Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

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The sole problem from population contraction, is replacement tax dollars for existing entitlement-type programs that are built on a ponzi scheme approach to ever larger inflows of tax revenue to support them over time.

Most of the developed world has the same problem on that front. The desperation by these countries when it comes to figuring out how to patch up the finances of those programs will increase by the year.

Robot (productivity) taxes will be one small answer. Another will be ever higher income taxes, also eventually including heavy wealth taxes (that comes last). Most of the developed or semi-developed world is starting to get hit on demographics at the same time. The weaker economic nations are being forced to respond first, as in Russia having to raise their pension ages so high it starts to cut people off at the life expectancy line (plunging Putin's popularity numbers in a rather startling fashion, which tells you how important the pension promises were). France is being forced to confront similar problems, with Macron trying to dress that up as market reforms. The US is temporarily avoiding it thanks to its ability to run absurdly high budget deficits for now.

I agree with the economic implications. Countries that experience an ageing population need to face the fact that they either have to raise taxes considerably, or reduce the care and benefits they extend to the elderly.

I also disagree heavily with the last paragraph. Creating disincentives for automation is the last thing a country needs when its workforce is shrinking. Automating jobs is a way of expanding the amount of labor available without actually needing more people in the work force. If anything, countries that are experiencing a population decline need to invest in more automation to maintain their economic output.

The US doesn't work that way. Taxes and spending have only the loosest correlation. As long as the US Dollar is the worlds reserve currency, it appears there doesn't have to be anything connecting the two.

Someday, though...

"Ponzi scheme approach ..."

Like the stock market, then. And pension funds.

> entitlement-type programs that are built on a ponzi scheme approach to ever larger inflows of tax revenue to support them over time.

Stop repeating propaganda please. Entitlement programs are just simple insurance programs. There is nothing ponzi about them.

Huh? Social Security, for example, is definitely a Ponzi scheme in the sense benefits paid out far exceed amounts previously collected, saved, and invested. Numerous government programs rely on this logic, which only works if the population of working age people is expanding.

Social Security isn't a Ponzi scheme in the sense that there was fraudulent intent. Nevertheless, a lack of political will to finance current benefits does burden future generations. "Adjusting benefits downwards" won't sit too well with people who worked 30 or 40 years and expect to enjoy a certain standard of living.

Why Was Social Security Designed Like A Ponzi Scheme? https://www.forbes.com/sites/johngoodman/2015/08/13/why-was-...

Is Social Security a Ponzi scheme? "Social Security has a funding gap equal to 0.7 percent of GDP over the next 75 years. We could wipe that gap out by lifting the payroll tax cap (right now, payroll taxes only apply to the first $107,000 of income) or by adjusting benefits downwards." https://www.washingtonpost.com/blogs/ezra-klein/post/is-soci...

For one thing Social security’s structure is transparent, so no it’s not a Ponzi scheme at all in that a Ponzi scheme is by definition a subset of fraud and requires investors to be unaware of the fact the money coming to them is from new investors and not profits from investing in a product or portfolio of companies.

For another, it’s still not a Ponzi scheme. It makes no promises for returns, and simply requires working age people to set aside money for retired people. If the ratio changes, there is no requirement for the retired people to be paid the same money they were a year ago.

It’s not a Ponzi scheme in any fashion. It’s pretty much a direct, transparent transfer of wealth from the young to the elderly.

You pretty much ignored everything he said and meant. Congratulations.

Not really; a ponzi scheme has a very specific definition. A form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

Social Security isn't a ponzi scheme for a number of reasons, first it's not a security. Second there is no nonexistent enterprise. Instead it's structure is entirely that of an government mandated insurance program.

The other difference is that a true Ponzi scheme is fundamentally unsustainable, whereas social security is not. It may need adjustments, it’s not like you have exponentially growing divergence.

If one looks here,

https://www.ssa.gov/oact/tr/2015/tr2015.pdf

> Total expenditures in 2014 were $859 billion. Total income was $884 billion, which consisted of $786 billion in non-interest income and $98 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities grew from $2,764 billion at the beginning of the year to $2,789 billion at the end of the year.

This is not in any shape or form a ponzi scheme.

You’re looking at inflows and outflows, which in the early stages of a ponzi scheme can also be similar. The way that social security in the US is a ponzi scheme is that the benefits paid out are not interest or earnings on the amounts paid in by the people receiving the benefits. They are paid for by new people paying in to the system. That is almost the definition of a Ponzi scheme.

> You’re looking at inflows and outflows,

Which the generally accepted way of analyzing insurance programs is by looking at the inflow and outflows plus interest on reserves.

> which in the early stages of a ponzi scheme can also be similar

The Social Security Act passed in 1935.

> The way that social security in the US is a ponzi scheme is that the benefits paid out are not interest or earnings on the amounts paid in by the people receiving the benefits. They are paid for by new people paying in to the system. That is almost the definition of a Ponzi scheme. That is almost the definition of a Ponzi scheme.

No that is the exact definition of an insurance program. Insurance programs are not investments they are about spreading risk. Which the Social Security Program in the US does a perfectly fine job of.

No, insurance is categorically different. It protects you against a loss of some kind, and only provides that protection while you are paying for it. As such, only a difference between the predicted and actual risk covered by the insurance policy can cause an insurance program to become insolvent. A change in the number of people buying insurance from year to year will have no effect on the solvency of the insurance program, as long as the actuaries predict the risk covered by the insurance correctly.

Social security is a pension. It guarantees a future stream of income in return for payments now. It is subject to the same actuarial risk as insurance (so, predicted payout period ends up being longer than expected, or returns on payments are lower than expected), but it is subject to an additional risk if it is unfunded (which Social Security is). That risk being that inflows become insufficient in the future to cover the outflows promised 40 years prior.

There is a difference between term life insurance, which you’re referring to, and universal life insurance. Social Security is indeed similar to universal life insurance.

Thank you for providing an actual example of insurance that works this way. I actually looked at the insurance article on wikipedia and it was describing what I was describing (unless I missed something about universal life insurance). And I actually had auto, property, and health insurance in mind more than life insurance.

That being said, the important distinction still stands: Social Security is unfunded, which makes it subject to a kind of risk that funded insurance programs are not exposed to.

> No, insurance is categorically different.

No.

> It protects you against a loss of some kind,

Social security protects you against outliving your savings when you can no longer work.

> and only provides that protection while you are paying for it.

This is an argument from ignorance. And it's incorrect.

You’re still not addressing the main reason that comparing social security to a Ponzi scheme makes sense: being unfunded means that people will get royally fucked if the number of people paying in starts shrinking.

Social security is funded via FICA which is mandated by the Federal government. You aren't going to get a more sure source of funding than that.

> Social Security, for example, is definitely a Ponzi scheme

Social Security is an insurance program. That you don't understand how insurance programs work is your problem.

It's not just entitlement programs, retirement in general is a Ponzi scheme.

The only way that anyone can retire is to rely on the productivity of people who are still working. Saving up money for retirement does not avoid this. Your saved up money just lets you buy someone else's future productivity, you can't actually live on it.

Exactly! Imagine a future in which 100% of the population is in retirement. Who is going to run the farms that produce the food? The only way to get food is by stockpiling it during your working age and somehow preserving it for decades until you have reached your retirement age.

This clearly isn't viable so instead we have kids that take care of us when we become old.

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