From: utzoo!decvax!yale-com!bj
Newsgroups: net.misc,net.politics
Title: Re: Social Security
Article-I.D.: yale-com.708
Posted: Sat Jan 22 02:44:29 1983
Received: Sun Jan 23 06:15:42 1983
References: hplabs.1124

	    Clearly this robbing Peter to pay Paul pyramid cannot continue
    indefinitely. I myself am 28 and do not feel confident about social
    security being around when I retire. How do you feel?

I believe that figures presented are misleading.  The comparison being
made is between apples and oranges.  To get figures which have any
value you have to look at real dollar ammounts.

For a contrived example, assume that people put in $1000/year for 40 years
and then collect $5000/year for 8 years.  In this case the ammounts put in
and taken out are the same.  If this happened for everybody and there was
a constant population, the system would work.  Income each year would
exactly match expenses.

Now, assume there is an inflation rate of 10% per year and that all
collections and payments are indexed.  The figures would then show
that a person puts in a little more than $440,000 and takes out almost
$2,600,000.  In spite of the apparent imballance, the system still
works since the collections and payments in a given year have the same
1 to 5 ratio as they did when the system started.  Income each year
would still exactly match expenses.

In order to get make the Newsweek figures meaningfull you have to
have a lot more information and do more compilcated things to it.
I suspect that meaningfull figures would show collections and payments
about even (except for the first generation).  It is not a pyramid scheme.


Social Security does have some problems, mostly due to the fact that are
society is getting older.  There are fewer and fewer people paying Social
Security and more and more collecting.  It used to be around 5 workers per
collector.  The ratio is somewhere around 4 to 1, will drop to 3 to 1 in the
next decade, and finally drop to 2 to 1 somewhere around 2020.
[caveat - all the numbers in this article are from memory (except for the
$44,000 and $2,600,000 which I just calculated).  If you discover minor
errors in the numbers, please notify /dev/null.]

	    Do you think it would be fair to reimburse everyone whatever they
    have paid into the system so far and then shut down the system altogether?

I won't make a judgement about fairness, but I do not think is should be done.
One reason is that the government could not to afford to.  It has less than
one years income at the present time, it could never pay back all the money
it has collected (plus interest).  Another reason is that the goverment does
a better job of supporting people than they would do.  If you gave the money
back, millions of people would spend it rather than investing for later.

					B.J.
					decvax!yale-comix!herbison-bj