Yes, we, the commoners, can transform our Social Security into a private or
communal security, because we are the numerical majority, which eventually gives
the authority to the public figures who make the social rules and execute them.
However, is such a transformation necessary; that is, is such a transformation
in our long-lasting interests? It depends. Because such a transformation cannot
be done in a day. That is what Governor Bush meant when he said, that the
government could not go from "one regime to another overnight. It's going to
take a while to transition to a system where personal savings accounts are the
predominant part of the investment vehicle. And so, this is a step toward a
completely different world and an important step." [New York Times, 5/17/00]
Why the political bureaucrats could not change their direction overnight?
Because they bound to promote the long-lasting interests of the majority.
A correspondent of the Dallas Morning News asked Bush whether he envisions
a system in which future beneficiaries would receive no less than they would
have under the current system, "if Americans could lose money?" Bush answered:
"Maybe, maybe not." [Dallas Morning News, 5/15/00] And that's correct,
because it depends on what "is" is, on what from what social strata a particular
American is.
Continuing his inquiry, the correspondent asked whether it was
"conceivable" that a worker taking advantage of the investment accounts would
get a lower guaranteed benefit from Social Security. Bush admitted that it was
"conceivable". A correspondent of the New York Times [5/17/00] reported that,
"Bush also refused to say how much benefits might be reduced for workers who
created private investment accounts. 'That's all up for discussion,' Mr. Bush
said." Bush said it was possible workers would eventually be allowed to invest
their entire Social Security tax, not just a portion. The Houston Chronicle
[5/17/00] reported: "Bush on Tuesday said his plan to create private savings
accounts could be the first step toward a complete privatization of Social
Security." However, Mr. Bush does not believe that it can happen in his
life-time. May be in 10 or 20 years.
Besides the time-span for the reform, there is another problem to look at -- if
a commoner or a laborer would manage his-her own retirement account, where
he-she would go to gain the knowledge of the market place. That's right, he will
go to the corporate bureaucrat, who, eventually, would take control over the
commoner's account. It means that the commoner would transfer his trust from the
political bureaucracy to the corporate bureaucracy. Why he would do that and how
much the corporate bureaucracy is more trustworthy than the political one?
On the first glance, Bush’s plan of privatizing Social Security is not only
contradictory in terms, it contradicts also with the long run interests of the
American majority. Bush's privatization plan puts a commoner's retirement
security at the caprice of the market professionals who may lose and lose big
not only their own money, but also the money of those commoners who would
rather prefer to entrust their money to the market "wizards" than to the federal
bureaucrats. The commoners used to hear for the 75-year history of Social
Security that it is a guaranteed secure retirement regardless of the
fluctuations of the stock market. Investing these funds in the market means to
put them in jeopardy. Bush’s privatization plan could result in massive
government bail-outs.
In their report, A Primer on Privatization of 11/99, J. Cordes and C. Steuerle
for the Urban Institute noted: “Privatization proposals that would allow
individuals to ‘keep’ gains from private accounts in good times but require the
government to maintain a floor in bad times would encourage individuals to take
excessive risk. The consequences to the government would be similar to those
when the savings and loan financial sector essentially went bankrupt.” On April
22, 1998, GAO reported that, "Over the past 70 years or so, stock returns were
negative in nearly one out of four years. There is no guarantee that investing
in the stock market, even over two or three decades, will yield the long-term
average return" [about 17% now]. Neither there is guarantee that such an
investment will yield the long-term minimal return (about 2% now); that is, what
the banks pays to the savings accounts.
Bush admits he has not accounted the trillion dollar transition cost his
privatization plan would require. According to a report published by the Center
for Budget and Policy Priorities, Bush's privatization plan would cost the
commoners $900 billion over the first ten years. These losses would occur
because the Social Security system would have to pay out simultaneously current
benefits, while privatization would drain over 15.1% of the amount of money
coming into the system (assuming a 2% diversion out 12.4% currently paid). Plans
to divert two percentage points of pay-roll taxes, or 15.1% of the money paid
into the Social Security system, into private accounts could make Social
Security go insolvent 14 years sooner than it would if no action were taken at
all. From the above-mentioned report follows that, "under a two-percentage point
plan, Social Security could go bankrupt by 2023". [Wall Street Journal, 5/12/00]
The combination of Bush's privatization plan with his nearly $2 trillion tax cut
plan (the lion share of which will benefit the upper class) will leave
multi-trillion dollar national debt intact as an increasing burden to the
following generations of the commoners, who will ultimately pay for this debt by
own increasing sweat and exploitation.
That is why Gore asserts that Bush's plans could weaken the American economy by
eliminating a chance to pay down the national debt and could place at risk the
Secure Retirement Benefit that Social Security provides for millions of
commoners and laborers. If commoners' investment experiments would fail, Bush's
proposals have left no ways to pay for Social Security, national debt, and
Medicare except resorting to the printing machines and following in the mode of
the treacherous financial schemes of the Russian bureaucrats. Bush puts all the
extra federal surplus into tax cuts, 36% of which goes to the wealthiest 1% of
Americans. Taking into consideration that the major technological progress of
the past decade was made by the small business enterprises, is it not too
generous to the big corporate bureaucrats for their modest entrepreneurial
activities?
Once upon a time, a hare bumped into a fox at a neck of their woods. The fox
asked the hare why the latter was in a hurry. The hare answered that the coyotes
were going from the other side of the forest and were cutting testicles of those
who had three. "Do you have three," asked the fox. "No," replied the hare, "but
they cut first and then count." So, the commoners would be so much like those
coyotes if they permit to cut the taxes of the wealthiest first and then to look
at the maintenance of Social Security and Medicare, and relieving themselves
from the national debt. It would be more appropriate to relieve first the
majority from the 15% Social Security federal tax, to extinguish the national
debt, and transfer the supervision over Social Security from the political
bureaucracy to the corporate one.
On April 18 of this year, Jeb Bush, George W. Bush's brother, wrote an editorial
for the Tallahassee Democrat stating that, "it makes sense that we take the
surplus we have now and place it in a reserve that is not affected by changes in
the market." On May 16, the Philadelphia Inquirer reported that George W. Bush's
chief economic adviser, Larry Lindsey, who briefed reporters on the safety of
the stock market, acknowledged, that "he bailed out of the market years ago"
because of its risky nature and because he does not take any risks because he
hates losing money. Jeb Bush and Larry Lindsey feel the stock market is too
volatile today. If the stock market is too risky for Florida’s aristocrats, how
is it not too risky for the common Joe who did not finish Harvard and had no
time to study Economics 101 and higher?
Nevertheless, Mr. Lindsey acknowledged that Bush's Social Security plan would
deplete the cash surplus in a few years. He also acknowledged that the Treasury
Department would then have to make good on Social Security bonds. Moreover, Mr.
Lindsey acknowledged, the government may need to dip into general revenues; that
is, to rely on budget surpluses to cover the cost of transition to private
accounts in 2030.
Contrary to his relatives and advisers, George W. Bush has suggested the full
privatization of Social Security, even though he has admitted it is
"conceivable" that "some" American workers would receive less under
privatization than the conventional Social Security system. In an interview with
Business Week, Bush recently said, "the stock market appears to be somewhat
skittish these days, and there is nervousness on the horizon." It is a step in
the right direction of McCain's moderate approach to the reform of the social
help system. McCain, whose own plan is roughly half the size of Bush's, once
said, that he has "called this kind of economics fiscally irresponsible".
So, when retirees far outnumber active workers, the Social Security system will
need infusions from Treasury and a corresponding tax increase to pay benefits;
and this necessity will be the pivotal point of a future presidential campaign.
But the majority of prognostications tell us that such a time will probably come
somewhere in the years 2015-20.
Therefore, the central domestic issue of the 2000 presidential campaign seems
will not be defined by tomorrow's old folks, who are not the key to what
present-day alarmists label as "saving Social Security."
That is why the candidates of both major political parties, George Bush and Al
Gore, are seemingly freely touching what used to be called "the third rail of
American politics." And that is why their differing approaches offer the
moderate commoners a vague political choice.
Bush's plan calls for taking one-sixth of the present payroll tax and allowing
workers to invest it in mutual funds in individual accounts. The intent is to
get a return on that investment that is higher than the present rate; that
equity growth would supplement the Social Security benefit somewhere after the
year 2030.
Gore's destructive labeling Bush's plan as "a risky scheme" could not impress
the old generations of Americans because many of them are now stock market
investors and know that in the long run, broad indexes do better than risk-free
bonds. Therefore, Gore come up with own constructive plan to supplement Social
Security with an individual savings account for low-income workers. Gore would
encourage the latter to save a little each year by adding matching government
funds (three dollars for every one saved), similar to the corporate match of
401(k) plans.
Correspondingly, Bush's conservative advisers derides the Gore plan as another
government hand-out to re-distribute income of the middle-class, while Gore's
liberal advisers down-play the Bush proposal as a scary threat to future Social
Security benefits of the lower-class workers.
Both plans are based on a premise that the economy continues to generate
trillions in surpluses -- that is, the good times will continue to roll on and
on as far as the reasonable eye can see. If the economy will continue to clime
up, then, both right and left approaches have its merits. Bush's upper
middle-class would get their benefit of long-range stock growth, and Gore's
middle lower-class have their savings enhanced. So, if both plans would be
implemented, one third of the American workers would be tax-deferred to allow
the buildup of different degrees of financial security. That would be not bad.
But if the good times don't continuously roll? What if the federal bureaucracy
would be deprived of surpluses? That is from where comes the need to dig deeper
to see who will be those "old folks" in the nearest 20 years.
In 1935, when Social Security was launched, life expectancy was in the
mid-sixties. So, when the federal bureaucrats pegged the retirement age at 65,
they thought that not too many commoners and laborers would live to collect
their benefits for long. Now life expectancy in America is in the mid-seventies.
That is why the Capitol Hill is presently noisy about increasing the retirement
age to 72.
The conservatives are pushing the message that if "we" want to maintain Social
Security benefits without raising taxes or depleting the Treasury, "we" should
raise the bar of retirement age to the present longevity.
However, longevity, in its turn, depends on the "good" times and on the "bad"
times. Look at Russia -- for the past ten "good" years, longevity over there
dropped from mid-seventies to mid-fifties.
And how you would assure that workers under 55 will get their full benefits when
they retire at 72?
The moderate commoners should welcome the change among the conservatives and
liberals, but they have to be vigilant in order that their long range interests
prevail. To that end, they should vote in Washington such political leaders as
Pat Buchanan or "Dirty" Harry Browne, who understand what Social Security
("as we know it") really means to the middle class and who will be responsible
to the middle class for the implementation of the reform, not to the upper or
lower classes.
And what does Social Security, in its present form, mean to the commoners? Ponzi
scheme, an insurance swindle, in which the political bureaucrats collect money
from commoners (pretending that it is for their retirement) and immediately
spend that money to pacify the lower class or to benefit the corporate
bureaucrats or themselves.
The idea is old as the world. Oriental people know this kind of scheme through a
tail about Hajji Nasreddin, who became a contractor to an emir in order to teach
an ass the Koran in 20 years. Hajji thus explained his scheme: "In twenty years,
somebody will die -- either me, or the emir, or the ass".
Occidental people know this kind of scheme as Ponzi scheme -- an investment
swindle in which high profits are promised from fictitious sources and early
investors are paid off with funds raised from later ones. It was named after
Charles Ponzi, an Italian-born speculator who organized such a scheme in Boston
in 1919. He promised to pay investors 50% profit on their money in just 45 days.
When someone wanted to withdraw his principal and interest, Ponzi simply paid
him from money received from new investors. There were some of those who
wished-to-receive beyond reasonable reciprocity. However, there were some who
believed in reciprocity between the wish-to-receive and the want-to-give.
Consequently, Ponzi could not gather enough money to equalize the rate of return
he promised, and the political bureaucrats had to intervene to stop his swindle
and sent him into a prison.
What do you think, the political bureaucrats will do to me if I would open a
shop and offer a retirement plan that pays a pension more generous than my
neighbors can get elsewhere. Every payday each of my "clients" will pay me a
small portion of his pay-check -- say, 5%, -- and I will send them a monthly
check equal to what each of them would make when he would retire at age 65. As
the money comes in from my first "clients," I can spend it on a luxurious
life-style. In fact, I would not need to keep money in reserve for my clients'
retirement. When the time comes to pay them, I will do it with money I will
receive from my new and younger clients. So long as I keep attracting enough new
clienteles to pay for my lavish life-style and to the old clients, I will be one
of the novo-riches, one of the corporate bureaucrats.
If I would have trouble attracting enough fresh clients to keep my promises,
then I can change the rules. I can either raise the retirement age to 70 or the
amounts deducted from my clients' paychecks -- from 5% to 10%; or I can either
lower the promised benefits or pay them without inflationary adjustments. It is
more probable than not, that the political bureaucrats of all levels will
immediately shut my shop down, drag me into a court, and send me into a prison
for "re-education". But how does their Social Security plan differ from my
would-be retirement insurance plan? Is it because their scheme was started in
1935 and I was born only in 1953 or what?
From the vantage point of tax-payers -- polls steadily show that an overwhelming
majority of young Americans have little hope of getting back even a dime from
those 15% of their wages that the political bureaucrats extricate from each
pay-check.
From the vantage point of Social Security receivers -- the system also stinks,
because it provides only a meager monthly income to a commoner (maximum $1,500)
and no estate for him to leave to his posterity. If he would invest the same
money in a simple bank savings account, such an investment would provide a
monthly income several times greater than Social Security. Moreover, it would
build an estate worth hundreds of thousands of dollars, and such a plan would be
a reality for the majority of the middle class.
Indeed, how richer would be an average middle-class family if the political
bureaucrats would not mug it through the income tax?
Here are some price-tugs for your liberties that the bureaucrats re-distributed
in the name of the War on Poverty for the past 35 years:
Spending by all levels of the political bureaucracies for all forms of social
"help" (education, social insurance, welfare, and so forth) has totaled $35.4
trillion (in 1999 dollars).
Federal spending for all forms of social "help" (education, social
insurance, welfare, and so forth) totaled $19.8 trillion.
Total public "assistance" (welfare) by all levels of the political bureaucracy
amounted to $5.3 trillion.
Federal public "assistance" totaled $3.4 trillion.
The middle-class family's forced "help" to the lower-class people amounted to
$56 thousand.
The middle-class family's forced "help" to the lower-class people and for the
maintenance of the bureaucratic apparatus totaled $411 thousand.
You can imagine what you could have done with that money if the political
bureaucrats hadn't taken it from you. If the money had actually achieved some of
the proclaimed goals, some of you might try to make a sense out of the
destruction of the federal Constitution in order to help the lower-class people.
But the programs have failed, and it seems the right time to stop the failed
social experimentation.
Most of the commoners agreed that the present day messy welfare system should be
cleaned up and returned to its previous meaning.
President Roosevelt's New Deal program had entangled the federal bureaucracy
into what had historically been a local issue -- social or rather communal help.
During the following 30 years, the federal bureaucrats had been systematically
destroying the middle- and lower-class families, their ambition and the very
existence. President Kennedy's reforms were meant to fix the problems created by
the 30 year implementation of the New Deal. That is why President Johnson said
in 1964, "The days of the dole in this country are numbered." He thought that
the simple transfer of the communal and private alms distribution into the hands
of the federal bureaucrats would somehow elevate scornful "alms" to the
honorable badge of "welfare".
However, before the New Deal, welfare had always been considered a temporal
expediency -- something to shelter a worker until he found a new job or a widow
until her children were old enough to support her. It was not meant to be a
life-long source of existence. A representative of a church or other communal or
private organization monitored recipients of charity, which was never
impersonal. But the struggle for power and control led the federal bureaucrats
to transcend their constitutional limitations. It embarked them onto the banks
of the local matters.
As it is always the case with the mass production, whether in the banking or
health industry, the federal bureaucrats conveyerized social help into the
impersonal welfare system. In few cases the bureaucrats have been monitoring the
welfare recipients, but the thousands of rules that were set thousands of miles
away prevented them from paying attention to the real needs of a particular
"client," because they were busy reading all those "executive directives" in
order to protect their own hinds. Moreover, the real money, the checks, were
dispensed automatically from Washington to the lower-rank bureaucrats and to the
welfare recipients alike.
Such a depersonalized social help system became increasingly counterproductive
in rescuing honest people from their misfortunes, but it became increasingly
attractive to all kinds of crooks. Fewer lower-class people were helped to
transcend into the middle class and more commoners sank into the lower class as
welfare became a source of opportunity rather than a stigma.
The majority of the commoners realized that the more money the political
bureaucrats re-distribute to the poor, the less the latter would strive to
ascend into the middle class. Meanwhile, the federal bureaucrats heavily
contributed their energy into the welfare system and made enrollment permanent,
rather than a temporary expedient. Thus, welfare became a right -- one to which
a poor is entitled, probably because a commoner has "natural" ability to work
harder and to earn more money than that poor. Therefore, no more monitoring the
poor, no more pressure to get back on his feet, no more need to change his
unhealthy habits, which pulled him into poverty in the first place. The only
responsibility was left to him -- to rise from a couch and stroll to the mailbox
once a month to pick up his check.
In 1992 the federal bureaucrats spent $879 billion (in 1999 dollars) on all kind
of social help programs -- 15 times the 1964 level; and state and local
bureaucrats spent $636 billion -- 11 times the 1964 level, essentially in order
to be qualify for federal funds. That amounted the social help programs by all
levels of the political bureaucracy to $1.5 trillion in comparison with $117
billion in 1964. And the money spent for public assistance (welfare) by all
levels of the political bureaucracy increased to $234 billion in 1992 from $11
billion in 1964 -- the year President Johnson promised to the poor -- 'no more
dole'.
Still, the Johnson administration spent only $57 billion (in 1999 dollars), and
state and local bureaucracies spent only $59 billion yearly on social insurance
and welfare programs -- a tiny fraction of the present day mindless waste of the
commoner's labor, thus, demoralizing both -- the commoner and the poor.
Although the government's statistics didn't track the trend of social division
prior to 1950, there had been no much movement between the lower and middle
classes. The latter had even shrunk for 3% (from 48% in 1950 to 45% in 1999),
while the upper class had grown up from 2.2% to 2.8%.
The money is a nominal representative of our labor, of our sweat in our struggle
for living necessities. Its mindless waste by the political bureaucrats is sad,
but not deadly. Far more dangerous to the commoners were the accompanying
explosions in teenage pregnancies, one-parent families, and teenage crime among
the lower-class people. For instance, a teenage girl can become independent of
her parents by getting pregnant and receiving welfare; otherwise, she must live
with her parents and under their supervision. Is it not more attractive to a
girl to have her own source of income and have sex whenever she wants it without
having scruples about consequences of such acts? Nevertheless, the bureaucrats
of the Aid to Families with Dependent Children (AFDC) pay her money, if only
there is no Dad at her house. No surprise -- Dad has been steadily faded out of
the family picture. Thereafter, teenage boys have no steady role-model and are
easily influenced by the street-gang leaders who become their surrogate dads.
And this tendency of the lower-class families coupled with the tax penalties on
married couples have been surreptitiously influencing some three generations of
the commoners.
Any not reciprocated alms cost to the giver twice -- firstly, through the
nominal, economical value; and secondly, through the destruction of his moral
values that had been perverted by the ungrateful receiver, whose real
appreciation would instigate him to change his unhealthy way of living. This
ungratefulness of the poor, coupled with the greediness of the middle-class
welfare advocates, invented the right to privacy -- to pressure the political
bureaucrats to relinquish their control over the testing procedures that
question the right to welfare. Thus, the federal bureaucracy, after 50 years of
struggle for control over minutest details of the social life, came to point
where it started, but it came not as David but as Goliath. Consequently, it lost
the battle for details, but it is still struggling in hope to win the campaign
of self-preservation in its present size.
Meanwhile, the easy income test for welfare makes a low-paying job seem
pointless. This eliminates the incentive for a youngster to get the crucially
important first job, and so he never gains the experience needed to get a
highly-paid job. The availability of welfare reduces the incentive to save for
emergencies. When people spend without saving for rainy day, what else can they
do but go on welfare when trouble strikes? It's a pity, but some of the
commoners have been seduced by easy money -- and gradually they also became the
patients and wards of the political bureaucrats, unable to procure for
themselves, with no self-confidence or self-respect that tighter the yoke of
slavery.
Time and again the upper- and lower-class leaders have claimed during the past
35 years they've learned how to fix the system of social help. The
commoners have seen one their patchy effort after another. The commoners have
been told tons of stories about successful federal programs, flavored with
anecdotes of former welfare recipients whose lives were turned around when
government job-training let them of the hook and they became self-sufficient at
last. But in reality, the waste of money does not shrink -- and the plague of
pregnancies, family breakups, and crime continues.
President Reagan's reform, implemented by the Bush's administration in 1990, was
aimed particularly at reducing the number of people on the rolls of Aid to
Families with Dependent Children (AFDC). But over the next four years, the
people on the AFDC's pay-roll grew nearly 1/3 (from 11.0 million to 14.2
million). And the present welfare reform will probably be the same kind of a
fiasco.
But what counts to a political bureaucrat is a "good intention". So, in 1996,
the lower- and upper-class leaders proclaimed "the end of welfare as we know
it". And the waste of "public assistance" grew up from $226 billion in 1996 to
$256 billion in 1999. New entitlements, such as a $24 billion for
children's health care and a $500 tax credit for people who pay no income taxes,
were created by the upper- and lower-class leaders on the bi-partisan basis.
So, the commoners should re-evaluate their own leaders by criteria -- the only
worthy reform is to get the federal (and then the state) bureaucracy out
of social help in accord with the federal Constitution, which dictates to leave
the "temporary and expedient" matters to the local governments and charitable
organizations, where true and personal compassion can be found. The latter will
not make everyone responsible for everyone else, meaning that no one responsible
for anything. The real compassion is when people pay from their own packets for
their failed projects, they thought were "good," as they should pay expenses for
their failed frivolous law-suits.
The genuine compassion was always personal and voluntary, from the bottom of the
heart. It cleaned the giver and lovingly nagged the receiver to get out of
dependency, because it was better to be a giver than a receiver. But the leaders
of the lower class have managed to inculcate into the minds of the lower class
people the notion that to receive is better than to give. The commoners should
vote the federal bureaucrats out of the economy, to give more opportunities for
the unskilled and the inexperienced. Not one federal bureaucrat can possibly
know all the details of production and distribution of a particular good or
service. The only way a person can become a really free citizen is a way of
learning that every his right reciprocates with his responsibility. If he has a
right-to-receive, he must have a responsibility-to-give.
The demagogues would quick to point out that the responsibility contradicts to
the volunteering. But the truth of the matter is that the reason of an
individual, through his soul, connects with his emotional heart, thus
influencing the latter and cleaning it from the filthy habits. Thus knowledge of
rights and responsibilities leads to the conscious limitation of ugly passions,
to the limited government, to the real freedom and real citizenry.
The leaders of the upper and lower classes think that the middle class can
afford other ten years of transitional period to turn the social help to the
local authorities. They think you can afford a few more trillion dollars to
waste, but you know it well -- multi-year federal programs never stopped and
returned as soon as the commoners turn their attention elsewhere.
The next President should announce to all non-reciprocal recipients of the
federal hand-outs -- 'Read my lips, no more taxes. You have six months to turn
your life around, to find a job, to learn how to take care of yourself, and
become the real citizens.' That would be the real compassion, that would be the
America of the middle class. It would be a common sense because the commoners do
not want a country in which everyone is dependent on the political bureaucrats,
because it would mean that each of them would work under compulsion -- and
that would be slavery.
The Soviet social experimentation showed the commoners of all countries where
the system of politically compulsive work leads. The ruling American middle
class used to be an example of where the system of economical compulsion leads.
Today, under pressure of the upper and lower classes, the American commoners are
two thirds of the way toward the Soviet-style political and economical system.
However, they still have the ability to avert the "1984" because the majority of
them still want to be self-reliant and be proud of own resourcefulness -- in a
country where people used to keep and multiply what they fairly earn. And that
is why one twentieth part of the world population still produces one third of
the world's goods and services. But that can be changed quickly, and the next
generation of commoners might produce a puny fraction of what they produce today
under the system of free enterprise. Precisely in the proportion, the commoners
let the limited bureaucracy to spread limitlessly, they become slaves of that
bureaucracy. The greater economical power the commoners cede to the political
bureaucrats, the greater power the latter use against the commoners. That's why
every year the federal bureaucracy makes more of our decisions, leaves us with
less control over our business, thus, turning our active destiny and freedom
into our passive fate and slavery.
The upper- and lower-class presidential candidates have made it clear that they
like the present political system of big federal bureaucracy. They advocate new
programs to "help people" through either new subsidies for new privileges to the
lower-class recipients, or new programs that will increase the possibilities of
the political bureaucrats to hand out the commoners' money to favorite and
"faith-based" lower- and upper-class organizations or "grass-roots". Therefore,
the commoners should "do as 'they' say, and do not do as 'they' do".
Otherwise, continued meddling of the federal bureaucrats into our purse will
turn the American correctional facilities into a continuation of the GULAG in
the nearest 20 years, as surely as federal "aid" to education has decimated our
public schools.
What will happen to the poor when the commoners reduce the federal bureaucracy
in a half? If the commoners will manage to repeal the income and Social Security
federal taxes, it will leave them a trillion dollars a year -- enough to
organize small businesses with capacity to hire those poor who can work, and
enough charity for those who can't.
Who was helped by being enslaved? Who was helped by being forced to live in
slums and housing projects to be preyed upon by criminal gangs? Who was helped
by being unemployed because of fear of losing money on taking a job? Only
federal bureaucrats benefit from present system of social help -- and that's why
every reform proposed by the upper- and lower-class leaders have led to
increasing hand-outs and larger lower class.
As to the Social Security recipients -- the leftists and the conservatives let
us to know -- they prefer to patch the system through gradual tax and benefit
reductions, including raising the retirement age, invoking a means test, and
changing the cost of living index on which they calculated the yearly
dispensations. However, the only viable way for the middle class to avoid the
coming Social Security collapse is to get the federal bureaucrats completely out
of the Social Security picture.
And there is a presidential candidate, "Dirty" Harry, who proposes to sell to
us, the young and solvent commoners, trillions of dollars worth of unneeded and
abused, unconstitutional and, therefore, illegal federal assets (mostly swindled
from the middle class) to finance the purchase of private retirement accounts
for those who are already dependent on Social Security. This would give older
Americans guaranteed contracts with private insurance companies and greater
probability that the economical bureaucrats will not brake their promises,
because their business is for life, unlike the political bureaucrats -- whose
business is only for six years or so. That is the only case where we can regret
about absence of hereditary aristocracy. Thus, the younger generations of
commoners would be free of the 15% Social Security federal tax. They would be
able to save on their own, earn a much higher rate of return, and build a
substantial fortune for a prosperous retirement.
When Social Security was established in 1935, a trust fund was set up -- to keep
the money collected in taxes, so it could be returned with interest to each
taxpayer when he retired. But where is a large sum of money, there are the
political bureaucrats, like flies around... you know what. So, in 1939, the
federal bureaucrats transformed Social Security into a Ponzi scheme -- one in
which the amounts paid to the recipients come from taxes collected from other
commoners the same year. What an adult commoner pays as the Social Security
federal tax is not put aside but is paid out to the senior-citizens. Even if a
commoner receives anything from Social Security, after he's been paying into it
for 40 years, what he gets will be taken from the pay-check of his son -- an
active worker.
Therefore, federal Social Security differs from a Ponzi scheme only in that
respect that the political bureaucrats would not put themselves into prison for
cheating their "clients". Indeed, they have been cheating us from the 1939.
They've been constantly changing the rules. They have increased tax rate about
once every three years. They have increased the portion of wages that subject to
Social Security federal tax for twenty times -- from an original maximum of
$3,000 to the current $60,600. And the portions of dispensation are changed
frequently. Consequently, what was once a $60 annual tax is now as much as
$9,271. They have increased tax rate sevenfold since 1935. Today an employer
must deduct 7.65% from the first $60,600 of an employee's income each year. In
addition, he has to match that dollar for dollar. Therefore, roughly 15% of his
earnings, commoner is forced to give away to the federal bureaucrats.
Presently the life expectancy among the commoners rises; consequently, a larger
portion of the middle class survive to the retiree age. That means each younger
commoner has to support more senior-citizens, and that means more sweat,
exploitation, worsening conditions of life and work that lead to moral
degradation of younger generations of commoners. And the moral degradation will
necessitate the depression of economy, thus, leading to stagnation and pauperism
of the middle class.
Some economists project that rising costs for Social Security, Medicare,
government pensions, and interest on the debt will chew up 71% of the future
generations of commoners' earnings. Consequently, the political bureaucrats will
survive in the atmosphere of the extreme public skepticism only if they will not
brake the majority of their promises. What kind of moral and material lives will
our children have if they will get only one third of their earnings?
It is already clear that current rates of taxation and benefits will lead to the
insolvency of the federal Social Security system within a few years. To fix
this, a bi-partisan commission is appointed. It will probably recommend to raise
taxes or retiree age and to lower benefits for the next four years. Then the
upper- and lower-class leaders will proclaim Social Security completely safe and
secure for another 30 or so years. In four years there will be another
bi-partisan commission, which will recommend again to raise taxes or retiree age
and to lower benefits for the next four years.
Unsophisticated people think that the federal bureaucrats would never brake
their promises to Social Security recipients, no matter in what shape federal
finances are. But when the only alternative is to raise the Social Security tax
rate to 20% or 30% or to cut off food stamps to the poor, then, the federal
bureaucrats might have no choice but to cut Social Security benefits or raise
retiree age. After that, the upper- and lower-class leaders will ask the
commoners to be compassionate to the needy and to tighten their belts. But by
then, some of the commoners would be unable to work harder and make up the
difference.
It is not just a cliché when upper- and lower-class leaders accuse each other in
passing a bill for federal spending on to our children, although a few of us may
think that they will also pass their bills on to their children. In fact, each
generation may pass the primary debt on, but it cannot pass on the yearly
interest that keeps getting larger. Every generation already is suffering from
the government spending of earlier generations, and the bills get larger and
larger.
Our parents paid around 35% of their income in taxes. Today, we are forced to
give away 47% of our income to the federal, state, and local bureaucrats. Will
it really be 71% for the next generation? There is a limitation of the
commoners' patience. And once the political bureaucrats will reach that
limitation, they will hardly survive the out-break of anger of the middle class.
Meanwhile the upper- and lower-class leaders are playing political ping-pong
with Social Security -- warning the senior-citizens that the other site will
water down their Social Security or Medicare benefits and denying own intent to
do the same. But the commoners are already fed up with their rhetoric, and polls
routinely show that about two thirds of the Americans do not expect to receive a
dime from Social Security. The majority of commoners do not expect Social
Security to survive until they start to draw their pensions. And they are right
-- Social Security ("as we know it") is broken and will soon collapse. However,
if we want to build a new system of social help within the present political
system, we should know where are we going.
When Alice fell down into the Wonderland and met the Cheshire Cat, she asked
him, 'Dear Sir, how I can get out of here?' The Cheshire Cat replied: 'Before
anything else, you should know where are you want to go.' So should we know what
kind of system of social help do we want; until then there is no reasonable
basis for reform. And what kind of system do we really want?
Apparently, it should be a really funded and transparent system. The money I put
in should be saved and invested on my behalf by a portfolio manager. The latter
would live on a portion of profits and losses that the principal investment will
make. I should have the power to fire and hire my portfolio manager when I
see his inability to do his job and keep my capital growing. And when I will
retire, I should receive at least the same money as I put in. With such a system
of social help, my pension would not rely on making money off my own posterity.
In fact, many of such really funded and transparent systems are already set in
motion. They are lifetime annuities offered by private insurance companies, and
they have existed for hundreds of years. While I pay into the annuity over the
years, a company manager invests my money and pays me a lifetime pension when I
retire.
If I would own an annuity, I would have a contract with an insurance company. I
would know my rights and my responsibilities. I would know how much I would have
to pay every year and (unless I agree otherwise) the amount I should pay would
never change. Moreover, I would know how much I'll receive when I retire and
(unless I agree otherwise) the amount I'll receive is guaranteed.
This is a voluntary and contractual way of providing for corporate help, which
nearly entirely eliminate the necessity of supervision of the Big Brother. When
I have my annuity, I do not have to worry that Congress might change the rules
of "Social Security". Instead, I will frequently check upon the decisions of the
board of directors of my insurance company -- it would be more personal, nearer,
and simpler to do than try to control the Capitol Hill. Besides, many employers
already provide pensions for their employees. If there were no federal Social
Security system, competition for the best employees would inspire a greater
number of corporate bureaucrats to do the same.
You have to admit that the economical system of private annuities works. On the
other hand, the political system of federal "Social Security" does not work. So,
it would have a common sense to abandon the system of social help under the
supervision of the federal bureaucrats and to build such a system under the
supervision of corporate bureaucrats, because Social Security ("as we know it")
will always be a tactical means for the upper- and lower-class leaders to go
ahead of their political competitors by promising bigger benefits now and
leaving the necessary taxes for their successors to impose. That is why the two
party political system could fool the commoners for so long. So, it will be a
chronic problem unless the commoners take it from the federal bureaucracy and
re-do it with the corporate bureaucrats.
In that end, the commoners should free themselves from the 15% Social Security
tax by voting in the federal bureaucracy such middle-class leaders, who would
actively implement this plan while making sure that no one dependent on Social
Security today loses what has been promised by the upper- and lower-class
leaders. The fresh federal bureaucrats should sell unneeded federal assets and
buy from the private insurance companies annuities for those active workers
whose age more than 55 and for those who already depends on Social Security.
Those who younger than 55, would easily accumulate the necessary capital to
provide a benefit at least as large as the maximum of what the present Social
Security can provide. They will be able to provide a real retirement for
themselves by putting aside whatever they want from their earnings, instead of
paying 15% as the Social Security federal tax. The annuities should provide
lifetime incomes similar to what the political bureaucrats has promised creating
their own Social Security. Based on the amounts now being paid out each year, it
will probably cost around $5 trillion. That is what national debt all about.
06/05/00
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Victor J. Serge created this page and revised it on
04/10/03