Amity ShlaesIn an amusing and incisive column that suffers from the recency and non-ever changing cycle bias, Amity Shlaes says that presidents tend to learn at the end of their term that they have to solve the social security problem and that Bill Clinton called up senator Bill Archer to solve the problem and Archer remembered it because "Rush Limbaugh was on the phone and we had to turn it down." Reminds one of how a certain real estate personage remembered that a certain governor came in every Thursday for 25,000 in cash (before he passed away): "He would jog back from his girlfriend's house and he was always so sweaty. Then he'd sit down in my good leather chair and I'd get so upset because he sweated it up so much I'd rush over to him and take the bag and escort him out."

Stefan Jovanovich comments:

The irony of the present situation is that Social Security is only "in trouble" because the Trustees allowed the Congress to prevent the Trust from having actual assets– i.e. Treasury securities that the Trustees could sell on the open market to pay for benefits. If the bonds in Al Gore's famous "lock box" were actually negotiable, Social Security would have a surplus.

The Social Security crisis exists only because the Federal government has literally stolen Social Security contributions and now finds itself needing that same money to pay promised benefits. Social Security is the broadest single program in the American history, and it remains enduringly popular for a simple reason: it allows even "ordinary" people to avoid outright destitution when they get old or disabled.

If its early participants received more money than they would have received under a defined contribution plan, that was intended. Many more recent participants (yours truly, for example) now receive far less from the program than they would be making if they had been allowed to invest their Social Security contributions. That is partly a function of the fraud that the Congresses and Presidents have committed, but it is also in the nature of the system. If some of us could have done much better, many would have done far worse. Those of us who have skills where making money is concerned have other resources; we are not going to suffer because the rate of return on our contributions is less than we could have made for ourselves.

The flaw in all privatization plans is that they presume that everybody is good at investing. They are not. That is one of the reasons why Franklin Roosevelt wanted Social Security program to be established as a defined benefit plan, and it is a very good reason why it should stay that way. What we need to do is follow through on the rest of Roosevelt's plan. He wanted every person to know exactly how many Treasury bonds were in their own Social Security account and how much those bonds were worth.

It is time for the Federal government to make good on the rest of Roosevelt's promise.The only other "reform" we need for Social Security is to expand it to include all employees and self-employed people in the country no matter who their employers are. The present state, local and Federal pension problem exists for one reason only: the people in those pension plans wanted more than Social Security recipients get.

George Orwell once said that the public servants in a rich country are mostly just people who want a special annuity in the name of "the public good". No one has ever explained why public employees are somehow more deserving than other working people. It is time for all those special annuities to be cancelled; everyone who works at a legal job serves the public good, and they should be entitled to equal treatment by the government where public pensions are concerned.

 A Social Security reform that abolished all other public retirement plans would require a sacrifice. It would mean that the specially entitled– members of Congress, for example– would only receive what other people with the same earnings history received. What a shocking idea– that public servants should receive the same Social Security retirement benefits that citizens and other legal residents have earned and nothing more.

If George Orwell were alive today, he would probably add one other comment about "fiscal conservatives". The people who want to call Social Security an "entitlement"– as if it were somehow unearned or excessive– are, at bottom, arguing that in the name of "Social Security reform" the Federal government should be allowed to find a way to default on the broadest promise it has ever made. The cure for having had a government that has lied, cheated and stolen is not to allow further lying, cheating and stealing in the name of fiscal prudence.

P.S. Medicare is a very different matter. The projections are truly scary, but they are like world energy forecasts in 1850 made on the basis of whale oil prices. The current Medicare and Medicaid projections assume that there is no possible way for medicine to be done better, cheaper and faster like everything else that is subject to competition. That goes against all common sense, unless, of course, you assume that Obama care will remain the law of the land. If it does, then American medicine will be the Slumdog Millionaire version of Amtrak.

Here endeth the rant.





Speak your mind

4 Comments so far

  1. Russell Sears on August 17, 2010 11:17 am

    The problem with Stefan’s suggestion is that there is a significant insurance element and transfer of wealth in the current Social Security system. It is set up to prevent debilitating poverty amoung the infirmed and elderly with relative minimal contribution requirements to qualify for benefits.
    If indidvidual’s had their own accounts, with those charges deducted from the system, people would be outraged with how much the system is “socialized”.
    Making the public aware of this would be politically distasteful.

  2. andre wallin on August 17, 2010 10:44 pm

    Hypothesis: Male dominated capitalist societies win. Therefore India and less so China will win in the long run. America has become increasingly female dominated and I suspect it will lose its fight down to the laborer at the factory level. The more female dominated a society becomes, the more it is likely to give in to the group and surrender to the countries where each man is FIGHTING for his right to mate. In the US it is now a right as long as he gives in to the female that is in his life. In China and India men rule and they fight for their egos. Also, they’re capitalistic and they have the freedom to fight.

  3. douglas roberts dimick on August 20, 2010 12:17 pm

    Do You Feel the Need for Speed… or Not?

    Space and time: such is the nature of the thing – electronic exchange markets of financial instruments.

    Of late, we are presented with dramatic dimensions of the latter, namely on May 6, around 2:40 p.m. EST, after modest selling pressure throughout the session, the Dow Jones Industrial Average plummeted 1,000 points. Within 20 minutes, the index rebounded 700 points and closed down on 348 points. There were some 21,000 canceled trades, stocks had traded for as little as a penny.

    The heart of the matter?

    “Trading happening at one millisecond or faster isn’t the purpose of the stock market,” Goldstein said. “It’s to allocate capital, and I believe it hasn’t been doing that any better than in 2007, when markets were slower.”


    Quantitative Relativity indicates that the governing of time correlates to regulatory exchange requirements of price. Sanctioning of markets, such as embodied within the charge of the SEC, determines systematics of fair and orderly exchange.

    Is low latency technology marginalizing both the spirit and rule of law governing market order?

    Is liquidity now too often confused with volume?

    How and why does one so construct rules-based exchange systematics?

    At the close, for whom does the bell toll?


  4. Georg on November 3, 2012 12:51 pm

    Social security (SS) is something that Franklyn Delano Roosevelt–a Marxist–helped create in order to change the U.S. into a communistic oligarchic nation ruled by elites such as himself and his family. His mom's side of the family, the Delanos , got their immense fortune by being notorious drug dealers and forcing the Chinese to buy opium. SS is inherently economically flawed, like all communist programs, and inevitably will go bankrupt (it's only around now because of money that's been borrowed from the Chinese). The sooner SS goes bankrupt the better.


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