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From: laura@utzoo.UUCP (Laura Creighton)
Newsgroups: net.politics
Subject: Re: Social Security (reply to Larry Welsch)
Message-ID: <4971@utzoo.UUCP>
Date: Mon, 21-Jan-85 17:32:35 EST
Article-I.D.: utzoo.4971
Posted: Mon Jan 21 17:32:35 1985
Date-Received: Mon, 21-Jan-85 17:32:35 EST
Organization: U of Toronto Zoology
Lines: 186

Larry,

You are going to have to do some reading of economic history. You have
your facts wrong. First of all, you do not appear to know where
Social Security came from, both globally, and in the United States,
and secondly you do not appear to know where the depression came from.

You write:

   The main reason social security was formed was to provide protection for
   all the hard working folks who worked their asses off being good citizens.

There are two problems with this statement. The first is that it assumes that
it is possible to ``protect'' hard working folks and 
Social Security is actually doing it. But the second is more glaring --
*this is not where social security came from at all* -- the business of
*protecting* came much leter as an extra justification for the existence
of the whole thing. 

About 6 months ago, I posted ``How the Federal Reserve Act lead to the
Depression''. How soon you all forget! The Depression was *caused* by
government meddling -- in the forms of taxes, tarrifs, and most especially
by how it enabled banks to inflate their currency (something now reserved
for the government alone). Inflation causes depressions. I am now going
to outline how SS cuases inflation (or rather, how the government, now
committed to SS, is forced to inflate the dollar). SS, rather than
protecting the hard workers, only causes the very things you want to
protect them from! 

Social Security, like any other political institution, began with an
idea. In the case of the United States, it came from a man (whose first name
I forget) named Townsend.

It was his claim that the Depression could be cured if one gave $200 (or
$250? I forget) to
everyone over sixty, each month, provided that they spend it within the
month; the resultant demand would cause production to increase, and
everybody would be better off.

This sort of idea (that the government can much with the money supply
and make everyone better off) was gaining tremendous respect among
politicians and some economists at the time. The master of these sorts
of theories was John Maynard Keynes, but the notion had been attractive
to politicians since before his arrival on the horizon.

Have you received Daniel Kian Mc Kiernan's article on inflation?
If you study that one you can figure out what is wrong with Townsend's
proposal -- besides the moral idea that it is immoral for you to take
my money away from me for any purpose whatsoever.

The market works a certain way. People do not come up to frogs and say
``gee, I wish you were a bird, so I will tack on wings and expect you
to fly''. People do not try to make Crays out of IBM PCs. For some
reason, though, politicians are *determined* to pretend that the market
will operate according to their desires, and people are *determined*
to agree with them.

Okay, back to the depression. Nobody likes it. The politician who makes
it go away will get lots of votes and lots of power and the eternal
gratitude of the American people. Townsend's proposal gains popularilty,
and eventually, after about a third of the American people think that it
is a good idea, Social Security becomes law. (It is just too bad for the
two thirds who either didn't like it or expressed no opinion on the subject,
not to mention people like myself who weren't even born yet.)

What is wrong with the idea? Why doesn't it *work*, you ask? Well, here is
a very basic secret. *Consumers qua Consumers do not drive the market*.
*Consumers qua Consumers determine which of the competing products they
can buy will be bought, and thus which producers will do well and which
will go bankrupt. They are influencial in the weeding out process whereby
inferior products stop being produced, but as consumers they do not drive
the market.*

There is no such thing as a consumer who is not also a producer, unless,
of course, he is on ``relief'' or otherwise being supported by somebody
else. (Unemployed people who are living off their own savings are still
producers, or at least they were.) It is *production*, not *consumption*
which drives the market.

Which brings us to a very basic truth. TANSTAAFL. There ain't no such
thing as a free lunch. Townsend sounds like he is promising a free lunch,
so *there* *must* *be* *something* *screwy* *around* *here*. Frogs don't
fly...

Look a bit. What he is saying is that just transferring bits of paper
around is going to cure the depression. At that rate we can all become
insurance salemen and sell insurance to each other and all become
millionaires. Ooops, it doesn't work that way, alas.

What Townsend has forgotten is that he is going to have to get those $200s
from somewhere. He has 2 choices. He can either take it away from people
who already have $200 or he can go to the presses and print more money.
In either case he has not increased the wealth of the nation, because
*Wealth is not Money*. Wealth is all the goods that the nation has and
is producing. If Townsend takes the money away from the people that have it,
all he has done is *transfer* wealth from the ``haves'' to the ``have nots''.

What happens? Well, the ``haves'' no longer can spnd that money as they choose.
They can't just keep it in the bank, either, if that is their choice. The
bank no longer can invest the money as they would have if the ``have''
didn't have to withdraw it to pay the taxes. All the people who would have
received the $200s, either directly from the ``haves'' or from the banks
in the form of loans LOSE. All the people who receive the $200s WIN. The
winners know whom they are. Most of the losers do not know whom they are --
indeed, some of them think that they are winners, not realising that they
have lost more money in business then they received in SS. This is politically
desirable -- the politicians appear to be doing good things. But, for
every winner there is a loser -- TANSTAAFL.

Eventually, either the government does not tax enough one year, by
mischance, or, as is more likely, realises that if it raises taxes it
stands to lose the next election. At this point it goes to the treasury and
starts printing money.

The nation doesn't know it yet, but it has just been poisoned. Take all the
wealth in the nation and divide by the number of dollars in circulation.
That is how much a dollar is worth. If you raise the number of dollars without
creating any new wealth then you have devalued the dollar. TANSTAAFL. This
(as you recall) is inflation. Inflation amounts to a tax on money. Your
money is worth less, you have to pay more money, and the difference is used by
the government to keep those SS payments going out the door. (Plus any
other expeditures that the government might have.) The people on SS notice,
as everybody else does, that they're dollar isn't buying as much as it used
to. They clamour for more money. They want it ``indexed against inflation''
for instance. The people who pay taxes can't buy what they used to, either.
They sure as hell don't want to pay any more taxes, so raising them is
politically unfeasible. So the government prints more money. More poison.
The nation gets sicker....and sicker....and sicker... and all the while most
people think that ``inflation'' means ``raising prices'' and blame the 
fellow victims of inflation who are forced to raise their prices, rather than
the government. A lovely scam for the government...

Government officials are not all fools. if you read any history you will
see that from the Athenian League through Germany in the 1930s-40s and
many South American countries today the journey from inflation to total
monetary collapse is quite well marked. The only way to avoid this is to
either:

	stop spending what you can't afford

or

	raise taxes so that you can afford more.

Both of these are politically unfeasible. But if you can con the public
into paying more into SS, you can keep the whole game running longer,
perhaps until you retire or until someone else figures out a way to
make frogs fly.

What you do is to see the American public on insurance. You sell SS as
insurance -- you pay now and it will all be there when you retire. This
sounds like a RRSP. If this was what SS *really is*, then while I would
have severe moral difficulties with a government that tells me I *must*
save my money, and where I must save it, I could see the scheme working.

RRSPs work, after all. However, the government is *not* investing my
money. What it is doing is paying the people who are already at retirement
age with it. This is not a RRSP -- this is a chain letter. If a private
individual starts a scam like this -- either with a chain letter, or through
the stock market (remember the guy who sold franchises of franchises of
franchises to sell cosmetics?) the government sends him to jail pdq. The
reason is that it rips off the guys at the bottom, who pay their money to
the guys at the top (who get rich) and will never get any money back because
by the time their name is at the top of this list there won't be anybody
left who is willing to pay money at all -- the market is saturated.

On to some more basic facts.

The soundness of the SS system is unrelated to the trust fund. That was just
set up to maintain the illusion that SS was some kind of insurance plan.  

Once you realise that there is no investment, just a chain letter, you can see
this. The problem won't go away -- there aren't enough new people being 
born that we can send the SS chain letter to who will start paying.

SS IS GOING TO STOP. We simply cannot afford it. We have a choice --
cut down on it, gradually, (thus not simply creaming the poor people
who believed that SS was a RRSP when they started paying 40 years ago,
or so.) -- or we can face monetary collapse. The government cannot
continue inflating the dollar indefinitely. TANSTAFFL. Social Security,
Military Spending, Aid to Farmers, the national debt --- all these things
*cost money*. And inflation is no way to pay for it, it is just a way to
trade political acclaim now for monetary collapse later.

Laura Creighton
utzoo!laura