Social Security? The Enemy Of Social Security!

January, 2011 Feature--Truth Based Logic

Federal Estate Tax, enemy of true social security. Family wealth & the preservation of individual liberty. Egalitarian pursuits & inflation vs. social security & individual liberty. Egalitarian greed?

The recent compromise on Federal Tax Policy has been a source of great commentary, but with pathetically little focus on what is meaningful for an American future. The Republican Congressional leadership took a surprisingly principled stand in defense of American cultural continuity, yet allowed an egalitarian Left to assail them with only the most anemic response. They thus failed to demonstrate real comprehension of the issues, or why their position was not only economically & socially sound, but absolutely essential to our way of life.

We refer, of course, to a reduction in Federal Estate Tax rates, and the increase in the exemption therefrom. If there was one issue where economic reality coincided with proven social & cultural values that have elevated the West since the time of Charlemagne, this was probably it. But the nominally "Conservative" Republicans, who for once--to an extent at least--stood fast on a principle, showed little effective follow through--no clear understanding--when verbiage from the egalitarian Left got really nasty.

Our approach will not be so limited.

Federal Estate Tax Policy--Enemy Of True Social Security

The misnamed, "Social Security" system that Franklin Roosevelt established in the 1930s, was never actually funded; has always depended upon Federal taxes cushioned by Federal borrowing; and thus, while preserved for now over 70 years, has been endlessly politicized against the interests of those who have been taxed in its name, to never provide true social security. Given the vicissitudes of economic & social interaction in the human experience, it is doubtful if anything resembling perfect social security is obtainable; but there are clear attributes for what tends in that direction--as for what does not.

Here, we use the term social security with reference to a multi-generational quest by a human society to provide secure futures for themselves & their posterity. Consider an array of historic truths of particular, but not exclusive, relevance to the American experience:

1. Personal Liberty & social security, among a settled people with a common government, require significant, individually controlled, resources. People dependent upon Government or a collective for their immediate needs can never truly have either.

2. Those nations that have most faithfully respected the right of people to obtain, retain & bequeath property, have been those which have allowed the greatest degree of personal freedom and, correspondingly, expected the greatest degree of personal responsibility.

3. Frugal & provident behavior, before & since Biblical times, has always included preserving achieved resources for future contingencies, with multi-generational purpose & perspective; a pursuit of social security.

4. The initiators of the American Revolution were men of property, who by today's devalued measure, would, in virtually every case, be multi-millionaires--in some instances billionaires. These men risked an achieved measure of social security on behalf of the liberty of their descendants to achieve yet better.

5. Such men, of an Anglo-Saxon/Celtic heritage, steeped in the concept of a social/political compact--a concept inherent in Magna Carta, which had not only guaranteed a right to pass on legally acquired wealth to one's heirs, but had actually codified a right to rise against the Government if guaranteed economic liberties were infringed (an essential safeguard to the prerequisites for social security)--later gave us our written Constitution.

6. That Constitution clearly enunciated a commitment to multi-generational purpose--to an ongoing pursuit of real social security--in a carefully worded Preamble: "to secure the Blessings of Liberty to ourselves and our Posterity,"

7. Both the United States and such long stable European States as Switzerland & the Netherlands, have been Blessed with the fruits of an individually responsible population, in which many families, scattered over the land, had adequate multi-generational resources never to be entirely dependent upon a State or political subdivision to provide basic economic needs.

8. The existence of such an affluent middle-class has often served as a front-line defense against over-reaching Government, as well as a ready source for the employment of lesser achievers in each society--indeed serving as a catalyst to the multi-generational advance of these;--in short, a source for social security to a broadening base.

9. Conversely, the destruction of the multi-generational wealth of the affluent members of any society, can lead to very dire consequences; a prime example, the destruction of family wealth in Germany in the early 1920s--a result of inflation--leading to Hitler & the Socialist takeover in 1933, World War II & continent wide devastation. (Germany's fall into Totalitarian Socialism is a better example than Russia's post 1917, because Germany had a far larger affluent middle class, more analogous to those in the United States, Switzerland & the Netherlands.)

Now consider some economic facts:

A. Given the steady erosion of the dollar from Keynesian folly since 1930, the dollar in terms of a traditional gold measure is worth only 1.5% of its value in the 1920s. Thus, the new five million dollar exemption for American Estates from Federal Estate Tax, is only equivalent to $75,000 dollars in our grandparents' day.

B. The misnamed "Social Security," always dependent upon future revenues--as opposed to retained achievement;--always dependent upon political decisions, rather than vested rights; has been repeatedly corrupted to serve new projects, intended to win votes by solving "problems" that have nothing to do with securing the "Blessings of Liberty," or the fruits of honest labor (as witness, awarding "Social Security" Disability benefits to 20 year old drug addicts); and has long suffered from a dishonest 'fudging' of adjustments for inflation, to deliberately understate the rate of inflation.

C. The net effect of Keynesian inflation since 1930, coupled with confiscatory Estate Taxes, has forced the sale of family owned businesses, which once provided good employment opportunities to rooted populations in local communities across America, to out-of-State conglomerates indifferent to the social security of those communities. This, coupled with misleading promises on behalf of the Government's "Social Security," have tended to increase the percentage of the population in each community dependent upon Government, as compared to those who actually achieve social security. Such systematic destruction of real social security contributed greatly to the rise of Corporations deemed 'too big to fail' in 2008.

D. These economic factors are in addition to socially disastrous effects of a Welfare system that actually promotes out-of-wedlock births among those least adaptable; lowering the average IQs of American communities, breaking down family structures--essential to real social security--and persuading many in each new generation that the world owes them a living; a mindset fatal to constructive aspiration, and thus a compounding charge against the social security of all communities.

The dynamic reality represented by such historic & economic phenomena has been obscured by artificial bubbles, which create an illusory sense of real wealth, directly attributable to Governmental gimmicks that lead in turn to Corporate over-leveraging (driven by greed rather than provident behavior) & artificial inflation of prices & demand. The housing bubble that burst in 2008 is but one example--as is the financial bubble that it exposed. The ashen faces of many masters of the world of macro finance, as the panic unfolded in the fall of 2008, showed that all of the players are not as stupid as their policies might suggest. But if they are not stupid, we must consider if they are not, then, fully culpable.

The Wealth Of Nations

Advocates for continuation of the present Fiat money system sometimes claim that the dollar, in effect, is backed by the total wealth & productivity of the American people. This may be consistent with the idea of confiscating family achievement--the capital resources accumulated over generations--via vicious Estate taxes, such as those the Congressional Left has lately defended with so much vitriol. It is certainly not consistent with the Founders' vision of providing the Blessings of Liberty to our posterity. Nor is it consistent with any real understanding of either money or the actual derivation of the wealth of nations.

To imply that a flood of fiat dollars--largely created because tax revenues are completely inadequate to fund enormously increased expenditures--are not governed by laws of supply & demand; will not lead to a massive default in the real value of dollar obligations, because of the total private resources of people subject to an improvident Government; suggests that all private resources are held merely at the whim, subject to the command, of that improvident Government. That is not what they fought for in 1775 to 1781; certainly not what the Declaration of Independence treats as a legitimate relationship between a people & their Government; certainly not what the Constitution provides. It is an utterly absurd proposition.

It is true that the wealth of a Nation lies in its people & resources; resources achieved & developed by labor & ingenuity through the generations. It is also true, as stated, that the freer the society, the less burdensome the Government--the less meddlesome, beyond protecting the Nation's commercial freedom from predators--the greater those achieved resources are likely to be. It is, however, a total contradiction to both the reality & the philosophy of a free people, born to that reality, to imply that such people achieve only for the State, for a collective; that their entire wealth may be used to back any fiat currency that improvident politicians & corrupt central bankers may issue.

We reiterate that the social security of each community is best achieved by productive families, accumulating & passing on the fruits of honest labor & ingenuity to their posterity. What, then, of the Class hatred spewed last month in Washington?

The fervor of certain members of Congress, who treated the idea of allowing American families to keep more of the wealth, accumulated over generations, as some form of special privilege, demonstrated, once again, that the Egalitarian (whether Socialist or Jacobin) is compulsion driven. Displayed hatred for families earning & retaining resources--true social security--is pathological. Equally pathological is the myopic greed of any financial manager happy with an artificial inflation of nominal values, prices & public expenditures; glad to have economic bubbles blown, focusing rather on annual bonuses dependent upon such economic bubbles.

Neither artificially inflated company profits, nor the taxes & bonuses premised thereon, represent a creation of real wealth; although skillful manipulation of the amount of bonuses may allow individual participants, in those levels of management able to manage the size of bonuses, to skim off some of the real capital of a Corporation. In recognizing that something was very much amiss--even though many of those outraged over-simplified the actual operation--a public, furious with the Treasury & Federal Reserve, for bailing out Corporations that paid huge bonuses for the illusion of success, immediately before collapsing as bubbles burst, were far closer to the mark than anyone inside the Washington Beltway dared to admit. Americans involuntarily bailed out fools & scoundrels, at the expense of their own social security!

While an affluent American middle-class did not suffer to the extent of its German equivalent, earlier in the decade, the Stock Market collapse in 1929 ruined enough of us, that the idea of double digit leveraging should have been understood as the insanity that it was, ever since. Yet in greedily playing such an obvious inflationary spiral as the Housing bubble, as well as some of their globalist adventures, major American financial houses did not even stop at the ten times leveraging that had destroyed so many speculators in 1929. Rather they leveraged themselves 30 times over to buy "assets" of very uncertain real "value."

Mortgages, bundled for some of those large transactions, were ones that an Egalitarian element in Congress had pushed lenders to finance, in order to make housing available to many who had no realistic ability to pay the puffed up prices. These, too, were victims, who would have been far better counseled not to go forward with the purchases. Thus a strange, unacknowledged yet de facto, partnership between improvident greed on the part of a Managerial Class running some of our largest financial houses & Egalitarian theorists, took America to the brink of another 1929 level crash, with immense damage to the material resources--the private resources & social security of American families.

William Flax

[Note: Why has gold been an essential measure of monetary value & social security since ancient times? See articles on gold & money, below. We could demonstrate an even greater loss of value in the Dollar with other measures; but, historically, gold is the truest measure.]

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