Fat Steve's Blatherings

Wednesday, December 28, 2005

Lack of Historical Knowledge


        Robert Samuelson demonstrates his ignorance, courtesy of Betsy's Page.

At Length:

        In the Washington Post, Robert J. Samuelson has a story worth looking at, called Our Entitlement Paralysis.  It has some interesting things to say, and is worth reading in full (it's fairly short).  But on one level, it fails abysmally.

        No, I don't mean its Bush bashing, which is more or less a requirement of being an MSM reporter writing about this subject.  No, I don't mean the way it goes easy on the Democrats.  I mean the author's flat out ignorance of history.

        My grandfather St. Onge was an insurance salesman.  When Socialist Insecurity was created, he pulled out the actuarial tables, ran the numbers, and concluded that it wouldn't work.  It wasn't actuarially sound.

        But S.S. wasn't supposed to be actuarially sound.  What it was supposed to be was politically sound.  In Our Country: The Shaping of America From Roosevelt to Reagan, Michael Barone tells of the then head of the S.S.A. going to see Roosevelt.  'The whole business of Social Security accounts is bogus and a waste of money,' he said.  'Why don't we just eliminate it, and run it out of the general funds.'  FDR replied that the guy was both right and wrong.  Yes, it was a waste of money, yes, the S.S. trust fund was bogus, but that wasn't important.  What was important was, the S.S. numbers and accounts made the program politically untouchable.  Congress couldn't abolish it.  And the reason it was untouchable was those phony individual accounts.  They covered up a government giveaway with the appearance of paying into some personal account.  People believe that they're owed Social Security, because they "paid into it."

        Politicians have always found it easy to make big promises concerning S.S., secure in the knowledge that when the time comes to pay, they won't be in office.  Private industry is not much better -- when General Motors came up with its pension fund idea, Peter Drucker immediately wrote an article titled "The Mirage of Pensions," saying that the promises being made couldn't be kept.  But as the philosopher P. Simon put it: "A man hears what he wants to hear."  The management of General Motors wanted to believe it could buy some labor peace with a pension fund that wouldn't cost them anything.  Members of the UAW wanted to hear that someone else would cover their health care bills, and fund a lavish retirement.  The public at large wanted to hear how they'd get something for nothing.  They still do.  Social Security and other "entitlements" were run by paying out to the old more than they paid in, and sticking the current generation with the bill.  Now the unpayable bills are coming due.

        Eventually, the realities of the budget, and the inability to keep the promises made, will force people to make hard choices.  But not till we're a lot closer to the edge of disaster.  Democracy may be better than other forms of government, but it still isn't very good.

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