FT182: “Obamacare will do to health care what the Soviet Union did to their economy.” —Old Pithy

Posted by PITHOCRATES - August 9th, 2013

Fundamental Truth

The whole East versus West Cold War Showdown was a Battle between Capitalism and Socialism

If you’re not old you may not be familiar with the Soviet Union as it no longer exists.  The Soviet Union was also known as the USSR.  The Union of Soviet Socialist Republics.  And in that full name lies the key to understanding what the Soviet Union was.  That socialist part.  For the USSR was socialism on a grand scale.  Formed following the Russian Revolution of 1917.  Also known as the October Revolution.  When the revolutionaries toppled the Russian monarchy.  And set up a communist state.  Which spilled over in counties surrounding Russia.  And by ‘spilled over’ I mean they conquered those surrounding countries.

People like to make distinctions between communism and socialism but they’re the same thing with a little different window dressing.  Central to both ideologies is a hatred of free market capitalism.  And that enlightened state planners can do everything better than unfettered free markets.  For in socialism they put people before profits.  Whereas in that evil, greedy capitalism they put profits before people.

The whole East versus West showdown of the Cold War was about settling that question.  Which system of government was better?  The free market capitalism of the West?  Or the state planning of the East?  And for a clue to that answer go back to that first sentence.  Where I noted that the Soviet Union no longer exists.  In fact when that socialist utopia did exist those people on the inside dreamed of one thing.  Getting out.

Socialist States use Secret Police to coerce People to Stay and Work for the Greater Good

So why did the people want to get out of their socialist utopia?  Two reasons.  The first was the economy.  Which was horrible.  With state planners managing the economy people waited in line at stores for the things they needed.  Staring at empty shelves where those things should have been.  And seeing shelves full of stuff they didn’t want.  East Berliners risked their lives to climb over the Berlin Wall to get to West Berlin for a better life.  And to go to those stores full of wonderful Western goods.

This brings us back to that other reason.  Which ties into the Berlin Wall.  Which East Berliners risked their lives to climb over.  Why?  Because they couldn’t walk across the street to get to West Berlin.   Or drive there.  And why couldn’t they walk or drive to West Berlin?  Because the East German government wouldn’t allow them to.  The communists built the Berlin Wall because the best and brightest were leaving East Berlin for West Berlin.  And East Berlin, as well as East Germany, couldn’t survive if that brain-drain continued.

Given the choice the people would leave.  If they all left there would be no doctors, scientists, engineers, etc., required in a modern state.  And if they didn’t want to stay and work for the greater good the state used a secret police force (the Stasi, in East Germany) to coerce them to stay and work for the greater good.  To make sure people had the right attitudes and the right thoughts the Stasi spied on people.  Turned people into snitches.  Jailed people.  Tortured people.  And simply made people disappear.  By killing them.  And expunging them from the public record.  As if they never existed.

Liberals in the West loved the Soviet Union and National Health Care

Growing up in the West it’s hard to comprehend life in these socialist utopias.  Thankfully, there are some good movies that bring the fear and loathing of living in a socialist utopia to life.  There’s V for Vendetta.  And Nineteen Eighty Four.  Both set in a futuristic socialist Britain.  If you’re interested in seeing actual life in the former East Germany there’s The Lives of Others.  A movie everyone should watch.  As it is the inevitable destination of creeping socialism.  Life gets worse, not better.  People have less, not more.  And the further we creep towards socialism the worse things get.  And the less we have.

The Democrats passed Obamacare into law on strict party lines.  No Republicans voted for it.  Because history has shown that when the government manages things life gets worse, not better.  And people have less, not more.  This is the basis of the Republican opposition.  On Monday (8/9/2013) President Obama held a rare press conference.  Where he said the holy grail of the Republican Party is taking away health care from 30 million people.  Not their fear of creeping socialism.  Of their fear that health care will get worse, not better.  And that people will have less, not more.

The Soviet Union had national health care.  Liberals in the West loved it.  As they loved the Soviet Union.  College professors.  Public school teachers.  Hollywood.  Even the mainstream media.  Who were (and are) liberal Democrats.  Who all wanted what they had in the Soviet Union.  At least what they believed the Soviets had.  Because the Soviet press wrote glowingly about the Soviet economy.  And the high quality of Soviet health care.  Because enlightened state planners made things better.  Despite the Soviets and the eastern European countries having to use secret police to keep their people from escaping their socialist utopias.  Even with that free high-quality health care.  Because for those living in those utopias it wasn’t everything the liberals in the West thought it was.  Instead, for them, life got worse, not better.  And they had less, not more.  While suffering the brutal oppression of the secret police.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , ,

Woodrow Wilson, FDR, Progressivism, Great Depression, Creeping Socialism, Social Security, Baby Boom and Baby Bust

Posted by PITHOCRATES - January 15th, 2013

History 101

The Policies of Herbert Hoover and FDR caused and prolonged the Great Depression

Franklin Delano Roosevelt (FDR) took Rahm Emanuel’s advice.  Long before Rahm Emanuel gave it.  FDR did NOT let a good crisis go to waste.  And as far as crises go, none were better than the Great Depression.  After the government’s bad policies (wage and price controls, higher taxes, Smoot-Hawley Tariff Act, etc.) caused the Great Depression and then their monetary contraction caused the massive bank failures the poverty rate soared for senior citizens.  FDR saw that suffering and thought here was a way to forever lock in the senior vote.  Give seniors a government pension.  And put the fear of God in them that the opposition wants to take it away.

At the turn of the Twentieth century the new thing in politics was progressivism.  Smart government people intervening into our private lives to make things better.  The size of the federal government exploded during the presidency of Woodrow Wilson.  He gave us the Federal Reserve System.  America’s central bank.  That would prevent anything like the Great Depression from ever happening.  Which it failed to do.  As the Great Depression happened on their watch.  He gave us a permanent federal income tax.  He attacked the U.S. Constitution.  Making the case for expansive presidential powers.  And used the courts to get around Congressional opposition.  As well as the U.S. Constitution.

The political opposition fought back against Wilson’s power grab.  Defeating the progressive successor in the next election.  And returning the country to normalcy.  Warren G. Harding and Calvin Coolidge undid much of the anti-business policies of the Wilson administration.  Returning the nation to prosperity.  And giving us the Roaring Twenties.  Where the nation modernized with electric power, the automobile, radio, etc.  Unlike the speculative dot-com bubble of the Nineties.  Where investors poured money into dot-com companies that never made anything to sell.  The Federal Reserve was a little loose with their monetary policy causing some inflation in the Twenties.  But the economic activity was so robust that it absorbed that inflation.  Then the progressives got back in power.  First the Republican Herbert Hoover.  Then the Democrat FDR.  Whose policies caused and prolonged the Great Depression.

When FDR gave us Social Security it only cost Employer and Employee each 1 Cent of every Dollar up to $3,000

FDR was picking up where Wilson left off.  Expanding the federal government.  And the power of the presidency.  Using the federal courts like Wilson to bypass Congress.  And the U.S. Constitution.  Marking yet another departure from the free market capitalism that founded the country.  And made it the world’s number one economy.  It was a creeping socialism.  At least, that’s how the political opposition saw.  Especially with Social Security.  Which helped tip the power from the states to the federal government.  Just as Thomas Jefferson feared a strong executive would do.

Of course, the progressives played on our emotions.  These were, after all, destitute seniors.  We had to take care of these people.  Our fathers.  Our mothers.  Our grandparents.  Who sacrificed for us.  Now it was time to sacrifice a little for them.  And they promised it would be a little.  Both employer and employee would only pay 1 cent on every dollar earned up to $3,000 a year.  That’s all.  Only $30 a year (about $483.58 today).  And how could such a small amount be socialism?  The problem was that it didn’t stay only 1 cent on every dollar earned up to $3,000 a year.  The tax rate went up.  As well as the maximum taxable earnings.  The government has increased them both.  Often.

(source: Historical Social Security Tax Rates)

That low tax rate lasted barely a decade.  Then they started raising the maximum taxable earnings.  Not much for the first 30 years or so.  But once the Seventies arrived that maximum amount grew at an accelerated rate.  Despite the increasing tax rate.  Thanks to President Nixon decoupling the dollar from gold.  And ushering in the era of out of control Keynesian economics.  Where the government inflated the money supply like there was no tomorrow.  Devaluing the dollar at an alarming rate.  Which is why they increased the maximum amount of earnings at an accelerated rate.  Because constantly devaluing the dollar reduced what those Social Security checks could buy.  So they had to keep making those checks bigger.  And that required more tax revenue.

The Social Security Tax Rate held Steady during the Nineties thanks to the Dot-Com Bubble and Japan’s Lost Decade

But it’s worse than that.  For it’s just not bad monetary policy forcing the increases in the tax rate as well as in the maximum taxable earnings.  Something else happened during the Seventies.  Birth rates fell.  The baby boom ended in the Sixties.  But not the baby making activities.  They just continued along without producing new taxpayers.  Thanks to birth control and abortion.  Also, over the years they expanded the Social Security program to provide for more than just those destitute seniors.  So the benefits of the program greatly increases just as the falling birth rate reduce the growth rate of tax revenue.  As the number of people leaving the workforce grew at a greater rate than those entering the workforce.  Which is why when you convert the dollars into constant dollars the graph doesn’t change much.

We finance most wars with inflation.  By printing money to expand the money supply.  To give the government all the cash they need to buy the instruments of war.  And to pay, feed and clothe their military personnel.  We can see this rapid inflation during World War II as the real dollar amount of the maximum taxable earnings fell.  That changed in 1951.  When they started to increase that maximum amount.  That and the higher tax rate stabilized things for awhile.  Then the Seventies came along.  Where both the tax rate and the maximum taxable earnings amount continued to rise.  Even in real dollars.  Reflecting the growth in benefits.  And the fall in tax revenue.  Thanks to the baby bust following the baby boom.

The tax rate held steady during the Nineties thanks to the surpluses of the Clinton administration.  Due to that dot-com bubble.  And Japan’s Lost Decade.  Whose bad economic times helped boost the American economy.  Still they had to keep raising the maximum earnings amount.  As the baby boomers started retiring.  Then Clinton’s dot-com bubble burst.  Giving George W. Bush a recession to start his presidency.  His tax cuts pulled us out of that recession.  Then Bill Clinton’s revamping of the Community Reinvestment Act caught up with us.  Giving us the subprime mortgage crisis in 2008.  And the Great Recession.  Which President Obama tried to ameliorate by reducing the employee’s Social Security tax rate from 6.2% to 4.2% in 2011.  For his near trillion dollar stimulus bill failed to end the Great Recession in 2009.  As his Social Security tax cut failed to do in 2011.  Which was not enough to overcome his anti-business policies (such as Obamacare).  All he did was starve Social Security of hundreds of billions in revenue.  Making the Social Security funding problem worse in the long run.  Requiring even higher tax rates than that once promised 1% (for both employer and employee).  On earnings more than that promised $3,000 (about $48,000 today).

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,