Not sure if anyone caught the article about the college student that did a political science study on students with high GPA's. The premise goes something like this:
The student surveyed other students who had 3.8 or higher grade point averages and asked them two questions. The first question was: Do you believe in wealth redistribution through taxation?
Many of the students answered "yes" with various explanations that you can see if you do a simple google on GPA redistribution. YouTube has many videos as well as other media outlets so this experiment appears to have taken place many times over the course of the past few years. The brilliant part of this social experiment is the follow up question and the reactions that go along with it.
The follow up question goes something like this: Since you believe in wealth redistribution, would you like to redistribute some of your GPA to a student who is struggling to make it?
Everyone of the students who answered "yes" to the wealth redistribution questions answered "no" to the GPA redistribution question.
To be fair, this is not an apples to apples question, but the general theme of the questioning holds considerable merit. Needless to say many of the students reactions were typical along those lines citing the question as being unfair in its nature. Other students actually had never thought through their political position on taxation and you could tell this question challenged them to reevaluate some long held positions. So lets knock out some of the unfairness of the question that many will argue:
1). You can't inherit a 4.0 GPA like one can be born into money: Fair enough. Some citizens do win the genetic lottery and are born into wealth, but if they are unwise with their investments those riches could be squandered quickly leaving the next generation to fend for themselves. Even if one could inherit a 4.0 GPA would those same students be willing to redistribute their GPA? My anecdotal reaction would be they would not be. They would still have to study and progress to maintain their lofty inherited GPA's and although they may be more inclined to assist others they would not be willing to sacrifice GPA points for no gain unto themselves.
2). GPA's are capped at a top level and income is not: This is an interesting argument for which I have several simple answers. A). This has been tried and is also know as communism. Just ask the former Soviet Union how that all worked out. B). This scenario also produces very little incentive to achieve and progress as a society. C). This would be unconstitutional but we are playing what if, so who cares about the constitution. If we actually could implement this history shows us the societal structure we would have and sure enough everything boils down to 99% lower middle class with a very wealthy 1% ruling class with no possibility to progress. No thank you, I would rather take my chances here in the US under a Republic where I can go from nothing to Bill Gates. ( FYI these are the remaining communist countries: China, Cuba, Laos, North Korea and Vietnam ) Care to trade places with anyone in one of those countries??
3). Everyone is being taught the same curriculum but not everyone has the same upbringing: This question could be phrased a different way. Lets state it like this... In the classroom everyone is hearing the same message and has the same opportunity to take notes, ask questions etc. Outside the confines of the classroom not everyone had the same upbringing / opportunity. I can see how this could affect ones future ability to earn income, and in some respects this is the most difficult one to define logically. There are so many factors one has to consider when addressing this issue that it would be virtually impossible to give a just answer. When I boil this down in my mind a few things stand out. The government does not offer equal outcomes but only guarantees equal opportunity. I can't compare my life to someone who grew up in the ghetto who had a single parent that work two jobs to support the kids and was never around. What I can state is that everyone has something inside them that drives them. Some people are more motivated to achieve then others. Some have a greater work ethic and internal drive to not be satisfied with mediocre results. This country is filled with success stories of people who came from nothing but worked hard to get ahead and make a name for themselves. Just like those students sitting in that classroom hearing that same lecture. Not everyone will have the same level of dedication to study as hard as the next person. Some students will be content putting in half the effort getting by with a C and other students will put fourth a greater effort and work harder to get the A. Our economy works in a similar way.
I agree this is a loaded question proposed for some shock value, but I think the merit of the question holds real value even if one could argue based on the details above. I am sure there are more ways to break down comparison and if you think of any please let me know. I am always interested in hearing feedback.
Friday, September 30, 2011
Tuesday, September 13, 2011
Politics of the week
Is Social Security a Ponzi Scheme??
Much debate has been going around about Social Security being a Ponzi Scheme, so I decided to delve into this topic a little deeper and form an opinion for myself. Lets start with the basic definition of a Ponzi Scheme:
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
Ok, lets take out the "fraudulent" part for a sec and see if Social Security meets the technical requirements of a Ponzi Scheme:
Indeed it does, but it is a lot more complicated then what you may think which is why I will link to a few articles to help support this opinion.
First article: http://www.chron.com/opinion/outlook/article/Krauthammer-Social-Security-lockbox-is-full-of-1690376.php
This article outlines what happens with the money you pay into Social Security while you are working. You basically get an IOU in the form of a treasury bond from the government, but they spend those dollars today to pay retirees who are receiving Social Security now, so in effect, there is NO MONEY in there for you. This is screaming Ponzi Scheme, but it actually gets worse...
Second article: http://www.cato.org/pub_display.php?pub_id=13625
This article lays out the numbers game that is being played out with Social Security right now. In a nutshell the number of working citizens paying for retirees is headed towards an unsustainable equation. Here is a key quote from the link above: "In 1950, for instance, there were 16 workers supporting every retiree. Today, there are just over three. By around 2030, we will be down to just two."
So how does Social Security keep on going when it is clearly based on the Ponzi Scheme?
Good question and here is the reason Social Security is not a Ponzi Scheme.
1). In a real Ponzi Scheme the investors are voluntary: Social Security is mandatory so you can't "opt out". This protects Social Security from falling apart like Bernie Madoff's Ponzi Scheme.
2). In a real Ponzi Scheme, investors can take their money out whenever they want: Social Security has an age eligibility requirement that must be met which protects it from falling apart like Bernie Madoff's Ponzi Scheme.
3). In a real Ponzi Scheme, you can't change the rules or the contribution amount: With Social Security the government can always change contribution amounts and age requirements to keep the program solvent. Say the numbers look really really bad for the baby boomer generation, they just keep moving up the age requirements to 69, 70, 72, 75 etc... Eventrually the number of eligible retiree's will match up favorably to what is being taken into the treasury.
4). In a real Ponzi Scheme you can't print your own money: Unlike any other investment, the US government can decide to just print more money when it runs out of tax payer funded money.
I'm sure there are more reasons that I am leaving out, but the overall point is Social Security is not a real Ponzi Scheme, it is just based off the Ponze Scheme and made worse by the mandates that the government can control.
I'm looking forward to hear feedback on this and hear what others have to say about Social Security. Needless to say I'm 36 and don't think I'll see a penny of my Social Security, but who knows.
Much debate has been going around about Social Security being a Ponzi Scheme, so I decided to delve into this topic a little deeper and form an opinion for myself. Lets start with the basic definition of a Ponzi Scheme:
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
Ok, lets take out the "fraudulent" part for a sec and see if Social Security meets the technical requirements of a Ponzi Scheme:
Indeed it does, but it is a lot more complicated then what you may think which is why I will link to a few articles to help support this opinion.
First article: http://www.chron.com/opinion/outlook/article/Krauthammer-Social-Security-lockbox-is-full-of-1690376.php
This article outlines what happens with the money you pay into Social Security while you are working. You basically get an IOU in the form of a treasury bond from the government, but they spend those dollars today to pay retirees who are receiving Social Security now, so in effect, there is NO MONEY in there for you. This is screaming Ponzi Scheme, but it actually gets worse...
Second article: http://www.cato.org/pub_display.php?pub_id=13625
This article lays out the numbers game that is being played out with Social Security right now. In a nutshell the number of working citizens paying for retirees is headed towards an unsustainable equation. Here is a key quote from the link above: "In 1950, for instance, there were 16 workers supporting every retiree. Today, there are just over three. By around 2030, we will be down to just two."
So how does Social Security keep on going when it is clearly based on the Ponzi Scheme?
Good question and here is the reason Social Security is not a Ponzi Scheme.
1). In a real Ponzi Scheme the investors are voluntary: Social Security is mandatory so you can't "opt out". This protects Social Security from falling apart like Bernie Madoff's Ponzi Scheme.
2). In a real Ponzi Scheme, investors can take their money out whenever they want: Social Security has an age eligibility requirement that must be met which protects it from falling apart like Bernie Madoff's Ponzi Scheme.
3). In a real Ponzi Scheme, you can't change the rules or the contribution amount: With Social Security the government can always change contribution amounts and age requirements to keep the program solvent. Say the numbers look really really bad for the baby boomer generation, they just keep moving up the age requirements to 69, 70, 72, 75 etc... Eventrually the number of eligible retiree's will match up favorably to what is being taken into the treasury.
4). In a real Ponzi Scheme you can't print your own money: Unlike any other investment, the US government can decide to just print more money when it runs out of tax payer funded money.
I'm sure there are more reasons that I am leaving out, but the overall point is Social Security is not a real Ponzi Scheme, it is just based off the Ponze Scheme and made worse by the mandates that the government can control.
I'm looking forward to hear feedback on this and hear what others have to say about Social Security. Needless to say I'm 36 and don't think I'll see a penny of my Social Security, but who knows.
Welcome to my blog
About me:
My name is Chad. I'm not exactly sure what I hope to accomplish by starting this blog other then getting my own opinions out and in blog format for folks to see and discuss. I will probably cover a wide range of topics from politics to sports to local happenings in the community, technology, stocks, family, etc... I'm an engineer and see the world in very black and white terms on a lot of things, and that will probably come through in my posts as well. I hope you enjoy this blog and return often to see more of my ramblings.
My name is Chad. I'm not exactly sure what I hope to accomplish by starting this blog other then getting my own opinions out and in blog format for folks to see and discuss. I will probably cover a wide range of topics from politics to sports to local happenings in the community, technology, stocks, family, etc... I'm an engineer and see the world in very black and white terms on a lot of things, and that will probably come through in my posts as well. I hope you enjoy this blog and return often to see more of my ramblings.
Subscribe to:
Posts (Atom)