I had taken a bit of a break from reading philosophy to give my mind a bit of a rest. I re-read for the umpteenth time, "Beguilement" by Lois McMaster Bujold. This is one of my favorite books, series actually.
It was something of a different experience reading it after having read of lot of Ayn Rand's philosophy as I could see similar themes, especially in the main characters who, over the course of the series, go against what is expected of them and instead work for what gives them the most fulfilling lives and in the process improve the lives of everyone around them.
At any rate, I am back reading "Capitalism: The Unknown Ideal" by Ayn Rand and soon came across another great quote.
Remember that private citizens-whether rich or poor, whether businessmen or workers-have no power to start a war. That power is the exclusive prerogative of a government. Which type of government is more likely to plunge a country into war: a government of limited powers, bound by constitutional restrictions-or an unlimited government, open to the pressure of any group with warlike interests or ideologies, a government able to command armies to march at the whim of a single chief executive? Yet it is not a limited government that today's peace-lovers are advocating. [emphasis mine]
Corporations receive a lot of blame for the supposed ills of the world (while at the same time not receiving any credit for the good that has come from them) especially for their "influence" on government. It seems that few people stop to ask themselves how much corporations would lobby and try to manipulate government if government was limited and restricted from interfering in the economy? As Yaron Brook points out in a number of his talks, before the Department of Justice went after Microsoft, the tech giant spent virtually nothing on political lobbying. Corporations, like individuals, respond to incentives. When government interference and regulation make it more profitable for a company to spend their money lobbying than developing innovative new products, is it any wonder that is what they do?
I had a little interaction on Twitter the other day that got me thinking. A dangerous thing as my brother might tell me.
I had posted to Twitter:
Ah, first paycheck of the year, first view of my higher taxes. And people say the government can't work fast.
The difference in my paycheck was just the ending of the so called "payroll tax holiday."
This garnered a decent number, for me, of favorites, retweets and even a few new followers. It also drew one direct reply:
This was a two year tax holiday; would you like to have it made permanent? Why not lower the rate to 0%, and borrow 100%?
Implicit in this reply is that Social Security is a fact of reality that is not subject to change and that the only choice open to us is how we fund it.
This is a pretty common assumption, or at least not uncommon. A quick search revealed any number of similar reactions a year ago when the payroll tax holiday was extended. For example:
Investor's Business Daily (one of my favorite newspapers) said, "Result: cash for pizza now — and smaller Social Security checks later." Truth Sandwich's headline read: "Raiding the Social Security Piggy Bank for Pizza Money" CNS News reported, quoting Rep. Frank Wolf (R-VA), "Wolf called the payroll tax extension a "raid on Social Security, which is already going broke," and he noted that the money paid into the system now -- through payroll taxes -- pays benefits for existing retirees."
This was pretty much my reaction at the time. I felt that if we have a Social Security system that is by all accounts already looking at trouble down the road it is foolish to knowingly take in less money. For those that don't believe that Social Security is on shaky ground, here is a quote from Social Security Administration that they used to send out when they mailed statements to people:
"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2037, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”
There are a number of philosophical issues with a Social Security system. The first is that it essentially requires that you work/live for the benefit of someone else. To whatever extent you are living for someone else's benefit you are NOT living for your own. Given that we are forced to live for others, as opposed to choosing to do it for your own reasons, we are not free. As Ayn Rand put it, "Living for others is slavery -- and nothing else whatever -- and no names, ends or excuses can alter the fact."
Contrary to popular belief, the government is not saving and investing your contributions in order to give you income during your retirement. Rather, money paid in today is used to pay benefits to those collecting them today. In the past, more revenue was collected in payroll taxes than was needed to pay the current benefits and the surplus was used to fund other parts of the government in return for IOUs (Treasury bonds) which were put in the "Trust Fund." Now that payroll taxes are no longer covering current benefits, bonds from the "Trust Fund" need to be redeemed. Which means the cash needed to pay shortfall is coming from general tax revenues further burdening current tax payers. This latter problem will worsen as demographics catch up with us and there are fewer and fewer workers paying taxes to support retirees. In the 1930s it was about 17 workers for 1 retiree and now it is approaching 2 to 1.
There have been a number of models for privatizing Social Security which would appear to remove the issue of requiring people to work for the sake of others. Two of the more often mentioned systems are those of Chile and Galveston, Brazoria and Matagorda counties in Texas.
Chile converted their system from an untenable government run system to a privately invested system where the individuals can decide how their money is invested. So far this seems to a lot of improvements over the government run system. One interesting side effect is that savings rates are higher than before the private system which certainly helps long term growth.
The three counties in Texas took advantage of a since-closed loophole in the law and opted out of Social Security in 1981 and convert to a privately invested system. These counties pool the contributions and then money management firms bid to manage this money with certain restrictions on guaranteeing rates of returns. Even the report from the Social Security Administration indicates that in many ways the private program is as good and often better than Social Security. In the areas where it appears Social Security is better it is unclear whether the figures given for Social Security include the reduction in benefits that would appear to certain to occur around 2037 (the examples given in the report are for workers retiring in 2045). Assuming the government doesn't increase payroll taxes by about 1/3, at current estimates, then benefits as noted above would be reduced by 24% making the private plan in these counties better in pretty much all areas.
The problem with both of the above alternatives is that they use government force to compel the workers involved to participate. (Well, in the case of the counties in Texas, workers are compelled to either participate in the private plan or social security.) While the government properly should have the monopoly on the use of force in a civilized society, this force should only be used in retaliation against those who initiation the use of force unlawfully. The government should never be the initiator of force against the innocent.
When the government uses force to compel behavior, or prevent behavior that does not infringe on the rights of others, it effectively takes away our right to use our own mind and reason to decide what the best course of action for ourselves is. When the government compels someone to save X% of their income towards retirement it precludes the person from using that money for something else.
Maybe the person would like to start their own business but because of such a law they would be unable to save the money needed to begin, or would be so delayed that the opportunity would disappear and the person's future be worse off as a consequence. Maybe the person would decide to take a trip, buy a new computer or whatever and not bother with saving for the future. Either way, man's most important right, the one he cannot truly live without, is the right to live his life as he sees fit based on his own reason.
Below is Yaron Brook of the Ayn Rand Institute discussing the entitlement problem in the United States.
So my feeling is the the ultimate answer is essentially the same as what Yaron speaks of in the video. As I put it in response to the tweet quoted above:
or how about phasing out Social Security all together and let individuals plan for themselves?
After I started writing this post, I noticed I had a reply to my response. I was a little surprised, but pleasantly so, given my preconception based on the initial reply:
That would be the best idea, since it isn't a "retirement plan" and is nothing more than an entitlement program.
I was watching the John Stossel program on Fox Business News last night, primarily to see the segment with Yaron Brook. The overall theme of the program was charity, but towards the end of the segment with Yaron Brook, a somewhat offhand remark was made and then repeated by John Stossel about how John D. Rockefeller saved the whales, something you are likely to never be taught in your Environmentalism class.
So, understandably curious I did a quick search and found a number of articles on the web verifying what was mentioned on the program last night. Essentially, Rockefeller via his Standard Oil Company reduced the cost of kerosene, from 59 cents per gallon in 1865 to about 7 cents a gallon in 1895, while improving its quality. Keep in mind this is during the period when he had a virtual monopoly (about 90% control) of oil refining in the United States. So much for monopolies driving up prices and reducing quality.
How did this save the whales? In the 19th century, one of the biggest (if not the biggest) driver of whaling was the need for whale oil which was the primary fuel used for lighting in western nations. In 1856 the price of whale oil reached its peak of $1.77 per gallon, making it vastly too expensive for the average person to use, essentially reducing productive hours to daylight.
It was about this time, a few years earlier in fact, a geologist named Dr. Abraham Gesner developed a method of distilling kerosene from petroleum, which was then considered a nuisance. His kerosene was cheaper than whale oil and burned longer and could be used in existing lamps. This improved the quality of life immensely for the average person.
As Rockefeller pushed the price of kerosene down even further, the demand for whale oil disappeared. In the 1840's the United States alone had more than 700 whalers but by the 1870's that number had drop to less than 40, due in large part to the impact of cheap kerosene. Oddly, it was fashion that helped enable whaling to limp along for a few more decades as the demand for whale bone for corsets and the like allowed whaling to continue to be somewhat profitable. This finally ended when spring steel replaced whale bone for these uses. The last US whaler set sail in 1924 and promptly ran aground.
The source of the bulk of the information for this post came from an article in the Freeman titled "How Capitalism Saved the Whales." It is definitely worth reading as it covers a lot more than I did here.
One quote in particular jumped out at me and I think is something people need to consider when they discuss the role of government intervention in business:
If the government fosters an atmosphere in which innovation and profit making potential are subject to whims of bureaucrats, lawyers and politicians, and not based in the abilities of creative people to find innovative solutions to public needs, innovators will not set their minds to the task, and no state whip can force them to do so.
One other interesting note towards the end of the article was the fact that many lakes in Pennsylvania were restored as oil drilling removed naturally occurring petroleum leaks that were polluting them. Makes me wonder if we'll see something similar with hydraulic fracturing?
You can find another article about this topic here.
Regards
