Your Friend, The Federal Reserve

Just a simple note.
Today C-SPAN aired a meeting of the Joint Economics Committee, where Alan Greenspan, long-time chairman of the Federal Reserve Bank and renowned economist
was questioned by such dubious luminaries as Sen. Jack Reed ( D - RI ) and Sen. Edward "Ted" Kennedy, ( D - MS ).

Senator Reed, of course, spent not one penny of his own money on his last election, as did Senator Ted. Both Senators are of course doing very well, and in no danger whatsoever of having to themselves suffer under the crushing tax burden laid on the U. S. population by Clinton's economic "policies," But in this particular hearing, they were of course passionately against any reduction in the tax burden.
And you just knew they were going to drag Social Security into things.

You were right. They did.

Senator Reed spent several minutes explaining to Chairman Greenspan that reducing the taxes, notably the estate tax and capital gains taxes, would further hurt the ability of the government to meet its "obligations" for Social Security.

Chairman Greenspan, with the inimitable tone of an older man explaining patiently to a particularly slow four-year-old, informed Senator Reed that (translation mine) "if people have more money in their pockets, they will invest more, which increases the tax base and the number of people able to pay taxes. This increases your tax revenue."

Well, duh. This doesn't take a WHOLE lot of thought. Who's going to buy stocks when they can't put food on the table, especially when they know that if they do, their taxes will go up amazingly if they make any money at it? Who's going to buy a house, or a business, or anything, if they get punished for making money?

The current tax rate on capital gains is 28%. This means that if you sell your house that you bought for $50,000, and you get $100,000, you have to pay the government $14,000 in taxes. Does that sound a bit steep to anyone? Especially since there are applicable sales taxes when you buy the property or stock which can result in capital gains, which means that in effect you have been taxed twice for the same item.

The estate tax is even worse. Although according to the IRS, it only affects people who are leaving an estate in excess of $1 million, let me ask a simple question. Who do you think employs the poor? If the rich have no cash money, and instead only own real property, they cannot hire workers, or start businesses, or invest in other people's business ventures. The "tax the rich to death" school of economic thought only results in a greater group below the poverty line. Further, the moneys and property affected by the estate tax have already been taxed before, upon their acquisition; in fact, in the case of stocks and savings, those moneys can be taxed each year that they exist. This is abusive taxation in its worst form.

But: all this is important only as a sidelight; the real issue at hand is Social Security, that great political deathtrap that no-one wants to address. So, here's how the system works.

Social Security, however it was initially conceived, has become a gigantic, government-subsidized Ponzi scheme. When you work, you pay Social Security taxes out of your wages. However, contrary to popular belief, these taxes do not go to pay for your benefits when you retire. Instead, they go to pay for those people who are already retired and drawing benefits. You are taking it in trust that when you retire, there will be enough people still working in this country to pay your benefits in turn.

Sadly, there's simply no actual evidence that this is even possible. Remember the so-called "Baby Boomers?" They gave birth to a generation which has largely limited its procreation, which means that when the Baby Boomers retire, the number of retired people will outnumber the number of those in the workforce enormously. This is not helped by the AARP, which lobbys constantly to get the age of "seniority" and the retirement age lowered, thus increasing the pool of benefit recipients steadily.

What this means is that eventually, the number of retired people being supported by each worker's taxes will exceed the worker's ability to pay. Just as in any Ponzi scheme, you can only rake in the cash until a majority of your customers are asking for their money back; then it falls apart.

The National Center for Public Policy Research has done a good essay on this.
Their conclusion is accurate, privatisation is not only necessary to save the system, but will actually result in increased benefits for everyone. But that's only good as far as it goes. They missed, as all the talking heads on TV do, the moral premise behind it.

This is very simple. IT IS NOT THE GOVERNMENT'S MONEY. IT IS YOUR MONEY. You have the right, having earned the money, to determine how it is used to provide your benefits. If the premise of Social Security is, as its founders stated, to provide YOU with a retirement account, then why should the government get to use its coffers as a private piggybank, and why should the government decide the manner in which it is to be administered? YOU EARNED THE MONEY. THEY STEAL IT. It really is that simple. The people whose idea this was are now not contributing to the system, and they are being paid for by those who are contributing.

The current system is in the process of collapsing. Frankly, given a choice between taking the word of Senator Jack Reed, (Master's Degree in "Public Policy") and that of Federal Reserve Chairman Dr. Alan Greenspan, whose doctorate, might I add, is in economics, I will take that of Chairman Greenspan, who says that Social Security is a sinkhole for our economy.

Watching Dr. Greenspan make Senator Reed look like a monkey made my day; it's a pity virtually no-one else was watching, or thinking about what it meant.