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January 09, 2005

Calling Inigo Montoya: Yet More AEI-Quality Analysis

I don't have the heart to deal with more than one paragraph from James "Dow 36000" Glassman:

TCS: Tech Central Station - Saving Us From 'Poverty-Ridden Old Age': Begin with the obvious. Social Security is a Ponzi scheme headed for collapse. It is a pay-as-you-go program. Taxes from working Americans go directly into the pockets of retired Americans. (There's a tiny bit left over for a so-called "trust fund," which will soon be depleted.) Initial retirees scored big, as early winners who are bait for any Ponzi. The very first recipient, Ida May Fuller, paid in $44 and collected benefits of $20,934....

A forecast trust fund exhaustion date of 2054 is "soon"? Ida May Fuller's $23 a week Social Security benefit checks are "scoring big"? I do not think that any of these words mean what James Glassman pretends to think that they mean.

The last word necessary on Glassman was said by Daniel Davies quite a while ago: "Good ideas do not need lots of lies told about them in order to gain public acceptance."

Posted by DeLong at January 9, 2005 04:16 PM

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And my daughters have scored big on auto insurance, collecting large amounts due to damage caused by other drivers, after having been paying for insurance only a few years. So auto insurance must be an even better Ponzi scheme, since you don't have to grow old to collect on it.

Posted by: jm at January 9, 2005 04:27 PM

How much is that $23 in today's terms? Regardless, off of an investment of $44, it is scoring big.

Posted by: Maestro at January 9, 2005 04:50 PM

"Social Security is a Ponzi scheme headed for collapse."

That will only be the case because of jackasses and liars like James Glassman.

Posted by: praktike at January 9, 2005 04:56 PM

LOL jm.

I guess you could say that about all types of insurance.

"Good ideas do not need lots of lies told about them in order to gain public acceptance."

I guess this is why the Bush administration lies so much.

Posted by: Unstable Isotope at January 9, 2005 05:04 PM

The 1st cohort did get a good deal but we can't change that. And it has zip to do with the current issues. Didn't Glassman understand what the Reagan-Greenspan commission did over 20 years ago? And does he think stocks give risk-free returns?

Posted by: pgl at January 9, 2005 05:06 PM

glassman, isn't he the jerk that slams Lou Dobbs all the time? He really isn't very bright or did I miss Dow 36,000.

Posted by: me at January 9, 2005 05:10 PM

Of course Ida collected a lot. She lived until she was 86. Was that her life expectancy in Glassman's world? Does Glassman even get the point?

Posted by: pgl at January 9, 2005 05:15 PM

Correction. Ida died in 1975 and was born in 1874. Been reading too many NRO opeds.

Posted by: pgl at January 9, 2005 05:21 PM

Life expectancy at birth? See Atrios who slammed Tim Russert's comment on MTP today. And Glassman makes the same error?

Posted by: pgl at January 9, 2005 05:34 PM

"The very first recipient, Ida May Fuller, paid in $44 and collected benefits of $20,934..."

Well, that's astoundingly relevant to the situation for the next 40 years, isn't it.

Maybe he can write another column in which he picks out an individual who died without a spouse or minor children just two days before becoming eligible for benefits. What would that tell us about the Social Security situation?

I'm waiting for the ad set in the 2080, featuring 88-yr old "Emma".

Emma is pouring cat food into a bowl and explaining that privatized Social Security worked out really well for her sister, who died at age 70 and had plenty to live on. But, alas, Emma took good care of herself and had now outlived the assets in her privatized account. Thank goodness that her kind neighbor, 92-yr old Jen, stayed with the traditional Social Security program and helps out by buying food for Emma's cat.

Emma sticks a spoon into a bowl and whispers conspiratorily to the camera: "I don't really have a cat." As the camera pans back, Emma pours milk into the bowl and takes her first bite.

Posted by: Ottnott at January 9, 2005 05:36 PM

I dunno about this Glassman feller. He seemed like a nice guy.

Ida May Fuller filed her retirement claim on November 4, 1939, having worked under Social Security for a little short of three years (http://www.ssa.gov/history/imf.html).

As pgl notes, Miss Fuller died in January 1975 at the age of 100, after having received benefits for 35 years (http://genealogy.about.com/library/weekly/aa010801a.htm).

Nice deal if you can swing it. Your mileage may vary.

Glassman also says saving for retirement is no more gambling than buying a home. This is preposterous. Unless you're really an idiot, buying a home isn't a gamble at all. Assuming you don't wreck you house, and you carry homeowner's insurance and title insurance, you will never lose all of your investment. Property values may decline, but what you've purchased will always be worth something.

In fact, even if you don't insure you home, and it burns to the ground, you still have the real estate, which is generally going to be worth something. That is assuming you don't buy something over a Superfund site or in a flood plain.

On the other hand, you wanna buy stock? Chance of reward, but hey, company goes down the tubes, you lose. I got a nice stock certificate from Braniff hanging on my wall right now. I suppose you could open a savings account at a bank and get the FDIC, but you also get a rather modest rate of return - 0.25%.

Posted by: knobboy at January 9, 2005 05:45 PM

There's a tiny bit left over for a so-called "trust fund...

Yeah, that trillion-dollar trust fund is just chump change.

Posted by: Tenuous Leemployed at January 9, 2005 06:08 PM

Bashing Glassman is like beating up on a cripple. It’s not worth the candle. However he is not the first one to compare the SS system to a Ponzi scheme. Nathan Keyfitz (professor of mathematical demography and advisor to SS) made the same observation, "Why Social Security is in Trouble." The Public Interest, No. 58, Winter 1980. A little later (1982) SS did run out of money, and had to borrow from other parts of the government as a stop-gap measure. In absolute terms you can’t ever “score big” with SS, it was designed to supplement other retirement income. While the FICA tax is certainly regressive, the benefit formula is not. There are three bend points in the SS benefit formula that ensures that low-wage workers will receive proportionately more from their Social Security contributions than average- or high-wage earners. So high wage earners had better have other sources of retirement income if they hope to keep their standard of living during retirement. Unfortunately a lot of middle and high wage earners don’t save very much, and they could suffer. Of course low wage earners can’t save either because they don’t have much left over. So I think a lot of people are going to have to keep on working after age 60. With good health, that’s not so bad.

Posted by: A. Zarkov at January 9, 2005 06:25 PM

You know who the big SSA winners are? Those who become permently disabled at 30. And if they can get a malpractice claim on top of that? Score!!!

Posted by: Rob at January 9, 2005 06:33 PM

You want to see a pyramid scheme in action? Get this:

People hold stock that has a certain value because a limited number of people want or can buy stock. Dumping hundreds of millions of dollars into the stock market for EVERY worker to buy some stock will drive the price WAY up, making lots of profits for those in the market on the bottom, but less and less profit for those who come along later.

And then when the market get way up there and ready to level out, they cash out, selling the cheap stock they started with to poor dumb suckers who think the market is going to keep going up.

Now THERE's a ponzi scheme for ya'!

Posted by: pragmatic_realist at January 9, 2005 08:16 PM


Brad's made it on a hit piece on TCS!!

Congratulations, Brad. The quality of your comments is about to go waaaaay down for a while.



Posted by: Dano at January 9, 2005 10:58 PM

holy shit! I didn't know there was a silver lining to permanent disablement!

Posted by: perianwyr at January 10, 2005 12:43 AM

And then they complain that they can not get their work in the refereed journals and get tenure.

Posted by: spencer at January 10, 2005 06:24 AM

I don't get it. What's wrong with a program in which we're ensuring the economic security of our elders? Is reducing something like this to "Every woman/man for her/himself" really the best way to handle it?

Posted by: kurzbein at January 10, 2005 06:00 PM

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