Skip navigation. Stanley Iola LLP

Archive for September, 2011

Social Security Not So Much a Ponzi Scheme

Monday, September 26th, 2011

We have been hearing criticisms of Social Security as a Ponzi scheme as candidates gear up for the 2012 campaign for President, but the Ponzi scheme criticism is nothing new. To respond to the criticism, the Social Security Administration (“SSA”) keeps a research article on its site, comparing what a Ponzi scheme is to how Social Security works.

The scheme is named after Charles Ponzi who came to notoriety in the 1920s, even though the scheme has been around long before Ponzi. Ponzi was issuing bonds that paid back an exorbitant 50% interest in 45 days, or 100% profit in 90 days. He would take his second round of investors’ money, use that to pay the money to the first round, and then repeat that process. This fraud only works, however, if the schemer can keep getting more and more money coming in.

Social Security benefits – whether retirement or disability benefits – have a least a superficial similarity in that new workers are providing the benefits for the newly retired or disabled. At the same time, though, many private pension systems employ this “pay-as-you-go” system.

With Social Security programs, we should expect there to be years of benefits and deficits with the change in the number of working Americans, though. When there is a large demographic like the Baby Boomers, we will have more people receiving benefits than paying into the system. On the other hand, with the regular population increases, we gradually have more workers paying into the system than those receiving benefits.

Additionally, the SSA can make adjustments to ensure the viability of benefits. These changes are likely coming over the next several years, whether in the form of tax increases or stricter criteria for benefits. A Ponzi scheme, on the other hand, promises huge returns with no goal of ever making the scheme viable.

Perhaps the biggest difference is the intended goals of the two. A Ponzi scheme has the potential to defraud everyone who invests in it. The criminal behind the scheme does not care what happens. Social Security aims for the opposite. It is meant to help retired and disabled Americans through difficult financial times. While it is not perfect, it is a lifeline to millions of Americans. More information on applying for disability benefits is available from a Tulsa Social Security disability law firm.

Troutman & Troutman, P.C. – Tulsa Social Security disability lawyers

Reforming Benefits an Important Issue for Republicans

Friday, September 23rd, 2011

Social Security reform is shaping up to be a key issue for the candidates hoping to secure the Republican presidential nomination for 2012. We posted last week about Texas Governor Rick Perry’s references to Social Security as a “Ponzi scheme” and a “monstrous lie.” Perry also took aim at Social Security in his book “Fed Up!” Now it seems that other Republican candidates have taken aim at Perry, criticizing him for his harsh words and prodding him for more details on his ideas for reforming the system.

Another frontrunner, former Massachusetts governor Mitt Romney, has other suggestions for reforming Social Security, including pushing back the retirement age and privatizing it. He has said that he would not be in favor of raising taxes to fix Social Security’s financial grounds. A Romney spokesperson said that Romney would like for the public to come to know Republicans as the party that saved and improved Social Security.

Perry appears to changing his strategy in response to reactions to his criticisms of Social Security. Last week, he wrote an article for the USA Today in which he said he would like to protect benefits for those currently in retirement, but he added that reforms would be necessary to keep Social Security viable down the line.

Politicians’ comments that we hear in the media about Social Security usually refer to the retirement benefits, which are a large portion of the benefits that the Social Security Administration (“SSA”) pays out. But, the SSA runs a number of programs – including benefits for disabled or deceased workers – that comprise a significant portion of the SSA’s payouts. We would be interested in hearing the candidates’ thoughts on reforms they would propose for the disability benefits process.

Troutman & Troutman, P.C. – Tulsa SSI attorneys

290 of 300 Workers Apply for Disability, See Same Doctor

Thursday, September 22nd, 2011

A criminal investigation into disability benefits in Puerto Rico highlights several concerns that we have posted about in the past. First is the issue of disparities between Social Security offices. The approval rates vary widely throughout the United States, and some articles have delved into the disparities between local offices. New York City residents, for example, have multiple options of where to file for disability benefits, and they usually avoid particular offices known for unusually high rejection rates. On the other hand, there is the West Virginia office, which came to light for one of its judges approving nearly 100 percent of disability applicants.

Puerto Rico has developed a similar reputation for being perhaps too applicant friendly. Last year, Social Security Administration (“SSA”) offices on the island approved nearly two-thirds of initial applicants, a much higher rate than most offices. In fact, nine of the top ten zip codes in the US for Social Security disability beneficiaries come from Puerto Rico.

The investigation into one particular office came about when a pharmaceutical plant closed down, and all of its employees lost their jobs. 290 of the 300 employees applied for disability benefits, and perhaps not coincidentally, they all went to the same doctor for their disability diagnosis. The SSA’s inspector general is investigating the potential fraud in this case.

The investigation stems from the same Wall Street Journal article that uncovered the troubles at the West Virginia office. The article looked at approval rates all over the country. It is good to hear the SSA being responsive to allegations of fraud. It often lacks the resources to carry out investigations, but more efforts to do so would be a step in the right direction, as that would free up money to provide better financial support to disabled workers truly in need.

Troutman & Troutman, P.C. – Tulsa SSI Attorney

Debt Super Committee Takes Aim at Social Security Benefits

Wednesday, September 21st, 2011

Social Security disability benefits and other programs that the Social Security Administration (“SSA”) runs could see major changes in the next few months. These programs are one target of the so-called “super committee”,” the 12 member Congressional committee that President Obama tasked with coming up with ways to trim the federal budget over the next decade. Some sort of cuts or taxes is inevitable, given Obama’s comments that Democrats need to be flexible with Social Security.

One expert who tracks federal spending predicts that the committee will employ at least one of two ways to deal with the SSA’s financial problems – either increase the payroll tax that workers pay into the system, or cut the current level of benefits. Possible cuts include bumping up the retirement age for those receiving retirement benefits, or reducing the inflation adjustments that beneficiaries get from time to time. The super committee is bound to recommend changing something, since the Congressional Budget Office recently estimated that, for all of this year, Social Security payments will make up a fifth of the federal budget.

If it is any solace to beneficiaries, you can probably expect the change to be small and maybe something that the SSA gradually phases in. This is because of the political sensitivity of cutting Social Security benefits. By and large, Americans strongly favor benefits, so it is hard to conceive of politicians making any drastic, immediate changes.

Troutman & Troutman, P.C. – Tulsa SSI attorney