Restocking the Lake: The Argument about Social Security
I've been reading some excellent posts lately from Kemstone and Rw005g on Social Security about how there are moves to reduce and/or privatize it, ostensibly out of the misguided conviction that any program run by the Government is intrinsically a bad idea but actually because banks can make way more money if they can force all Americans to speculate on their retirement income, particularly with the Government's blessing. (Now THAT's an awful opening sentence. It sounds like I'm writing in German.)
We're looking at the latest incarnation of what can best be described as class warfare, a term I'm extremely uncomfortable with given that I'm capitalist rather than Marxist. (Where I part ways with a lot of my fellow capitalists is that I believe that the market operates more efficiently when regulated.) What I've learned over time is that class warfare is overwhelmingly practiced downward. You'd think that the poor would steal from the rich, being as the rich are where the money is, but it almost always works in the other direction. Go figure.
What's currently happening is that we have historically low tax rates on both corporations (some oil companies are basically not paying any) and rich individuals. Most of us know that the estate tax has been decimated and that we're still giving huge tax breaks to millionaires. Now we're hearing complaints about how spending on social programs, such as Social Security, is fiscally irresponsible, primarily from people who are causing our budgetary problems by being too fiscally irresponsible to pay their fair share of taxes themselves. In other words, this is an effort to take a financial burden off the rich and put it on the middle class.
We could argue until the cows come home about how immoral this is. Though I agree, there is an extent to which morality can be viewed as subjective. What strikes me about this action isn't so much its immorality as its stupidity. Stupidity has the advantage of being considerably less subjective.
The problem, to use a metaphor, is that our lake is running low on fish. We have one political party, and apparently parts of the other, that argue that the government should subsidize the purchase of bigger boats, bigger nets, better bait for those big enough to be in the commercial fishing business. However, that course of action will just lead to more people fighting over fewer fish. The place to invest isn't in improved fishing gear, the place to invest is in restocking the lake.
Where do most businesses make money? It isn't from investment, because investment is all borrowed, so none of it is actually profit. They make money from their customers. There are only two kinds of businesses I know of that don't depend on their customers having money to spend with them: One is called a shelter or writeoff and the other is called a front. Some businesses, such as banks, have a customer base that is primarily made up of institutions, but most have customer bases that are primarily made up of individuals. They make money because enough individuals have enough to spend with them.
By the way, businesses whose customer bases are primarily institutional are also dependent on individuals, just not as directly. Banks that lend to, for example, various governments (State, Federal, local) that run deficits are ultimately dependent on those governments' sources of tax income which is, of course, individuals.
So, how do we restock the lake?
By making sure that long-term disposable income gets into as many hands as possible.
How do we do that?
All sorts of ways. We know that people earn more on average if they're more educated, so subsidize education, including college education. This doesn't mean "subsidize" by giving banks a way to make money by lending to students who will take most of their lives to pay off their college loans; it means subsidizing such that these students end up with long-term disposable income ASAP.
We know that young children with inadequate education and support at home to do well will make less money over their lifetimes, so they'll be less economically useful to all of us: less useful as employees for American businesses, spending less money as customers for those businesses, paying less taxes to governments and using more social services (and, quite possibly, prisons). So, to maximize their lifetime incomes, subsidize whatever works, including programs like Head Start, and of course primary schools in districts that don't have enough of a tax base to provide a decent primary education.
We know that certain industries are poised for enormous growth and that we as a nation will be better off if those industries are largely based here. This is particularly true of "green" technology at the moment, emphatically including renewable energy. So, commit on a governmental level to using and requiring these technologies so American companies can make the case to banks that loaning them money to expand in these areas constitutes a good investment. That's already being done overseas, so a lot of jobs that would end up here are ending up in Germany, Denmark, and China, often with American technology because we didn't make this commitment soon enough. Right now, too much government support is instead going to the oil and coal industries, which have all sorts of influence but don't represent our best growth area for a plethora of reasons.
We know that our national demographics are such that an awful lot of Americans will retire in the next several years. The economy will be a whole lot better off if they have disposable income than if millions and millions of them are broke. So, DON'T FOOL WITH SOCIAL SECURITY! That would be an unbelievably irresponsible place to try to save money, not only because it would be disastrous to the aging population but because it would be disastrous to the millions of businesses who depend on their spending.
It's this last part that gets me. An awful lot of rich people depend on investments for their income. Most of that money is presumably invested in businesses that depend on customers with money for their profits. If those businesses run out of customers with money, what do you suppose happens to those investments?
Like I said: Stupidity has the advantage of being considerably less subjective. We're looking at stupidity on a major, major scale.