Abraham Lincoln used to be one of my heroes. I bought into the idea that he was one of our greatest Presidents. After I graduated from law school and passed my Illinois bar exam and went to the state capitol in Springfield, Illinois for the swearing-in ceremony. While there, I visited Lincoln’s home, which is a national monument. A few years later I worked in the federal building in Fort Wayne, Indiana, across the street from what was then the national headquarters of the Lincoln National Life Insurance Company. I toured the Lincoln Museum, which is in Fort Wayne. I had some pride that Lincoln and I had something in common, which was that each of us had spent most of our childhood in Indiana. I have visited the Lincoln Memorial in Washington, D.C. and Ford’s Theater, where Lincoln was killed. I have visited the battlefield at Gettysburg, where he made is famous Gettysburg address. Lincoln is credited with freeing the slaves and saving the Union. However, after learning more about Abraham Lincoln and reflecting on what he did, I have begun to think that much of the legend of Abraham Lincoln is a result of the fact that the victors of wars get to write the history books. I still have great respect for many of his qualities as a human being; by all accounts, his nickname of “honest Abe” was well deserved. Also, nothing can take away from the fact that Lincoln was an outstanding orator and commander-in-chief. However, the fact that he launched the war that caused more American casualties than all other wars put together and contributed the process that has led to the Constitution to be ignored diminishes his reputation as a President greatly in my estimation.
Although the popular belief about the Civil War was that it was fought primarily over slavery, Lincoln himself had little interest in ending slavery and did not have a high opinion of African Americans. In 1858, in the fourth of the famous Lincoln-Douglas debates, he declared that he was not and never had been in favor in any way of bringing about the social and political equality of the white and black races, was not in favor of making them voters or jurors, qualifying them to hold public office, or to intermarry with white people. He went so far as to say that whites were superior to blacks and that the difference between whites and blacks were so great that they could never live together in social and political equality. In 1861, he supported a proposed amendment to the Constitution that would have prohibited the federal government from interfering with slavery in the states where it existed. Lincoln’s primary goal was to save “the Union” and he said that if he could save the Union by freeing the slaves, by freeing no slaves, or by freeing some slaves and letting others go free, he would do so.
Between the time Lincoln was elected President and his inauguration, seven states had seceded; the other four members of what was to become the Confederate States of America seceded shortly after his inauguration. If there were a strong consensus that states had no right to secede from the Union and that allowing them to secede was destructive, then perhaps Lincoln was justified in treating the southern states as rebellious and to launch the Civil War. However, an argument can be made states had (and still have) a right to secede and that whatever benefits there may have been to forcing them to stay in the Union was not worth the terrible cost. The U.S. Constitution does specifically whether states did or did not have a right to secede, although it does state in the preamble that one of the purposes of the Constitution was “to form a more perfect Union.” However, in their ratifying resolutions, the states of Virginia, New York, and Rhode Island reserved the right to withdraw from the Union if the new government became oppressive. In the nation’s history, the first states to give serious consideration to seceding from the Union were not the southern states, but the New England states because they perceived that the federal government was dominated by southern interests and because of opposition to the War of 1812. In the 1830s and 1840s, some abolitionists, most notably William Lloyd Garrison, called for northern states to secede because of the federal government’s support for slavery. Some felt that the breakup of the Union would encourage the end of slavery. Many of the Founding Fathers assumed that states had the right to secede from the Union. In short, the issue of whether states had a right to secede from the Union was not settled on the “battlefield of ideas” but was instead settled on real battlefields with real deaths, real injuries, and real disruption of lives.
The Civil War set new standards for incivility in warfare. Until then, the standards of warfare discouraged targeting civilians. The Union army, particularly the part under the command of General William Tecumseh Sherman, made a point of destroying homes, crops, and anything else in its path. By the time the war was over, it cost more American lives that all the other wars in American history combined. The Battle of Gettysburg was the biggest battle fought in the history of the Western Hemisphere. In addition to causing massive devastation, primarily to the southern states but also to the northern states, the Lincoln administration so dramatically increased government spending that the United States still has not recovered from the debt from the Civil War. It had finished paying the debts incurred by the American Revolution and was completely free of debt during the administration of Andrew Jackson. Before the Civil War, the federal government had never spent more than $75 million in a year. By the end of 1861, the first year of the war, it was spending $1.5 million a day, and in 1865 the United States became the first nation in history to spend more than a billion dollars in a year. Since then, the least the government has spent in one year was $236.9 million, in 1878. By the time the debt from the Civil War of about $2.8 billion was almost paid, the United States entered World War I and has not come close to being out of debt since. Although it is necessary at times for the nation to go into debt, it should make every effort to repay the debt within the generation that borrowed the money. Any debt that is not repaid during that generation must be paid by taxing future generations to pay not only the debt but interest. Since future generations could not vote and are saddled with taxes, this is taxation without representation. It is also a form of slavery - not as bad as the slavery that the Civil War ended, but slavery nonetheless.
What would have happened if Lincoln would have let the southern states secede rather than causing us to fight the bloodiest war in our history is subject to speculation. Slavery probably would have lasted a few years longer than it did, but with slavery disappearing in the rest of the world, it probably would not have lasted long. The states in the Confederacy may or may not have rejoined the Union. One thing that we can be sure of is that a lot of death, injury, destroyed lives and families, property destruction, and debt would have been avoided. Was preserving the Union really worth all that?
Wednesday, January 26, 2011
Sunday, January 02, 2011
The Immorality of Using Government to Redistribute Wealth and Income
Associated with the recent compromise in the United States Congress in which the “Bush” tax cuts, which were set to expire on December 31, 2010 were extended for individuals and couples of all income levels. That was essentially what the Republican Party wanted. The Democratic Party wanted the tax cuts extended only for individuals making less than $200,000 per year and couples making less than $250,000 per year. What made it a compromise was that to get the Democrats to agree, the Republicans gave up on their opposition to another extension of unemployment benefits. One of the arguments against extending the tax cuts for higher income households was that the “rich” can afford the higher tax burden and that it is unfair for them not to pay their “fair” share. Supporters of tax cuts for the higher incomes have been attacked as selfish and immoral. Arguments in favor of “soaking the rich” include biblical references to a duty to help the poor and that it is easier for a camel to pass through the eye of a needle than for a rich man to enter heaven. I am not a scholar of the Bible, and I am not even particularly religious, but I do know that the Bible places the duty to help the poor on individuals and not on government. It does mention a duty to pay taxes (“render unto Caesar what is Caesar’s”), but says nothing about what tax policies should be. The Bible is about the responsibilities of individuals and not of governments.
The thing that distinguishes a government from any other organization is that it is considered to have the legitimate right to use force and coercion to get some people to do things that they would rather not do or to refrain from doing things that they would rather do for the benefit of society as a whole. Since government is fallible and made up of fallible human beings, its use of force and coercion should be restricted to the legitimate functions of government. People may differ about what the legitimate functions of government are, but in my opinion, the legitimate functions of the federal government are pretty much those described in the Declaration of Independence and the Constitution. The Declaration of Independence says that the purpose of a government is to protect life, liberty, and the pursuit of happiness and that the people have a right to alter or get rid of any government that is destructive of those ends. The “enumerated powers” of the federal government are listed in Article I, Section 8 of the Constitution. Redistributing wealth and income is not among them
The use of coercion to redistribute wealth when done by any organization other than government is usually considered to be robbery. From a moral standpoint, it is robbery even when the government does it. All that keeps it from being robbery from a legal standpoint is that the government defines what the law is and it does not tend to make its own actions illegal. The Bible has something to say about robbery; it says, “Thou shalt not steal.” It also has something to say about desiring the property of others; it says, “Thou shalt not covet.” I submit that the promotion of the use of government as a tool to redistribute wealth and the envy of the rich that progressives in this country promote is stealing and coveting and is immoral.
I and other critics of government redistribution of wealth from the rich to the poor may be accused of being heartless and having no sympathy for the poor, but concern for the poor does not require acceptance of any and all means to help the poor, and one of the ways to help the poor is to help them avoid dependency on government. If they believe that they are “entitled” to relief from the government just because they are poor and therefore society owes them a closer approximation to equality of income and wealth, they are less likely to develop habits of self-reliance that tend to get them out of poverty and to keep them out without dependence on others. Studies sponsored by the American Enterprise Institute have indicated that conservatives (who tend to oppose the use of government to redistribute wealth and income give far more to charity (and real charity, not just contribution for fancier church buildings and things such as art galleries and opera houses) than do liberals, who tend to view helping the poor as a collective responsibility rather than an individual one. Want to help poor people? Then do it!
The thing that distinguishes a government from any other organization is that it is considered to have the legitimate right to use force and coercion to get some people to do things that they would rather not do or to refrain from doing things that they would rather do for the benefit of society as a whole. Since government is fallible and made up of fallible human beings, its use of force and coercion should be restricted to the legitimate functions of government. People may differ about what the legitimate functions of government are, but in my opinion, the legitimate functions of the federal government are pretty much those described in the Declaration of Independence and the Constitution. The Declaration of Independence says that the purpose of a government is to protect life, liberty, and the pursuit of happiness and that the people have a right to alter or get rid of any government that is destructive of those ends. The “enumerated powers” of the federal government are listed in Article I, Section 8 of the Constitution. Redistributing wealth and income is not among them
The use of coercion to redistribute wealth when done by any organization other than government is usually considered to be robbery. From a moral standpoint, it is robbery even when the government does it. All that keeps it from being robbery from a legal standpoint is that the government defines what the law is and it does not tend to make its own actions illegal. The Bible has something to say about robbery; it says, “Thou shalt not steal.” It also has something to say about desiring the property of others; it says, “Thou shalt not covet.” I submit that the promotion of the use of government as a tool to redistribute wealth and the envy of the rich that progressives in this country promote is stealing and coveting and is immoral.
I and other critics of government redistribution of wealth from the rich to the poor may be accused of being heartless and having no sympathy for the poor, but concern for the poor does not require acceptance of any and all means to help the poor, and one of the ways to help the poor is to help them avoid dependency on government. If they believe that they are “entitled” to relief from the government just because they are poor and therefore society owes them a closer approximation to equality of income and wealth, they are less likely to develop habits of self-reliance that tend to get them out of poverty and to keep them out without dependence on others. Studies sponsored by the American Enterprise Institute have indicated that conservatives (who tend to oppose the use of government to redistribute wealth and income give far more to charity (and real charity, not just contribution for fancier church buildings and things such as art galleries and opera houses) than do liberals, who tend to view helping the poor as a collective responsibility rather than an individual one. Want to help poor people? Then do it!
Saturday, October 02, 2010
The Truth about MoveOn.org's Social Security "Myths"
I have taken a special interest in the future of Social Security, in part because I worked for the Social Security Administration for 38 ½ years before retiring on January 2, 2009. So, when I ran across an article on the MoveOn.org website (not a site I frequently visit, but occasionally I like to spy on the enemy) entitled Top Five Social Security Myths, I read it carefully, thought about it, realized that it is mostly nonsense, and decided to explain to readers of this blog (both of them) why it is mostly nonsense. I encourage you to read the same thing I read buy opening the article in a new window or tab on your browser and follow along.
The first alleged myth is "Social Security is going broke." The article state that by 2023, Social Security will have a $4.3 trillion surplus and can pay schedule benefits with no changes and after 2037, will be still be able to pay 75% of scheduled benefits. The trust fund deserves its own discussion, which I will get to shortly, buy think about that business about being able to pay 75% of scheduled benefits. That is meeting 75% of an obligation. Would any of the people that you have to make regular payments to, like your utility companies or your the financial institution that holds your mortgage (if you own your home) or your landlord (if you rent) be happy if you told them that you cannot make the full amount of your payments in the future but you can make 75% of them? Of course not, and anyone who expects to receive Social Security benefits after 2037 would not be very happy either. If being headed in the direction being able to pay only 75% of what it obligated to pay is not going broke, then what is?
The second alleged myth is "We have to raise the retirement age because people are living longer." The article says that this is a myth because the reason life expectancy is going up is because many fewer people die as children than they did 70 years ago. The article makes reference to a June 2010 study by the Center for Economic and Policy Research entitled Social Security and the Age of Retirement. I read the study. It does indeed make a very good case that most of the increase in life expectancy in the United States over the last several decades has been because of decreased death rates of people who have not reached retirement age. However, some of the increase is because on average people of retirement age are living longer, which is a case made by the the bipartisan Social Security Advisory Board in its September 2008 report, Working for Retirement Security, in which a case is made that to improve income security of older Americans, they should be encouraged to lengthen the number of years in which they work. MoveOn.org also points out that higher income workers live longer on average than lower income workers and so raising the retirement age discriminates against people with lower income. Raising the retirement age is not the only way to address the solvency of Social Security and it may not be the best way, but it is one option.
The third alleged myth is "Benefit cuts are the only way to fix Social Security." First the article says that Social Security does not need to be fixed, which is nonsense. Then they suggest that a better way to strengthen Social Security is to raise the maximum income from which payroll taxes are assessed. For 2010, no taxes are assessed from the employer or employee for earned income in excess of $106,800. Raising the cap would indeed increase revenue. It would also increase the eventual Social Security benefits of those high income workers because the amount of Social Security benefits is computed based on a formula that considers average income. However, the formula is weighted to favor lower income workers, so raising the cap may raise more than enough revenue than needed to pay the higher income workers their Social Security benefits once they retire. I'll concede this point to MoveOn.org; benefit cuts are not the only way to fix Social Security. There are other ways. However, saying that it does not need to be fixed is still nonsense.
I am going to combine my comments about myths four and five because the arguments that the MoveOn.org article makes that them contradict each other. Myth four is "The Social Security Trust Fund has been raided and is full of IOUs" and myth five is "Social Security adds to the deficit." There argument regarding myth four is that the Social Security trust fund is made composed of U.S. Treasury bonds that are backed by the full faith and credit of the United States. The argument regarding myth five is that by law Social Security funds are separate from the budget and therefore Social Security cannot add a penny to the deficit. Both arguments can easily be refuted in one short sentence: "Those Treasury securities are not going to pay themselves." Lets say that this year a hypothetical worker, lets call him William Worker, earns an income such that he and his employer each pay a payroll tax of $1000. Lets also assume the Social Security system is taking in more money than it is paying out and all of the $2000 goes into the trust fund. What does the government do with the money? It does two things. One thing it does is spend the money. The other thing it does is issue securities to the trust fund that represent a promise to pay the money back with interest. Years later, when the Social Security system has reached the point that it is paying out more in benefits than it is receiving in payroll taxes, William has retired and has applied for his Social Security benefits. Lets say that the money to pay for them for his first year of retirement comes from that same $2000 in treasury bonds plus interest. So, the bonds are redeemed. Since they don't pay themselves and the government has already spend the money to pay them, it has to raise more money. There is just no other way to look at this. The government has spent the money and has increased its debt by issuing a securities that promise to pay the debt with interest. Saying that a Treasury security is not an IOU not saying anything that changes the situation. Saying that Social Security does not increase the deficit because it is not part of the budget is like saying that if you close your eyes you can't see it and therefore it isn't really there. When management officers at Enron kept transactions that put its shareholders off its books to hide them, it was eventually recognized as accounting fraud and people went to prison for it. When the government does it, no one goes to prison, because it is the government that puts people in prison. It is legal, but only because it is the government that is playing this game that makes the laws. What they cannot do is make it ethical. The scams that Charles Ponzi and Bernie Madoff ran were small potatoes compared to this one.
Recommended reading for those who want to understand the financing of Social Security include the 2010 Social Security Trustees Report on The Status of the Social Security and Medicare Programs (click here for PDF version) and any of several publications that the Cato Institute has published. The advantage of the Trustees Report is that it is politically neutral and written by the actuaries whose job it is to manage the Social Security and Medicare trust funds. The advantage of the Cato Institute publications is that they are written by people who have some good ideas for how to deal with the problem.
The first alleged myth is "Social Security is going broke." The article state that by 2023, Social Security will have a $4.3 trillion surplus and can pay schedule benefits with no changes and after 2037, will be still be able to pay 75% of scheduled benefits. The trust fund deserves its own discussion, which I will get to shortly, buy think about that business about being able to pay 75% of scheduled benefits. That is meeting 75% of an obligation. Would any of the people that you have to make regular payments to, like your utility companies or your the financial institution that holds your mortgage (if you own your home) or your landlord (if you rent) be happy if you told them that you cannot make the full amount of your payments in the future but you can make 75% of them? Of course not, and anyone who expects to receive Social Security benefits after 2037 would not be very happy either. If being headed in the direction being able to pay only 75% of what it obligated to pay is not going broke, then what is?
The second alleged myth is "We have to raise the retirement age because people are living longer." The article says that this is a myth because the reason life expectancy is going up is because many fewer people die as children than they did 70 years ago. The article makes reference to a June 2010 study by the Center for Economic and Policy Research entitled Social Security and the Age of Retirement. I read the study. It does indeed make a very good case that most of the increase in life expectancy in the United States over the last several decades has been because of decreased death rates of people who have not reached retirement age. However, some of the increase is because on average people of retirement age are living longer, which is a case made by the the bipartisan Social Security Advisory Board in its September 2008 report, Working for Retirement Security, in which a case is made that to improve income security of older Americans, they should be encouraged to lengthen the number of years in which they work. MoveOn.org also points out that higher income workers live longer on average than lower income workers and so raising the retirement age discriminates against people with lower income. Raising the retirement age is not the only way to address the solvency of Social Security and it may not be the best way, but it is one option.
The third alleged myth is "Benefit cuts are the only way to fix Social Security." First the article says that Social Security does not need to be fixed, which is nonsense. Then they suggest that a better way to strengthen Social Security is to raise the maximum income from which payroll taxes are assessed. For 2010, no taxes are assessed from the employer or employee for earned income in excess of $106,800. Raising the cap would indeed increase revenue. It would also increase the eventual Social Security benefits of those high income workers because the amount of Social Security benefits is computed based on a formula that considers average income. However, the formula is weighted to favor lower income workers, so raising the cap may raise more than enough revenue than needed to pay the higher income workers their Social Security benefits once they retire. I'll concede this point to MoveOn.org; benefit cuts are not the only way to fix Social Security. There are other ways. However, saying that it does not need to be fixed is still nonsense.
I am going to combine my comments about myths four and five because the arguments that the MoveOn.org article makes that them contradict each other. Myth four is "The Social Security Trust Fund has been raided and is full of IOUs" and myth five is "Social Security adds to the deficit." There argument regarding myth four is that the Social Security trust fund is made composed of U.S. Treasury bonds that are backed by the full faith and credit of the United States. The argument regarding myth five is that by law Social Security funds are separate from the budget and therefore Social Security cannot add a penny to the deficit. Both arguments can easily be refuted in one short sentence: "Those Treasury securities are not going to pay themselves." Lets say that this year a hypothetical worker, lets call him William Worker, earns an income such that he and his employer each pay a payroll tax of $1000. Lets also assume the Social Security system is taking in more money than it is paying out and all of the $2000 goes into the trust fund. What does the government do with the money? It does two things. One thing it does is spend the money. The other thing it does is issue securities to the trust fund that represent a promise to pay the money back with interest. Years later, when the Social Security system has reached the point that it is paying out more in benefits than it is receiving in payroll taxes, William has retired and has applied for his Social Security benefits. Lets say that the money to pay for them for his first year of retirement comes from that same $2000 in treasury bonds plus interest. So, the bonds are redeemed. Since they don't pay themselves and the government has already spend the money to pay them, it has to raise more money. There is just no other way to look at this. The government has spent the money and has increased its debt by issuing a securities that promise to pay the debt with interest. Saying that a Treasury security is not an IOU not saying anything that changes the situation. Saying that Social Security does not increase the deficit because it is not part of the budget is like saying that if you close your eyes you can't see it and therefore it isn't really there. When management officers at Enron kept transactions that put its shareholders off its books to hide them, it was eventually recognized as accounting fraud and people went to prison for it. When the government does it, no one goes to prison, because it is the government that puts people in prison. It is legal, but only because it is the government that is playing this game that makes the laws. What they cannot do is make it ethical. The scams that Charles Ponzi and Bernie Madoff ran were small potatoes compared to this one.
Recommended reading for those who want to understand the financing of Social Security include the 2010 Social Security Trustees Report on The Status of the Social Security and Medicare Programs (click here for PDF version) and any of several publications that the Cato Institute has published. The advantage of the Trustees Report is that it is politically neutral and written by the actuaries whose job it is to manage the Social Security and Medicare trust funds. The advantage of the Cato Institute publications is that they are written by people who have some good ideas for how to deal with the problem.
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