http://sociology.ucsc.edu/whorulesamerica/power/social_security.html
In the 1930's, a series of things occurred in the United States that still has reverberations today. First, the stock market crashed. Then, companies started going bankrupt. Bankrupt companies defaulted on their pension promises to their workers and left them unemployed. To stem the bleeding, Congress got together to pass a social security bill, which would guarantee workers unemployment insurance and an old age pension. Relying on the private market to achieve the same thing was hopeless.
What were they going to do, invest in the stock market? The stock market was in free fall. Hoard gold? All gold in the United States was seized by Roosevelt to help pay the government's bills. Rely on an old-age pension from their employers? But employers could spontaneously cut or eliminate these pensions, or simply go bankrupt and default on them. There was no way to force them to pay money they didn't have.
As a last resort, individuals could have simply stowed away part of their pay check all their lives in banks, and then started withdrawing those savings when they were suddenly unemployed or too old to work. But of course this wouldn't work either, because banks randomly, and often, went bankrupt, and at the time there was no Federal Deposit Insurance that would restore your savings to you regardless of market fluctuations. (This was only passed in 1934, even though it sounds like the most obvious and common sense policy ever invented.) Furthermore, it is more efficient for people to purchase insurance in case something bad happens to them, than to 'insure' themselves through personal savings. This is because there's always the chance that nothing bad happens to you (you don't lose your job and you die before you retire), in which case all that money you saved was just lost. There's also the chance that what you set aside simply wasn't enough because the outcome was worse than you predicted. If you instead buy an insurance plan that saves less money, and then pays you out more money, but only if you actually need it, you can get the best of both worlds -- security in the future, and prosperity in the meantime.
The vaster a company's reserves, the more likely it will be able to pay out your insurance benefits when it comes time to claim. Putting money into a private insurance company inevitably runs the risk of the company going bankrupt and not actually paying you when the time comes. Only a limitless reserve of wealth can give people proper insurance, which requires the Federal Government as the proper source of insurance. It isn't like pensions plans weren't originally tried under the private system. Private pensions were already available, they were just infinitely unreliable and never actually paid out in the end. In the midst of the Great Depression, there was simply no way for private insurance funds to ever have enough money to weather the economic disruption. Now that we have entered a comparable downturn in the economy, we yet again must realize the limits of private insurance companies. Just as the federal government had to bail out the insurance companies after 9/11 because the insurance companies couldn't actually cover the losses of the companies who had bought their insurance, the federal government had to bail out all the 'securities' insurance companies like AIG bought during this recession when they suddenly became 'toxic' and essentially worthless.
What we're seeing is the same story, repeated over and over, teaching us the same lessons. Private companies whose sole reason for being is providing a large reserve of money so that it can shoulder risks at more efficient prices than individuals are themselves less efficient than government programs that can shoulder larger risks at even more efficient prices with an even greater reserve of money. Whenever a private company attempts to serve the role properly served by government, it inevitably fails and requires government assistance to rush in and save it. Therefore, why do we even bother? Why not simply nationalize all insurance agencies and stop pretending that private insurance is actually reliable or safe for those who buy it?
Social Security long ago realized that old age insurance was best handled by the one unchanging facet of life, the US government. This is even more true today, as corporations endure faster and faster life-cycles that no longer even attempt to keep people employed for life, since the average human lifespan is longer than the average corporation's lifespan.
Republicans want to eliminate social security and return old age insurance to a variety of different schemes: People could buy old age insurance from insurance companies, who could then pay it or not pay it based on their current financial well-being. Or people could invest in a stock market, which has lost 30% of its value since 2000 (when inflation is taken into account) and has remained basically flat for decades. People who invested in singular stocks, instead of the entire stock market, would face even greater risk as companies can suddenly lose all their value overnight -- like Lehman Brothers or Enron. Stowing money away in banks is no longer an option, because by the time retirement age comes about, inflation will have eaten all the value of your old money away. Social Security is indexed to inflation, but bank savings are not. They're well Below inflation levels. There is only one way for people to save for retirement that gives them the same dollar value as they put in, 100% of the time, risk-free. That is the government run social security program. Rather than privatize social security, we should lump it in with all other insurance programs in America and reinvent it as the Citizen's Dividend. An annuity which will pay out across your entire life, including enough money to provide for yourself in your old age.
The central idea behind social security was good, but like usual, circumstances changed and the law has lagged behind. Social Security was made at a time where old age was much rarer, and the worker to retiree ratio stood at 13:1. Now people live longer, and the worker to retiree ratio is a cripplingly small 2:1. This is due to the low birth rates of the baby boomer generation who failed to perform their most essential duty in life, the simple preservation of life and passing of their genes and culture to the next generation. Since the baby boomers created this problem, the baby boomers should have to bear the consequences. If a Citizen's Dividend of $12,000 a year is less than what they would have received via social security and medicare (an aspect of national health insurance which should also be lumped into the Citizen's Dividend), then that's their tough luck. Social Security and Medicare cannot be supported by the rump population they left behind them and the forecast debt for these programs are in the hundreds of trillions. More importantly, the Citizen's Dividend cannot be abused like social security and medicare were. The government took tax dollars that were intended for the later use of the social security and medicare programs, and used them to spend on frivolous general government funds instead. They got away with this because no one noticed the theft that was occurring, because social security and medicare funds aren't drawn heavily upon until the baby boomer generation retires.
The Citizen's Dividend is different. Every dollar paid into the citizen's dividend in that year of taxes, is immediately turned around and paid back out to the citizenry the same year. There is no time for government to hijack the funds and divert them to other governmental uses. No stealth borrowing from 'citizen's dividend taxes' can occur, no IOU slips can be left in the treasury like we have for social security and medicare.
Where did those trillions of dollars go, that were collected for social security and medicare, but spent on the general government? Most of it went to the military. Even though we had already won the cold war, and even though it was inconceivable that any country on Earth would stand a chance if it attempted some sort of amphibious landing and conquest of America, or beat us in a nuclear war, Americans out of sheer hubristic delight decided to spend trillions of dollars a year to fund an overseas empire. Our military funding equals the entire rest of the world's combined. Whereas all other countries on Earth manage to protect their borders, prevent terrorist attacks, and retain their sovereignty with a few billion dollars of military spending per year, the USA alone requires trillions of dollars a year in order to fail at all three projects -- our borders are completely porous and anyone who wants can move through them, our sovereignty is being steadily eroded by massive influxes of foreign, often illegal, immigrants with no allegiance to America or the historic American people, and the Christmas Bomber and Fort Hood incidents have yet again exposed America's vulnerability to terrorism. On the bright side, we managed to prop up two pseudo-democratic, corrupt, sharia states in the middle east, which will probably collapse again the moment we leave. In neither case did we in any way aid US interests, as Al Qaeda simply moved to Pakistan or other places, and Iraq did not, in fact, have any WMD it could have threatened us with, or give us any free oil in 'gratitude.'
We also managed to rebuild Haiti, over and over, just like we are rebuilding Haiti now. We also got to bomb Serbia, over and over, stripping it of Bosnia, Montenegro, and now Kosovo. But it is hard to fathom how either activity has benefited Americans in any way, aside from the sheer joy of blowing stuff up and playing kingmaker. In addition, we managed to keep bases in over 130 countries, exerting some sort of imperial 'influence' over Germany, Japan, South Korea, Qatar, and dozens of other places -- an influence that yet again cannot imaginably serve US interests in any way, and usually sours the public's opinion of us wherever we are located.
Excluding medicare and social security, which if simply left alone could have paid for themselves through their own special taxes designed to pay for them, (or at least for the most part paid for themselves), the military accounts for over half of government spending. Almost none, zero, of this spending is necessary. It could all be phased out, just like the rest of the modern world has shrunk and phased out their military spending to minuscule levels, and lost no security thereby. All we would have to do is renounce our imperialistic foreign policy and return our military home, where they belong, protecting ourselves, not anyone else, and not executing hare-brained utopian nation-building schemes designed solely for Presidential amusement. At the same time George W. Bush got us into these awful wars, George W. Bush passed a tax break, mostly for the ultra-rich, but continued to fund the government at higher and higher levels. The only way this was possible was to use social security and medicare tax receipts, and an enormous deficit, to fund the imbalance in the general budget. In such a way the government created, wholly unnecessarily, a tax shortfall in the social security and medicare budgets, and a ballooning national debt which itself takes up more and more tax money simply to fund the interest it has accrued.
All of this was made possible by the pyramid scheme that is the central nature of Social Security and Medicare taxes -- pay now, receive benefits later. If people paid now and received benefits now, the issue would be solved. "But, if people simply received back from the government exactly what they paid every year in taxes, what would be the point?" Well of course there would be no point in that. The point is to tax the rich more than the rest of the public, so that most people receive a larger Citizen's Dividend than they paid in taxes that year. This discrepancy could then fund all of their insurance needs -- their old age insurance (social security), their health insurance (medicare, medicaid), their life insurance, their auto insurance, their fire insurance, their unemployment insurance (extended by the stimulus bill), natural disaster insurance (FEMA), etc, which we've already established inevitably falls to the government one way or another anyway.
People, secure in the knowledge that they'll have a steady source of income no matter what happens to them, won't have to purchase insurance plans anymore. They won't have to pay into insolvent pyramid schemes like Social Security and Medicare. Instead they can either invest or spend their money immediately, either of which activities would be a great boost to the economy. People, no longer paralyzed by fear and no longer robbed by ridiculous government spending on the military, could all enjoy a high quality of life with no deficit spending, no inflation, no looming debt crisis, and lower taxes than we pay today.
Why haven't we already adopted the Citizen's Dividend, when it so obviously would be beneficial to the vast majority of Americans?
The answer to that must be a later post, but the short answer is that the US electoral system does not provide a sufficient check on the power of the rich.
No comments:
Post a Comment