It’s amazing the
stories people will tell when they have no idea what they are talking about. For example, for years we’ve been hearing
that the goal of the Just Third Way is to abolish wages (which are presumably
absolutely secure) and force all workers to live on profit sharing alone.
 |
| Walter Reuther |
This, of course,
is nonsense, as anyone with a grain of common sense would be able to see in an
instant. The goal of the Just Third Way
is not the abolition of the wage, but the abolition of the wage system. The wage is just compensation for
labor. The wage system is when
most people gain all their income solely from wages, almost inevitably
resulting in injustice, either to the wage earner or the wage payer.
By turning
workers (and, ultimately, everyone) in owners of capital, compensation can
consist of the market-determined price of labor without regard to what the
seller of labor needs to survive. By
taking any increases out of profits due them as owners instead of increasing
wages and benefits, worker-owners keep prices low (which benefits them
primarily), creates instead of destroys jobs, and increases consumption power
without increasing costs. As the
labor-statesman Walter Reuther said in his testimony before Congress,
The
breakdown in collective bargaining in recent years is due to the difficulty of
labor and management trying to equate the relative equity of the worker and the
stockholder and the consumer in advance of the facts…. If the workers get
too much, then the argument is that that triggers inflationary pressures, and
the counter argument is that if they don’t get their equity, then we have a recession
because of inadequate purchasing power. We believe this approach (progress
sharing) is a rational approach because you cooperate in creating the abundance
that makes the progress possible, and then you share that progress after the
fact, and not before the fact. Profit sharing would resolve the conflict
between management apprehensions and worker expectations on the basis of solid
economic facts as they materialize rather than on the basis of speculation as
to what the future might hold…. If the workers had definite assurance of
equitable shares in the profits of the corporations that employ them, they
would see less need to seek an equitable balance between their gains and
soaring profits through augmented increases in basic wage rates. This would be
a desirable result from the standpoint of stabilization policy because profit
sharing does not increase costs. Since profits are a residual, after all costs
have been met, and since their size is not determinable until after customers
have paid the prices charged for the firm’s products, profit sharing as such
cannot be said to have any inflationary impact upon costs and prices…. Profit
sharing in the form of stock distributions to workers would help to democratize
the ownership of America’s vast corporate wealth. [Testimony before the
Joint Economic Committee of Congress, February 20, 1967.]
Our subject
today, however, is not to counter the bizarre accusation that CESJ is out to
abolish wages, but to deal with the equally false idea that we advocate “privatizing”
the Social Security system. As it
becomes increasingly obvious that Social Security cannot provide anything more
than an often inadequate subsistence on retirement — nor was it ever intended
to do anything else — and that efforts to increase the entitlement and fund the
increases range from the ridiculous to the even more ridiculous, it becomes
just as obvious that Something Must Be Done.
One of the most
frequent demands is that the
entire Social Security system be “privatized,” that is, the money paid in
by participants is used to purchase private sector securities instead of
government bonds. This will ensure a
presumably greater return on the participants’ “investment.”
The problem, of
course, is that participants don’t own the money they paid into “their”
accounts. It’s a tax, not a contribution
to a retirement plan. It’s plain old
redistribution and was never intended to be anything else. Even the United States Supreme Court
agrees. In 1960 in a landmark case, Fleming
v. Nestor, the Court ruled that participants do NOT own what they pay in,
and Congress clearly reserved the right to adjust benefits at any time, up or
down.
That’s
right. To the best of our knowledge
Congress has never actually decreased benefits, only increased them, but it has
the authority to decrease them at any time for any reasonable cause without
having to satisfy the “takings” clause of the Fifth Amendment. The “takings” clause requires that OWNERS be justly
compensated when the government takes what they own for public use.
The kicker is
that not only do participants not own anything in their Social Security
accounts . . . there actually isn’t anything in them to own! No, the money that is collected is either
paid out or borrowed and replaced with government bonds.
Since the Social
Security Administration is part of the government, that means that all the
so-called investments in government bonds in the Trust Fund consist of money
that the government borrowed from itself and must make good either out of future
tax collections or new issues of debt that must be made good out of future tax
collections. In other words, for every
dollar that the government pays out of the Social Security Trust Fund, it must
collect two dollars in taxes and whatever it costs to administer
the fund!
That’s hardly an
investment in the traditional sense. It’s
a Ponzi scheme in which the people who got in on the ground floor are paid out
of what is collected from people who came in later.
That’s if you
regard Social Security as some kind of investment. It’s not, and was never intended to be. As an investment it’s a fraud. As a welfare program, it’s essential,
especially at this stage of the game . . . but it is unsustainable if it
continues as it is going.
So what is it
that we do propose instead of replacing Social Security with Capital Homestead Accounts?
Reform. That’s right, we’re in favor of Social
Security reform, not replacement or abolition.
The larger
program is outlined in Capital
Homesteading for Every Citizen (2004), but we can summarize it
here. The first thing is to reassure
people that all the promises made will be kept, at least in essence. To achieve this,
·
Merge the FICA tax into the general tax rate and
abolish the Trust Fund. The concept of
owing money to one’s self is financial sleight-of-hand and only gives the
illusion of wealth.
·
Make receipt of future benefits need-based. It was originally intended to be a welfare
program, and there is no reason why people who don’t need welfare should
receive it while others who receive an inadequate amount should get more. This, however, is only possible if the
program is based on the need of the recipient, not the amount paid in by the
participant.
·
Immediately implement a “Capital Homesteading”
program that has the potential to turn every child, woman, and man into an
owner of capital on borrowed money with non-recourse loans repaid with the
future dividends and collateralized with capital credit insurance.
(Yes, given the
current understanding of dividends, private property, money, and credit, this
makes no sense — which is why we say reform in all those areas are needed, and
as we have addressed the issue in previous blog postings. This is just a summary today, not the whole
program.)
That’s it. We are talking a system completely separate
from Social Security, not privatizing Social Security — or abolishing
wages. If you have issues with any of
this, visit the CESJ website before going
ballistic.
#30#