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Thursday, April 7, 2011

Tax Time: Are You Contributing to a Ponzi Scheme?

As tax day—April 15th—returns, take some time to consider where your tax dollars are going. As Social Security titters on the edge of bankruptcy with no solution in sight, I want to demonstrate that Social Security is a deliberate Ponzi scheme set up by Congress to bilk the American public out of trillions of dollars. If Congress passed a law that persecuted Christians, it still would not make it right. Just because Congress has legalized a Ponzi scheme, that still does not make it right.
          I am using an Excel spreadsheet that is formulated to simulate what happens if you had put the same amount of money into Social Security or some form of secure investment.[i] What is the truth? Numbers do not lie; politicians do! Read on and weep!
          First, let me deal with the major falsehood most often told by supporters of the Social Security scam. They say that you will receive more money back from Social Security than you ever put into it. Like most deliberate deceptions, this one has an element of truth in order to hoodwink the intended victims.
          To illustrate, I will use a wage that stays the same, even though wages have increased through the decades. I am also using a constant Social Security rate of 15% even though this rate has changed over the years—beginning at 2% rate in 1937 unto its present 15.3%.
Let me illustrate the sugar-coated deception. When I began to work over forty years ago, my salary was $2 per hour. At that rate I would have contributed $28,080 over 45 years to the Social Security trust fund. Now, the government minimum payment is about $750 per month. In one year, they will pay the retiree $9,000. If he lives to be 75, then the retiree would have received $90,000. At age 85, the retiree would have received $180,000. At age 95, the retiree would have received $270,000 in payments.
Now, the Social Security supporters love to boast saying, “Look, you only paid in $28,080, but in four years you will receive back more than you put in. After ten years, you will have received tens of thousands of dollars more than you put into the fund.” Now that is a great deal…they say! If it is such a great deal, then why did Congress exempt themselves from Social Security and set up their own retirement. If it’s good for the goose, it should be good for the gander. Until Congress puts every elected and appointed federal worker on Social Security, they only reveal their own hypocrisy. They lay on the common citizen an onerous burden that they themselves refuse to bear. Blind guides, hypocrites![ii]
Let me remove the sugar coating—one layer at a time. First, what happens if someone dies before he/she gets Social Security?  Of that $28,080 paid in, what does the grieving family get? That’s right—nothing. Oh, yeah, I forgot about the most generous burial benefit of $200. Wow, that makes a big dent in the burial costs! When the spouse retires, then that person can collect half what the deceased would have received. If they have a child under 21 or in college, they can also collect a small check. Liberals are so-o-o-o lavish! The staggering fact is that about 12.5% of those who contribute will die before they get to retire.[iii] Do the math! At minimum wage worker contributes over $100,000 in 45 years. There are about 125 million workers today. 12.5% of those will pay but never collect. Now multiply that percent of workers times what they have paid in. Has anyone asked the obvious question: where have all those hundreds of billions of dollars gone? Do you really believe Congress has put the money into the “lock box”?
If you really want the truth, then review the Social Security tables that show that 39% of the workers will die before they collect 10 years, 69% will die before they collect 20 years, and 95% will die before they will collect for 30 years.[iv] Now, the average Social Security and Medicare payment per retiree is $30,250 per year.[v] In ten years Social Security pay over $300,000 in benefits, in twenty years they pay over $600,000, and in thirty years they pay over $900,000. So, liberal supporters love to boast how much more that Social Security pays in comparison to what the worker paid into the trust fund. The reality is that only 5% of the population will live long enough to get back a fair share of their money. 95% of the population will get the shaft while liberals in Congress spend the gold. Keep these figures in mind as you read on.
Second, the supporters of Social Security never include the idea of compound interest into their figures. If I would have been allowed to put my Social Security into a private IRA, then what would I have at retirement? Getting paid $2 per hour would mean that I would pay $6 in FICA and the employer would match that for a total of $12. After 45 years, I would have contributed $28,080 into an IRA. That does not seem like much of a retirement until you consider interest compounded yearly. (Interest compounded monthly would add considerably more!)
Now, the objectors say that the stock market is too vulnerable and most Americans are not capable of managing the stock market. That is the typical condescending attitude of liberals—the average American is too dumb to take care of themselves.  However, liberals are not including all options. There is an option that guarantees rates up to 8%, and it is a safe option. Watch what happens through the magic of a safe compound interest.
After 45 years, a 2% growth fund would turn $28,080 into $44,890—not enough for retirement. A 5% growth fund would yield $99,919—better, but still not enough. However, an 8% growth fund would yield $242,654 with a monthly pay out of $1,617. The average Social Security payout is $1,170.[vi] I am not dreaming because I have my money in a guaranteed 8% growth fund. That’s right Mr. Liberal—the investment never loses when the stock market goes down. The only problem I worry about is a liberal president and Congress who would bankrupt the nation with trillion dollar deficits. I also worry about a Federal Reserve Chairman who is hyper inflating the dollar. In these cases, no retirement is secure (unless you are a billionaire or a member of Congress).
Third, I want to make you mad—not mad enough to hurt anyone, but mad enough to vote every liberal out of office. In the private IRA, you have almost a quarter of a million dollars to give to your family. If you die, how much money will your family get from Social Security? Not much! Your spouse gets half your monthly payment—a very generous $809 per month. Aren’t liberals so-o-o-o-o liberal! How much does your spouse get from the private IRA? That’s right—every last dime!
Now, over the years my wage that started at $2 per hour has gone up to just over $18 per hour. So, let me take a below median of $8 per hour as my lifetime wage. At this rate, my lifetime contribution to Social Security is over $112,000. Liberals say, “Look, you are still getting so much more from Social Security.” However, if I could have put the same money into an 8% growth fund, I would have a retirement account worth over $970,000 with a monthly payment over $6,400. The maximum social security payment is $2,366 per month. Now, I don’t have to live until I am 95 years old to get that much. If I die a month before I turn 65, just how much will my family get from Social Security? That right—very little! How much would they have gotten from my private account? Good answer!
Take this one step further. If 12.5% of all workers die before they get a dime from Social Security, then how many money did Congress get to spend on tunnels for turtles? Do the math—it’s hundreds of billions of dollars! My generation will have contributed over $100,000 per individual to Social Security. A conservative estimate of the 12.5% of my generation’s workforce is about ten million workers whose families will get—oh, yeah, that generous death benefit of $200. The reason that Congress wants to raise the age limit is obvious—they want a larger percentage of people to die before they get to collect a dime. Instead of 12.5%, Congress wants 39% to die before they collect. At that point Congress is literally stealing trillions of dollars from families. Does Congress live by the same rules? No way! How much did they raise the retirement age for Congress? Nada! How much have they raised the amount that they must contribute to their retirement? Zilch!
Fourth, do you want more? The average income in 2009 was about $63,000 per year.[vii] FICA on that would be about $9,450 per year. This worker will not get the maximum SS payment of $2,366, which is reserved for the highest income earners of around $100,000 and up. But, just what would an 8% guaranteed growth IRA give this average worker at retirement? After 45 years, your retirement account would have a meager $3,675,009 with a paltry payout of only $24,500 per month. I hate to be the bearer of bad news! Don’t you just love liberal generosity? Here’s more!
Even if you received the maximum SS payment of $2,366 per month and if you lived to be 95 years old, then you would have received the grand total of $851,760 in total payments. However, you would also have contributed $425,833 to the trust fund while working 45 years. That is a return of 1.1% per year. By any standards, that is not a good return on investment. Liberals just love to steal money from the rich. Have you realized that if you have a job—any job, they consider you rich?
Now, the liberal deception—that workers get more than they will ever pay in—looks mighty meager—or should I say miserly. Which retirement plan would you rather have? Congress is stealing your family’s inheritance! Did not Congress rail on the evils of Maddoff? What about the evils of Congress? Did anyone feel sorry for the victims of Maddoff who lost all their families’ inheritance while his family retires in luxury? How many members of Congress retire in luxury while the average American family has no inheritance to pass along? Where is that inheritance? It was stolen—legally! It is MADDENING!
Fifth, what would happen if you only worked at the minimum wage of $7.15 for the rest of your life? Liberals pretend that they care so much about the poor workers; after all, this meager salary will not yield a good retirement. Right? True—these workers would not retire with millions of dollars to give their families—like the average worker could have. However, after 45 years, the minimum wage earner’s guaranteed growth IRA would yield $867,491 with a $5,783 monthly payout. I know that is hardly enough to get by on—after all Social Security will give them how much more! Oh, yeah, a generous $1,170! Great! Don’t you just love liberal big-heartedness?
Liberals counter by saying, “Well, Social Security was only designed as a safety net. It was not designed to be a full retirement.” Mr. lunatic liberal has just made my point. When Social Security began, they only took 2% of a workers wage. That left the worker with the opportunity to save for their own retirement. However, when government now takes 15.3% of every paycheck, that is a huge amount and would supply a great retirement—even for minimum wage earners—if only workers were allowed to put that money into a private account that corrupt Congress could not get their hands on.
Sixth, do you understand why liberals do not want to privatize Social Security? It would take away trillions of dollars that they have used to get reelected. It would take away trillions of dollars that they could use on idiotic projects—tunnels for turtles—and shovel ready jobs. Also, it would reveal just how criminal liberals in Congress have been. Maddoff is in jail for doing what these scoundrels have been doing every year for over 70 years. Should not Congress be investigated?
What would have happened if in the beginning Congress would have set up a privatized system? The law could have been very simple, such as: Individuals shall put 10% of their earnings into a private IRA. If the worker fails to do that, then he will pay that amount to the government. The private market would then have to compete for those funds, which could have possibly given better investment returns.
Another possibility is to imagine what could have happened if the best hedge fund managers had to compete to handle those billions of dollars in the trust fund. There are hedge fund managers who have made themselves billionaires from managing growth funds that do well. Just imagine if they were hired to handle the trust funds with this agreement: Retirees and government would split the profits that exceed 8%. For example, if the growth fund only made 10%, then the worker would get 8%+1% = 9% and the government would get 1%, a 20% returns means the worker would get 8%+6% = 14% and the government 6%. What if each year only the best hedge fund manager was allowed to manage the Social Security trust fund?
According to Bloombergs, the top hedge fund made 65.6%. The fifth place performer made 44%, and the average return of the top 100 performers was 20.8%.[viii] That’s not bad. Think of how much greater a return workers would get, plus the government has an incentive to make sure the funds are managed properly because they would receive half the excess of 8%--that could have been 57.8% divided by two which is an extra 28.8% for the worker and 28.8% for the government. Now do the math!
There are about 125 million workers today. According to Visual Economics, the average salary for 2009 was $63,091.[ix]  If the manager only increased the fund by 20.8%, then how much would the government have to spend? It would be well over 100 billion dollars a year. Now, increase that amount by 18% and the government would have a huge income generator.
Instead of the trust fund going bust and workers having to take less, just the opposite would be true. Workers could retire as millionaires, the government trust fund would be solvent for future generations, and Congress would have hundreds of billions of dollars to spend on tunnels for turtles. However, government is notorious for making a profitable business into a totally bankrupt fund. If Congress took over Wal-Mart—one of the most successful American companies, Wal-Mart would be bankrupt within five years! It’s past time to fire the liberal members of Congress.
If liberals think that is too risky, then allow workers to choose from a whole range of investment possibilities. There are insurance and annuity options that are among the safest. Liberals treat common workers like idiots. However, most workers can make smart choices if the facts are laid out. One qualification should always be part of any plan: Congress must be on the same retirement system. Also, Congress should be rewarded for successful management, but both Congress and the fund managers should be held liable if the performance of these funds is mismanaged.
This is why I believe Congress should be investigated. These men were smart enough to know how to privatize Social Security, and they knew what the benefits would be. Instead, they were only concerned about control. That is the real issue—control of workers. Liberals want millions of workers to be dependent upon their “liberal” handouts, and they want lifelong “paid-off” voters.
If Congress did not know this, then they should be investigated for dereliction of duty. Either way, their action is a crime against the average citizen. Either liberals knew what a cruel Ponzi scheme they were starting, or they were the most ignorant leaders to ever live. Personally, I do not think anyone is that ignorant.
Seventh, do you believe that ObamaCare is about helping the poor uninsured? Or is it just another Ponzi scheme that liberals hope Americans will fall for? I hope I don’t have to give you a hint.
I also hope you will never again believe or vote for a liberal. Let me paraphrase a famous saying, “You know when a liberal is lying because their mouth is moving.”
Now, let me get on my soapbox for a moment. These lying, lunatic, liberals have stolen untold trillions of dollars from our families and expect us to be “grateful” for their puny pittance. Yet, most of them retire filthy rich with a generous retirement from the voters. That’s irony! And they want more! They want workers to “sacrifice” for the good of the future while they increase their retirements. That’s real brass!
          Workers pay into Social Security for forty-five years expecting that enough will be there when they retire—my illustration proves that the exorbitant FICA rates would supply a millionaire retirement for most workers if they were simply allowed to privatize and keep their own money. Washington liberals have not learned: it’s not government’s money; it’s our money that liberals are wasting. It’s our children’s and grandchildren’s inheritance that Congress is stealing.
However, the harsh reality is that Americans, who are about to receive Social Security, may be forced to live on less and less—and it’s too late for them to save for retirement. Our children will pay into the system for a lifetime and will probably receive far less than their parents and work until they are over 70 to even receive it. Our unfortunate grandchildren will be forced to pay into the system for a lifetime, but the system will be bankrupt, and they will receive nothing. How could this happen? The truth is that Social Security is a scam that has been perpetuated by greedy liberals in Congress since 1935? It is past time to let them know that we know.
          Like any pyramid scheme, the top get the most and the bottom or last will get nothing. Remember the mail pyramid scams of a few decades ago that went around with everyone sending someone just a dollar. The scammers who started the letter got rich and everyone else got little or nothing.
          When Social Security started, about 17 workers supported one retiree. That fact begs the question: what did Congress do with the excess funds? You just know Al Gore “locked” the “box.” For decades Congress has taken the billions of extra dollars and spent them on give-away programs to buy votes. Over the years the number of workers has decreased, and the rate of FICA has increased from 2% to 15.3%. In 2010 there were 2.9 workers supporting one retiree, and by 2035 there will be 2.1 workers per retiree.[x]  At some point the pyramid scheme always collapses.
If Congress had only allowed every worker to set up an IRA in which they could put their FICA taxes until retirement, then there would be billions of dollars in the private economy, and every worker would retire with a healthy nest-egg to pass on to his family. Even the FICA tax rates and the retirement age could be lowered.
But, instead liberals have brought the system to the verge of collapse and offer only two solutions: higher FICA taxes and a higher age of retirement. It is criminal—their guilt is accentuated by the fact that they refuse to put themselves on Social Security as their only retirement! The pyramid scheme is collapsing around their ears, and liberals offer one solution—blame conservatives—those mean conservatives want to make grandma eat dog food. Liberals really believe the American people do not understand what they have been doing. The only blind eyes are looking in a liberal mirror. Most workers see that they are paying more, but will be getting less and less.
          Have you seen the shell game? They place a pea under one of three shells and you place your bets. Around and around the shells are mixed up. If you can guess which one has the pea, then you win the money. You always lose when it really counts. You swear that you didn’t take your eye off the shell with the pea, but it disappeared. Do you remember the “lock box”? I swear that Al Gore was guarding it, but where did the money go.
          Do you remember Bernard Maddoff and his billions of dollars stolen in a Ponzi scheme? Like the shell game, only the dealer gets rich. Like the pyramid scheme only the top few get rich. In a Ponzi scheme, only the scammers get rich. Maddoff is in jail because he took money under false pretenses—claiming to invest them—and then used the funds to enrich himself. Is Social Security any different? Liberals took funds under one pretense—putting it in the “lock box”—and then they used it for whatever lame-brained idea they thought would insure their re-election.

          Let me quote the SEC on Ponzi schemes.

What is a Ponzi scheme?

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.
Why do Ponzi schemes collapse?
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.[xi]
This describes perfectly the Ponzi scheme of Congress called Social Security. Who is it that supports Social Security? The new investors, which are new workers, who must pay into the fund! Why will the scheme collapse? When the number of new investors—new workers—become too small to support the retired workers! Congress would have run out of victims decades ago because at first workers could opt out of Social Security. But, when they saw their victims were leaving the scam, Congress made it mandatory for every person to have a Social Security number.[xii] Maybe the SEC should investigate the Maddoffs in Congress.
          It does not matter what the name of the scam is liberals must be forced to face their crimes against the American taxpayers. Crimes for over seven decades cannot be ignored. Crimes involving trillions of dollars cannot be ignored. Crimes that have robbed future generations and bankrupted America cannot be ignored.
Therefore, when conservatives get control of Congress and the presidency, full investigations should be held. The American people deserve the truth. Promises should be kept to those who have paid in, or many might take a fair settlement right now. Let them give those at age sixty $300,000 and we can put that money into our own IRAs. Let them settle with every age group who wants to settle and put a fair amount into their own IRAs. In other words, let people have the choice: if they want to privatize their own accounts then let them, or if they want to remain in Social Security then they can. However, the debt to American workers is one debt that Congress owes that should be paid first—China can be second in line.
          Some people love to be flimflammed—these liberals can keep their Social Security. In fact, every liberal including Congress, federal judges, and all Presidents should be “volunteered” to take Social Security retirement as it is now. Unless they are rich—remember Obama’s definition of rich is anyone making over $250,000 a year—then they should get nothing! It’s only fair!
          Why was Social Security set up like it is? The answer should be obvious. Liberals saw a mountain of money that could be taken from the sheep. Like a frog in water that is gradually brought to a boil, liberals knew that by the time people figured out it was a scam, it would be too late to change anything. Now that the frog is about dead, they want a new Ponzi scheme as a cash cow—wah-la, ObamaCare.
          What should they have done? If liberals had really been thinking of the poor worker, they could have simply made it a law that the worker must contribute 10% of his wages to an IRA. If the worker did not save the money, then they would have had to pay an equal amount in Social Security taxes and depend upon the government hand-out. But, common sense legislation would have ruined their Ponzi scheme.
          What should we do now? We must insist that Social Security be privatized to save it for future generations. The idea is good; however, the Congressional desire for real change is weak. Until they are forced to retire on Social Security, they will not have any skin in the game.
We must also insist that all federal employees—including those elected and appointed—must retire on Social Security. No more million dollar retirement plans just because they were elected or work for the government. What Congress does not understand is that Americans are willing to make sacrifices if we see our leaders making the same sacrifices. On the other hand, when Congress increases their pay and benefits, but preach that workers must be satisfied with less, the American workers see the hypocrisy. It’s past time to vote the bums out!
We must also make every worker and voter aware of the benefits of a privatized system. It would benefit businesses by reducing taxes, red tape, and paper work. It would make tax preparation much simpler. It would reduce the need for IRS audits. Setting up private accounts would also save the government hundreds of billions of dollars because the monstrous Social Security bureaucracy could be reduced in size and budget. Individuals would handle their own accounts. It would also stop the billions of dollars in fraud, waste, and abuse that bureaucrats refuse to search out.
What about Medicare? Same solution! Allow workers to create tax free Health Savings Accounts (HSAs) into which workers can put in their present Medicare taxes or as much money as they want—not only to cover all types of present health care needs, but also save for future expenses. Young workers are usually healthy and could save hundreds of thousands of dollars before they really needed to use the funds. With large amounts in an HSA, the worker could buy major medical insurance with much lower premiums. A privatizes system would create competition among insurance companies for those dollars. Competition always keeps prices at the lowest possible rates—lack of competition is the chief culprit in the present bankrupt system.
From now on, we the people must insist that any socialistic program is never made law again. ObamaCare must be repealed, and Social Security must be privatized. For the liberals who want social programs to take care of them from the cradle to the grave, I have one suggestion. Move to China—I’ll buy the one-way ticket.
We must overcome seventy years of deception, we must overcome a liberal propaganda machine—the lame-brained press—and we must overcome the stigma created about the idea to privatize Social Security. Our motto must be: Stop the Ponzi scheme of Congress; privatize Social Security. We must let Congress know that we know it is a scam, and that we are holding them responsible. Americans have two clear choices: continue the Ponzi scheme and bankrupt the system or privatize the funds and make those funds truly secure for future generations. There is no middle ground—continuing to kick the can down the road is no longer an option. Politicians who take that option should be voted out—pronto!

[i] Contact me for a free copy of the Excel spreadsheet. You can input your own numbers and play with the numbers to see what your retirement could possibly be. I can also come and do a presentation to groups.
[ii] Matthew 23:4

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