign, they make a lot of promises that sound really great!
    UNLESS OF COURSE…
    We are smart enough to realize that as lawmakers these people have been in positions where they could have and should have already introduced legislature based on these promises!
    So why haven’t they previously started down the path to fulfilling the promises they are making to win votes. It isn’t because they are holding off in order to get the credit because when they introduce legislature it is well documented who and when did so and who supported it!

    If I were a member of Congress or the Senate and decided to run for president my promises would be to follow through with the completion of laws and legislation I had already sponsored or co-sponsored, that way the voters would be able to see that I am already invested in my promises, and as a result I am more apt to complete the work I have already started than I would be to start and complete work that would still have the political battle to deal with before getting it passed.

    A perfect example of this is the border wall! The president fought and fought to get the funding from Congress to build the wall. Eventually, after watching his struggle and seeing that he was seriously trying to keep this promise to the voters the American people stepped up and started donating money.

    Although I believe many donors gave money just to see if he would utilize the funds to build the wall or if he would reallocate the funds elsewhere or if he would embezzle the money received! With donation totals equaling enough to complete a significant length of the wall, construction began! Voters watched as their donations turned into the reality of a border being secured!

    But a partially built wall does place the pressure on the president to follow through with the promise for its completion and he has even given the completion timeline he anticipates. Historically he has a reputation for completing projects under budget and early!
    So…
    Even though the wall will not be completed before the 2020 election if I were in his place trying to get re-elected this would be my primary campaign point! He has already spent 2+ years fighting the Democrats over the wall, so the promise to see it through to conclusion is an achievable promise and will have the same amount or more from the voters because they trust he will complete the project that his reputation will hang on!

    Personally, my vote is going to be with the candidate that has a proven record for keeping his promises long before I will consider giving it to someone that has had more than adequate time to show they have good intentions and the strength to see it through, yet failed to do either!

  2. My husband paid Social Security for years. He died 10 days before his 50th birthday. I received a couple of hundred dollars for his burial. Had we invested all that money in our own IRA, there would have been more money for his family.

  3. Democrat politicians are always looking for ways to scam the American people. They tell us it is for our benefit but it never is. We must admit though that they often talk a great story and often manage to fool the gullible. But a lot of us are no longer buying their snake oil.

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