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From: orb@whuxl.UUCP (SEVENER)
Newsgroups: net.politics
Subject: Re: Re: Calculation of Social Security benefits vs payments
Message-ID: <823@whuxl.UUCP>
Date: Fri, 15-Nov-85 15:49:20 EST
Article-I.D.: whuxl.823
Posted: Fri Nov 15 15:49:20 1985
Date-Received: Sat, 16-Nov-85 15:55:55 EST
References: <549@drutx.UUCP>, <812@whuxl.UUCP> <279@pyuxii.UUCP>
Organization: AT&T Bell Laboratories, Whippany
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Ah, T.C. is such a careful reader:
> Just one more small point, Sevener.  You're calculations
> concerning how much someone would get after 25 or 40
> years of investing are all very nice, but, they do not
> mean a thing as far as SS is concerned.  The SS funds
> are NOT invested.  Olsen is right, it is a gigantic
> ponzi scheme.  
> T. C. Wheeler

1)I was *very careful* to point out that in fact the Social Security
Trust Fund is *not* actually invested.  Please reread the article.
While some people may have trouble understanding this point such
investment is not actually needed given the law of large numbers and
demographic trends.  Banks do not back up *all* of their loans
with actual deposits or assets: the law of large numbers enables
them to predict fairly well the flow of demand for funds and
deposits for funds under normal circumstances.  It is logical that
private insurance companies work under the same dependencies on
statistical averages which can be quite confidently predicted for
large numbers.  The typical atuo insurance policy may cost several
hundred dollars per year, yet it insures protection against
medical damages and physical damages in the thousands of dollars.
*IF* every owner of an auto insurance policy were to wreck their
car there is *no way* that the several hundred dollar insurance
policy would pay the thousands of dollars in damages: the insurance
company would go broke and then all those people would never 
collect their insurance claims.  However this is *extremely*
unlikely to happen.  Insurance companies base their prices upon
projections of the average number of car accidents and damage claims.
Those projections are quite accurate- when they get out of line with
new claims they are adjusted accordingly.
So with Social Security: demographic trends for various segments
of the population are quite stable and slow to change. So,as
Jeff Myers excellent article pointed out, the Social Security
system as a whole is in good shape according to demographic
projections.(always barring Nuclear War which would ruin everything!)
 
2)my point that people do pay in enough money to earn the
benefits they eventually receive refutes the argument that it
is so terrible that "people get 3 times what they pay into Social
Security" and that therefore Social Security is simply a gigantic
giveaway program.  The expenses and receipts  of Social Security
are carefully calculated to insure that Social Security stays
solvent and that it is *not* simply a huge giveaway program.
        tim sevener  whuxn!orb