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From: renner@uiucdcs.CS.UIUC.EDU
Newsgroups: net.politics
Subject: Re: Supply-side Economics: the  Savings
Message-ID: <29200246@uiucdcs>
Date: Thu, 7-Nov-85 18:23:00 EST
Article-I.D.: uiucdcs.29200246
Posted: Thu Nov  7 18:23:00 1985
Date-Received: Sat, 9-Nov-85 07:26:19 EST
References: <756@whuxl.UUCP>
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Nf-ID: #R:whuxl.UUCP:-75600:uiucdcs:29200246:000:2297
Nf-From: uiucdcs.CS.UIUC.EDU!renner    Nov  7 17:23:00 1985


>  ...you know very well that you are greatly confusing the issue by
>  including Social Security as part of "social spending".  ... Social 
>  Security is not even a part of the Federal budget as such but
>  technically is an independent trust fund to which people pay every 
>  year for their retirement like any other pension fund.
>  			-- tim sevener (orb@whuxn)

Oh no, not the old "Social Security isn't social spending, it's a pension
fund" argument.

Social Security is not an insurance program or a pension fund -- no matter
what people in Congress call it.  If SS were either of these, then the
"contributions" you pay now would be invested and held until you began to
draw benefits from the fund.  But this doesn't happen.  The money in the SS
trust fund is negligible compared to the obligations of the system.  What
actually happens is that the money you pay now is *immediately* paid out to
someone who has already retired.  Where will *your* money come from?  When
you retire, somebody else will be working, and the SS people will take his
money and give it to you.

[If you still cling to the belief that SS *is* a pension system, try this
experiment:  Imagine a person retiring today at age 65.  Imagine that this
person has paid the maximum SS tax since age 18.  How long before this
person's benefits exceed the total tax paid?  Answer: about three years.]

Social Security works exactly like any other "social spending" program:  it
gives money to individuals to further a social goal considered worthwhile
by Congress.  The difference is that (a) the beneficiaries are *old* people,
not *poor* people, and (b) that the money comes primarily from payroll
taxes.  Poor people end up losers with SS for several reasons, but that
just means that Congress doesn't dare admit how the program really works,
even to fix it.

Hey, don't take my word for it.  Find out for yourself.  Find someone who
runs a pension fund and knows how pension funds work.  Ask them if SS is
run the same way as other pension funds.  Ask them if SS uses the same
accouting techniques as they do.  Ask them what would happen to someone who
tried to start a private pension fund running the same way as SS.  [The
answers will be "no", "no", and "they will go to jail."]

Scott Renner
ihnp4!uiucdcs!renner