Thursday, August 1, 2013

“Need” for Social Security Indicates Coming Failure of Economy



Recently Don Watkins said that he was working on a book about Social Security. Without question, the book will be well informed and insightful. It will have information and arguments that will be very useful in the attempt to bring that program to its deserved end.Bureaucrats

One reason why Social Security is a prime candidate for the extensive treatment that Don will give it is the place the entitlement program has in the American attitude toward government’s role in our lives. It seems to embody the idea of government help for the poor and those no longer able to work. It also appeals to the idea that someone who has worked hard all of their lives deserves a little rest in their old age. All of those ideas have completely irrational elements, but I will leave their exposure to Don and other already written material.

However, focusing on Social Security should not leave out the much bigger threat of Medicare. Medicare alone will bankrupt us, while by itself, Social Security would probably just doom us to perpetual poverty. I would expect that Don will include Medicare in his book to some extent.

But I have a problem with focusing on government spending as a primary. While it is necessary to expose the evil of the underlying state-enforced altruism and that the spending will destroy us at some point in next decades, it is not the major reason for our economic problems. Even if we were to convince sufficient numbers of American somehow to ramp down the programs and kill them, we would still be in a very bad way, economically.

But the enormous numbers that Social Security and Medicare will rack up in required spending reveal much more than is normally considered. It isn’t just that the government can’t possibly tax or borrow the numbers required to support and care medically for the Baby Boomers. There is no other source for that care, even if medical costs were to stop growing. This economy cannot possibly support a generation that lives for decades without being productive. Our economy just does not have that capability. I am not sure that any economy could or should support a generation in that manner, but the U.S. economy, as it exists, will not.

Consider that by any measure the Baby Boomer generation, perhaps the wealthiest in the history of man, has a very small amount of savings compared to the cost of living without producing for a decade or more.

Consider that a great amount of our savings has been wiped out by the most recent financial crash, the constant, decades long reduction of purchasing power (2% a year for decades is a disaster for retirement savings), the failure of any but very aggressive, time- consuming investment strategies (which tend to ignore the underlying reality of the division of labor), the fact that savings in banks, cds, or money market funds do not grow at all after loss of purchasing power and taxes are figured in, etc.

Consider that there are no jobs for many who wants to work, and generally not for the retired. Indeed, the unemployment indicator that the government publishes monthly has gone down because it stops counting people who give up. Employment, from the perspective of a growing, high-tech, industrialized economy, has probably fallen since 2008.

It isn’t that the government can’t afford to support the Baby Boom generation in retirement, no one can, as the economy currently exists.

Further, even if you were able to convince sufficient Americans that Social Security and Medicare are wrong, they will resist ending them because they will realize that there is no replacement.

We have to have a replacement to be successful to overcome the problem of our aging population.

What is that replacement? Of course!

It is capitalism: freedom.

Which means the end of regulation. Capitalism means freeing up of the producer, the creator to be productive and profitable. Capitalism means productive work for anyone willing to do it. In capitalism, the primary shortage is people.

It means the recognition of individual rights: that man has to be able to act on his own judgment without requiring permission.

A free economy can solve our problem.

This is the economic side of the implication the DIM Hypothesis. Only the I mode supports an advanced, industrialized, high-tech economy. Any other mode will result in poverty and a much smaller population. There is a fundamental, reality-driven conflict between an economy with any freedom and a culture dominated by D or M. The result will be destructive, and the eventual crash will be very difficult. I don’t know if the crash we are facing will be soon or not, or will play out in a brief period or not. I suppose that the political situation will have some impact. But it will be nasty.

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