How Long Do Dictators Last?

I was watching the news as the Taliban sweeps fledgling state Iraq, so recently “liberated” from the brutal dictator Saddam Hussein. Are they again to become a failed state due to their own religious factionalism, enslaved yet again by new opportunistic warlords?

“Worst case scenario,” I thought, “they’ll fall to a new dictatorship. But, how long do dictatorships really last? Since ancient Greece, Rome and Persia, I can’t remember a real dictatorship that made it to a hundred years.”

I soon realized, there IS a hair-splitting difference between a dictatorship and a totalitarian regime. Regimes, under a succession of dictators, such as the USSR, last under a century in modern times. And then we have “authoritarian regimes” in which some freedom is tolerated but rigidly monitored, all the way down to “benevolent dictatorships” and kingdoms such as Saudi Arabia, where the king is still head of state and nominally the final authority.

China, once one of the bloodiest dictatorships after millennia of emperors and the indignity of the British Opium Wars, seems at the time to be a special case. North Korea, with its three generations of hereditary Kim Jongs, is almost universally held to be one of the most brutal and detestable regimes, with each generation of “Dear Leader” being crazier than its predecessor.

And finally, we have that resurgent scourge of Huns, the terrorist armies, who, having seen territory they want, simply take them and execute the opposition.

How long do dictatorships last, on an average?

My guess for maximum longevity in recent times was about right. I did some research and analysis.

To make much sense of the conclusions of this piece, you really should first quickly peruse this list at Conservapedia.com “List of Dictators.”

Their website states “The following is a list of national leaders (heads of state and/or heads of government) commonly regarded as modern dictators.” The list is mind-boggling. Look at it. You can see some patterns that dovetail with what we remember of of history, but they don’t lend themselves to easy statistical analysis.

What I liked was that their list included dates dictators were in power. I wanted durations of their reigns over time.

What is their average, high and low reign as absolute ruler? Are there any patterns over time? Would it be fair to say dictatorships are today on the decline world-wide?

I exported their web table to an Excel spreadsheet, calculated each dictatorship’s term in power, and I tried to do some simple analysis. I graphed the most significant result: dictatorships are almost always short-lived aberrations, though frequently followed by new aberrations. I could see no particular evidence they are on the wane; what changes is where and when they sprout, like poison mushrooms after a rain.

I think you could make a case that chaos and authoritarian regimes flourish after an occupying power vacates, or is forced out of, a geographical area. But this is tough to prove. Given the scholarly difficulty of tracking down the history of every individual shifting country on the list, I didn’t try to quantify my conclusion.

I’d have liked to see graphed breakouts by region, and more by century or historical period, but in most cases it is easy enough to see those patterns in the Conservapedia listing.

I compiled my chart by counting the number of occurrences of 0 years, 1 year, 2 years and so on, all the way up to a 47 year maximum duration of power. There were 230 entries total. There were a few multiple entries representing multiple terms by the same despot. My graph only answers my original question, “How long do dictatorships last, on an average?”

No modern dictatorship ever lasted 100 years. I see no clear trend showing dictatorships are dwindling world-wide. The new hotspots are Africa and the Middle East. I found 220 distinct “modern dictators.”

You’ll find a graph of my “how long do they last?” results below.

Dictator

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The New Economic Colonialism

Urban renewal, or economic imperialism? In Corsica, some residents resorted to dynamiting empty mansions to intimidate the wealthy from taking over their neighborhoods and homes. In San Francisco, we see increasing unrest among the poor and middle classes, for it is no longer a city where the poor and middle classes are permitted to live, let alone welcome…

FRANCE: STRIFE WITH SPECULATORS – Real estate prices on the Mediterranean island of Corsica are extortionate. A little cottage can set you back 400,000 euros. The Corsican authorities have passed a law requiring anyone who wants to buy a house there to have lived on the island for at least 5 years. The move is a response to people from mainland France and abroad buying up properties as holiday homes, causing prices to spiral. As a result, many Corsicans can no longer afford to buy property there. But now a few communities are fighting back, and threatening to enforce pre-emption rights – including the village of Cuttoli near Ajaccio, the birthplace of Napoleon.


SAN FRANCISCO TENDERLOIN PROTESTERS RALLY AGAINST TENANT EVICTIONS
: The Tenderloin is the seediest, highest-crime district in The City. Arrests do little to curb assaults, robbery and drug trafficking. Yet a 1 bedroom studio, a 475 square feet apartment, lists for $2295 monthly. Residents protest being evicted and displaced as wealthy yuppies renovate whole districts at bargain prices.

In the Middle Ages, when wealthy power elite wanted a piece of property, they simply used armies to take it.

Today, they use “perfectly legal” economic strong-arm tactics to force existing residents out. Landlords, police and sheriffs handle all that messy, unseemly business of serving eviction notices, warrants and arrests. In the end, the wealthy get what they want, and displaced residents are forced to try to find someplace else to live, else join the growing ranks of homeless.

I don’t have the answers. But we are going to have to find them. It seems obvious that improving a neighborhood and simply taking it over are two different things. Increasingly, this problem is going to become a problem of good government – and governance. We’re being pushed back closer and closer to the feudal economy.

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The Breaking VA Scandal

We’ve all read today that retired four-star General Eric Shinseki just resigned as head of the Veterans Administration. As reported by the New York Times:

In a speech Friday morning to a veterans group, Mr. Shinseki apologized and described the V.A. he led as having “a systemic, totally unacceptable lack of integrity.” He vowed to fix what he called a “breach of integrity” and said he had already initiated the firing of top managers at the Phoenix medical center, where allegations of mismanagement first surfaced.
But his contrition and promises of action came too late to save his job.

It is too soon to gauge the extent to which Mr. Shinseki can really bear responsibility for those decades-long failures of the VA to professionally care for our nation’s military veterans. Budget cuts and unethical medical practices both do a great disservice to both our veterans, and to the thousands of highly competent, dedicated doctors and medical assistants who struggle to provide care in a dysfunctional and understaffed system.

In my opinion, and the opinion of many, Shinseki’s most visible failure was in not acknowledging and addressing these deficiencies more visibly and proactively. But with his departure, we now face the prospect that our do-nothing Congress can now say the problem has been fixed, and move on to what it does best.

My own personal VA story is trivial by comparison, but I see it as a tiny snapshot of a small part of a much bigger picture. I’m a Vietnam veteran (1963-1964), but VA ineptitude caused my application to be denied in 2009, 2010 and 2013. I’m still waiting. My honorable discharge documentation is in order. For the military time period in which my documentation was issued, it’s accurate to say it has always been in order. The VA told me they “believed” me, but they could find no evidence that I was in fact a Vietnam veteran … Continue reading

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Jimmy Wales and His Wikipedia Revolution

Some time back, the online tech blog Slashdot hosted a Q&A session letting readers post single questions to Jimmy Wales, founder of the vast online encyclopedia Wikipedia. Wales would personally respond.

Below is one such exchange, on the unimpeachable infallibility of encyclopedic references:

Editing of Information
by sylivin

Q: Wikipedia has become so large that students and youth in particular deem it the official truth. As such governments, companies, and individuals will constantly try to spin that to their own advantage.

Do you believe you will ever be able to reconcile with governments in regards to information they deem classified showing up on Wikipedia and private citizens that consider articles about them to be libel? Or, perhaps, is that just a fight you will need to struggle against for all eternity?

A: Wales: Human beings will never stop quarreling. It’s part of the glorious nature of our species. Government will never cease being stupid and overstepping their boundaries. That, too, is part of the human condition.

The real question is: can open systems adapt and respond in mostly effective ways to deal with the worst of it? And the answer to that is clearly YES.

WHAT’S THIS REALLY ABOUT?

The Old Way

300px-Brockhaus_Lexikon

In the previous century, the standard reference works for home, school or library were “encyclopedias,” literally a circle of learning or course of instruction. Most readers remember the reference standard Encyclopedia Britannica. Perhaps appropriately, we’ve linked the topic to the Wikipedia article here.

There used to be many other encyclopedias, such as Encyclopedia Americana and World Book, which focused on knowledge and learning from a slightly more national, occupational or educational-level perspective, not to mention specialty encyclopedias and dictionaries like Bartlett’s and Webster’s, or indispensable compendiums on professional subjects like medicine, science, and engineering. Encyclopedia Britannica published its last print edition in 2012. A subscription-model online edition still carries on.

Traditional encyclopedias were written by accredited subject matter experts, and edited by boards of other professional editors and academics, often drawn from the ranks of the university and college communities. Every effort was made to ensure article content was as objective and factual as possible, and to present “controversial” topics (such as the American Civil War) as historical recitations of documentable and footnoted fact, along with terse descriptions of the motivations and viewpoints of various opposing sides and viewpoints.

That’s how we came to regard encyclopedias as “gospel,” unimpeachable sources of fact as it were, at least insofar as it’s possible for humans to agree on facts and interpretations. Many a family argument used to be settled by referring to the family encyclopedia.

The problem with the static encyclopedia: the “accuracy” of the encyclopedic “answer” was sometimes dependent on the views and objectivity of the contributors and editors. And you might never know when this was the case, unless you were already an expert on that topic. An article on “Laissez-Faire Capitalism” would definitely read quite differently if prepared under the vigilant eye of the conservative University of Chicago, as opposed to the more liberal eye of the University of California Berkeley.

In defense of the bound volume, it is a static record of the period or era in which it was printed. I have an old Encyclopedia Britannica given to me in the 1970’s, missing two volumes, that’s about twenty years older than that. In preparing my 2002 Astronomy article “Stardust: Where do rocks come from?” I was startled to realize how little mid-century encyclopedias could tell us about supernova explosions, and how these seed the universe with the “heavy” elements that make life possible on Earth.

It’s not often we get a chance to save the Carrier Pigeon. Old bound and printed encyclopedias are a “state of knowledge” frozen in time. We rarely can find that online. Projects like Google Books can preserve those “legacy” volumes. In my opinion, at least, such projects should be supported.

The New Way

The guiding principle of Jimmy Wales’ Wikipedia is that, following the Wiki process, anyone can contribute to or update an article. There are controls, and there is oversight, most of it peer oversight. You can find a Wikipedia article on Harold “The End of World is Coming” Camping, but you won’t find an article asserting that there’ll be no need to pick up the kids after school, because the world will end at exactly 2PM.

Wikipedia says it currently hosts almost 4.3 million articles. If printed and bound, that would amount to 1,902 hardcopy volumes. I can’t get my arms around the number of Wikipedia contributors in a reasonable span of time, but it seems to be around a million a month, both first-time and repeat. Wikipedians seem to measure productivity in number of edits, not number of new posts. There’s a list of the top 1,000 individual “heavy hitters,” the highest of those amassing over 1,000,000 edits each.

When peer review hits the law of large numbers, some interesting statistical things begin happen for data reliability. It’s no coincidence Wikipedia, in its many international languages, is widely regarded as such a reliable and authoritative reference source.

Wikipedia “works” because constant many-hands peer review tends in the long run to correct inaccuracies and misleading or poorly written entries. If I happen to remember that the early Apple ‘HyperCard’ was a “scripting language” and not a full-fledged “computer program,” to give a hypothetical example, Wikipedia provides a way for me to update the inaccuracy.

If someone were to write an egregiously wrong, incompetent, agenda-biased, prejudiced or sloppy article, chances are it may start a Wikipedia flame war. As in the real world, eventually these anomalies sort themselves out whenever clearer heads finally prevail.

That’s why I think Jimmy Wales dropped the ball, or sold himself short, on explaining why open systems like Wikipedia are so effective.

Yes, again, where the topic can support different points of view and controversial differences of opinion, Wikipedia can be messy, just like the real world.

The difference between Wikipedia and the old printed and bound encyclopedias should by now be pretty obvious. Wikipedia has transparency and accountability.

The old system by its nature allowed for little or no difference of opinion. Once it went to print there was no way of recalling or updating the content. Anyone who ever tried to use the “annual update” volumes, as I once did, is likely to praise them as an effective and helpful research tool. No wonder we took those compendiums as unimpeachable. Any disagreement was swept under the carpet.

There’s a very good reason why printed volumes were called “bound.” Once you bought a set, your knowledge base stopped growing and evolving. Wikipedia is a NON-filterable knowledge base with an almost unlimited supply of subject matter experts. When there are disagreements, these are easily discoverable at a glance.

The person originally questioning Jimmy Wales about information editing obviously had government or corporate censorship and redacting in mind. While I don’t personally believe governments in free western nations have yet made significant inroads toward controlling freedom of online content on Wikipedia or of the press in general,  we can expect occasional interaction on classified information, such as pertains to military or national security. To the extent that might be true, it’s not necessarily likely we’d hear much about it. Corporate redacting must go through the courts and the libel laws.

Having said that, if it hits the national media fan, such as on the recent Bradley Manning and Edward Snowden affairs, or the 2001 Enron scandal, it’s fair game for Wikipedia, blogs such as mine, and other online and offline publications, and I’m not particularly worried about it yet.

The highly visible sporadic messiness of Wikipedia open source authoring is superior to the old system of institutionalized consensus and dogma. The “new” system is a stochastic process; a new entry starts out with bumps and warts, perhaps lacking the Britannica finished eloquence of Oxford verbiage, but with a clearly defined aim of providing useful information about the topic. With the aid of many hands, perhaps thousands over time, the Wikipedia topic quickly becomes a polished authoritative reference, and a superior one, for it is never frozen in a stasis of printed paper. It can always evolve and adapt to new information and discovery.

In effect, it became the first impeachable reference work that’s corrected real-time by the same processes that challenge it.

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Occupy Wall Street: Gone Rogue?

I picked up a free San Mateo Daily Journal yesterday when I joined a friend for lunch. There was a nice story on page 1 about some civic-minded Redwood City high school girls who decided to join a regional Occupy demonstration. They thought, by participating, they could make a difference.

“Students deserve the opportunity to discuss what they care about,” an organizer said. “Once you leave high school, life hits you like a ton of bricks and these students need to know about the troubles with the banking system and why cuts are made to education.”

There was some isolated violence. The real violence was in Oakland, Seattle and elsewhere in the nation. Banks were vandalized, windows were smashed, police cars were burned, police were assaulted, and police and the crowd were at one point bombarded by a roof-top crazy hurling down long sections of heavy steel piping. There was no follow-up story on the high school girls, but I bet most were disappointed.

Occupy Wall Street, what the hell do you think you’re doing? Continue reading

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Church vs. State: Religious Freedom vs. Freedom of Speech

Just when we thought the HHS “Contraceptive Kerfuffle” was resolved! So-called “social conservatives” from the religious right are attempting to hijack the issue from the Catholic Bishops to put a two-pronged political and religious spin on it.

  1. The President ordered a change to the HHS ruling so that health insurers automatically provide the coverage at no additional charge to any insuring employer.
  2. Brooks and Shields agree that the Administration pulled us back from the brink of “religious war.”
  3. The Catholic Church, ACLU, women’s groups and Planned Parenthood all seem mollified.
  4. GOP candidate Romney finally announces “that attacks religious liberty and freedom of speech.”
  5. Brooks shows how the Administration’s original ham-fisted proposal for universal access to birth control, and the recent California court overturn of the ban on gay marriage, have emboldened the religious right.
  6. The religious right will step up its long-standing assault on personal choice it opposes.

Well, Catholics having been somewhat mollified, we should have been able to predict this would only prompt the religious right “social conservatives” to step in where Bishops care not to tread. Brooks explained the religious right would be opposed to any aspect of the HHS bill anyway, since the original proposal concretized their claim that the whole “Obamacare” program is an unwarranted government intrusion upon their religious freedom, not to mention the untouchable private sector.

As we’d expect from any religion-driven political movement, this is partly political and partly because in the view of the religious right, reproductive preventative services of any kind are a violation of the word of the Creator who blessed only their interpretation of our founding state papers. We only need a Supreme Court to rubber-stamp doctrinaire edicts from the great pulpit on high. The constitutional separation of church and state is being broken down, piece by piece.

In other words, in the “social conservative” view, religious freedom must trump personal freedom of choice every time. In that view, religious freedom requires an imperative to impose upon others sharia, i.e. religious law, by force of political legislation. Never mind that this is unconstitutional in the United States.

Do you want fries with that? Did you know that the very organization which aggressively defames gays and lesbians has its own anti-defamation league? The irony is that we find freedom of speech and religion being used here as a tool to silence personal liberty. See:

1. DefendChristians.org
2. Right Wing Watch
3. Christian Anti-Defamation Commission

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Contraception: Controversial Health Care Mandate

The U.S. Health and Human Services department (HHS) recently announced a controversial ruling that would compel most religious organizations to offer contraceptive services as part of their basic health care package. Churches themselves would be granted the “religious exemption.”

Sometimes it may seem hard to defend organizations which in many cases push intrusive meddling upon the rights and private lives of American citizens. Here we have a case where the exact same wrong is being perpetrated upon some of those religious groups. The danger in each case is that the wrongs are perpetrated through the offices of the United States government.

What was HHS thinking? Who would be beneficiaries of this new ruling? PBS reports that while churches themselves are exempt from the new rules, Catholic hospitals and universities must comply. Continue reading

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Taking a Second Look at Social Security

Recently Cousin Ron Lamont re-posted a Facebook “Like” quote by someone alleging that as early as 1967, liberal economists were calling Social Security a “Ponzi scheme.” This irritated me enough that I removed it with the “hide this post” tool. I’m still considering whether Facebook, a family-friendly safe space, is even the proper forum for hard-core political commentary and opinion.

So to be honest, It’s fair to say I started it all when I re-posted my personal website article “Social Security Not a Ponzi Scheme” on Facebook. Even though PolitiFact [1] rates Perry’s 2011 “Ponzi” statement as “False,” I’d have to rate the 1967 “Ponzi” allegation, far from being a “Pants On Fire” item, as “Half True.”

My cousin’s post was a fair turnaround. Now then, what’s the story about Social Security?

In 1967 Newsweek reportedly ran a column by noted liberal economist Paul Samuelson (of college Economics textbook fame). Samuelson in fact did compare Social Security to a Ponzi scheme [2]. This source cites numerous other early references to the same opinion, including the Wall Street Journal. The source notes that Samuelson was “actually drawing on the Ponzi analogy to defend Social Security”, a back-handed way for an academic to illustrate a point if ever I heard one. There’s a long history of groups that tried to pin Social Security to the mat before. You should read the PolitiFact assessment [1] of the whole issue.

In my first article I showed that Social Security is NOT a Ponzi scheme by definition, but an account that is actually but not physically held in each contributor’s name. Despite all the rhetoric about what Congress is doing or has done with those funds, the account is still due and payable according to the terms of the social contract. The obvious cause for concern is: how long will the Social Security trust fund remain solvent and be able to pay out on its obligations?

Over the years a major defense of Social Security has been that it is deemed “actuarially sound,” meaning that a statistical analysis of FICA and Employer Contributions, charting pay-in and pay-out amounts against actuarial table life expectancies shows that Social Security is paying its own way, or is at least solvent. Well, it probably would be solvent if its funds were securely invested at going interest rates like any other form of pension fund.

I recently read a cynical charge somewhere that when FDR and the New Deal Congress inaugurated Social Security in 1935, the actuarial life expectancy of the current generation of retirees was about three years. I couldn’t verify that. Social Security Online [3] presents a quite different accounting: “men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940.” 1940 was the first year Americans could collect Social Security.

One study I can and did do is an analysis of my own SSI account. I started drawing on it at age 65 in 2009. Raw data includes all of my contributions from 1960 to 2009 (49 years), matching Employer contributions in like amounts, and even a withholding rate adjustment recalculation for a five-year period where I was mostly self-employed. Given the taxable income data posted to everyone’s annual SSA statements, and the withholding rate for each year [4], it is a simple matter to calculate annual withholding amounts without trying to locate 49 years of W2’s or Form 1040’s. My 49-year figures came within $186 of the government-reported withholdings. And I know exactly what my SSI income is.

I assumed those funds must be adjusted or amortized for the value of interest they should earn in any interest-bearing account, making no assumption about what the Congress and Treasury may actually be doing with our money. I chose a 5% APR. Some may object that the government doesn’t credit interest accruals to our account. I am calculating the value of the account, not just the portion allocated to us.

But what is the difference between the principal and principle plus accruals? My own contribution’s cash flow plus assumed accrual worked out to 148.47% of principal. (That’s so low because the early years contributed the least). I calculated what the future value [6] of each year’s total adjusted contribution would be by year 2009. Adding the sum of those payments plus interest equaled just under 12% of my lifetime earnings.

Obviously I won’t be publishing personal financial data out of privacy concerns, but you could run the same calculations on your own account using the source links I’ve provided in “References” below. If you do not yet have a retirement year and estimated SSI monthly income, use your SSA annual statements to make some assumptions. You need to know the effect of different retirement ages on SSI income anyway.

My own work experience may not be entirely representative. I probably worked somewhat longer than the average of all wage-earners. On the one hand, my wages include three years in the military, part-time income in college, and five years of exquisitely marginal self-employment income. On the other, I finally “capped out” on SSI contributions in my last years in the workforce. The difference is what those early years might have contributed to personal savings growth had my income curve been more even. That makes a big difference to my old age, but doesn’t materially affect the amount of my monthly social security payment.

We noted how low my wages were in those early years (even if adjusted for inflation, which we should not do here). My experience would be different from someone who went straight from college into a lifelong professional career. Those earners would “cap out” early, and the Social Security Administration fund would probably never “go into the red” for individuals least likely to depend on it. Conversely, my contributions would be proportionally greater than those of someone who, for example, left the workplace to raise a family, or on account of illness or disability. All I can conclude is that it sounds reasonable that a substantial proportion of the workforce probably survives to receive social security payments well in excess of that ever put into the fund. Perhaps people who complain that is not fair forget that’s the security benefit of a social security insurance plan. Private insurance plans of all types depend on the very same mathematical certainty of pooling of risk.

The reason we can’t add an inflation factor to our calculations is off-topic but worth examining. Savings and other interest-bearing accounts don’t take inflation into account either. There, a dollar is only a dollar whether deposited in 1960 or 2009. I ran the “Inflation Calculator” [5] on my yearly payments anyway, even though I could not fairly use them for my bottom-line calculations. It’s instructive to note that the same $36.13 worth of groceries in 1962 (my FICA contribution for that year) would cost $256.66 in 2009 dollars. Younger readers would not remember the late 1970’s, when so many of us consumed with plastic credit cards bearing an 18.99% APR, since we could more cheaply repay later with devalued dollars. It isn’t just the stodgy classic University of Chicago economic conservatives who call inflation the “hidden tax.” It is. Today we call it “Quantitative Easement.”

In my early years I argued that I would probably live to regret paying into the Social Security fund (as if I had a choice). My spreadsheet proves me wrong. Actuarially speaking, in my case, I should expect to get out of it almost exactly the value of what I put into it. The spreadsheet calculations revealed that my own account will hit “break-even” when I turn age 80.25, and my statistical life expectancy right now in 2011 is age 82.77 years.

Unfortunately, even considering my low-earning early years, the purchasing power of my Social Security “nest egg” would have been worth 91% more (almost double the real purchasing power) if we did not live in an inflation-addicted economy. Our “hidden tax” benefits the government in the short run, because it repays debt with cheaper dollars just like we did with the plastic 1970 credit cards. As you can see, in the long run inflation hurts all of us, including our government.

Unsurprisingly, conservatives and upper-income wage earners will argue that Social Security is inefficient and of limited value. Liberals, seniors and lower-income workers will argue that the vast majority of Americans need a safety net. Despite all the rhetoric on both sides, I’d like to know what is going to be done to save a program that has worked for generations of American retirees so far.

If Congress can’t or won’t fix the program we have now, it would be foolhardy to put our faith and trust in a poor substitute that takes the “insurance” out of Social Security insurance, or, even worse, in some scheme that’ll be shunted off to the same private sector that brought us toxic assets, job offshoring and an imperiled middle class. That’s just my opinion, but whether the polls prove that to be in the 51% majority or 49% minority, it can’t and won’t be ignored.

©Alex Forbes 2011

References

[1] PolitiFact, “Shacking up: Social Security & Ponzi schemes
[2] Liberally Conservative, “Perry Wasn’t the First
[3] Life Expectancy for Social Security, SSA
[4] Social Security Administration Trust Fund Data
[5] Bureau of Labor Statistics CPI Inflation Calculator
[6] Future Value: I couldn’t get the built-in Excel function to work properly in my spreadsheet. Just use the formula FV = PV ( 1 + i )^ t (see NetMBA Future Value) which, in the Excel cell, would look like this: =D5*1.05^G5 if cell D5 contains the principal and G5 contains the number of periods. 1.05 is the assumed interest factor compounded annually.

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Social Security Not a Ponzi Scheme

Many Americans were surprised to hear any frontrunner candidate for President, even Texas Gov. Rick Perry, say recently in the GOP candidate debates that Social Security is a Ponzi scheme. As quoted by the Washington Post on August 29, [1] Perry claimed:

It is a Ponzi scheme for these young people. The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie,” Perry said. “It is a monstrous lie on this generation, and we can’t do that to them.”

It’s a lie only if and when Congress reneges on a solemn US government promise and obligation. Seniors who have paid into the Social Security fund all their working lives should be outraged. The young and those who are only beginning working careers might well find cause for alarm in those words. I believe we can set the record straight here while still bypassing 95% of the partisan rhetoric. The status of Social Security as a “Ponzi scheme” begins and ends with the intent of Congress.

Merriam-Webster defines ‘Ponzi scheme’ as:

an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.

For more information on Ponzi scheme, see Wikipedia [2]. It is true that the money you’re depositing into your SSI account goes into the Social Security Trust Fund. It’s true that the money credited to “your account” goes not into the purchasing of equities to build a nest egg for your own eventual retirement, but to pay off obligations to the current generation of retirees. Just like most private pension funds, Social Security obligations pose a long and growing debt “tail” of outgo which is micro-managed by Congress in periodic fits of oversight.

According to OMB, the Office of Management and Budget as quoted in Wikipedia [3]:

These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense…. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)

The Wiki article quoted Dr. Alan Greenspan as saying: “The crucial question: Are they ultimate claims on real resources? And the answer is yes.”

The devil’s in the details. All the worrisome arguments about how those dollar bill notes paid to you out of the fund come from the current cycle of depositors, and are not “your” dollar bills, could equally well be applied to any checking or savings bank account you own. This out-of-context argument makes no sense. The thing to remember is that it’s YOUR account, and the source of the physical greenbacks is an irrelevant distraction. The obligation to make good on your account is indeed YOUR asset, and morally it should certainly not be subject to the discretion of Congress, any more than your bank can legally decide whether your savings withdrawals coincide with the bank’s current priorities.

It’s a well know fact that the Baby Boomers are putting a heavy strain on the Social Security system. We’ve known that was coming for half a century. As we face a looming cash flow problem with Social Security, I think Congress and not individual Americans deserve full blame and responsibility for that.

Personally, I was trained in classical laissez-faire economics, and I’m very conversant with all the theoretical arguments why Social Security was a mistake in the first place. They’re just another political case of “that may work in practice, but it won’t hold up in theory.”  In my twenties I resented Social Security bitterly. After a lifetime paying into the fund, and a lifetime observing corporate practice in the American workplace where I worked for over forty years, I saw I’d be a fool to trust any “privatized” solution. Neither am I amused when I hear my account dismissively called an “entitlement.”

Reasonable people will conclude that Social Security is NOT a Ponzi scheme because, among other things, it is NOT a get-rich investment scheme and, for better or for worse, the “real resources” backing the fund are United States Treasury bonds. One could, if one wished, even argue that Perry was really calling into question the full faith and credit of the United States government. After all, it was his party that shook world confidence in our national will to pay our just debts and obligations in the first place.

© Alex Forbes 2011

Further Reading

[1] Washington Post, “Perry’s Ponzi scheme rhetoric” by Jonathan Bernstein
[2] Wikipedia, Ponzi scheme
[3] Wikipedia, Social Security Trust Fund

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