The Will To Believe

The web site pyramidschemealert.org is aimed at educating and warning people about pyramid schemes.  Ironically, that web site has a page that attempts to educate people as to why Social Security is not a Ponzi scheme.  Posted in September 2011, the page is entitled 'Is Social Security a Ponzi Scheme?' —
    http://pyramidschemealert.org/is-social-security-a-ponzi-scheme

Here are the main points from that page --

---

 ...
Fact, Not Opinion: Social Security Is Not a Ponzi Scheme
Here’s why:
• Social Security does not require an ever-growing base of new contributors. It is sustainable.
• The rate at which we each contribute to Social Security is calibrated to be sustainable, and if there’s a big change – in birth or death rates or unemployment – it can be recalibrated.
• Social Security does not employ concealment or deception. It is fully disclosed.
• Social Security is exactly what it claims to be, a mandated, government operated insurance program. It is not a private, individual investment program. It is a national, social insurance system. As in all legitimate insurance, the transfer of money is intentional and financially sound.

Social Security’s sustainability is a matter of mathematically verifiable fact, not opinion. Ponzi schemes, which are not sustainable and which rely on deception, are identifiable. They have traits that separate them from legitimate sales businesses, insurance and investment programs. This is a matter of fact, not opinion.      ...

---

Regarding the first bullet point above, note that the OASDI trustees report from 2011 discusses the unsustainable imbalance between Social Security's income and costs, due to the increase in retirees vs. workers —
      http://www.ssa.gov/oact/tr/2011/II_E_conclu.html
      https://archive.is/L4mcb

So even in 2011 when that pyramidschemealert.org page was written, Social Security was in trouble because the costs were already exceeding the program's income, since the number of workers had not increased to overcome the increased number of retirees drawing benefits due to the aging baby-boom generation.  In other words, the first bullet point is clearly false — Social Security requires a much larger number of workers paying into the system, than retirees receiving benefits, or it won't perform well (never mind failing).

Also, notice this article from a fellow at the Brookings Institution that repeats this point about the imbalance, but goes on to claim there's no immediate problem.  Why?  Because the interest income on the trust fund is NOT being counted, and that the nation's private pension system is also normally in this 'cash negative' situation — of course, the author of this article doesn't mention the obvious point that Social Security's interest income is paid from taxes, since the so called Social Security 'trust fund' holds government treasuries, so any Social Security income is yet another expense that must be paid by future taxpayers — that is, the so called income from Social Security's 'investment' must be paid by the plan participants — this is certainly not the case with private pension plans holding real investments that generate income that is not paid by the plan participants —
   http://www.brookings.edu/research/opinions/2011/11/16-social-security-burtless

Going back to the pyramidschemealert.com bullets, the second bullet point listed above is using euphemistic language that explains nothing.  Of course, Social Security can be 'recalibrated' to even further reduce the return — this is something that has already happened (such as raising the retirement age), and will continue to happen — this has no relevance to the question of Social Security being a Ponzi scheme.  How does making Social Security even less effective by 'recalibrating' it, make it NOT a Ponzi scheme.  Charles Ponzi could also have 'recalibrated' his postal coupon scheme by paying investors a much smaller return to make that fraud seem sustainable.

The third bullet point above is a total non-sequitur — disclosing the structure of anything has no effect on what the structure actually is, and whether that structure constitutes a Ponzi scheme.

The fourth bullet point, that states Social Security is an insurance program, confuses the nature of insurance.  Insurance plans are risk pools that pay out for uncommon events.  This must be the case for an insurance plan to be economically viable, since insurance plans must pay out less than they collect in premiums to remain solvent.  So, insuring a regular expense must cost more than the expense itself.  Who will not draw on SS when they reach retirement?   Every SS contributor will draw benefits when they retire, making it impossible for SS to function as a typical insurance plan, taking in a small fraction of the normal benefits it pays to a beneficiary.  This is 'Sandra Fluke Insurance' — trying to fund a risk pool for normal expenses that have close to a 100% probability of occurring, with a fraction of that cost (think of why you can't buy 'Grocery Insurance' to cover your food costs — the plan would have to cost more than the typical person spends on food, so it wouldn't be cost effective to purchase such insurance, even if it were offered).

Here's another odd quote from the same page on pyramidschemealert.org --

---

The program pumps $727 billion into the economy in benefits each year. Additionally, the reserves are invested in our government bonds and earn interest.

---

This is an obvious begging the question fallacy — where did the $727 billion come from?  Social Security payments to beneficiaries must be taken out of the economy before they can be paid.  It's absurd to claim that such payments benefit the economy — Social Security payments must be a net loss to the economy, after administrative costs (however small) are taken into account.  And note, again, the fallacious statement that the interest paid on government treasuries should be viewed as income, and so taxpayers who must make these interest payments should view them as a benefit.

There is one crucial respect in which Social Security is not a Ponzi sheme — Charles Ponzi had no way to force people into his scheme, so it had to fail before it could harm the entire population.  Given the ability of government to force people into Social Security, it's inevitable that the entire population will suffer.  Notice that the vast majority of even current recipients receive less than they would have, had the money simply been put in bank CDs — so the vast majority are already being made to suffer, since even if Social Security were sustainable, it's a bad investment —
       http://research.stlouisfed.org/publications/review/05/03/part1/GarrettRhine.pdf

And here's an interesting quote from a 1967 Newsweek article by the famous economist Paul Samuelson that highlights the assumptions that supported the belief in Social Security --

---

https://www.princeton.edu/~dixitak/home/PASLegacy2_WP.pdf
http://www.economicpolicyjournal.com/2011/09/samuelson-thought-social-security-was.html

    The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)!
    How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population.
    More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.
    Social Security is squarely based on what has been called the eighth wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived.

---

Well, we all know how that turned out — you can't assume a constant population growth (even if you could, wouldn't that create another set of problems?).  Social Security desperately needs to be reformed — it's already in the process of failing —
    http://www.cato.org/sites/cato.org/files/pubs/pdf/PA689.pdf

But reform isn't possible when a majority of people are determined to pretend there isn't problem.

Take the 5th

Police testimony in court can only be used against you.

Part of the Miranda warning is normally read, "anything you say can and will be used against you."

That statement is factually true, but misleading, because it does not indicate that things you say to the police cannot be used in your defense.

An attempt by a defense attorney to have a police officer testify to anything he heard a defendant say will be objected to as hearsay by the prosecution.

But a defense attorney cannot object to police testimony regarding the defendant's statements from the prosecution's questioning, because police officer testimony against a defendant is considered "an opposing party's statement", and is an "exclusion from hearsay".

See Rule 801(d)(2)(A) —

---

http://www.law.cornell.edu/rules/fre/rule_801

---

Simply put, you must be very careful when talking to the police when they are supposedly trying to help you, and never talk to the police if there is any possibility you may be a suspect.

Saying anything can only hurt you, because even if you can explain why you cannot be a legitimate suspect, the police cannot testify in court to anything you say that is exonerating — only the things you say that implicate you.

Here is Regent Law Professor James Duane explaining why you should always exercise your right to remain silent —

---

http://www.youtube.com/watch?v=d-7o9xYp7eE
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1998119

---

Many people see 'taking the 5th' as a shelter for the guilty, but our judicial system is a very dangerous thing to be entangled with, and it is often critical for innocent people not to testify, if their testimony can be manipulated in any way to make them appear guilty.

Milton Friedman Addressing Some Popular Fallacies

Here's Milton Friedman taking a question back in 1978 in his 'Free to Choose' series —

https://www.youtube.com/watch?v=rQLBitV69Cc

The questioner nicely captured the main fallacies that the majority of people accept today.   Here are the highlights of those fallacies —

1. there are no good examples of free economies working.
2. resources cannot be allocated efficiently without govt. involvement.
3. that the economy is driven by demand (spending) rather than productivity, so government taxation and spending is critical to economic growth.

It was nice to see the questioner explicitly name the use of force in the third part of his question.  I rarely hear anyone acknowledge this obvious point — many people pretend that we have a voluntary taxation system, and only people who want to free ride, or don't care, object to 'voluntarily' giving a large portion of their productivity to government to spend — as if questions concerning waste and corruption aren't especially important.  Never mind that most people do what they can to avoid paying taxes, even while denouncing 'the rich' for using tax shelters.

This fallacy regarding government taxation and spending is so pernicious — so few people acknowledge the obvious point, that government cannot spend what it does not take from the private sector (via explicit taxation, or through money printing (inflation)), so any 'stimulus' the government creates at one time, will be cancelled out (and then some due to waste) when the taxes are taken to pay for it.

In his response, I thought Friedman made a great succinct statement that perfectly addresses the root cause of the problems we're facing today.  Here's part of Milton's response --

---

     No, the third part of your thing is just pure fallacy from beginning to end.  Because if those people who are now government employees were employed in creative activity and productive activity they would also be spending their money.  And we'd have a greater total around.
     All you're doing ... let's suppose for a moment, take the extreme case, that that 40% [used for government spending] is being used just to have people sit around — the fact that they spend their money doesn't alter the situation.
     The only product there is, is what the 60% produce, and that 60% is divided among the 100%.  If those 40% are also producing goods, then there are more goods to go around among everybody.
     You are just involved in a fallacy of looking at dollars, which is important sometimes, instead of looking at the real product, the goods and services that people produce and people consume.
     Spending isn't good, what's good is producing.  What we want to have is more goods and services.  And as I say, the obvious indication that that's clear, is that if your logic were right, it would apply at 50%, 60%, 70%, 90%, 98%, 100% — and obviously you would see that that would be a bunch of nonsense at that stage.
...
     We express some of our values through doing things through government, and there's nothing wrong with doing that, provided we keep in control, and don't let the government become the master instead of the servant.
     And the real problem is, in my opinion, that as we move from the local community to the state, from the state to the federal government, it becomes increasingly difficult for us to control the mechanism we have established, and that mechanism tends to control us.
     That was the great wisdom of the founding fathers of this country, of the people who wrote the Constitution.  That Constitution was designed to limit government's powers in order to preserve the freedom of the individuals.  And what has happened in the past 50 years is that the fundamental character of the Constitution has really been changed.
     We have broadened enormously the conception of what is a governmental power and what is not, and have departed from that limited government, until we have created a Frankenstein, an unlimited government that threatens to destroy us.

---

And note that his 'Free to Choose' series is now over 30 years old — the trend toward greater government control that he described, is even more firmly in place now than it was then.

Of course, most people would just pretend that Friedman's statements in the video are false, even though they're incapable of making a convincing argument to refute them.

As an example, here's a comment to the video I noticed on YouTube, regarding Friedman's emphasis of the value of productivity over spending —
     "if no one spends no one produces..."      (some version of this is repeated often)

Even after Friedman specifically explained the obvious point that increased productivity is what raises living standards (rather than spending and consumption), someone still posted a comment attempting to reverse cause and effect — as if their comment is obviously true, and needs no defense. Of course, the comment is an obvious fallacy, since if you haven't produced something (or borrowed what someone else has produced), you will have nothing to spend — productivity must come first, since all market activity is an exchange of what people have produced.

The comment is just obvious question begging —  'what is being spent, if no one has produced anything?' 

Imagine you're stranded on a deserted island — will you not work as productively as you can to survive, if no one comes to spend money?   So a better comment would be, 'If no one produces, there is nothing to spend.'

The original series can be watched here —  http://www.freetochoose.tv/

https://www.youtube.com/user/FreeToChooseNetwork

The Government Most Deserve

Sandra Fluke is running for CA state senate -- http://www.standwithsandra.org/

Fluke's testimony before congress back in 2012 was especially appalling, not so much because she pretended women must use birth control to maintain their health, and that a business can properly be forced to provide a service just because someone decides they want it, but also because she completely exaggerated the cost of birth control.

Of course, it was also simply idiotic that no one seemed to understand that a viable insurance plan has to charge more than it spends on claims, so any insurance plan that covers regular maintenance expenses must cost more than those expenses (obviously the plan will fail, if this isn't the case), so someone who can't afford to purchase birth control regularly, wouldn't be able to afford the coverage for regular purchases of birth control -- just like someone who can't afford eye glasses, couldn't afford to purchase vision insurance, because you can always get cheap eye glasses for less than the cost of those plans.  Of course, I guess that's the point -- it's the old entitlement mentality again -- if I can pretend I have enough of a need, then I can try to make someone else pay part of my costs through some kind of forced government subsidy.

It's instructive to watch Sandra speak on the birth control issue -- there's a video of it here --
    http://en.wikipedia.org/wiki/Sandra_Fluke
She even get's emotional at one point, as if it's a dramatic tragedy being played out.

Sandra Fluke doesn't give any indication that she's qualified to serve in government, but she has that pretentious, morally presumptuous and self-righteous attitude that many people respond to, so that means she's likely to be a popular candidate.

Here's a good analysis of the absurdity of Fluke's statements --
   http://online.wsj.com/news/articles/SB10001424052970204603004577269491399954950
   https://www.google.com/search?q=sandra+fluke%27s+amazing+testimony
The author points out how inexpensive various forms of birth control are (nowhere near $3,000 per year, as Fluke claimed), and also that birth control pills are only one of the treatments for Polycystic Ovarian Syndrome -- the condition Fluke emphasized in her testimony.

And I found it especially frustrating to hear Fluke denounced as a slut in the media, because these comments helped to obscure how ridiculous her testimony actually was, and also helped to turn her into a kind of folk hero for corrupt progressives, who want to treat society as some kind of play toy that they can control and manipulate at will, to satisfy their smug moral presumptuousness.

And notice the vacuous content on Sandra's campaign website.  Here's a link to an issue she's prominently supporting -- equal pay for women --
    http://www.standwithsandra.org/huffington_post_sandra_fluke_equal_pay

As one might expect who is familiar with political discourse and vote buying, that issue is a complete myth, but it's very useful for demagoguery.  So it's no surprise that she would get behind it, given her testimony on birth control.

Here's an article by Hanna Rosin (a woman!), published in August, 2013, on Slate.com (no anti-feminist bastion) explaining the myth --

---

http://www.slate.com/articles/double_x/2013/08/the_familiar_line_women_make_77_cents_to_every_man.html

How many times have you heard that “women are paid 77 cents on the dollar for doing the same work as men”? Barack Obama said it during his last campaign. Women’s groups say it every April 9, which is Equal Pay Day. In preparation for Labor Day, a group protesting outside Macy’s this week repeated it, too, holding up signs and sending out press releases saying “women make $.77 to every dollar men make on the job.” I’ve heard the line enough times that I feel the need to set the record straight: It’s not true.

The official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. But that is very different than “77 cents on the dollar for doing the same work as men.” The latter gives the impression that a man and a woman standing next to each other doing the same job for the same number of hours get paid different salaries. That’s not at all the case.
...

---

Of course, it's not surprising that men make more than women on average, if you pause and think for a moment.

Men should make more than women, on average, not because they're smarter, faster, or bigger, but because (again, on average) they're willing to do things women will not do.

When's the last time you saw a crew replacing a roof, and noticed any of them were women?
When's the last time you called for a plumber, and a woman showed up?
Ever see any women on an Alaskan crab boat?   (I wouldn't try this either)
      http://www.discovery.com/tv-shows/deadliest-catch

This is just one obvious point that explains part of the pay difference -- another I've read is that women work fewer hours than men on average -- a point Hanna Rosin also makes in her article quoted above.

Sadly, I'd say we can expect to see more of Sandra Fluke -- she's already demonstrated a talent for the kind of pretentious demagoguery that is effective with the public, and it seems like she's just getting warmed up.   She'll fit right in the California State legislature.

It's almost comical how she gets behind these bland uninformed conformist positions, and then acts like she's waging this lonely battle against entrenched power.

The road to hell being paved by so-called 'good intentions'.

Cutting CEO Salaries Won't Help Fast Food Workers

Rather than documenting the problem of people having a family, when their job skills only qualify them for an entry level job at McDonalds, this 2013 report by the 'National Employment Law Project' makes the case that McDonalds is the cause of the welfare payment costs to taxpayers for the McDonalds workers who don't earn enough to support their families —
    http://archive.is/o4WVX
    NELP-Super-Sizing-Public-Costs-Fast-Food-Report.pdf from 2013
    http://finance.yahoo.com/news/fast-food-chains-costing-taxpayers-173510741.html

So following this logic, if you are an employer, and you don't pay each employee enough to support his family (however large), you are being subsidized by taxpayers!

The market value of the employee's work has nothing to do with what he should be paid. Of course, this is absurd — it is just more spin that will help people rationalize their entitlement mentality and avoid their own responsibility.

The report emphasizes the compensation of the highest paid executives of seven publicly traded fast food companies, giving the figure of $52.7 million. As if that figure alone proves the employees of those companies are being exploited.

Of course, it begs this obvious question:

'How much more could employees of those companies be paid, if the corporate management were simply eliminated, and their compensation distributed among the employees?'

Anyone familiar with the basic accounting for a large company (you can look the numbers up on any financial website) knows eliminating management would not do the employees any good, but let's do the math anyway.

As of early 2014, according to their website, McDonalds had something like 1.8M employees (including at all franchisees), and the total compensation for their key executives is under $35M, but lets just use the $52.7M figure from summing the amounts from multiple companies given in the NELP report at the URL above.  So the executive compensation for all the major fast food companies could raise each worker's pay at only McDonalds by $52.7M / 1.8M = $29.28 per year.
    http://finance.yahoo.com/q/pr?s=MCD+Profile
    http://www.aboutmcdonalds.com/mcd/our_company.html
    https://en.wikipedia.org/wiki/McDonald's
    https://www.reference.com/business-finance/many-employees-mcdonald-s-511b2af5d945387f

But lets do the math again, using the number of restaurant workers for McDonalds shown in the 2013 NELP report: 707,850.

That would put the annual raise for just the McDonalds restaurant workers at $52.7M / 0.708M workers = $74.45 per year.

Ha!   Problem solved — eliminate those greedy fat cats!

---

https://www.youtube.com/watch?v=AUf3S5NLzsk

---

Of course, you would have to eliminate the management at every major fast food company, and then distribute their pay to only the restaurant workers at McDonalds to even get to a $75 per year raise, but whatever.

Cutting CEO pay sounds good to people, even though it accomplishes nothing, so it will keep being repeated over and over.