Social security and medicare

Hi

In keeping with my comparison of Social Security and "A Ponzi scheme" this blog is how the social security system works. I will use examples to illustrate my points.

In my example let us say that Business Corp hires Fred for ten hours a week, a part time worker. The rate of pay is to be $10./hour. Fred works his first week and now he gets his paycheck, 10 hours at $10 per hour. This figures to be $100. dollars. But when Fred gets his check it is less. What happened?

Fred looks at his pay stub and he sees an item "FICA". what is this? FICA (Federal Insurance Contributions Act) is the legal name for social security. There is another deduction for Medicare. Upon asking Fred finds out that these are mandatory deductions. Now let's trace what happened to the money deducted. Business Corp. does not keep the money, but instead it must pay this over to the federal government. The corporation must deposit these funds from employee deductions into an account of the US Treasury. Before making such deposit the corporation must make a calculation and pay a different, larger sum. The corporation must match the deductions made by employees for social security and medical insurance. Just as a side note there is also a payment due on state and federal unemployment. This is an example of the regulation of a business that is imposed by the tax code. More on that in a later blog.

When social security was originally set up the funds collected were meant to be kept in a "lock box" account, which was that congress would not have the power to use these funds. This was changed by congress when LBJ was president and now we the American taxpayers are paying. This is a brief explanation of social security, medicare works similarly and for comparison either plan can be used.

In my next blog I will compare the Ponzi scheme to social security.

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