Tag Archives: Public Finances

Obama’s Tax Gimmick

First Obama was for small budget deficits. Then he decided he really wanted more investment. For a while it looked like he was going to support universal health care. But now he wants young poor workers to subsidize rich old men and women.

My Way News – Obama’s ‘no income taxes on seniors’ draws critics
WASHINGTON (AP) – If you’re a senior citizen and earn less than $50,000 a year, Barack Obama has a deal for you: a life free of federal income tax.

Sounds appealing, right? Maybe to many seniors. But tax policy experts in Washington are giving it bad reviews. They see it as another subsidy for senior citizens, who already get federal help through Social Security and Medicare and often have economic advantages over other demographic groups.

Seniors typically have paid off their mortgages, many have investments and usually don’t pay taxes on their Social Security benefits. The kids are usually grown, so they’re not saddled with day care or college costs.

“The odds are the retired folks – they’re getting pensions, they’re getting Social Security, they have investment assets, they own a house – so … they’re better off than somebody who is 30 or 40 years younger who’s trying to buy a house (and) trying to start saving,” said Clint Stretch, managing principal of tax policy for Deloitte Tax.

What is Obama thinking? Is he serious? I realize he is not much smarter than George W. Bush was in 2000 when it comes to policy, but even Bush’s income tax cuts could theoretically have worked.

Obama’s tax plan looks like a bigoted attempt to buy off the vote of rich seniors, forcing young workers who are trying to afford health insurance, buy a home, or pay off their student loan to subsidize those with a lot more wealth than they have.

Is Austrian Economics Pseudo-Science?

Razib of gnxp thinks so:

The “grasped a priori” part has really bothered me. I mean, I read psychology and history, I can’t derive it a priori. Recently I was going over some issues in modern Middle Eastern history, and learned that King Hussein of Jordan had apparently asked Israel for permission to send a brigade to Syria to invade the Jewish state during the 1973 Yom Kippur War. Honestly, I really don’t know if I could ever grasp Arab psychology a priori. The more and more I read about psychology the more I think that anyone who believes that they could develop an axiomatic system of human action from insights they grasped a priori is totally retarded (mad props to Aristotle though, he worked before the cognitive revolution)…

My readings in psychology and history makes it very difficult for me to understand how anyone could adhere to a Misesian form of Austrianism with its commitment to praxeology. In short, I really think praxeology is a rotten foundation for any system of thought.

I don’t care for the personal attacks in Razib’s original post, but he raises a good question: considering how bad we are at introspection, why should we trust introspection to build an economic order?

Anyone from Chicago Boyz care to answer?

Shrink the Gap. Support the Gas Tax

The Energy Challenge,” by Stephen F. DeAngelis, Enterprise Resilience Management Blog, 12 June 2006, http://enterpriseresilienceblog.typepad.com/enterprise_resilience_man/2006/06/the_energy_chal.html.

First, the reality:

Of course, China could buy state-of-the-art equipment that helps reduce the pollution created by coal-fired plants, but it fears that doing so could put the brakes on its economy, something it believes it can’t do at this stage of its development. As a result, it buys antiquated equipment from local manufacturers, burns indigenous coal, and refuses to ask consumers to pay for measures that could protect their health. The article estimates that 400,000 people a year die in China from pollution-related illnesses. As its population ages and the long-term effects of pollution begin to kick in, the piper that China refuses to pay today will cost even more tomorrow in health care costs and subsequent productivity reductions.

In Beijing and Tianjin, I saw the face of pollution. But even I didn’t see the 400,000 dead in Zhongguo per year. I am lucky I was merely robbed of the sky for a month, not my life like that annual half-million. I was merely sent to the Emergency Room.

Next, the hope. (Hint: it’s a geogreen gas tax).


With oil prices continuing to break records, the time is rapidly approaching when it will become economically feasible to pursue alternative fuels. Despite the pain we feel at the pumps, the benefits of increasing our use of alternative fuels will be worth it in the long run. A few companies have already begun to see how “being green” makes them more resilient — both to the vagaries of the energy market and by attracting “green” consumers and investors. Another New York Times article [The Greener Guys; A Few Companies Take Special Steps to Curb Emissions,” by Jad Mouawad] discusses their strategies for reducing their carbon footprint.

We can speed up the economic feasibility of alternate fuels by implementing a geogreen gas tax. The economic effect for the common person could be minimal, and the benefits are enormous

  • An America that relies on her ingenuity and innovation, not oil kleptocrats
  • Easing the rise of New Core states such as India and China, and not forcing them to rely on the decaying regimes of the AfroIslamic Gap
  • Creating a more beautiful, healthier world.

We can do it. By distributing the proceeds of the geogreen gas tax directly to the American people, it may even be popular to do so.

Increase the gas tax to $5/gallon. Shrink the gap!

Republican Senators Understand Barnett’s "Flows"

Grand strategist Thomas PM Barnett defines four “flows” of the contemporary world

(1) the movement of people from the Gap to the Core;
(2) the movement of energy from the Gap to the New Core;
(3) the movement of money from the Old Core to the New Core;
(4) the exporting of security that only America can provide to the Gap

Now the Republican Senate identifies two more

(5) the movement of clean air from the New Core to the Old Core
(6) the movement of terrorism from the Gap to the Core

and is about to speed up one, and decrease the other


Barnett’s third flow, as well as the two tdaxp flows, are on display in a Senate Republican proposal

Most American taxpayers would get $100 rebate checks to offset the pain of higher pump prices for gasoline, under an amendment Senate Republicans hope to bring to a vote soon.

However, the GOP energy package may face tough sledding because it also includes a controversial proposal to open part of the Arctic National Wildlife Refuge in Alaska to oil exploration, which most Democrats and some moderate Republicans oppose.

“Our plan would give taxpayers a hundred dollar gas tax holiday rebate check to help ease the pain that they’re feeling at the pump,” Senate Majority Leader Bill Frist announced Thursday.

This is an amazingly good idea.

  • It will make the New Core’s (Argentina, China, etc) rise easier, by not making them compete with the Old Core for energy sources that the Old Core doesn’t need.

  • It sets an environmental standard that the people of the New Core will see and demand for themselves.
  • It prevents the worst of the Gap, which invariably comes from oil-producing states, from destabilizing the Core

The $100 rebate for expensive gas is a great idea because it paves the way for a geogreen gas tax. As I proposed last year, and reiterated again this week, we need a high tax on gasoline that is rebated in direct payments of heads of households. This has the benefit of discouraging gasoline consumption, while not taking discretionary spending dollars away from average Americans.

In particular, this plan is much better than the insane Democrat Party alternative which would suspend the gas tax. At a moment when the American people are most aware of the dangers of dependency on foreign oil, the Democrats want to encourage that dependency by encouraging oil consumption.

The Democrats’ plan is as terrible as it is hypocritical, for a party that supposedly cares about the environment.

So, in conclusion, tdaxp applauds the Republican Senates for proposing this first step towards a Barnettian, geogreen solution to our oil woes. And tdaxp condemns the Democrats who would harm our environment, and our national security, by supercharging oil consumption.

Think geostrategy. Think environmentalism. Think “geogreen.” And think Republican.

Keep Gas Prices High Forever

The current high prices for oil and gas gives us a great opportunity. They focus the minds of Americans on the great problems in the world today.

The American People will make great sacrifices to achieve a Goal, but will not tolerate meaningless hardship. The currently high prices are meaningless. They represent nothing more than the fluctuations of supply and demand, instability and war.

President Bush should turn this around. He should announce that gas prices will never come back down: that we will never subsidize Oil-Tyrants again. He should do this with a new federal gas tax, which will floor the price of gas at five dollars per gallon.

This money should not go to the general treasury. Instead, it should be immediately divided evenly given to heads of household as a monthly check. Immediately, this would make those who consume a lot of gas (and thus support the destructive policies of Iran, Saudi Arabia, and Venezuela) subsidize those who do not so contribute to geopolitical instability. Better, it would encourage the economy to swiftly move to other sources of motor power.

The FairTax: A Rallying Point for 2006

Brendan is a long time friend of mine. I’ve known him long since he helped me out against The Nation Master entity, and I’ve checked his blog — I Hate Linux — regularly since before tdaxp was born. I am now proud and delighted to announce he has allowed me to host his review for The FairTax Book After reading Brendan’s column, I strongly support the tax reform he proposes.


What would you say if I told you that there is currently legislation in front of the House Ways and Means Committee with 52 cosponsors that would not only eliminate the federal income tax, but also remove the need for the IRS, allow you to take home your entire paycheck without Social Security and Medicare deductions, and make April 15th into just another spring day?

Sure, I might sound crazy, but The Fair Tax act of 2005 (HR 25) sets out to do exactly that. But why?

Let’s face it, the current income tax system is a nightmare. Every year millions of American taxpayers (both individuals and businesses) spend countless time and money on making sure that they are paying no more than they owe, while countless others take the easy way out and just file the short form in order to save time, but end up paying far more than they owe because they didn’t spend the time or energy to take the deductions that they are entitled to and instead overpay. To add insult to injury, even tax professionals like H&R Block have made mistakes with their own taxes. If its so easy for experts make mistakes, what does that say about the potential unnecessary complexity of the current system?

Really the only people who understand the existing system are our legislators and the lobbyists in Washington who derive power from manipulating it with the end result of those without lobbyists having to pay that much more to make up the difference. It is time for that to end.

Before going into some of the details of the FairTax, take note of the image to the right of Congressman John Linder (R-GA), the author of The Fair Tax Act of 2005 (HR 25) holding it in comparison to the existing income tax code. 132 pages vs 50,000+ pages. Quite a difference isn’t it?

In addition to my belief in the FairTax, the reason I write this is because of my concern for the upcoming 2006 elections. Even with the new found interest in abortion and immigration reform in this country, neither in the President’s State of the Union, nor in the Democrat’s rebuttal, nor any other serious political debate so far has put forth anything new of merit that can be part of a platform for either side to rally around in order to maintain or regain control this fall. I believe that the FairTax can and should be that platform.

National Sales Tax

In short… the FairTax which replaces the entire federal income tax as well as other payroll taxes with a simple embedded national inclusive sales tax of about 23% on new products and services at the retail level that would show up on your receipt every time you buy a CD, TV or even loaf of bread.

At first glance 23% may seem pretty high, but consider the increased price you are already paying due to the income and payroll taxes being paid by every single company in the production chain and ending with the end consumer. With the elimination of those taxes not only would drop prices significantly, but you would end up with more of your money with every payday. As a result with the 23% sales tax being added onto a product whose price has dropped due to not having the supplying companies pay any federal taxes, it pretty much ends in a wash for you as the end buyer.

Exemptions & Prebates

Under such a system some might be concerned about a lack of exemptions for things like medical care as exists under the current tax system. It doesn’t exist. That’s right, under the FairTax system, all new goods and services fall under the tax. Without such a blanket system covering all areas of business we end up in a similar situation to what we have today… high priced Washington lobbyists campaigning for our elected officials to exempt their clients from certain taxes because of the importance of their clients business and its contributions.

Again, under this system, no new product, service or person is exempted from the tax, including the poor who today pay little or no income tax and in order to allow the poor to continue to remain tax free the prebate was created in order to resolve this issue which results in the federal government mailing a check every month to every head of household for the amount of tax that they would pay during the month up to the poverty level.

This way, not only do the poor not pay the tax, but no one does up to the poverty level.

Compliance Costs & Missing Deductions

If you aren’t already sold on the FairTax, think for a moment of the cost that US tax payers end up paying for tax compliance. Not only do many businesses and individuals hire professionals to help guide them through the process to make sure that they don’t pay more than they owe… this is still an expensive process in terms of both time and money.

Let’s not forget that the bureaucracy that is the IRS requires massive funds in order to do its collections and enforcement, how much? For their 2005 budget [pdf warning] they requested over $10 billion. Don’t you just love the concept of paying them in order to enable them to do their much loved work?

Retirement

Under our current system workers and employers pay further taxes under the names of Social Security and Medicare. Under the FairTax these line items on our pay stubs disappear, but the programs don’t. Instead, both draw from the same general fund that the FairTax creates.

Let’s not forget that on every payday when you take home all of your earnings and you are free to invest and save it for things such as retirement, a child’s college education, a house or anything else you want… all without any tax consequences whatsoever. Instead of the difficulty of using pretax dollars or hassle of reporting yearly income due to interest as you do today, you simply pay the embedded tax the day you spend it.

End Benefits

I have only scratched the surface on what experts predict would happen after the FairTax went into effect, a larger list of benefits includes:

  • Offshore tax-shelters and foreign based businesses no longer provide the same benefits and appeal as they do today, bringing billions of dollars currently offshore back into our economy
  • Workers keep 100% of their paychecks
  • Interest rates fall between 25-35%
  • Voluntary rather than compulsory tax system
  • Tourists and illegal workers not currently paying taxes would pay taxes to our tax system every time they buy new in this country
  • Higher rate of savings and investment
  • Cost of tax compliance drops by 90 percent
  • Thousands of IRS agents and tax lobbyists become unemployed (darn!)
  • Gross Domestic Product increases by almost 10.5 percent in the first year after enactment
  • Companies and individuals no longer have to consider the tax implications of financial decisions
  • Revenue neutral as far as the federal government is concerned

The Book & More

In large part due to lack of time and not wanting to overload you when reading this I have not written everything there is to know about the FairTax, including answering many of the questions you likely have by this point. If you have interest in learning more, I suggest you read the book or stop by www.FairTax.org to learn more.

The book, written by CongressmenJohn Linder and talk-radio host Neal Boortz, the pair set out to answer many of the questions related to theFairTax with regards to what it is, what would happen after its implementation, as well as a bit of history on how we reached the chaotic tax system we enjoy today. First published in August 2005, it debuted as a #1 New York Times best seller and its updated andpaperback edition to be released in May expected to be greeted with similar attention.

www.FairTax.org is the primary online presence of the grassroots work spearheaded by the Americans for Fair Taxation group in order to provides news related to the campaign, as well as material to help us achieve our goal.

Now that you’ve learned the basics of the FairTax, I encourage you to explore more of it on your own, read the book, ask questions, tell others about it, and call your congressperson and ask them to join in the campaign to destroy the existing tax system and replace it with a more fair tax, namely the FairTax.

Increase Immigration to Shrink the Size of Government

Mike Bales’ Infantilism,” by Dan, tdaxp, 26 February 2005, http://www.tdaxp.com/archive/2005/02/06/mike_bales_infantilism.html.

“The Road to Dubai,” by Paul Krugman, New York Times, 31 March 2006, pg A21.

Two days ago I argued that we should annex Mexico to expand States’ Rights. However, we don’t need to go that far to bury the dreams of the big government elite. Simply embracing sustained immigration leads to smaller government and more freedom

america_guatemala_md
The Face of Small Government

The paleoeconomist Paul Krugman eloquently demonstrates this point in his New York Times column today…


Labeling immigration part of a “hard right economic conservative” agenda, Dr. Krugman notes

Countries with high immigration tend, other things equal, to have less generous welfare states than those with low immigration. U.S. cities with ethnically diverse populations — often the result of immigration — tend to have worse public services than those with more homogeneous populations

This is true. I’ve seen this first hand. As I wrote more than a year ago:

[My home state, South Dakota, was] settled by two big government groups: Germans and Swedes. Swede-state Minnesota is famous for its “red’ tradition, while the state of Bismarck, North Dakota is partially socialist. Fortunately, while Germans and Swedes are very charitable to their own they are suspicious of each other, and so ethnic distrust led to South Dakota’s very small government.

Diversity leads to small government. Think of the huge “protected” sector in Japan, or the traditionally insular European states, and the huge welfare systems they have built. People are generous with other people’s money to people like them, and will spend away the future in big-government solutions to problems. But in an immigration nation built with people from all over, and the public is more respectful of property and skeptical of Official Establishments.

Shrink government. Increase immigration.

Let’s Tax and Spend for Better Health Care

U.S. weighs taxing health care benefits: Unusual coalition from both the left and the right looks at ending exemption for job-sponsored plans,” by Kevin Hall, Knight-Ridder, 17 July 2005, http://timesunion.com/AspStories/story.asp?storyID=379969&category=NATIONAL&BCCode=HOME&newsdate=7/17/2005.

Tax-free corporate health insurance, which super-empowers big business, is a relic of price controls from the Second World War

 

Today’s system of employer-provided health care dates to World War II, when the federal government imposed wage caps to help the wartime economy. Unable to offer higher wages to attract scarce workers, companies competed for them by offering health insurance.

 

The war ended, but job-based insurance stuck. By the mid-1950s the Internal Revenue Service code favored it. Companies were allowed to deduct the costs of employee health care plans from their taxable income. For employees, those often-generous benefits were separate from taxable wages.

This pork warps the free market

 

Some right-leaning advocates think the tax exclusion for job-sponsored health benefits should end because it distorts the free market. The Heritage Foundation, a conservative policy-research center, says the exclusion leaves consumers in the dark about the real costs of health care, leading them to make uninformed decisions that ripple through the health care economy, driving up costs.

 

And doesn’t help those who need it the most

 

The tax break is regressive because people at the lower-income brackets get less benefit. It does just the opposite of what it should,” said David Kendall, a senior health policy analyst at the Progressive Policy Institute in Washington, a research center for the centrist Democratic Leadership Council. “It promotes coverage for people who can already afford it.”

Census Bureau data show that 82 percent of Americans who earned more than $75,000 last year had job-sponsored health plans excluded from taxation, but only 23 percent of Americans who made less than $25,000 did.

 

But if we ended this regressive, distorting loophole, we could afford to give health credits to all Americans

 

Advocates on left and right agree on this: Ending the tax exclusion should be accompanied by a new national tax-credit system for health care.

 

It’s easy to do

 

Tax credits would exempt health plans from taxation up to a set dollar limit. Employers would put price tags on the benefits they provide to employees — many already do this to remind workers why wages aren’t rising — and anything above the government-set limit would be treated as taxable income. This would allow the taxation of so-called Cadillac health plans, the generous ones that cover everything from fancy eyeglasses to hair transplants.

 

“The mechanics of doing it don’t have to be revolutionary,” said Mark Pauly, an expert on health care costs at the University of Pennsylvania’s Wharton School. “The main problem now is that the exclusion makes expensive insurance look cheap.”

This is a first step to solving our biggest domestic problem. Let’s do it.

Richard Rahn on Taxing and Growing

The Taxing of Nations,” by Richard Rahn, The National Interest, Spring 2005, ppg 112-118.

A very good article by a senior fellow at the Discovery Institute on taxes and growth.

On the harm of taxing capital:

Economists have long known that taxing capital is economically destructive. Nobel Prize-winning economist Robert Lucas, after carefully reviewing relevant economic studies, concluded in 2003 that reducing capital-income taxation from its current level to zero (using other taxes to support an unchanged rate of government spending) would result in overall welfare gains of “perhaps 2 to 4 percent of annual consumption [compounded] in perpetuity.”

On the importance of the birth rate on retirement savings

It is often said that demographics drive history and, to a considerable extent, the lower-than-replacement birth rates on the continent are at the root of the tax-rate war [attempts by “Old Europe” to force developing countries to raise their capital tax rates]. Starting in the 1960s, these countries built welfare states with generous retirement systems. Such systems are barely sustainable, even with rapidly growing populations. “Defined-benefit” systems are in essence Ponzi schemes that require the number of new workers to grow as fast, if not faster, than the retirees, because it is the taxes of the working population, not any sort of savings, that are used to finance the payments to retired workers. Europe is plagued with stagnant or falling populations, which means that the proportion of the elderly is increasing rapidly.”

On the pain Old Europe must go through before it can grow again

In Many countries are moving to a “defined-contribution” system, much as Child did a quarter century ago (and as President Bush is now advocating for the United States). In such a system, workers are required to invest a given percentage of their incomes in relatively safe investments, such as government bonds r high-grand corporate bonds and stocks. The Europeans have waited too long, however, to make the necessary changes without going through considerable pain. They cannot get out of the dilemma by raising taxes, because their current tax rates are already above the revenue maximizing point. Hence, any tax increase will further reduce economic growth. Because present growth is so low, tax increases will actually lead to less tax revenue over the long run. The European governments are then left with no alternative to to begin reducing real benefits. But the public is not yet willing to support politicians who tell them the unpleasant truth. As a result, reducing benefits is constantly postponed by the politicians.

On just how insane capital taxes can be in Europe — which leads to capital flight

Individually, most Europeans understand the reality they are facing. Thus, we find that Europeans have much of their income. The problem is that Europeans have few profitable domestic investment alternatives available to them — given that tax rates on capital income often approach or even exceed 100 percent when an adjustment for inflation is made . (For example, if you are French investor who received 4 percent on a capital investment before taxes, but are subject to a 50-percent-plus tax rate on that investment, while the inflation rate is 3 percent, the actual after-tax return is negative 1 percent.)

1983 Adoption of Revolutionary/Insurgent Tactics by American Right in Social Security Debate

1983 Adoption of Revolutionary/Insurgent Tactics by American Right in Social Security Debate

The Prince,” by Nicolo Machiavelli, Medieval Sourcebook, AD 1513, http://www.fordham.edu/halsall/basis/machiavelli-prince.html.

Achieving Social Security Reform: A “Leninist” Strategy, by Stuart Butler and Peter Germanis, CATO Journal, Fall 1983, https://www.cato.org/pubs/journal/cj3n2/cj3n2.html (from Clean Cut Kid).

Boyd on al-Qaeda’s Grand Strategy,” by John Robb, Global Guerrillas, 8 May 2005, http://globalguerrillas.typepad.com/globalguerrillas/2004/05/journal_boyd_on.html (from Safranski on GG through tdaxp).

Chad at CCK pointed me to a 1983 article in the CATO Journal that calls for the adaption of revolutionary/insurgent tactics in the Social Security debate. While the authors incorrectly describe the style as “Leninist,” it shares more than a little with Maoist and Sandinist thought. Indeed, it is historical proof of explicit Fourth Generation Politics more than two decades ago. And I thought I was original when I saw fourth generation struggle in the Social Security fight.

I am pleased to find proof that at least some groups have purposefully applied revolutionary/insurgent tactics to modern politics. The remainder of the post are my comments on the first few pages of the article.

Marx believed that capitalism was doomed by its inherent contradictions, and that it would inevitably collapse—to he replaced by the next stage on the ladder leading to the socialist Utopia.

The first paragraph, and the authors identify the most important part of decades-long political struggle: a happy ending

Lenin also believed that capitalism was doomed by its inherent contradictions, and would inevitably collapse. But just to be on the safe side, he sought to mobilize the working class, in alliance with other key elements in political society, both to hasten the collapse and to ensure that the result conformed with his interpretation of the proletarian state. Unlike many other socialists at the time, Lenin recognized that fundamental change is contingent both upon a movement’s ability to create a focused political coalition and upon its success in isolating and weakening its opponents.

A step below Marx’s path-to-victory is Lenin’s grand strategy. Lenin recognized the need for a correlation of forces — creating a full array of friendlies who help pull the movement to victory. Likewise, Lenin’s “isolating and weakening” of the opposition is analogous to Isolation and Subversion in the famous PISRR model of conflict.

As we contemplate basic reform of the Social Security system, we would do well to draw a few lessons from the Leninist strategy. Many critics of the present system believe, as Marx and Lenin did of capitalism, that the system’s days are numbered because of its contradictory objectives of attempting to provide both welfare and insurance. All that really needs to be done, they contend, is to point out these inherent flaws to the taxpayers and to show them that Social Security would be vastly improved if it were restructured into a predominantly private system. Convinced by the undeniable facts and logic, individuals supposedly would then rise up and demand that their representatives make the appropriate reforms.

Simply good conflict preparation — drawing on the lessons of history. Lenin did his work in the 1910s. This article was published in the 1980s. A lifetime had passed, but the rules of ideological struggle remain the same. It is up to the wise historians to discover them, and it is up to the wise warrior to be a historian.

While this may indeed happen, the public’s reaction last year against politicians who simply noted the deep problems of the system, and the absence of even a recognition of the underlying problems during this spring’s Social Security “reform,” suggest that it will be a long time before citizen indignation will cause radical change to take place. Therefore, if we are to achieve basic changes in the system, we must first prepare the political ground so that the fiasco of the last 18 months is not repeated.

More wisdom. While the article suggests a way to hurry up the social security reform over what would naturally happen, the authors prepare the reader for a struggle that will take “a long time.” Bush’s misstep on the aircraft carrier in the Pacific was to imply that the war would soon be over. Butler and Germanis are not making that mistake.

Likewise, Butler and Germanis are preparing the battlespace. Foolish commanders fight where their enemy wants to fight. Wise strategists select the battlespace at a time and place of their choosing. An implication of this strategy is avoid direct confrontation until the battlespace has a friendly correlation of forces.

First, we must recognize that there is a firm coalition behind the present Social Security system, and that this coalition has been very effective in winning political concessions for many years. Before Social Security can be reformed, we must begin to divide this coalition and cast doubt on the picture of reality it presents to the general public.

More preparation of the reader. The authors are hyping the strengths of the status quoistas. This is building for a call to the fight in the way of the weak – guerrilla warfare.

Second, we must recognize that we need more than a manifesto— even one as cogent and persuasive as that provided by Peter Ferrara. What we must do is construct a coalition around the Ferrara plan, a coalition that will gain directly from its implementation. That coalition should consist of not only those who will reap benefits from the IRA-based private system Ferrara has proposed but also the banks, insurance companies, and other institutions that will gain from providing such plans to the public.

Another recognition of weakness. Butler and Germanis lay out their planned correlation of forces. They see what Nicolo Machiavelli saw nearly five hundred years ago

Those who by valorous ways become princes, like these men, acquire a principality with difficulty, but they keep it with ease. The difficulties they have in acquiring it rise in part from the new rules and methods which they are forced to introduce to establish their government and its security. And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, then to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.

The no-changers have “the laws on their side,” but the Butler and Germanis are trying to minimize their other weakness — “the incredulity of men, who do not readily believe in new things until they have had a long experience of them.” The authors are presenting a slow, building plan that will give men long experience with the benefits of reform. Specifically, powerful men “those who will reap benefits from the IRA-based private system… but also the banks, insurance companies, and other institutions…”

As we construct and consolidate this coalition, we must press for modest changes in the laws and regulations designed to make private pension options more attractive, and we must expose the fundamental flaws and contradictions in the existing system. In so doing, we will strengthen the coalition for privatizing Social Security and we will weaken the coalition for retaining or expanding the current system. By approaching the problem in this way, we may be ready for the next crisis in Social Security—ready with a strong coalition for change, a weakened coalition supporting the current system, and a general public familiar with the private-sector option.

“Modest changes” help with the Machiavellian building of a favorable correlation of forces. While “expos[ing] the fundamental flaws and contradiction in the existing system… [to] weaken the coalition for retaining or expanding the current system” is another Isolation-Subversion PISRR attack.

Peter Ferrara’s “family security plan” provides a sound framework for reform.2 The Ferrara plan resolves the contradiction within the existing system and provides a realistic phase-in process for a private pension plan. Recent efforts to publicize and implement the Ferrara plan, however, only confirm the fact that a successful reform strategy must be designed within a framework of well-understood constraints and opportunities; otherwise we will fall into the same political traps that have discouraged many a would-be reformer.

Butler and Germanis are saying that having a plan for after victory is not enough, there needs to be a plan for victory. Good examination of the existing battlespace and history.

In an effort to identify a broad framework for Social Security reform, the Heritage Foundation (1982) gathered various experts, who discussed the essential ingredients of reform. The principles and observations that emerged from that gathering can now be summarized.

Calming Existing Beneficiaries

The sine qua non of any successful Social Security reform strategy must he an assurance to those already retired or nearing retirement that their benefits will he paid in full. It was irresponsible in the first place for the federal government to promise unrealistic benefits. But it would be even more irresponsible now to break faith with the millions of people who have based their retirement plans on these expected benefits. Instead of spreading widespread panic among our elderly, which will only undermine our efforts to reform the system,

The authors being by demanding an Isolation attack, separating existing seniors from younger defenders. Isolation is a critical part of struggle. Butler and Germanis’s focus on Isolation is reminiscent of the planning of war genius John Boyd.

From a purely political standpoint, it should be remembered that the elderly represent a very powerful and vocal interest group. This power was reflected in the recent bailout plan, which made no effort to address the system’s underlying structural problems. One congressman, with disarming frankness, implicitly evidenced that considerable power when he explained his position on Social Security reform: “I have no intention of trying to explain what needs to be done,just give me a vote on something that can save the damn thing until I retire.” ‘‘~

The authors recognize the power of greed in the social security atrophist camp. Again, to quote ol’ Nick

Nevertheless a prince ought to inspire fear in such a way that, if he does not win love, he avoids hatred; because he can endure very well being feared whilst he is not hated, which will always be as long as he abstains from the property of his citizens and subjects and from their women. But when it is necessary for him to proceed against the life of someone, he must do it on proper justification and for manifest cause, but above all things he must keep his hands off the property of others, because men more quickly forget the death of their father than the loss of their patrimony. Besides, pretexts for taking away the property are never wanting; for he who has once begun to live by robbery will always find pretexts for seizing what belongs to others; but reasons for taking life, on the contrary, are more difficult to find and sooner lapse. But when a prince is with his army, and has under control a multitude of soldiers, then it is quite necessary for him to disregard the reputation of cruelty, for without it he would never hold his army united or disposed to its duties.

Except Machavelli did not foresee the vampire quality of the current system: to rephrase for the modern environment, Seniors will sooner forgive the bankruptcy of the nation than being prohibited from stealing from their grandchildren.

Still, same lesson applies.

The political power of the elderly will only increase in the future. The proportion of the population over 65 will rise steadily, from 11.3 percent today to 18.3 percent by 2030. So any proposal aimed at cntting benefits will face increasingly stiff opposition from the elderly, undermining the prospects for genuine reform. Any plan to change the system must therefore he neutral or (better still) clearly advantageous to senior citizens. By accepting this principle, we may succeed in neutralizing the most powerful element of the coalition that opposes structural reform.

The authors see that the most powerful element of the correlation of forces opposing them — the elderly — are only increasing their power. A correlation is that isolating the elderly from Social Security atrophists is the best move the reformers can make.

The full article, which fully develops the plan, is available from the Fall 1983 edition of CATO Journal. Highly recommended.