The Instigator
Mimshot
Con (against)
Losing
7 Points
The Contender
Lordknukle
Pro (for)
Winning
16 Points

Social Security is a Ponzi scheme

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Post Voting Period
The voting period for this debate has ended.
after 5 votes the winner is...
Lordknukle
Voting Style: Open Point System: 7 Point
Started: 3/2/2012 Category: Politics
Updated: 4 years ago Status: Post Voting Period
Viewed: 2,781 times Debate No: 21659
Debate Rounds (4)
Comments (8)
Votes (5)

 

Mimshot

Con

I am issuing this challenge in regards to my (hopefully) opponent's here: http://www.debate.org...

I will be arguing against the proposition that Social Security is a Ponzi scheme. My opponent may just accept and let me go first, or he may lay out his argument here and proceed in the normal (pro first) order and skip round 4. Final round for rebuttal only.
Lordknukle

Pro


I thank my opponent for this debate.

Definitions

Social Security: Any government system that provides monetary assistance to people with an inadequate or no income (restricted to pensions for this debate).

Ponzi Scheme: A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors.

Preface

This debate is not talking about Social Security in general or its possible ramifications to future society, legality, or effectiveness. This debate is solely talking about whether the Social Security system found within the United States operates like Ponzi Scheme. For me to win this debate, I must prove that Social Security is a Ponzi Scheme or that Social Security is very similar to that of a Ponzi Scheme. For my opponent to win, he must prove that Social Security does not have any connection with that of a Ponzi Scheme.


What is a Ponzi Scheme?

A Ponzi scheme is by definition, a fraudulent investment operation in which money is transferred from one party to another party by a third party outsider while no profit is made. The money received from the new investor(s) is used to cover the supposed gains on investments from the previous investors. A Ponzi scheme will eventually fail because the supposed earnings will be less than the money promised to the investors. A key point of a Ponzi scheme is that there is no profit gained during the transaction, simply distribution money from a new investor to an existing one.

To prove that a specific entity is a Ponzi Scheme, it must fulfill the following criteria:

1. Money is transferred from one party to another party via a third party.

2. The money received from the new investors is given to the old investors.

3. No profit or very little profit is directly made of off the transaction.

4. The scam eventually fails because of a lack new investors supporting the old investors.


How does Social Security Work?

The premise behind Social Security is relatively simple, but increasingly complex if delved into.

“The basic idea of social security is a simple one: During working years employees, their employers, and self-employed people pay social security contributions which are pooled into special trust funds. When earnings stop or are reduced because the worker retires, becomes disabled, or dies, monthly cash benefits are paid to replace part of the earnings the family has lost,” states the United States Department of Health and Human Services social security booklet titled Your Social Security. (1)

For this debate, we will solely focus on the OASI aspect of Social Security.

Social Security is a program that is funded by mandatory payroll taxes of workers.




C1: Money is transferred from one party to another party via a third party

The taxes that the government receives are not in fact used to supplement funds into your own pension accounts. The money that a person invests into the system is paid out to various other retirees. The money is precisely not invested into anything, but instead used to pay other the current retirees with the money of the current retirees (2).

Michael D. Tanner, Senior Fellow at the Cato Institute has this to say about Social Security(2)(3):

"Social Security, on the other hand, forces people to invest in it through a mandatory payroll tax. A small portion of that money is used to buy special-issue Treasury bonds that the government will eventually have to repay, but the vast majority of the money you pay in Social Security taxes is not invested in anything. Instead, the money you pay into the system is used to pay benefits to those “early investors” who are retired today. When you retire, you will have to rely on the next generation of workers behind you to pay the taxes that will finance your benefits.

"As with Ponzi’s scheme, this turns out to be a very good deal for those who got in early. The very first Social Security recipient, Ida Mae Fuller of Vermont, paid just $44 in Social Security taxes, but the long-lived Mrs. Fuller collected $20,993 in benefits."

From this information, we can clearly see that Social Security operates by taxing the younger generation to pay for expenses of the older generation. This operates exactly the same as a Ponzi Scheme: the transfer of money from one party (the new investors) to another (the old investors).



C2: Money received from the new investors is given to the old investors

I sufficiently proved this point already in C1, but a quick reiteration ought to be in order. Similarly to a Ponzi Scheme, the new investors in a Social Security system must pay for the benefits of the older generation. This process until the scam falls apart because of a lack of new investors entering the market.



C3: No profit or very little profit is made of off the transaction

An important aspect of a Ponzi Scheme is that very little or no money is made during the entire transaction other than the simple redistribution of money (4). The same holds true for Social Security.

According to the Government Social Security Website (5):

“The U.S. Treasury does not set aside financial assets to cover its liabilities associated with the OASI and DI Trust Funds. The cash received from the OASI and DI Trust Funds for investment in these securities is used by the U.S. Treasury for general Government purposes. Treasury special securities provide the OASI and DI Trust Funds with authority to draw upon the U.S. Treasury to make future benefit payments or other expenditures. When the OASI and DI Trust Funds require redemption of these securities to make expenditures, the Government finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. This is the same way that the Government finances all other expenditures.”

From this, we can clearly see that the government does not make any money from the transaction in itself but instead uses the money from the investors for its own personal gains (similar to a traditional Ponzi Scheme).
Also, from this we can also clearly infer that the money that a person invests into the system is not directly returned to him at retirement. Instead, some one else’s investments are used to cover his/her own benefits. Therefore, this operates similarly to a Ponzi Scheme because a new investor’s money is used to cover the old investor’s supposed return on investment.




C4: The scam fails because of a lack of new investors

The current problem with Social Security, like with that of a Ponzi Scheme, is that there is a decreasing number of new workers entering the labor force and an increase of people attempting to receive retirement benefits.

According to the 2011 Social Security report by the government, Social Security funds will be exhausted by about 2036 (6).

The Congressional Budget Office that social security will run dry 2037 because of the retiring population of baby boomers and the demographic changes. The increase in benefits to these people will not be offset by the new generation of workers, similarly to a Ponzi scheme (7).

In January, projections from the Congressional Budget Office showed the program’s trust fund dwindling and hitting zero by 2037 as America’s baby-boomers retire and applications for benefits increase. This year, Social Security will pay out $45 billion more in retirement, disability and survivors’ benefits than it recoups in payroll taxes — a figure that almost triples when the new one-year payroll tax cut is included, CBO said (7).

By the year 2036, the amount of seniors on Social Security will double from about 41 million to 78 million (8).



Conclusion

In conclusion, SS is almost the exact same as a Ponzi Scheme. It transfers money from an older generation to a new one. No profit is made. Also, the scam eventually collapses because of a lack of new investors.


http://www.debate.org...

Debate Round No. 1
Mimshot

Con

I thank my opponent for the opportunity to debate this important topic. Several prominent Republicans have recently made the claim that Social Security is a Ponzi scheme, and while the media has criticized them it hasn't really refuted the claim. I look forward to the opportunity to do so.

I agree with my opponent that his four criteria describe a Ponzi scheme. However, one more must be added. The scheme must be fraudulent.[1] I would also clarify point 4 in that in a Ponzi scheme the scheme fails because as a result of new investors it runs out of money.

My opponent makes a few mistakes in his argument because it appears his reasoning confuses some important concepts. First, he confuses (or possibly equates) savings with investment. These are not the same thing. Savings is money that is held unspent the portion of one's salary that one puts away in the bank, a CD, or a bond. Interest bearing savings is still savings[2]. Investment on the other hand is the production of goods that are used to produce other goods (like a factory)[3]. In the macroeconomic sense investment is when consumption is forgone to allow greater production (and thus consumption) in the future, whereas savings represent a demand leakage. People have produced more consumables than they consumed, thus the available money supply decreases relative to GDP.

Second, my opponent confuses the government with a business. Governments should not act like businesses; their goal is not to make a profit. In fact, a government that does this (makes a profit and buys up assets) is a state-socialist system, not a capitalist one[4]. Thus his argument that social security does not turn a profit is off point. A government program should never be viewed as profit making.

Finally, related to the previous point, my opponent confuses a currency issuer with a currency user. Whereas a company or family needs to earn or borrow dollars before it can spend them, the government must spend money into the private sector before it can be taxed back out. All money in a national currency starts from the government thus it cannot be taxed or borrowed until after it has been spent once by the government. The government never "has" nor "doesn't have" dollars. Yes, the government uses internal accounts, but these are for record keeping and are not operational constraints[5]. Thus while family's fiscal constraint is solvency, a government's fiscal constraint is inflation. Logic that applies to one does not necessarily apply to the other.

1. Money is transferred from one party to another via the government
This does not describe how government payments actually work[6,7]. When the government makes a SS payment, it just increases the amount of money in the recpient's account. The government didn't "get" the money from anywhere because, as described above, the government never has nor doesn't have money. It simply spends it into the private sector or taxes it out[5]. Yes, the government keeps account of the total taxed through FICA and payed out through SS, but the amount of money written down in this account is not an operational constraint. Money is fungible[8] and thus although the government chooses to keep track of transactions this way, it doesn't have to. The government even periodically increases the value in the SS trust fund by pretending to pay itself interest[9].

Clearly, when the fact that the government does not behave like a private individual with respect to the monetary system, SS is not a transfer payment. The government does not take my money and give it to your grandmother. Rather, the government pays money to your grandmother (which it doesn't have to get from anywhere) and then taxes my money to keep a check on inflation.

2. Money from new investors is given to old investors
In point 1 I have shown that the transfer payment is an accounting fiction. The government cannot hold a limited supply of money because it can create or destroy the money in its own accounts at will. Watch the video to see Stephanie Kelton, economics professor at UMKC, explain the difference between a real constraint and a fake (accounting) constraint.

3. Profit
I agree that the government does not turn a profit on SS. This is a good thing as the government should not be meddling (as a securities buyer) in the financial market. If the government is turning a profit then something has gone horribly wrong. This does not make SS a Ponzi scheme. In fact, in a Ponzi scheme the originators of the scheme (by my opponent's analogy that would be the government) do make a fraudulent profit by siphoning off funds from the early investors.

4. Scam fails because of lack of money from new investors
As a government program, SS can never fail because of a lack of money. The constraint on government spending is inflation. Now, there is a concern with SS causing inflation, but I will show that this has to do with demographics and not OASI or it's structure.

The dependency ratio (DR) is indeed falling, (I'll refer to my opponent's source for this fact). In the future there will be fewer workers supporting more elderly. This is purely demographic -- there is nothing (humane) the government can do to make the population stop getting older. Now, dependency ratio is a problem, but it has nothing to with money or new investors. Let's consider a point in the future where there are (exaggerating to make the point) 300M retirees and only 100 worker. For that society to function, the 100 workers better have lots of robots to grow food and provide medical care for 300M people. They better be super intelligent and well educated to be able to manage all that equipment and to design improvement. They better have the best possible transportation network to get all that food, etc. to all those retired people. Without increasing production per worker, no amount of money will solve the dependency ratio.

Now, let's look at inflation in the situation I just described. If there's 1 apple farmer for 300M people, what will happen to the price of apples? It will go through the roof unless he can somehow make millions of apples himself. The problem with the DR is pure demographics, it cannot be fixed nor made worse by OASI. If we want to make SS work into the future, it doesn't need a continuous infusion of new "investors' money;" it needs new more productive workers. To save SS we should be spending on schools and roads and research, not worrying about keeping a positive balance in an imaginary fund. The problems with SS have nothing to do with needing "investors." The problem is a social not programmatic one. For this reason point 4 fails and SS is not a Ponzi scheme.


Counter argument

5. Fraud
My opponent has not demonstrated that SS is fraudulent. I've addressed this a bit in point 3 above. The government is not turning a profit therefore SS is not a Ponzi scheme. Moreover, it is not commiting fraud.

Fraud
1
a : deceit, trickery; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right[10]

Nobody surrenders a legal right, nor parts with something of value due to a perversion of truth in SS.

Social Security is not a Ponzi scheme.

References
[1] http://www.sec.gov...
[2] http://www.econlib.org...
[3] http://www.econlib.org...
[4] http://www.merriam-webster.com...
[5] http://papers.ssrn.com...
[6] http://www.fms.treas.gov...
[7] http://ecfr.gpoaccess.gov...
[8] http://www.investopedia.com...
[9] http://www.ssa.gov...
[10] http://www.merriam-webster.com...









Lordknukle

Pro



I thank my opponent for his arguments.

I would like to point out first that I will not respond to the video as it is not included in the pre-allotted 8000 character limit. This is simply an unfair way to get more information while not taking up character space.

First of all, my opponent accuses me of confusing savings and investments. I did none of the kind. Payment into Social Security is by definition an investment as you are forgoing current consumption for a possibly greater (or lesser) amount of future consumption (1).

Second, my opponent says that a government should not act like a business and therefore not make a profit. This is in itself, subjective. However, a critical part of a Ponzi Scheme is that no real profit is made, only fraudulent "profit." Establishing this criteria (which my opponent agreed to) when deciding whether Social Security is a Ponzi Scheme is essential.

These points are relatively unimportant and irrelevant to the point at hand. I do not wish that we spend any more time bickering on these useless subjects.

1. Money is transferred from one party to another party via the government

My opponent objections to the fact that money is not transferred can be covered in two points:

1. The government never really has money.

2. The government didn't "get" the money from anywhere.


My opponent makes the claim since that the government simply puts money into a person's account, no actual money is being transferred because the government never really has the money.

This is false. Money is an object whether it is electronic or physical. The government does not have separate accounts for each person using the SS system. Instead, they use a large trust fund called the OASI Trust Fund (2). When the government wants to give money from to a retiree from the trust fund, it withdraws money and sends it periodically to the recipients. It transfers money from the trust fund to the individuals. Now the question becomes, where does it get the money?

My opponent claims that the government never really has the money in the first place because it can get almost unlimited money from taxes. This is a fallacy of composition. My opponent infers that since money can be produced in almost everlasting amounts via either taxes or the operation of a Fractional Reserve Banking system, money cannot be a literal object. This is a logical fallacy.

To get the money into the OASI Trust Funds, the government taxes money from investors via the payroll tax. Simply because it can tax almost unlimited does not mean that it doesn't really have the money. No physicality does not equal no existence. The money is electronically stored and transferred from the OASI Trust Funds to the recipients (2).

Since we've established that the money into the trust funds is received through payroll taxation (3), a transfer of payments is surely to follow. The government taxes people money, and then puts it into the trust fund for reallocation.

Also, a definition of the Transfer of Payments from one of the most credible sources for investment information (Investopedia) states this:

Transfer Payments: Transfer payments are made by the U.S. Federal Government to individuals through programs such as Social Security, Welfare and Veteran's benefits (4).

Social Security is a transfer both from the government to the individual, and therefore from the individual to the individual via the government as previously explained.

2. Money from new investors is given to old investors

I already addressed this point in C1. Supposed unlimited (this is false. Nothing is unlimited) money of the government does not equate to a lack of transfer payments.

3. No or very little profit is made


My opponent agrees that the government does not turn up a profit on Social Security. In a Ponzi Scheme, no real profit is made (which my opponent agrees to). Therefore, my opponent is conceding this point. It does not matter whether a government program should make a profit as that is irrelevant to the case at hand. No profit or very little profit is made from the Social Security program. Instead, it is just a transfer of payments, like a Ponzi Scheme.

4. The scam fails because of a lack of new investors

A Ponzi Scheme fails because of one major flaw: the fact that the ever increasing amount of old investors and the decreasing amount of new investors will cause impossible returns. Eventually, no new investors and money are being pumped into the system, while an ever increasing amount is needed.

My opponent claims that Social Security is not a Ponzi Scheme because of the failure of the Dependency Ratio. However, the Dependency Ratio has a stark resemblance to the exact reason of why a Ponzi Scheme fails. The Dependency Ratio is the total amount of non-workers compared to the amount of workers (5). In other words, this can be expressed as the comparison between those who have already been in the labour force, and those who are currently in the labour force.

I agree that the DR poses a problem to society. However, the clear resemblance to a Ponzi Scheme is clear. A Ponzi Scheme fails because there are not enough new investors supporting the ever increasing amount of old investors. A high dependency ratio, which ultimately leads to negative impacts to society and the failure of Social Security as outlined in Round 1, is when there are not enough new workers supporting the ever increasing amount of old workers. In essence, my opponent has done my job for me because a desperate DR ratio directly corresponds with the factors that cause a Ponzi Scheme to fail.

The DR has been falling since the 1950's. In fact, according to the Senate.Gov, the dependency ratio in 1950 was 70:360, A being the # of workers and B being the # of retirees. This ratio has been falling for the best half century and is currently 70:250 and projected to be 70:125 in 2020 (6).

As outlined in Round 1, the DR causes massive problems to SS and its solvency.

I am not saying that the problem can be made worse or better with OASI. However, the Social Security system is structured as such that the DR ratio greatly affects it. It's already been established that the DR ratio is similar to what causes a Ponzi Scheme to fail. It also causes Social Security to fail (7) (8) (9).

I have successfully established that Social Security is either a Ponzi Scheme, or is very similar to a Ponzi Scheme.


Rebuttal to Opponent's Argument

Social Security is not fraudulent



Assuming a hypothetical government run program (not SS for this example) that functioned exactly like a Ponzi Scheme except for the fact that it is not supposedly fraudulent, wouldn't it be a Ponzi Scheme? Of course. It operates using the same basic principles of a Ponzi Scheme of new contributors paying for old contributors and therefore should be treated as such.

Legality does not determine whether something is a Ponzi Scheme. A specific operation can be perfectly legal, but it can be classified as a Ponzi Scheme. If we made Ponzi Schemes legal, they would still retain their criteria for being accepted as Ponzi Schemes.

Whether or not it is fraudulent is irrelevant. A Ponzi Scheme is simply a scheme where you take someone's money to "invest" and give them back more later, but the only reason that you can give more later is because more new investors have given you money.

This point is rather weak and focuses on attempted semantic exploitation which does not make a good debate in itself.

I hope the readers view this point as unsubstantiated as it is.


Conclusion

In conclusion, I have successfully demonstrated that Social Security is a Ponzi Scheme or is very similar to such.


I would also like to point out that three Nobel Prize winning economists: Milton Friedman, Paul Samuelson, and Milton Friedman all agree that Social Security is one of the biggest Ponzi Schemes to ever be perpetrated. I note that they all have polar opposite political views.


http://www.debate.org...

Debate Round No. 2
Mimshot

Con

Ladies and gentlemen, my opponent must really have disliked the prospect of rebutting my arguments, because rather than doing so he invented a new set of arguments to rebut instead. Since my opponent has chosen not do address most of my arguments directly, there is not much for me to rebut directly. Instead I will illustrate how he has rebutted straw-man arguments and effectively conceded my arguments of substance.

First, let me just say that it is a little rich for my opponent to attack my use of a video as a source. He has attempted to say that it over-ran the 8000 character limit and yet he himself has placed his references in a separate debate. My inclusion of the video was an incremental point, I made an argument around it and the point I was making (that there is no operational constraint on OASDI spending, only self-imposed ones) did not rely on the video. The video merely reinforced it. Instead of addressing the issue, my opponent used the inclusion of the video as an excuse to not address the point. This is a pattern found throughout his response.

1. Social Security is not a "transfer payment"

In the last round, I explained (with sources) how in the current "fiat" monetary system, all government spending is effectively done with new money, and all taxation removes money from the private sector, effectively "un-printing" it. My opponent did not address this point and has effectively conceded it.

My opponent then discussed how I allegedly said:

"My opponent claims that the government never really has the money in the first place because it can get almost unlimited money from taxes. This is a fallacy of composition. My opponent infers that since money can be produced in almost everlasting amounts via either taxes or the operation of a Fractional Reserve Banking system, money cannot be a literal object. This is a logical fallacy."

This is a complete strawman argument. I never said that the government can tax unlimitedly. I said that it can spend without operational limit, that the constraint is inflation not solvency. You will also note that I never mentioned "Fractional Reserve Banking." FRB has not existed in the US since at least 1934 because: (1) banks are capital constrained not reserve constrained and (2) bank loans create new deposits, but offsetting liabilities, thus total net financial assets are unchanged. This is a side point though. Again, my opponent has invented a new argument to respond to rather than responding to mine, because he can't.

SS is not a transfer payment. The SS payments create new money, the FICA taxes remove money. The government is not constrained by tax revenue to finance spending.

2. Another way of claiming that SS is a transfer payment and that taxpayers are "investors"

My opponent's rebuttal to this point was as follows:
"I already addressed this point in C1. Supposed unlimited (this is false. Nothing is unlimited) money of the government does not equate to a lack of transfer payments."

He claims "nothing is unlimited". This is false, numbers are unlimited. Printing money in unlimited quantities may be bad for the currency, but there is no limit. My opponent deliberately confuses solvency risk (that a family, business, or Ponzi scheme might have) with inflation risk that the government has. Further, the taxpayers are not "investors" nothing is built by paying FICA taxes. I offered a cited economic definition of investment my opponent tried to contradict it with a specialty "investments" site definition where my definition was relegated to position 2 (in that context). Again, there are no "investors" in SS.

3. No profit
Here we agree that no profit is made. However we disagree about which direction this cuts. This will get followed up below, but in a Ponzi scheme, the people running the scam make a fraudulent profit. My opponent has conceded the point that the government does not make a fraudulent profit from SS. Thus, the resolution should be defeated right here.

4. Lack of new investors
My opponent doesn't really know what he's saying here. He goes back and forth multiple times about whether the dependency ration is a social problem or not. Here are some examples in the order he presents them:

"However, the Dependency Ratio has a stark resemblance to the exact reason of why a Ponzi Scheme fails." (here it's Ponzi like)
"I agree that the DR poses a problem to society." (here it's demographics)
"a desperate DR ratio directly corresponds with the factors that cause a Ponzi Scheme to fail" (Here it's a Ponzi scheme)

I have outlined how the DR is a problem with demographics. SS neither solves or creates this problem. My opponent has not refuted this and thus concedes the point.

5. Fraud

My opponent agrees that a Ponzi scheme must be fraudulent and that SS is not fraud. He then attempts to argue that somehow SS is still a Ponzi scheme. This conclusion is clearly erroneous. He does attempt at one point (contradicting himself) that a Ponzi scheme does not need to be fraud. I offered a sourced definition saying that it does. He offered none to the contrary other than a bare assertion.

In summary, my opponent has conceded that: SS is not a transfer payment, the government does not profit, there is no fraud. Thus SS is not a Ponzi scheme.
Lordknukle

Pro

Ladies and Gentlemen, I take deep offence to the fact that my opponent is accusing me of supposedly straw manning my arguments. I have done none of the kind and I have responded to all of my opponent's arguments. Apparently, he did not want to rebut them all and just picked a few which he thought he could defeat. I would like to point out that my opponent is much more guilty of straw manning than me (I haven't), especially in this round where he has not rebutted anything presented.


1. Transfer payment of Social Security

My opponent's case is simply that a government is not restrained my monetary constraints and therefore can spend ad infitum. As a result, there is no transfer of payments between generations because the government is using "new money."

Here is what SSO Gov has to say about the transfer of money(1)

"Dependent upon an unsustainable progression, a common financial arrangement is the so-called "pay-as-you-go" system. Some private pension systems, as well as Social Security, have used this design. A pay-as-you-go system can be visualized as a pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end.









As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system"

From the picture and quote, we can clearly see that SSO Gov has conceded that Social Security is a transfer of payments from the old generation to the new generation. As long as there are enough of the new generation, the scheme will not fail (refer to Point 4).

Obviously, the point of the system continuing on forever is true, if it can maintain a forever lasting amount of investors, which cannot occur in a Ponzi Scheme. A Ponzi Scheme could also continue on forever if there were enough new investors covering the old investors, but alas there are not. This is why Social Security will fail in the near future.

This explanation of how the Social Security payments work is exactly one that corresponds with a Ponzi Scheme.

For my opponent to prove that the government has no operational constraint and that it translates to Social Security, he must have:

1. Proven that the government has unlimited money at disposal (Theoretically impossible).

2. Proven that the government takes the FICA tax and spends it elsewhere (Lack of evidence).

3. Proven that the money the older generation receives is not the money that the younger generation pays out (Countered by myself and a plethora of evidence).

The BOP clearly laid with him as the evidence of monetary redistribution (which he disputed to) was shown by myself.

In fact:

"When the OASI and DI Trust Funds require redemption of these securities to make expenditures, the Government finances those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures." (2)

From this, we can clearly see that the government does not have unlimited money which it can spend when expenditures are required. Instead, the government 1) Raises taxes (not unlimited) 2) Borrowing (not unlimited) and 3) Curtailing various expenses (not unlimited).

My opponent has failed to provide the burden of proof against my case which states that there is no monetary transfer between the old and young generations.

2. Money from new investors is given to old investors

This point was sufficiently proved in C1. My opponent and I could go all day about whether a tax classifies as an investment but that is irrelevant to the case at hand. My opponent has brought this up for some arbitrary reason that does not fall into our current debate.

3. No or very little profit is transaction

Here my opponent has conceded to my point. However, he goes onto say that a Ponzi Scheme has a fraudulent profit. This is false and was demonstrated as pure nonsense in the first round. A Ponzi Scheme is simply the redistribution of money from one party to another party. No real profit is made during the transaction, but instead there is simply the siphoning of money.


4. Lack of New investors

Here, my opponent has completely straw manned my argument. Instead of providing accurate rebuttals for my points, he has simply summarized them and apparently declared them "contradictory", even though that is completely false.

A Ponzi Scheme fails because of a demographic problem; the fact that there aren't enough new investors supporting the old investors. I pointed out that a Ponzi Scheme fails because of the Dependency Ratio, which is a demographic problem. My opponent has completely ignored my arguments.

There are only a finite number of people in this world, and the crux of a Ponzi Scheme failure as well as a Social Security failure, is the fact that the ratio of old dependents to new dependents will become too high to upkeep. This is evidently shown by my studies linked in Round 1 about how Social Security will fail.

A Ponzi Scheme does not direcly contribute to this issue, and neither does Social Security. A Ponzi Scheme is based on this issue of everlasting investors, which eventually fails. The only reason why Social Security has lasted so long is because it transfers money later on in a person's life, rather than almost immediately. Also, Social Security is implemented by a tax, and therefore not voluntary like a Ponzi Scheme.

A Ponzi Scheme fails because of the Dependency Ratio.

My opponent has not addressed any of my arguments.

5. Fraudulent

My opponent's argument as a metaphor is pretty much:

1. All Cigar are white.

2. A black cigar is not white.

3. Therefore, a black cigar is not a cigar.



Replace white with fraudulent and this is my opponent's argument.

I have already shown how a fraudulent distinction of whether Social Security is a Ponzi Scheme is superficial.

In fact, Social Security even fits under my opponent's definition of fraud:

Fraud

1

a : deceit, trickery; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right[

For it to be fraudulent, I must prove that there is either a surrender of a legal right, or a perversion of truth.

The Social Security program promises its retirees returns on their investments when they retire (3).

According to a recent study by the Cato Institute(4):

  • Mueller assumes that the returns to workers investing in the stock market will be 77 percent less over the next 75 years than stock market investors have earned over the past 75 years.

  • He projects that the rate of economic growth over the next 75 years will decline by over 50 percent compared with the past 75 years, and he fails to account anywhere for the increase in economic growth that would result from Social Security privatization.

By 2037, the expected payouts will only be about 3/4 of the promised benefits (5).

The mechanics of the Social Security system prove it to be unsustainable, and yet it was enacted.

Social Security is a fraud. It is the perversion of truth for citizens to systematically part with their money because of promised, but not given, benefits.

However, this argument is completely superficial. The mechanics of Social Security are exactly that of a Ponzi Scheme.


Conclusion

My opponent has completely straw manned by arguments and has not rebutted them in the slightest.

Social Security is a Ponzi Scheme.



(1)http://www.ssa.gov...

(2)http://www.ssa.gov...

(3) http://www.ssa.gov...

(4)http://www.cato.org...

(5)http://americanvision.org...
Debate Round No. 3
Mimshot

Con

An argument can be logically sound, correct, both, or neither. An argument being logically sound is not the same as it being correct. In response to my argument about fraud, my opponent attempted to show my argument was absurd by comparing it to another argument about cigars. His argument had two propositions and one conclusion:

P1. All cigars are white.
P2. A black cigar is not white.
C. A black cigar is not a cigar.

This argument is logically sound but not correct. The problem with this argument is not that the conclusion does not follow from the propositions (it does), rather the problem is with P1. In P1, my opponent claimed "All cigars are white," which is the no true Scotsman fallacy. He has considered a feature (being white) of something (a cigar) that is not part of its definition. Therefore, while his conclusion does logically follow from his propositions, the argument is not correct because one of his propositions is false.

Now, let's compare that to my argument:

P1. All Ponzi schemes are fraud.
P2. Social Security is not fraud.
C. Social Security is not a Ponzi scheme.

As we have seen above this argument is logically sound, therefore if the propositions are correct, the conclusion is correct. "All Ponzi schemes are fraud," is a statement regarding the definition of what a Ponzi scheme is. Several rounds ago I proposed this requirement with a source suggesting that definition. My opponent has not offered a counter definition since then and has conceded that Ponzi schemes are fraud. P2 was conceded by my opponent in round two when he said "Whether or not it is fraudulent is irrelevant." Therefore, my opponent conceded P1 and P2, and the conclusion follows that Social Security is not a Ponzi scheme.

Although my opponent had previously conceded the point that SS is not fraud, he does attempt to re-argue the point in this round, so I will briefly touch on why his new argument to the contrary fails. He accepts my definition of fraud "intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right." He then tries to read into "or to surrender a legal right" as if the "or" eliminates the need for anything before it. This makes no linguistic sense as it turns a definition of a noun into a verb. Fraud is not "to surrender a legal right." The correct reading of the definition is that fraud is intentional perversion of truth in order to induce another to surrender a legal right -or- intentional perversion of truth in order to induce another to part with something of value.

The debate is over here, there is no need to respond to the other points, since I have established that SS is not a Ponzi scheme because it is not fraud. However, I will do so, briefly.

1. Transfer payments

My opponent has still not refuted my argument from the first round, he has only quoted people describing the system differently. I argued that since the government can have unlimited money (whether or not you think it's a good idea) it is not constrained by recipets to make payments. Therefore it can't truly make a transfer payment.


2. New investors to old investors

My opponent stated "My opponent and I could go all day about whether a tax classifies as an investment." I have argued that it does not. My opponent has not established the contrary, therefore he has not proven point 2.

3. Profit
I conceded that SS does not make a profit. My opponent has not rebutted the sourced definition I gave 2 rounds ago saying that a Ponzi scheme results in a fraudulent profit for the people who run it. He has conceded that point. For this reason, the issue of (lack of) profit argues against SS being a Ponzi Scheme.

4. Demographics
Ponzi schemes fail because people wise up and stop investing, not because of an aging population. The population would be getting older with, or without SS. Is birth control a Ponzi scheme? I'm not really sure what more to say.

I thank my opponent for a very lively debate. Although my opponent went first as pro, I agreed when we set up the debate that he could make a final summary in the last round. I very much look forward to reading it.

Please vote con.




Lordknukle

Pro

Ladies and Gentlemen, I regret to inform you but it seems as if my opponent has taken a fascination to straw manning my arguments. A quick look at the previous round will demonstrate my point. My opponent has given a superficial rebuttal of part and the least important part of my "fraud" rebuttal. It is not only the smallest part of my argument against the distinction of fraud, but also the least important argument.

Right now, I shall go through each distinction on why SS is a Ponzi Scheme and show the points that my opponent has dropped. I will try not to introduce any new arguments.

Note: I only have to prove that Social Security is like a Ponzi Scheme.

1. Transfer Payments

Argument for no operational constraint------------>Not enough evidence from my opponent. Rebutted by myself. My opponent had to BOP but failed to back it up.

As a result, my opponent has not rebutted any of my arguments.

Argument for payments being transferred-------> Not rebutted.

Argument for new generation providing resources for the old generation-------> Not rebutted.

Argument for being a "pay as you go" system in which money from today's beneficiaries are received from today's workers (supplemented by SSO GOV website)---------> Not even touched upon by my opponent.

2. New investors to old investors

Same points as the first category. Not at all rebutted by my opponent.

3. No profit

Ponzi Scheme makes no profit------->Conceded.

Social Security makes no profit--------> Conceded.

4. Fraud

Superficial distinction------> Not clearly rebutted.

Fraud argument presented in last round (not the analogy which my opponent clearly straw manned)---------> Not at all touched upon, if even rebutted.

Note: I must prove that Social Security is "like a Ponzi Scheme," as defined in the Preface, which my opponent agreed to. This is simply a superficial distinction and does not have to do with the way that SS operates.

5. DR and reason that Ponzi Scheme fails

DR is not similar to the fact of why Social Security fails--------> Rebbutted by myself.

Striking resemblance between the DR and the reason that a Ponzi Scheme fails--------> Not rebutted.

DR=Lack of new investors/labours. Ponzi Scheme fail= Lack of new investors. It is same thing and should therefore be approximated as such.

This point was by far the most straw manned by my opponent and the one that is definitely worthy of recognition to myself.

Conclusion
  • Social Security involves a transfer of payments, like a Ponzi Scheme.

  • Social Security involves a transfer of money from the new investors to the old investors, like a Ponzi Scheme.

  • Social Security makes no profit, like a Ponzi Scheme.

  • Social Security fails because of a lack of new investors, like a Ponzi Scheme.

  • Fraud is a superficial distinction, which Social Security possesses.

I hope the readers took into consideration that I only have to prove that Social Security is like a Ponzi Scheme.

Social Security is a Ponzi Scheme.

Vote Pro!
Debate Round No. 4
8 comments have been posted on this debate. Showing 1 through 8 records.
Posted by Lordknukle 4 years ago
Lordknukle
You are pathetic, Writerdave.
Posted by Lordknukle 4 years ago
Lordknukle
This debate is not talking about Social Security in general or its possible ramifications to future society, legality, or effectiveness. This debate is solely talking about whether the Social Security system found within the United States operates like Ponzi Scheme. For me to win this debate, I must prove that Social Security is a Ponzi Scheme or that Social Security is very similar to that of a Ponzi Scheme. For my opponent to win, he must prove that Social Security does not have any connection with that of a Ponzi Scheme.

From the Preface.
Posted by Mimshot 4 years ago
Mimshot
Wow. Not only have you added a new argument in the last round; you changed the reaolution. Now you argue that SS is "like" a ponzi scheme? If i had known you intended such a broad "quick summary" i would have written my last round differently
Posted by Lordknukle 4 years ago
Lordknukle
Lol! And you say I'm straw manning....
Posted by Mimshot 4 years ago
Mimshot
Well, the fund itself is just an account. You need to include at least the payment of benefits out of the fund as well. But if that's what you mean (ignoring disability) that's fine.
Posted by Lordknukle 4 years ago
Lordknukle
Is it fine if we limit SS to Old-Age and Survivors Insurance for brevity?
Posted by Mimshot 4 years ago
Mimshot
That's fine.
Posted by Lordknukle 4 years ago
Lordknukle
I would accept this as long as I can have a quick summary rebuttal in the last round.
5 votes have been placed for this debate. Showing 1 through 5 records.
Vote Placed by 16kadams 4 years ago
16kadams
MimshotLordknukleTied
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Total points awarded:07 
Reasons for voting decision: I am changing my other beautiful vote :'( to a counter dave
Vote Placed by WriterDave 4 years ago
WriterDave
MimshotLordknukleTied
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Total points awarded:70 
Reasons for voting decision: Other people have given RFDs that I don't like, and I am voting to counter this, regardless of the merits of the debate. I assume that that's a valid reason for voting a particular way -- right, Lordknukle?
Vote Placed by RoyLatham 4 years ago
RoyLatham
MimshotLordknukleTied
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Total points awarded:03 
Reasons for voting decision: Con's case hinges on whether the "fraudulent" criteria is met in the definition of "Ponzi scheme." The expert opinions of Friedman and Samuelson are relevant in deciding that the intent is met -- the deal is fraudulent for political rather than for personal gain. In any case, the usage is a reasonable application of the word as used y authoritative economists.
Vote Placed by Buddamoose 4 years ago
Buddamoose
MimshotLordknukleTied
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Reasons for voting decision: Pro met ponzi scheme criteria
Vote Placed by 1Historygenius 4 years ago
1Historygenius
MimshotLordknukleTied
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Total points awarded:03 
Reasons for voting decision: Pro proved his 4 points on Social Security. and won the debate. Both did very well.