Why I love the government

by Jimmy

Because mothers are too STUPID to properly care for their children. Because doctors are too STUPID to know how and what medicines to prescribe for their patients. Because parents are too STUPID to know what car seat or toy is safe for their kids. Because we're too STUPID to know how to handle a firearm. Because we're too STUPID to plan for our own retirement. Because parents are too STUPID to know what school to send their kids to. Because we are too STUPID to know what kind of food to eat. Because we are too STUPID to think about our own health care, Because we are so STUPID that we continue driving cars that use too much gas. We're so STUPID that we need a label on an iron warning us not to use it on clothes that we are currently wearing. And we're too STUPID to pay for good art and culture. Quite simply we are too STUPID to take care of ourselves, our parents, our children, our future and our environment.

However, as STUPID as we are, we are able to elect all knowing, all seeing, all caring geniuses who will guide us through the minefield of life on our way to Nirvanatopia. These are the same savants who have saddled us with an ever increasing debt of over $30,000 for every man, woman and child (even those yet unborn) here in the United States. They build bridges to nowhere. They have managed the dollar so well that it is worth about 5% of what it was 80 years ago. The penny postcard now costs 26¢. They have lost the war on poverty, the war on drugs and the Vietnam war. They have made it a felony for a 10 year old to even draw a picture of a gun. They can secretly open all mail, listen in on all conversations and examine all our records for our own protection. They send hordes of petty bureaucrats into our homes and businesses to pester us with a never ending array of rules and regulations, and whose response to any question is a robotic, "I'm just doin' my job." And if you don't like it, they will send an armored SWAT team to your house, bust down your fucking door, tear out your windows and blast your STUPID ass away. You STUPID motherfucker.

The Banking "crisis"

On Dec 14, 2007, at 6:35 PM, Curtis wrote to Jimmy:

What' with this big WW banking bailout that's happening right now to the tune of 40 billion/month?

Jimmy replies:
I think they mean a one time charge or infusion of $40 billion. Not every month. $40 billion per month is about 1/2 trillion dollars each year. That doesn't sound right.

Normally, in a truly free market, this would work itself out (self correct) in a matter of months. The problem is that the U.S. gov has decided to wade in and try to forestall the correction.

The banks made some bad loans and they are having to take some write downs on their assets (the collateral behind those loans was not worth what they loaned). Some of the loans had escalator clauses that kicked in after the "teaser" period was up. It's like those credit card checks you get in the mail that say 0% for 6 months and then the rate goes up to the usual 14% to 24%. Ideally on the CC loans, you pay them off before the 6 months are up. Unfortunately a bunch of folks don't.

The same with the housing mortgages. The banks offered 100% financing at a teaser rate of, say, 4% for the first 3 years, and then the rate would go to 6.9% or whatever. Two things happened. #1, here were a bunch of folks who bought a house, not for themselves, but to resell. Call them speculators, call them investors. It doesn't matter. They got the 100% low interest rate mortgage figuring that they could make a profit by selling the house within the 3 year time span. The problem is that too many people decided to do the same thing, and suddenly (#2) there was a housing glut with too many sellers and not enough buyers. Prices dropped. Now these "investors" are owning a house which is not only not worth the financed amount, but they are also looking at a huge rise in their monthly payment. Can't sell and can't pay. It's the "can't pay" that's a problem.

Naturally some legitimate homebuyers/owners with less than sterling credit got scooped up in the net. These are the hard luck stories that Congress is attempting to address. They will fail. They will only prolong the pain as they did during the depression of the 30's.

A possible larger problem is that real investors do not like uncertainty. They are not looking for capital appreciation. Only a reasonable, steady, predictable return. Foreign governments hold over $2 trillion of U.S. Treasury debt on the presumption that the dollar will pretty much hold its value relative to their own currencies. If they see massive volatility in the U.S. markets, they may just decide to dump their dollar reserves. In the past three (maybe 4) years the dollar has gone from .88 per Euro to $1.44 per Euro. That's a 75% increase. Gold has increased about a third. This is not good news in such a short time. When you dump dollars, you can only do it by buying something else that you perceive as more stable. The price of those things will rise relative to the dollar as more and more people jump the dollar ship.

For every seller of dollars there must be a buyer, so how do you get the seller to part with his non dollar asset in exchange for dollars. Why, you offer him more, of course. This is called a price increase, or, if the Fed has expanded the money supply, (it has) then it's called inflation. People will deal with gradual, sneaky inflation. They will panic when it's obvious and rapid.

Jimmy is buying gold on Monday.

My Sister Loved "Sicko"

Dear Edith,

Thanks for the stuff on "Sicko."

I have not yet seen the movie, but I did go to the website to check out his remedy which is a complete government take over of the health system. As noted in the Clarence Page opinion piece, everybody knows that the current state of health care in America is a disaster for many people. What's interesting is that the proposed solutions can only result in more misery. "There is no problem so severe that the government cannot make it worse." (Quote by jimmydoane, 2006)

Here is MM's 3 step "solution."

1. "Every resident of the United States must have free, universal health care for life."
As P J O'rourke once noted, "If you think health care is expensive now, just wait until it's free." Of course it won't be free; it will be at no charge to the recipient at that moment. Big difference.

2. "All health insurance companies must be abolished."
There is only one way government can ever "succeed" at anything, and that is by outlawing the competition. Take gambling. The only reason anybody plays the state lottery is that you would be arrested and thrown in jail if you tried to set up your own competing enterprise. Even when the government tries to "crowd out" the competition by providing a service at no charge, some private entities survive and prosper. For instance, private schools and private parks.

3. "Pharmaceutical companies must be strictly regulated like a public utility."
Who will regulate the regulators? Regulation by another name is price control. Price controls have never, in the entire course of recorded human history, ever worked.

Health care is what economists call "a scarce resource." It's should be obvious on its face that not everybody can get all the health care wanted or even needed. I mean that if healthcare was like air, you wouldn't need any program, government or otherwise, for its distribution. There are only a limited number of hearts, livers and lungs available for transplant. There are "orphan" diseases that affect only a few, but require millions of dollars for treatment. There are very expensive "end of life" procedures that simply don't make sense for the last day, week or even month of existence. So rationing must and will occur.
Rationing can occur in one of two ways: price or availability. With a government run health system, price is thrown out the window. That leaves availability. Who decides who gets what? You can bet that there will be lengthy, tedious procedures to determine who is worthy, emphasis on lengthy. Just as "Justice delayed is justice denied," health care delayed is even worse. It's often a death sentence. Furthermore you can bet that the politically well connected will not be in the same line as the rest of us.
Here is Jimmy Doane's rule of government malfunction: "Where there is a line or a waiting list, you will find government intervention and failure."
What is stunning about MM's proposed "solution" is that it is the precise opposite of a free market solution which would work faster, better and be fairer. It's as if in order to stop a burglary problem, you outlawed private gun ownership and gave everybody a special number to call in the event of a break in. Oh, wait. We already do that.

Your Loving Brother

Why I am voting Libertarian

None of the Above

If the Republicans win, it will probably be by a whisker. They will spend money in a manner that will make the last six years look like a model of fiscal restraint in an effort to maintain control of the House, the Senate and the Presidency in 2008. The Democrats will go along for two reasons. One is that they like nothing better than spending money. Secondly they will be able to blame the wildly excessive spending on the Republican president.

If the Democrats win, it will probably be by a whisker. They will spend money in a way that will make a drunken sailor on shore leave seem like the epitome budgetary parsimony. They will blame George Bush for the resulting rise in the deficit.

Some are worried that if the Democrats win, there will be two vacancies on the Supreme Court that will be filled by activist, liberal judges because current sitting liberals are waiting for Democrat control. Probably true.

If the Republicans win, however, the current liberals will just wait until 2008 (actually 2009) to resign because, if the Republicans win in 2006, Hillary will win in 2008 as a backlash for the massive Republican spending between 2006 and 2008. In any event, we are doomed to having a more liberal court.

As an aside, this supposedly conservative court has made two rulings that defy any logic. Obviously one is the Kelo decision. Even though some states have passed some laws to try to ameliorate this whacko decision, there should have been a message from the Court that eminent domain is not for private use.

The other decision was Raich (sp?) which gave the Court the perfect opportunity to overturn Wickerd. Wickerd vs. Filburn (early 1943), passed in the heat of the second world war, gave Congress the power to declare virtually any action by anybody as interstate commerce and to regulate it accordingly. That particular decision certainly ranks in the top 5 as one that institutionalized the loss of freedom in America.

So the only real alternative is to vote Libertarian to send a message to whoever wins that they do not have a mandate to go hog wild on spending. Voting Libertarian is a way of voting for "none of the above." A pox on both your houses.

I am voting for one Republican, Katherine Harris, because she is a very capable lady and she is in favor of the Fair Tax.

Peace,
"jimmy"

Apologies for no show

Missed Last Saturday
Sorry guys. Last Saturday was a bust, so now show was recorded. Jimmy is finally going to have to figure out how to run his own studio.

As a consolation prize I will post here the letter I wrote this evening to the local County Commission.

Dear Commissioners,

First of all let me thank you for listening to me when I spoke the other evening, during citizen comment time, on the very general subject of County spending. I won't call what you do a thankless job, but it is certainly one that you could not pay me some $5,000 each month to do. In the alloted three minutes I had to skip some points, so I would like to take this opportunity to "revise and expand" my remarks. Most of you know me, and you know not to take anything here personally.

Recently Ron Cunningham over at the Sun asked readers to respond to the question, "Is spending by Alachua County government out of control?" I invite (dare?) the commissioners to go online and read the responses. Furthermore, while there, you might give us your views on why government spending is not out of control. You can even do this anonymously without any sign-up, although I don't know why you would want to.

So, is Alachua County government spending out of control? This is a rhetorical question, right?

Oh, there is the perfunctory genuflecting in front of the cross of fiscal restraint every election year, but otherwise it's the same old, same old. Even windfall revenues such as we had this year are not enough. Plans are afoot to garner yet more revenue.

Spending is out of control because there is no control. Asking the County Commission to control its spending is a little like asking a college kid to control his spending when he has his parents' credit card. The difference here is that the college kid doesn't have a gun. He can't force his parents to give him money.

You, on the other hand do have a gun. You are the only ones legally empowered to collect money at the point of a gun, and with that comes an awesome responsibility.

There are two questions that I never hear asked by commissioners during budget or new laws and regulations hearings.

One is, "What happens if this plan doesn't work? What if our assumptions turn out to be wrong? What is my fallback position? What is my plan 'B'?"

The second is, "Am I prepared to send the sheriff with full authorization to use any force necessary to collect the monies for this program?"

The answer to the first question is all too often to do more of the same. Make the program more inclusive and intrusive. "Tighten it up" is a phrase we often hear.

The answer to the second question must be "Yes" or else the program would not pass muster.

The reasons for overspending by the county are systemic and endemic to all governments at all levels. The commissars want to be liked and to do good things for the people. There are always unmet needs and wants. There is nothing so permanent as a temporary government program. Once started, programs not only become entitlements, but their "needs" increase every year. Job security requires the invention of a never-ending stream of crises that only the government can cure by extracting yet more revenue from the populace.

The beauty of our system is that the government can identify a new "crisis", say healthcare, put it on an out-of-the-way election day, convince 10% of the electorate into voting for it, and, voila!, a new program that requires everybody to pony up millions. This is known in government parlance as a mandate.

Our leaders sometimes forget that government is the overhead of society and they themselves are responsible for reigning in spending. There is no automatic check as there is in the private sector. Bill Gates may have an operating system monopoly, but he will never send one of his goons to my front door to force me to buy his product. One the other hand, government failure is rarely punished. Heck, half the time it's rewarded with a new plaque for services well done.

Private companies react rapidly to deteriorating market conditions by cutting back. When governments screw up, we don't get so much as an "oops" out them. Governments often react not by cutting back, but by instituting larger, more comprehensive programs.

Look, we citizens have given you the exclusive right to legally collect our money, by force if necessary, for purposes you deem essential. Nobody else, however rich or powerful, has that privilege. All we ask in return is that you don't abuse that very special franchise by spending our money on questionable items.

Think of it this way. We have a bank where we keep our money, and we have said to you, come on in with your loaded guns and take what you need. We know you need the guns because there are always some recalcitrant folks who object to your taking any money. But we trust you to take from us only what is absolutely essential.

Can you honestly say that every dollar you take is absolutely essential to the benefit of the entire community?

Sincerely,
"jimmy"

The Gainesville Sun - flack

Socialist Sun flacks for the county
The Gainesville Sun is a willing accomplice to local Socialist tendancies with the notable exception of Jake Fuller. I know that the Sun must feel they are doing a bang-up job, because they do receive some flack from the commissions. It's that old story in the media, "If both sides complain, then I must be right in the middle."

Nope, sorry, you don't get off that easy. Recently headlines have touted the reduction in the millage rate as a reduction in taxes. This in the face of an increase in the budget of virtually every governmental agency with more on the way. So where is all this extra money coming from? (That is a rhetorical question).

A recent example of the Sun flacking for the County. Headline: Buildings to Benefit County's Economy. And then there is the sidebar with a picture of Randall Reid, the county manager saying, "There is a good economic benefit to government spending."

Now Cindy (Swirko) is a long time reporter for the Sun, so I don't understand why she didn't ask the question(s) that immediately spring to my mind.

"Say there, Mr. Reid, isn't the $108 million taxpayer money that would have been spent anyway? I mean if you take a dollar from the private sector and spend it in the government sector, isn't the economic "benefit" just a wash? In fact isn't it a bit of a loss since we have to pay the staff to collect and disperse these monies?"

"And, Mr. Reid, where are the workers going to come from? It's not like we have any unemployment here in Alachua County, so are you not going to have to bid away the local workers from private construction by offering them more money? Won't that increase the cost of private construction thus raising the price of housing?"

"And, Mr. Reid, won't this ripple throughout the local economy by leaving less money for the citizenry to buy cars, flat screen TV's and Christmas presents?"

"And, Mr. Reid, will there not be more folks who simply not be able to afford the higher price of housing, and then will not the county step in and "solve" this problem by taking yet more taxpayer dollars and subsidizing housing for the newly poor?"

800 Number for the show

Some of you may know that we are "live" on the internet at ztlk.com on Saturdays from 3 until 5 P.M. We now have an 800 number you can call in during the show to ask questions or make (very short) comments. It's 1-866-955-4669 aka 866-95-JIMMY.

During other times, please feel free to call the number and leave voicemail. I check it several times each day.

The Gold Standard

Libertarian Rants
Dear John,

There are two ways to have a gold "standard." One is simply to decree that gold is the legal tender of the United States, and the other is to allow the government to hold the gold and issue receipts for an amount of gold as denominated in dollars.

If gold is the legal tender, then there is no reason for the government to have any in storage. The gold would be distributed among the populace and stored wherever.

If the government is to be entrusted with issuing gold receipts, then the government does need to hold an amount of gold in its vaults to redeem the receipts it issues.

Unfortunately, the government does not have a real good track record.

Allow me to rehash a little history.

Putting aside for a moment the government's disastrous foray into the bimetallic standard, $20 would buy you an ounce of gold until 1933. In fact the government issued official signed promises to that effect for 20 years starting in 1913. Prior to that time, the regional banks did the work with the same result since the price was guaranteed at $20 per ounce.

In 1933 the federal government realized that it had issued way too many of these paper receipts, and that it did not have the gold to back them up, so they defaulted.

Well, they couldn't admit to such gross mismanagement so they used the depression as a shield and outlawed the ownership of gold. People were required to turn in their actual coins at $20 per ounce and were issued new receipts that made no mention of gold, but simply said "$20."

As soon as the gov figured that all of the suckers that were going to be suckered had been suckered, it raised the price at which you could not own gold to $35 per ounce. An instant 75% windfall profit.

There was a loophole, and it was (fortunately) exploited by a surprisingly large number of non-suckers, and that was that you could still buy and sell "numismatic" coins and jewelry. Suddenly an awful lot of formerly circulated coins became "numismatic," and were spared from the smelter at Ft. Knox.

For nearly 40 years (until 1971) the U.S. was sort of and somewhat constrained from rampant inflation because, although we (the US citizen) could not own gold, it was still used to settle international accounts at $35/oz.

There was a little dust up in the late 50's when the French figured out that the US was printing up too much paper money and demanded that the actual gold be actually shipped from the US to Paris. The US authorities reacted with surprise and asked of the French, "What? You don't trust us?" The French replied as how, well, yeah sure, they trusted us, but they wanted the gold anyway. They got it, and other countries started to get nervous.

Well, by the late 60's the run on the US gold bank was on, and, to make a long story short, Nixon told anybody who wanted to exchange their dollars for gold to shove it. By any other name, it was a default on solemn promises made by the U.S. government.

Not content with stiffing foreigners, Nixon decided to spread the pain to the locals by instituting wage and price controls and proclaiming, "We are all Keynesians now." Within nano-months the economy did something that the Keynesians had for 40 years proclaimed was mathematically impossible: High unemployment along with high inflation. We coined a new term for it: Stagflation. The revered Phillips Curve which was a sacred cornerstone of Keynesian economics was shown to be as permanent as a fart in a windstorm. The stock market fell by over 50%, and the arabs decided to pile on with the first oil embargo in 1973. Armageddon was upon us.

At that point, the gov threw in the towel and said it was going to be OK to own bullion gold again. In anticipation of that event, in December, 1974, the market turned around (the DJ was about 475), and on January 1st, 1975, U.S. citizens were allowed to own gold in any form they wished. Gold overshot to $200/oz. , reacted to $100/oz., then really overshot to nearly $800/oz., and finally settled at roughly $300 + or - $50 for about 20 years.

So, now, that's the history and on to address your e-mail.

First with regard to counterfeiting. What I meant was that you cannot make a fake bullion gold coin. The fakes are way too easy to spot. Anybody with a scale and a glass of water can determine whether or not the coin he is handed is gold or not. A home made replica of a bullion coin would not be a problem since it would have to have the requisite amount of gold in it to be passed. Not so with paper. Witness the almost perfect currency coming in from North Korea.

To be sure counterfeiting could be a problem with a gold standard in that the receipts might be counterfeited. For example today counterfeiters find it easier to pass fake cashiers checks or even company checks. Interestingly, I have not heard of much of a problem with the Traveller Check people.

You say that the traditional gold standard means that each paper note is backed up by a set amount of gold in the US Treasury. Not true. What the notes said was that they could be turned in for, say, $20 in gold coin. There is nothing to stop the treasury from minting a gold coin 1/2 the size of a dime and stamping the words "$20" on it.

I unclear on your worry that a big boat from China will load up with all our gold. First of all, China has a fiat currency even more tightly controlled than the dollar. When the boat (junk?) shows up here, it's not the government that would give them gold, but rather Wal-Mart or some other retailer. You can bet that they are not going to give away more gold than the incoming products are worth.

As far as the deficit and debt are concerned, the US government will do what it has always done and default. Oh, they won't call it that, but you can bet that all those folks holding dollars overseas will end up taking it in the shorts.

Of course the real solution to stabilizing money would be to get the government out of the banking business all together. Not gonna happen because then the government would lose the power of inflation which has been called the invisible tax.

You say that you don't agree with a fixed standard, but I think you do. I mean you don't want to wake up every morning with all the prices on everything changed from the day before. In the very short term, the dollar is pretty well fixed, and you and I count on that, but that could change at the whim of the government. They have done it before.

I am not saying that a return to an anchor of gold would solve all problems. Even smart people get carried away sometimes. We would still have booms and busts, but they would be shorter, more localized and less severe than what we are headed for right now.

Hope this helps and please don't hesitate to write if you have more questions.

"jimmy"

Listener writes in - I respond

Libertarian Rants

I received an e-mail from our listener asking if Wal-Mart was too big a la the article in July Harpers. Here is my response.

David,

Thanks for listening. I hope you can tell that we have a good time
doing these shows, and we might have another one up by the end of the
week with Jack Rhodes sitting in as #4.

I pulled down the Harper's article from their website, and as I write
this, I have only finished about 2 or 3 pages, but I find it hard to
believe that what I am about to say will change much upon further
reading.

There was a very erudite refutation of this article in an op-ed
somewhere, but for the life of me I cannot seem to locate it. That's
the curse of reading about 20 publications each day.

The Harper's article is so chock full of erroneous premises leading to
false conclusions that it is difficult to know where to start, so
let's do one.

"The problem is that Wal-Mart, like other monopsonists, does not
participate in the market so much as use its power to micromanage the
market, carefully coordinating the actions of thousands of firms from
a position above the market."

There is no such thing as "above the market" any more than a man can
be above humanity. Wal-Mart, like every human action is part and
parcel of the market and subject to it's natural, self-correcting
control.

Every single human action involves a choice, and those are of exactly
two varieties: voluntary and coerced. Voluntary choices are exactly
like the coerced ones with one exception: coerced means that one of
the parties has a gun and will use it.

This is not to say that some voluntary choices are almost equally
unpleasant, but at least they do not have certain death as one of the
choices.

Somehow it is thought that because of its size that Wal-Mart is
different from the average consumer. This is not so. When I go garage
sailing, I often dictate the price I will buy at. And often the price
I am willing to pay is below the price I know I can sell the item for
on Ebay. The seller may groan and moan, but in the end he has a
choice, and no guns are involved.

Involving the state in a Wal-Mart transaction as the article suggests,
would be no different than if the garage sale seller enlisted his
armed neighbor to force me to pay the price he wanted.

There are other less obvious costs and problems when one involves the
state. What if they are wrong? Who regulates the regulators? Who holds
the reins if you "bridle" free enterprise? Who pays for the
regulators? Do you think that there might be a chance that politics
might enter into the equation along with the state?

The state is the camel's nose in the tent. And the camel is armed.

To (finally) answer your question(s): There is no such thing as "too
big" as long as guns are not involved. The same holds for your
question #2 on Laissez Faire.

Thanks again for listening. Write any time.

"jimmy"

Libertarian Rants

Libertarian Rants
Imagine my joy when I read the headline in the [B section of the July 6, 2006] Gainesville Sun: "[County] Budget proposal contains tax cut."

However as I continued reading, I noticed that the county will get a raise of some $50 million. But how can that be? How can county revenues increase by over 17% and I get a tax cut? Where is that windfall coming from?

Upon further reading I discovered the wonders of government accounting. I will get a millage cut, however the check I write will be larger than last year. And what did I do to deserve this privilege? Actually, nothing. It turns out that my neighbor sold his house for a bunch of money so it appears that my house is worth more and I get to pay more.

Well, at least I can rest easy knowing that after selling a kidney to pay for the increase that the county will spend the money wisely on parks (Didn't we vote that down last year?) and bribing the homeless to stay here.

Maybe next year I can sell a cornea.

Social Security Rant

I see that Molly Ivans has weighed in on the SS debate, and for once I agree with her on two items. To wit: Don’t listen to politicians and reporters are notably weak on math.

From C-SPAN to the pages of local and national papers, one thing is clear. There is a chasm the size of the Mars Canyon separating the views on how to “fix” Social Security. These range from a little tinkering around the edges to a major overhaul involving, at a minimum, partial privatizing.

In this morning’s Sun (12-30-04), Tom Teepen of the Cox Newspapers says Social Security ain’t broke, so don’t fix it. A professor at UF (12-18-04) says that there is no “crisis” with Social Security. He says that the surplus is “invested” in U.S. Treasury bonds.

Yeah, well, there’s no crisis in the sense that there is no crisis when an airplane loses all its fuel. As long as the plane is in the air, nobody gets hurt. What the SS people have done is to keep the plane in the air by filling the fuel tanks with liquor from the booze cart and duty-free liquor from the passengers. How long’s that going to last? Some of the younger passengers want to knit together a few shirts and take their chances by jumping. I say let ‘em do it. It might lighten the load.

Yeah, the money was invested if by “invested” you mean spent. Invested as I would “invest” in a lottery ticket or a bottle of liquor. Currently the surplus is being invested in bombs, bullets and Humvee armor plating. What kind of return are you expecting on that? The fact is that the SS Trust Fund is nothing more than a bunch of I-Owe-Me’s.

The people who claim that there is no problem must have gone to a school where arithmetic was an elective. They chose dodgeball instead. A normal couple who puts aside 12% of their earnings for 40 or more years in a triple A 5% bond can expect to have about a million dollars saved upon retirement.

I am always wary of people who want to do something for my own good. I always ask what’s the catch? I also worry about a government program set up for my own good where the penalty for not participating is jail time. You don’t want to pay into Social Security? How would you like Maximum Security?

What do you think of a system predicated on people dying before they retire? You are forced to pay into a system for over 40 years and then have the temerity to die 1 day before retirement. If you have no close relatives, the government gets it all. The shuffleboard generation is living off the corpses of those who paid and died.

If anything like this were tried in the private sector, the instigators would do serious jail time. Ponzi would be proud.

Social Security is the quintessential embodiment of communism: “From each according to his means; to each according to his needs.” If you are rich, you pay more, and if you are poor you get more. Why wait for “trickle down” when you can just grab and give?

The communist experiment, born of the Russian revolution, lasted for 70 years. It was “successful” for that long only because of the use of mortal force. It came crashing down under its own weight in November 1989. Social Security is not much different and it will be 70 years old next year.

Social Security is the Robin Hood ethic full blown. Note that Robin Hood was an outlaw, and far from robbing from the rich to give to the poor, he took back from the government monies that had been extorted from the citizenry by force. That is the way it was according to the Disney version, anyway.

Social Security is called the 3^rd rail of politics for the reason that it is fatal to politicians. They lose elections when they touch it. There is nothing inherently wrong with the 3^rd rail. In fact it makes the trains go. It’s Kryptonite only to politicians.

It was one thing to have 30 or 40 working people supporting a retiree whose life expectancy was 65 or 70. It’s quite another when 2 or 3 workers try to support a retiree who lives well up into her 80’s and 90’s. And 2 of these workers are married and raising a family thus supporting kids through college as well.

Current projections have the number of centigenerians expanding in the next few decades, and Lord help us if we find a cure for cancer, heart disease and obesity. Workers will be supporting a generation of Methusala’s.

It’s time to cull the herd, lighten the load. What makes poor people more deserving of rich people’s money than rich people?

Social Security is founded on the belief that most people are too stupid to provide for their own old age. Why then is not SS only for those folks while letting the smart ones do their own thing? The bedrock foundation of Social Security is that, on average, it’s like a roach motel. You pay in, but you get nothing out. This is especially true if you happen to be black or Hispanic.

Social Security was initiated at a time when the country was in a great depression and the government was madly flailing about, trying anything to “fix” the problems of the day. Many of the so-called “solutions” were patently unconstitutional and the Supreme Court said so. Unfortunately Social Security made it through. In fact the country was in some ways rather enamored of Communism. The Supreme Court finally buckled when Roosevelt threatened to pack the court with judges sympathetic to his ideas. The phrase, “a switch in time saves nine” was founded at that time when even the supremes saw the hand writing on the wall and gave in to political pressures. After all the country was at war, and, as happens during any war, the populace is only too happy to give up its freedoms in an effort to survive. Unfortunately, as too often happens, once the danger is passed, the loss of freedoms, having become commonplace, stay in place.

Even the diehard preservationists concede that some modifications must be made to preserve the long term viability of the system. Even their tinkering around the edges involves raising the retirement age and/or limiting benefits. In order to preclude private accounts, they want to raise the cap on contributions. What this means is that those who really don’t need Social Security will be paying for it for those who do. In a bow to envy, the “rich” are required to pay more and get less since even when they receive a SS check, it is taxed as ordinary income.

Another fact I find astounding is the fear that some have with the stock market as if everybody who gets their hands on some of their own money will immediately start speculating in risky penny stock schemes. First of all, most if not all pension plans other than Social Security are currently invested in the stock market. Secondly, any plan passed will have many restrictions to ensure the safety of the money. And thirdly the return on SS contributions for a beginning worker today is projected to be on the order of 1 or 2 percent. Virtually any municipal bond will beat that.

There is a wide division of opinion on the severity of the SS problem from renowned experts of every stripe. Obviously some and probably most must be wrong. What if the “patch-it-up” crowd is wrong. Then 100 million citizens or more will be left holding the bag. What if the “private investment” crowd is wrong. Then some who chose unwisely will be out in the cold.

There is a SS commission that is fighting hard to be sure that there is no privatization. A report is due Wednesday, Jan 19^th, 2005. One of the big worries is that the Wall Street brokers will strip up to 20% of the privatization funds. They say that the reason that SS administrative costs are so low is that it’s a really big program and the costs are spread out over 44 million recipients. They fail to mention all the people who get stiffed because they have the temerity to die before collecting their due. That money is available to pay those who are lucky enough to win life’s longevity lottery.

Of course, according to Larry Kudlow, virtually all of the people from the AARP to Paul Krugman to millions of state and federal employees have their retirement funds invested in the market. What’s sauce for the goose etc. Seems arrogant and hypocritical that the opponents of private accounts have no problem with their own private accounts.

(A friend of mine once had a motorcycle accident wherein he badly tore up his knee. The doctor said that the $5,000 operation would fix it, but that he would have a limp for the rest of his life. My friend then asked the doctor if ever had the same problem, who would he see. The doctor mentioned a surgeon in Atlanta, so my friend flew to ATL and asked that doctor to do the operation. That doctor looked at it and said that he didn’t need an operation, and that the knee would heal just fine by itself in 6 months. And it did just that. I forgot to mention that the original doctor had just purchased a million dollar condo. Do I need to point out the obvious moral here?)

So much is being made by the status quo crowd about the viability of SS in the out years. “Even if nothing is done, retirees in 2075 will get 81% of benefits…” Well, maybe. Nobody knows anything about 2075.

All these plans beg the basic question.

What’s so magic about the government involving itself in a retirement plan. If it could be shown that the government need not be there, would it get out? No. There are too many special interests that profit from the current system not the least of which are the members of Congress. I have often asked that question, “What if I could show you, Mr. Legislator, that what you are proposing is mathematically wrong and will do more harm than good. Would you be against your plan?” The answer is invariably no or at least something to the effect that there is no way I could prove that, so don’t even try.

Where does the money for old people come from? It comes from those of working age, roughly age 20 thru 60 with the more productive years generally, but not always, later. The Social Security Act shifted the retirement “burden” two generations into the future. Typically, prior to 1935, a worker provided for his own retirement. With the passage of SS, it fell to the next two generations of workers to provide for the previous generation’s retirement. Thus for 40 years, the government had a source of “free” money which it spent with lavish abandon. In order to “fix” the system, the current generation must take a hit and pay for two retirements in order to get the system back in synch.

Will this result in a drop in the standard of living? You bet. Somebody has to pay for 70 years of congressional prolifigacy. What is saving anyway but a lessening of one’s current standard in order to provide for a more comfortable life in those later years.

Paul O’Neill, former Sec’y of the Treasurer under Bush 43 has weighed in on the SS debate and how to fix it. He says that one should have a $1 million annuity stashed at retirement to pay for the necessities. Anyone (the long term working poor) who amasses less than that would get a contribution from the taxpayers to make up the difference.

My question is why? What’s the magic about a million dollars?

Think about it. A person earning $25,000 for their entire working life would retire at age 67 with something just over $530,000 assuming the 12.5% SS “contribution.” and a 5% reinvestment rate. This person would have lived for 45 years on about $22,000 per year. This person can now withdraw $26,000 per year for the rest of his life even if he lives to be 1,000. Additionally, remember that this person could very well have paid off his house, and any offspring type dependents would have long since moved out.

So we have a current system and all proposed systems wherein a “poor” person actually will live better in retirement than he or she did during the normal working life. That is not the definition of a safety net or poverty.

The current system and all proposed systems rely on the “rich” getting a poor return on their investment so that the poor can live well. You may not think that $26,000 enables YOU to live well, but for someone whose entire life has been at the $22,000 level, this must represent some sort of windfall. And that can be accomplished for about half of the million dollars proposed by former secretary O’Neill.

The fact is that SS is borrowed money in the same way that a government bond is borrowed money with a promise to repay. SS “bonds” however promise to pay a much higher rate of return than a normal bond and the rate is unsustainable. How did they get away with offering such a high rate? For one thing many of the “bondholders” died and their money went back into the pool. Another way was to enlarge to pool of contributors by adding more and more payers.

I cannot stress to highly the one reason that Social Security has been called “successful.” It is because a large minority pays in and gets nothing out. Their money is transferred to the survivors, and even with that extraordinary advantage over traditional retirement plans, the current payees can expect a miserly return of only 1 to 2%. In fact, Social Security, as with many government programs, is nothing but a swindle.

Interestingly private tontines are illegal in the United States.

I am not going to argue the merits or demerits of how the money was spent, but spent it was, and now that the pool of contributors is maxed out and the pool of payees is enlarging, the time has come to pay the piper.

SS is so typical of the “one-size-fit-all” solution that government always proposes. It is readily admitted that many if not most of the SS participants never had and never will have the need to be in that program. As always happens, when government shoulders a responsibility that was previously viewed as individual, then individual responsibility, a cornerstone of the American ethic, goes by the wayside. The problems first admitted to nearly 30 years ago and now nearly upon us are a result of this usurpation of personal responsibility.

How to fix it. The good news is that virtually anybody under the age of 35 is not counting on SS. Why don’t we just say to these people, “Yep, you’re right. You are going to pay and get nothing back. Our representatives of the 30’s, 40’s, 50’s and 60’s spent your money, and unfortunately the task now falls on you to pay it back”.

Mandatory contributions imply that virtually every worker is too stupid to pay for his or her own safety net. We know that that is not true, but it’s impossible to know in advance who are the responsible savers. So, stupid or smart, all are forced into the system to take care of the dummies. Seems like the group that doesn’t like mandatory contributing doesn’t need it and the group that profits from the system doesn’t really deserve it except by virtue of being alive and poor.

The opponents of privatization seem to have a pretty good handle on what’s good for everybody else. Whatever happened to “mind your own business”?

Letter to my reps about the Fair Tax

Dear Representative Stearns,

I have just finished reading the Fair Tax book by Neal Boortz and Congressman John Linder. This note is to ask you most fervantly to support this legislation.

I Personally sent a lot of money to Washington last year in payment of my federal tax obligation, and I realize that I could very well pay that much again under the Fair Tax proposal. I fully understand that the Fair Tax plan will NOT reduce federal revenues. What it will do, however, is save me the money and time I had to pay my accountant to fill out the multi-page return. Additionally, it appears that the huge underground economy will finally pay its fair share.

Since federal revenues will not be reduced, I wouldn't understand why all 535 members of Congress shouldn't support this overhaul. I mean you still get to divvy up at least 2.5 trillion dollars, and furthermore I don't see this as any kind of a “wedge” issue like the war or abortion. I mean I cannot really see any potential opponent using this issue to try to win an your seat.

Moreover, the “poor” which we all care about so much, will not suffer one iota. They get a “prebate” for all their essentials according to this plan.

It seems to me that virtually the only people who could logically object to this plan would be IRS employees and that segment of the “K Street” lobbyists who are concerned with tax legislation. I wouldn't expect much grief from the IRS employees, but no doubt you will be getting an earful from “Gucci Gulch.” Those guys, most of them multi-millionaires in their own right, will fight this thing tooth and nail, and I can't say I blame them. But now it's time to allow them to go on to more productive pursuits. They are smart and they are rich. They will not suffer.

So for once, I beg you, I implore you to pass this legislation before we are subjected to all the obfuscation that will occur as the small (but rich) special interest groups will no doubt innundate us with in the coming months.

I leave you with this quote from the Founding Fathers:

"It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow."
-- Alexander Hamilton and James Madison (Federalist No. 62, 1788)