Clash of The Clueless: Friedman v. Santelli
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TRANSCRIPT
FRIEDMAN: No, I don’t think it’s a Ponzi scheme.
SANTELLI: Earlier in the show you said that we’re putting a burden on our kids that’s unsustainable. What’s the definition of a Ponzi scheme?
FRIEDMAN: It’s a program that made promises that it cannot keep in full and it needs to be fixed and reformed.
SANTELLI: Isn’t that exactly what a Ponzi pyramid is?
FRIEDMAN: I don’t think it is a Ponzi scheme as a criminal endeavor.
SANTELLI: No, no — forget the criminal side. You need more people to perpetuate a myth because if the people stop the myth is known to all. That’s my definition of a Ponzi scheme. Let’s call at it chain letter, a pyramid scheme. Isn’t that by definition what Social Security is? Take the legalities and fraud out.
STEVE LIESMAN: Why is it a Ponzi scheme, Rick?
FRIEDMAN: It is pay as we go. Ronald Reagan fixed it. Why can’t we fix it?
SANTELLI: What does Ronald Reagan have to do with my question?
FRIEDMAN: What does your question have to do with reality?
MICHELLE CARUSO CABRERA: We brought it up.
SANTELLI: You can’t decide that more people is the only thing made Social Security work. We have a real issue because many people in government seem to like to read your work.
FRIEDMAN: What makes Social Security work is fixing Social Security in terms of the population demands.
SANTELLI: I didn’t ask if we should fix it or not. I asked if it’s a pyramid scheme.
FRIEDMAN: Your question is idiotic. That’s what you asked.
SANTELLI: You’re answer’s idiotic. I’m done. I feel good.
FRIEDMAN: So do I.
Source: Clash of The Clueless
Crooks and Liars, September 8, 2011
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September 10th, 2011 at 8:23 am
“SANTELLI: You’re idiotic. I’m done. I feel good.”
What’s idiotic is a group like TBP putting up a piece and not even getting the transcription correct. Santelli did not say “You’re idiotic.” But then again, BR, you definitely lean Democratic. So, maybe I’m wrong, it’s not idiotic. It’s simply you and TBP being biased, again.
~~~
BR: The transcript is from C&L, which pulled it from CNBC. I see the transcription error you referenced and fixed it in the transcript.
As to my leanings, I am decidedly not a Democrat, who I find economically inept and strategically clueless. In the world of pushing back at Idiocy, the GOP has staked out the meta-moron, ant-science, agnotology position.
I suspect the political link I frequently reference — No Labels –is beyond your partisan world view.
I am not a Dem or a GOP — I am anti-Idiot — what are you?
September 10th, 2011 at 8:27 am
If Social Security is not a Ponzi scheme, Mr Ponzi and Madoff should sue the government for having their reputations sullied. Of course its a Ponzi when the agent (government) relies on new investors to pay previous investors.
September 10th, 2011 at 8:34 am
reprint from myFB on another link to this meme momo “capitalism is a ponzi scheme – it will all fall apart if we do not continue to add people population – who buy more homes more furniture more stuff”
.. you know too .. or “destroy the stuff” works too .. or “slow down – job security” .. or “lets lawfully make it obsolete”
September 10th, 2011 at 9:22 am
Good grief. So is the stock market, for that matter. What idiots.
It’s a measure of the intellectual poverty of our popular culture that people like Santelli and Friedman are given a broad forum to spout their nonsense.
FWIW, I had to endure Friedman speaking at my kid’s recent commencement ceremony. The speech should have been titled, “Bromides and Pointless Cliches for a Generation Facing Historically Difficult Circumstances”. Well, at least Stevie Wonder was also on hand to compensate for the downer of having to endure Friedman.
September 10th, 2011 at 9:23 am
Which is the preferred ponzi schemer: government or the perpetually bailed out financial sector?
Reagan-Greenspan-Moynihan set the stage for the Social Security payroll receipts to give cash for perpetual war and tax cuts. Looks like accumulated $2500B in special treasuries assets of the SS administration.
The financial sector wants its minions in the political sphere to arrange for them to lose future Social Security payroll receipts.
September 10th, 2011 at 10:47 am
What’s idiotic is the fact that Social Security taxes are capped on the wealthy. What is even more idiotic is the fact that the Social Security doomsayers and detractors have never come up with a VIABLE and REALISTIC alternative.
401(k)s? Let’s count the problems:
1) Who wants to have a loss in their portfolio of up to 50% (such as happened in ’08) when it is your SOLE SOURCE OF INCOME?
2) How can half the country save up enough for a 401(k) to work when they are living paycheck-to-shaky-paycheck now?
3) If everyone did move their “social security fund” into the market, it would cause another bubble in asset prices (law of supply and demand – the supply of valid investments would not increase, simply the money chasing them) causing another catastrophic financial collapse later (causing problem #1).
Social Security is, was, and will be a TRANSFER payment, primarily from people who have money now to people who do not. It was created because during the Great Depression in the 1930′s what few pensions did exist were wholly inadequate. Social Security was created to do two things: Provide supplemental income to people who had no other adequate retirement income source, and to pump more money into an economy that desperately needed it.
Our situation today is almost an exact duplicate of then; inadequate or non-existent pensions (I don’t have one…do you?) plus a huge loss in retirement account values AND an economy that is desperately needing CONSUMER SPENDING in order to get going again.
Rick Santelli and his ilk see no personal benefit from Social Security and therefore conclude that there IS no benefit, only costs. They feel that their wealth will shield them from the costs to society that an elimination of Social Security would cause. I think they may actually look upon with envy the wealthy, ruling elites of countries where there is a huge wealth and education disparity.
If Rick and his cohorts admire the social structure of a country such as Columbia so much, why doesn’t he move there?
September 10th, 2011 at 11:22 am
Privatizing SS or personalization of it is what the real debate is. That is a loser with the American people.
Please tell me who would benefit from privatizing SS?
Answer that question and the motives become clear.
The same beneficiaries of TARP, ZIRP, TALF, etc.
The motive is to profit from it not reform it.
September 10th, 2011 at 11:44 am
Is Santelli normally this stupid or was he having a “special” day?
Social Security is an insurance plan and is wisely considered a generational bond. It needs an on-course correction to accomodate rising demand due to a number of factors most notably an increase in longevity. It can be fixed just as Reagan/O’Neal fixed it two decades ago.
September 10th, 2011 at 11:58 am
CardinalRam, well said, all of it.
Santelli is the Jerry Springer of business journalism, he lost my respect February 2009 calling underwater homeowners “losers” on national television….then insisting on his stance even though Steve Liesman pointed out that Santelli hadn’t even read the bill he was referring to.
September 10th, 2011 at 12:09 pm
http://www.tnr.com/article/economy/93955/diamond-social-security-fix?page=0,0
I thought this was a good article on fixing social security. Word from liberals is that the “acturual balance” can be restored to Social Security for the next 75 years with relatively minor changes to the structure of the intake and benefits.
Isn’t Santelli the guy who gave us the Tea Party Idiots?
September 10th, 2011 at 12:10 pm
I find it unfortunate that people continue to deride Social Security as a Ponzi scheme. Not only has the program paid for itself 100% through payroll deductions it has generated a cumulative surplus of over $2T since inception.
Yes, this year redemptions exceeded contributions and the payroll tax gimmick is a threat to the long term viability. However, another simple Reagan-O’Neill tweak and it is good for as long as it can be reasonable projected.
What if nothing happens? Those paying in now would get 75% of what is being promised now. Hardly a Ponzi scheme.
Sometimes the commenters on this site really disappoint.
September 10th, 2011 at 1:42 pm
‘Privatising’ social security has worked well up here in Canada
http://www.cppib.ca/
September 10th, 2011 at 1:42 pm
SS isn’t broken and it doesn’t need fixing – just adjustments to make up for population changes that have always been known were going to occur.
SS and the US government spending are not ponzi schemes by any stretch of the imagination.
Since WWII we’ve spent $14.4 Trillion and produced $280 Trillion in GDP. The American worker has earned every penny of it.
September 10th, 2011 at 3:49 pm
As numbers2on correctly notes, all long-lived assets are ponzi schemes by Santelli’s way of thinking. If the next generation has no money, then all these long-lived assets will collapse in value. If the elderly own stocks and the workers have no money, then the stocks will fall in value and the elderly will be left destitute. If the workers do have money, then they can afford to pay social security taxes.
It is probably for the best that Santelli and Rich Perry and the Tea Party are so outspoken about getting rid of social security. This is best hope for avoiding a President Perry in 2012.
September 10th, 2011 at 4:43 pm
Republicans call Social Security a Ponzi scheme in order to denigrate it, because they have been using it to subsidize lower income tax rates which they don’t want to pay back. The CBO projected that the surpluses Clinton left for Bush were enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. These “surpluses” were made up entirely of excess payroll taxes building up the trust funds. Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the Republicons to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing our money.
September 10th, 2011 at 6:51 pm
Santelli is spot on. I see no reason to call him clueless. Please explain why he is clueless.
Sure we can fix social, by cutting the amount of benefits we pay out. But it is still a pyramid scheme by which money is taken from three people and handed to one in perpetuity (until the three have no job or money in which case….whoops!)
September 10th, 2011 at 6:52 pm
Ponzi= promising to pay out perpetually growing amounts of money based upon assumptions that you will have perpetually growing income and revenues….FOREVER.
PONZI
September 10th, 2011 at 6:57 pm
ditto hi5 to bmz @4:43
September 10th, 2011 at 6:57 pm
I want to add another thing.
What is SUPPOSED TO BE A SAFETY NET has turned into a theft of each generation from the next.
MILLIONS OF PEOPLE choose not to save money because they know Chuckie schumer will forcefully take money from all of our paychecks forever to give them so they can enjoy a retirement which is in jeopardy for those who are victimized. It is a fucking disgrace.
Why save?
Why be responsible?
This isn’t about feeding people, it is about them taking out more from a system than they put in at the expense of younger workers. That is not a safety net…it is theft.
And if that werent absurd enough, we have NO MEANS TESTING so even RICH PEOPLE get to rip off younger workers!!!
I want an opt out. I will save my money and do without ripping off my kids thank you.
And for any doubters, go look at your statement if you think it is a lie….after about four years on social you start stealing for you have at that point exhausted every penny you put in.
September 10th, 2011 at 6:59 pm
PONZI = EVERYONE gets to take more out the ‘system’ than they put in – FOREVER.
EXPLAIN TO ME HOW THAT IS NOT A PONZI!
September 10th, 2011 at 8:06 pm
@Major
Please peruse this clear and precise description of the differences between a ponzi system and a “pay as you go” pension system:
http://www.ssa.gov/history/ponzi.htm
_ _ _ _ _ _ _ _ _ _ _
The discourse on social security is outrageous.
A recent sociological study strongly suggest that organized (and very well-funded) disinformation is likely to be a very effective way to manipulate public opinion:
http://news.rpi.edu/update.do?artcenterkey=2902
September 10th, 2011 at 8:16 pm
MayorQuimby Says:
“PONZI = EVERYONE gets to take more out the ‘system’ than they put in – FOREVER.”
An hour of labor still buys as much (if not more) as it bought 50 years ago. Nominal wages don’t mean anything in terms of what we can afford now. Unless future generations become less productive than they are now (has that happened in 75 years?) your claims have no merit. There are always enough resources to take care of our elderly. Unless we choose not to, but that is voluntary. It has nothing to do with what we can afford.
“EXPLAIN TO ME HOW THAT IS NOT A PONZI!”
You don’t understand math as in progressions and you don’t understand what a ponzi is. What PONZI has ever lasted 75 years?
What you are saying is that we can no longer afford to take care of our elderly. We have more wealth as a nation than we’ve ever had, so why can’t we afford it?
September 10th, 2011 at 8:26 pm
Yuan- social security not only IS a pyramid scheme but it is the absolute BEST example of one.
You have a system that perpetually requires morand more people to contribute and by so doing promises more and more people will get out more than they put in. MADOFF. PYRAMID. CHAIN LETTER. PONZI.
This isn’t even debatable and I am not going to waste any more time on it. It simpy IS. To characterize those like Rick who call it what it is as fanatics REEKS of the most vile and disgusting kind of debasement of discourse. If we can’t all agree wht the problems are we have NO CHANCE at ever resolving our deeply rooted structural issues. Social and medicaid are HUGE problems as they, along with other social spending, comprise almost 2/3 of the federal budget, a budget that has to borrow almost 40 percent just to exist.
FUBAR. Keep up the lies and bullshitting and see where it leads us.
September 10th, 2011 at 8:29 pm
Paulie-
You make a good point re: purchasing power of dollars. But I hate to break it to you but that has nothing whatsoever to do with the ponzi nature of social security. Social security is the means by which gvmt takes my money and gives it to my father. The purchasing power of a dollar and how that purchasing power declines over the years is a function of how many dollars are chasing how many goods and services. If gvmt had not stepped in in 2008 w could easily be paying 10 cent for a cup of coffee right now.
September 10th, 2011 at 8:35 pm
For those on the fence, I will demonstrate in simplest terms what social security is.
It is:
Gvmt takes $1 from 1 million workers and then hands out that $1 million to 100,000 retirees who get $10 each.
The ASSUMPTION is that next year, there will be 1.1 million workers so when there are 110,00 retirees, they will be able to maintain the payout of $10. Then next year it is 1.2 million giving to 120,000 retirees etc etc etc.
So you MUST have a perpetually growing input of perpetually growing revenues so that you can meet your perpetually growing liability on the payout side. The nice thing about this CHAIN LETTER is that as long as it continues….EVERYONE IS GUARANTEED TO TAKE OUT MORE THAN THEY PUT IN.
PONZI.
PYRAMID SCHEME.
Now can debate the merits of such a system until the cows come home for all I care, but it IS WHAT IT IS.
September 10th, 2011 at 8:54 pm
Add: Barry, you owe Rick an apology.
September 10th, 2011 at 9:06 pm
@ MayorQuimby…
Why does it matter that money taken out of my paycheck pays for a minimum level of retirement for current retirees? As long as productivity increases as it always has there is no sustainability problem. Further, taxing labor to “pay” for care of the elderly is extremely regressive. Taxes don’t fund anything, they just remove spending from the economy, ie reduces demand. The money is always there to fund a minimum level of retirement. The only constraint on spending is inability to produce what we consume.
Where is the generational theft (another buzzword right-wingers seem to love)?
Your arguments are always based on loosely-related talking points that explain nothing. I’ve heard these same incoherent arguments for years and they always sound the same no matter which right-winger says them. You guys must talk from the same script. Unfortunately for you facts seem to have a liberal bias.
September 10th, 2011 at 9:36 pm
“So you MUST have a perpetually growing input of perpetually growing revenues so that you can meet your perpetually growing liability on the payout side.”
What happens as the baby-boomers die off? The ratio of workers to retirees increases. As does productivity.
September 10th, 2011 at 11:18 pm
@ MayorQuimby…
The real scandal here is your extraordinarily limited ability to use a dictionary, read the definition of “Ponzi Scheme” and then apply logic 001 to realize (or admit) that your arguments do not and cannot hold water.
Permeating your multiple posts is the same rabid GOP-virus of “above all else, do not raise the cap for it is a (GASP!!!) tax” bullshit.
It’s getting so freaking old, vile and morally corrupt, it’s sickening!
September 11th, 2011 at 12:23 am
“As long as productivity increases as it always has there is no sustainability problem”
Niiiiice try there.
No…as long as nominal GDP increases FOREVER there is no sustinabioity problem. You can’t give ten grapes to grandma unless you can take one grpe from ten juniors each.
Generational theft is both accurate AND NON-DEBATABLE.
ONCE AGAIN…you can debate the merits of a social safety ponzi as much as you want and I’m sure there are valid arguments both for and against such a system but it IS a ponzi – the purest and most obvious example of one in existence.
Oh and the money that “is always there” can vanish into a deflationary vortex faster than you can yelp, “help”.
September 11th, 2011 at 12:27 am
“What happens as the baby-boomers die off? The ratio of workers to retirees increases. As does productivity”
And? Madoff’s ponzi did quite well and assuming that scenario is correct, we could see social run a surplus which it has at times in the past. What’s the point? It is still a ponzi. Some ponzis last decades. Others collapse in a huff.
I just want people to understand what social security is before debating how to fix it or whether or not to change the program.
I for one don’t even have an opinion on the matter. Part of me thinks this is a wonderful program if we can just make the necessary payout adjustments. Another part understands there will be one generation and millions of people that get screwed if we ever do enter a depression or worse and im not comfortable with that.
In the end I suppose I would say let everyone save for themselves or at least offer an opt out clause.
September 11th, 2011 at 12:28 am
…but of course we cannot have any opt out clauses! Why? Because the PONZI would fall apart once a small percentage opted out!
September 11th, 2011 at 9:14 am
To discuss this intelligently, one needs to understand the differences between any insurance system — that includes Life Ins, as well as SS — versus the impact of a criminal enterprise.
It also helps to understand the impact inflation has.
September 11th, 2011 at 10:20 am
Inflation is irrelevant. One could have saved all of their social security cash payouts in a box and had gvmt not stepped in in 2008, been enriched at the expense of many others.
As for insurance, it is nothing of the kind. An insurance plan is a plan by which the majority of people contribute more than they ever get out in the hopes of being made whole in the event of a catastrophe.
With social security, everyone contributes $1000 per annum in the hope of being able to collect $10,000 per annum. It is a ponzi. The decline in the purchasing power of a dollar is not fixed for a computer, DVD player, pair of jeans all cost much much less than they did fifteen or twenty years ago.
September 11th, 2011 at 2:49 pm
I’ve interlaced wikipedia’s definition of a Ponzi scheme (http://en.wikipedia.org/wiki/Ponzi_scheme) with a comparison to Social Security:
“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.”
Is Social Security a “fraudulent investment operation? That depends on your definition of “fraudulent”.
“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.”
Does Social Security “entice new investors”? No. It coerces them.
Does Social Security offer SHORT-term returns that are either abnormally high or unusually consistent?
No. But for Gen X and Y (the post-Baby Boomers), it promises LONG-term returns that are abnormally
high.
“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.”
Does Social Security require an ever-increasing flow of money from investors to keep the scheme going?
Yes, especially with the Baby Boomers retiring. And this was before Obama’s latest payroll tax cut
proposals.
“The system is destined to collapse because the earnings, if any, are less than the payments to investors.”
As Social Security designed to collapse? Yes, for Gen X and Y “investors”. Not for the Baby Boomers.
Are earnings less than payments to investors? Yes, as of this year, and until there is some sort of reform.
“Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.”
Will Social Security be interrupted by the legal authorities? Yes, if you consider reform to be an
“interruption”.
September 11th, 2011 at 3:22 pm
People who run Ponzi schemes do not open their books…..they rely on deception. Everyone keeps shaking their head in disbelief over the spectacular success until the truth comes out. No one has ever said that that the numbers being put forward by the authorities are wrong. They are just unsustainable. Everyone knows we have a problem. So what? Many programs run by the US Govt. are unsustainable.
The folks who say that SS is a Ponzi scheme are pretty much the same as the ones who were saying that the US might default on it’s debt. .
September 11th, 2011 at 4:12 pm
Kedar, it IS a ponzi. Not debatable. Really.
September 11th, 2011 at 5:54 pm
Ah, MayorQuimby has spoken. There must be no debate, after all MayorQuimby has spoken.
September 11th, 2011 at 6:17 pm
“You have a system that perpetually requires morand more people to contribute and by so doing promises more and more people will get out more than they put in.”
This is a fabrication. Social security is a “pay as you go” pension system. A demographic bulge (such as the baby boom) will cause a “pay as you go system” to TEMPORARILY pay out more than it receives. Demographic cycles in insurance systems can be fixed via a myriad of stabilizing mechanisms.
I think you are attacking social security not because you really believe its in crisis but because you are against social insurance altogether.
September 11th, 2011 at 11:01 pm
it is a clash of the clueless
santelli etc not completely wrong
it would be a ponzi IF the expected wage basket adjusted benefits were a legal obligation–they arent
when its stressed
adjustments will be adjusted
could even be taken taken away
in that case nobody gets adjusted each year just the same dollars
that will fix it–little price erosion? tough sh…
we ran through most of the actuarial surplus needed to make it an actual retirement scheme in the 70s 80s
it is /was mostly government welfare and should be taxed?
depending how you count the employer side and your discount rate
current retirees put in as little as 11% of their expected benefits
but this is rising andwill get much worse for contributors
as the demographics go to only 2.5 working for every retired
taxing that other “welfare” would also more than fix it
medicare medicaid
theres a bigger prob
September 12th, 2011 at 4:44 am
What matters is the RATIO of workers to retirees. As long as the average life expectancy remains the same, this ratio is not likely to change.
In the above examples, even if we take 1$ from each worker and give 10$ to each retiree, remember that the worker of today is going to be the retiree of tomorrow. If he works for 40 years but then takes the benefits for only 10 years (on average), then it can be sustained. The money that he has put in will get compounded over time and will be enough to pay out the benefits to him.