From: Brian Holtz [brian@holtz.org]
Sent: Wednesday, June 15, 2005 8:16 AM
Subject: RE: Candidates - RE: Best LP issue: fascism or
entitlements?
Let me say it another way: the SS law was passed as a
"pre-funded" program in the sense that SS should not be NEEDING
trillions of dollars now. The law quite clearly states that
Congress would appropriate for it each year.
There are also laws clearly
stating that Congress shall pass a budget before the start of each
fiscal year.
Nothing says the annual premium depends on taxes.
So I guess it was just coincidence that
from the very first year, the annual premium appropriated
just happened to be equal to the payroll tax enacted by the very
same law...
You sound incredulous that I would believe your paragraph 2):
2) The benefit and contribution schedule that was enacted
in 1935 and in effect for only three years would have been actuarially
sound over the subsequent hundred years, even in the face of all the
unanticipated changes in life expectancy, birth rates, labor force
participation, immigration, etc.
I do believe the program would have been sound at least until
today.
It would have remained sound because, in fact, the
"contribution schedule" is the annual premium based on mortality rates
and 3% interest.
If the
conductor promises the train will be run such that nobody will be
late for work, that's not a schedule. That's a wish. The schedule was
the table
that maps year to payroll tax rate. Again: we have no evidence that
this enacted schedule would have made the program actuarially sound
over the subsequent hundred years.
You also hold the original law-makers responsible because
subsequent Congresses, predictably, did not appropriate enough
money:
I hold them responsible because they
enacted a scheme that scheduled voters like Ida May Fuller for
multi-thousand dollar returns on a $50 contribution.
You might assume that "half
a loaf", when a major percentage of the work force has opted into
partially private accounts, somehow solves half the problem of Social
Security. In fact, such a program would simply politicize
the situation more severely.
It's odd to hear a libertarian
complain that moving funds from the communal federal purse to
personally-owned private-property accounts will "politicize the
situation more severely". If you know of a way to roll back socialism
without socialists complaining, I'd love to hear it. Even if it
were the case that changing from the communalist status quo to a more
libertarian alternative would lead to an increase in political strife,
that surely is no argument against doing so. And at any rate, it's a
standard belief among libertarians that privatizing leads to less
political rent-seeking, not more. If the only argument against
improving the situation is that rent-seekers will seek to undo the
improvement, then we're done here.
Adding one politicized program on top of another will not solve
anything. How could it?
Libertarians believe
that keeping resources in private hands instead of public ones tends to
not only be fairer, but to in fact diminish opportunities for
rent-seeking. Indeed, the Cato Institute has demonstrated the
correlation between government share of the economy and rent-seeking as
proxied by campaign contributions.
The problem is excessive
government power, not lack of financial planning.
Personal Social Security accounts reduces
government power -- specifically, its power to buy votes with debt and
unfunded liability.
I believe the "original
plan" for SS was to create an independent, tax-collecting, and
benefit-paying, agency. My high school teacher told me
about this in American Government class many decades ago. He said
that such agencies were unconstitutional because you could not
"earmark" taxes for social engineering purposes. The Supreme
Court had already overturned other New Deal programs.
Roosevelt, my teacher said, had crafted Social Security to
avoid that problem after conferring with Oliver Wendell Holmes.
I'd like to know more about this
conferring. The only relevant story I know is this one, in which
FDR's Labor Secretary said in 1962: "The constitutional
problem was the greatest one. How could you get around this business of
the State-Federal relationships?" She claims that Justice Harlan
Stone tipped her off at a tea party: ""The taxing power, my dear, the
taxing power. You can do anything under the taxing power." (She
later finalized the federal-only nature of the plan with an
alcohol-lubricated session at her house that lasted until 2am.)
She also made it clear from whom Social
Security was to buy votes: "the aged have votes. The wandering boys
didn't have any votes; the evicted women and their children had very
few votes. If the unemployed didn't stay long enough in any one place,
they didn't have a vote. But the aged people lived in one place and
they had votes". The context was a proposal that helped inspire Social
Security, in which everyone over 65 would be given a straight handout
of "$30 every Thursday".
More evidence that this "social
insurance" was insurance in name only: unemployment "insurance"
benefits were immediately made available to people who had never paid
premiums, and SS benefits for "those who are already 55 and had never
contributed" were "rigged up" on some unspecified compromise.
On the topic of actuarial projections, she
says: "we so desperately underestimated the number of people that would
have covered earnings at some time during the year. We greatly
underestimated the number of persons because there simply were no
statistics on turnover of employment. We didn't know; we couldn't know
these matters, but we finally rigged up a preconceived state of
affairs." She goes on to describe the benefits schedule as a series of
"assumptions".
If you read through the
Steward Machine decision you mentioned,
http://newdeal.feri.org/court/301US548.htm
and also US vs Butler cited in Steward Machine,
http://newdeal.feri.org/court/297US1.htm#56
you can find the arguments about "earmarked taxes" and the
unconstitutional programs of the New Deal. The Constitution
allows the government to impose taxes if they raise revenue to "provide
for the common defense and general welfare". When the New Deal
government tried to use taxation to do anything else, the Supreme
Court struck the laws down.
In which case? Butler
struck down the Agricultural Adjustment Act not on that ground, but
because no power "to regulate agricultural production is given, and
therefore legislation by Congress for that purpose is forbidden." The petitioner in Steward indeed
apparently tried to argue that earmarking is a reason to find a tax
unconstitutional -- but that's the opposite of what Butler
said:
It does not follow that, as the act is not
an exertion of the taxing power and the exaction not a true tax, the
statute is void or the exaction uncollectible. For, to paraphrase what
was said in the Head Money Cases (supra), p. 596, if this is an
expedient regulation by Congress, of a subject within one of its
granted powers, and the end to be attained is one falling within that
power, the act is not void because, within a loose and more extended
sense than was used in the Constitution, the exaction is called a
tax.
Despite this, the Steward opinion
indeed makes a point of denying that the tax proceeds are earmarked.
But if there were a principle in effect then that such earmarking is
unconstitutional, I would think petitioners would have cited not Butler,
but a case in which earmarking actually motivated striking a law
down. Presumably no such case exists.
We can hold current
politicians responsible for the shortage in Social Security because
most of them have been part of the Federal scene for decades.
I'm not at all arguing for the innocence of
current politicians. I'm just arguing against the innocence of
New Deal politicians. 1937 was the year of the socialist revolution in
America, and it pains me to hear a Libertarian apparently defending
that revolution.
You can call SS "vile
socialism" if you like, but I do not find this vile at all.
The New Dealers clearly intended to do something good.
Socialism is rarely founded on the
intention to do evil.
They did not conspire for
my parents to rip off my children. They simply did not
understand the future consequences of their effors.
They
understood perfectly well that full benefits would be payable years
before the contribution schedule had finished ramping up. I've
mentioned this ramping contribution schedule in each of my last three
messages, and you've ignored it every time. This was likely the first
social program in U.S. history that explicitly enacted cohort inequity
in its legislative provisions, setting the political and constitutional
precedent for the multi-trillion dollar unfunded liability that our
children face.
The truly "vile"
socialism is the nationalist kind. Like the Nazis the
NeoCons hunt for scapegoats, enemies, and victimize people in most
brutal ways, doing so quite intentionally.
Such comparisons with Nazis and fascists
are specious, for reasons I've described before: