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PaperclipPerfector  2d ago (text post)   1707 thread views

Small-Scale Question Sunday for March 2, 2025

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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Why do you consider pensions to be welfare rather than compensation?

Because they quite literally are welfare.

How so? Welfare is typically defined as "financial support given to people in need" whereas pensions are paid out to those who contribute (and/or their dependents) based on their contributions.

I can't speak to other countries, but social security is heavily redistributive in the US. If you are rich, you get much much less than you put in. If you are working class, you get much more.

Source for inflammatory claim (table 2):

Assumptions:

  • Mortality: Standard
  • Lifetime earnings basis: Individual
  • Lifetime earnings measure: Actual
  • Discount rate (%/a): 2
Income quintileSocial Security tax rate (%)
1−21.9
2−1.0
3+3.6
4+6.4
5+6.8

The researchers appear to say that, if you adjust for a zillion variables, the redistributive effect basically disappears:

Assumptions:

  • Mortality: Dependent on income
  • Lifetime earnings basis: Household
  • Lifetime earnings measure: Potential estimated based on income(?)
  • Discount rate (%/a): 4
Income quintileSocial Security tax rate (%)
1+4.1
2+5.2
3+6.0
4+6.0
5+5.5

I don't know how much I believe that claim.

Interesting.

Like you, I'm immediately suspicious.

First, as we expand the definition of income to use more comprehensive measures of well-being, we find that Social Security becomes less progressive. Indeed, when we use an "endowment" defined by potential labor earnings at the household level, rather than actual earnings at the individual level, we find that Social Security has virtually no effect on overall inequality.

That is some grade A bullshit right there.

Meanwhile, back on planet Earth, I'll admit that Social Security is somewhat less retributive when we adjust for life expectancy. But this is not going to gratify the biases of the paper's authors since it is primarily unmarried men that are getting screwed. They seemed to need a lot of twisting and turning to arrive at the conclusion they wanted to.

Yeah, I did the napkin math once, and it's mostly sex. Between women living longer, working fewer years, and inheriting their husbands' payments, they get a much better deal, even at the same yearly salary.

Race does make a bit of difference too, but not always in-line with actual life expectancy (technically a guy who died of a stress heart attack at 64 got a worse deal on SS than a guy who got shot at 19, because he paid in for 45 more years and still got nothing). It's the groups who regularly make their 90s that really get the best deal, which is rather unfair.

(tagging @jeroboam as well)

It gets even worse when we consider nerdy economist concepts like marginal utility and opportunity cost.

Those of means who contribute more to social security than they will receive from it are also not using their monthly payroll contributions to social security to invest in other areas. Likewise and conversely, those who do not contribute much to social security during their "careers" but then receive disproportionate benefit should they make it to 65+ are often - date I say - engaged in activities that may be net socially negative. This ranges from the pleasantly degenerate (drinking to excess, casual illegal gambling with friends, other high risk activities) to the actively and proudly felonious (violet semi-organize criminal activity).

We take meaningful amounts of money out of the hands of the pro-socially engaged and demonstrably more capable in capital allocation during their highest earning years in order to subsidize the poverty-lite elderly years of people who have had a rocky relationship with society and community for, perhaps, decades.

I'll admit I'm painting with broad strokes here and will further confide that I spent too much time this past weekend looking at how taxes, transfers, and social programs actually shake out in the US. I, therefore, am still riding a hell of a rage high on this particular topic.

Still, the basic (and good!) arguments against social security still fail to adequately capture just how perverse it has become. It is no longer a "help out the small amount of old folks who make it to such an advanced age" program. It's a multi-generational ponzi scheme complimented by a massive DEFECT, DEFECT, DEFECT incentivized prisoner's dilemma. Throw in the deadly sisters of housing, education, and healthcare costs and the picture gets even more grim.

The economic tragedy in America is that, today, the dutiful "middle class" career person or family who pays all of their taxes, saves responsibly but without being monkish about it, and tries to setup a self-sufficient future is actually the RUBE. The equity owning elites use the various tax loopholes to keep cash that isn't income but "dividends" and the devotees of social degeneracy simply enjoy a taxpayer subsidized orgy of irresponsibility from their earliest adult years all the way through silver years' death, if violent calamity does not land on them in the intervening decades. The government pursues monetary and fiscal policy that inflates the dollar to oblivion and takes yet more of those dwindling dollars out of the hands of the earnestly, albeit naively, pro-social.

The economic tragedy in America is that, today, the dutiful "middle class" career person or family who pays all of their taxes, saves responsibly but without being monkish about it, and tries to setup a self-sufficient future is actually the RUBE.

Wait what? You more or less described me, but I don't see how I'm a rube. I know that social security is basically stealing money from me, I don't have a choice whether or not to pay it. I know that the uber-rich have ways of making money that surpass my wildest dreams, but also they require seed capital I don't have. So, I put money into my retirement account because that's all I can really do as far as I can see. But I'm not doing this because I've been fooled into thinking it's an amazing option... it's just the one I have available to me.

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