Enjoy

Seems like before we can even engage in a serious debate over SS reform, we need to examine the factors that brought SS into being. To do that, we need to first take the “fool’s gold” luster off FDR.

And I repeat, we know much more now about economics as a whole than all of the “experts” back then. This may shock you, but economics ain’t really all that complicated. La-La land is what you see when you look in the mirror.

In a nutshell, FDR was guided by demand-side economic theory (which only works in the short-term as a method of kickstarting the economy) and by his ego.
The problem with FDR is that he was great at managing a war, but sucked terribly in the economics realm. If not for the war, he would have been tarred and feathered, wheelchair and all!

Yet because of the war, he’s improperly praised as the greatest president of the 20th century — of course that mantle belongs to Reagan. While Hoover dismissed as incompetent. Actually Hoover tried mightily and would have suceeded if he wasn’t sandbagged by the dems and global events beyond his control — the GOP was in decline with both House and Senate evenly split in the latter half of Hoover’s admin.

However, thanks to “post hoc ergo propter hoc” (after this therefore because of this), the common fallacy of assuming that because one thing follows another, therefore the 2nd was caused by the 1st, it is difficult to assign cause and effect in the historical context until enough time has elasped. The unvarnished truth is that the Great Depression was caused by not Hooverism, but the Smoot-Hawley Act by a congress shifting to the Democrats.

Everything else was a ripple effect of the Government attempting to manage the invisible hand. Naturally the invisible hand disagreed and voted with their pocketbook. Aside from Alvin Hansen and a few others, the economic elite of FDR’s era were blinded by Keynes. Schumpeter once quipped that “they held their ground firmly; but the earthquake was shaking it beneath them.”

As an aside; Demand-side economics was embraced thru most of the years since FDR until discarded by Carter, of all people, in part because the economy was out of control and Keynes’ Grand theory wasn’t cutting it anymore. Modern day Demand-Siders include Krugman, Rubin, among others. That opened the door for Reagan to introduce the supply-side, also known as classical economics theory. Stop right here and toss Goldwater from your mind, Barry was a Demand-Sider. Supply-Siders include Laffer, Friedman, Hayek, Smith, Drucker, Forbes and co. Schwartz, Mises, Hansen and others fall somewhere in between.

In essence, Demand-Siders believe the government can do it all from above (your position), while Supply-siders take the grassroots approach regarding individual behavior fostering economic growth over the long-term. Simply put, the opposing approach to economic growth is this:
Demand-siders=trust govt to insure, supply-siders=trust individuals to invest.

Now back to FDR’s ballyhooed acumen. It is true that FDR did say “New conditions impose new requirements on government and those who conduct our government.” It is here that I really need to excerpt from THE FED AND THE GREAT DEPRESSION by Robert L. Formaini, Senior Economist and Public Policy Advisor Federal Reserve Bank of Dallas. ( More good stuff that deconstructs the myth of FDR in just under 14 pages at http://www.dallasfed.org/news/educate/04ecsummit-formaini.pdf )

“Whatever policies the Fed might have followed – or did
follow – between late 1929 and 1933 were the last ones to matter
until after WW2. The Treasury took over policy, and the Fed played
a much smaller role between 1934 and the end of WW2 than it had
during the 20s and early 30s. What power there was at the Fed
shifted to the Board in Washington. The seeds for the post-WW2 Fed
we now have were sown by the Banking Act of 1935, finishing what the
Banking Act of 1933 had begun. After WW2, the regional banks became
a good deal less important than the Board, and policy became
centralized. It is hardly surprising that the Fed took a passive
role during the New Deal – FDR was not one to share power easily,
and so his Treasury Dept. – over which he had total control – became
the center for national economic policy. It would be good if one
could say it did better than the Fed had done but, of course, it
didn’t, and hardly could have given the economic capriciousness of
FDR’s attitudes and actions – all of which flowed from his general
ignorance of, and contempt for, market process and business people.

“Fundamentally, perhaps, the business cycle is a psychological
phenomenon. Only when the memory of hard times has dimmed can
confidence fully establish itself; only when confidence has led
to outrageous excess can it be checked. It was as difficult for
Mr. Hoover to stop the psychological pendulum on the downswing
as it had been for the Reserve Board to stop it on the upswing.””

That’s FDR, the greatest economist for ya!!! And if it wasn’t for the economy being mangled by know-nothing politicians, we could well not even be discussing Social Security in any shape or form today.

Of course, FDR didn’t operate in a vacuum. He also had Bernard Baruch, a prehistoric moonbat who earlier railed against Hoover’s “socialistic legislation”. Then there’s Rexford Guy Tugwell who would later confess, “We didn’t admit it at the time but practically the whole New Deal was extrapolated from programs that Hoover started.”

Truth is, FDR undid many of Hoover’s policies in his first term. Early on in his admin, FDR birthed 17 major programs, of which only 2 were of any use in combating the depression. FDR’s problem is he and his circle didn’t understand the fundamentals of aggregate demand and consequently the budget began to kill the sensitive recovery. Luckily, there was Mariner Eccles over at the Fed, who posited that a budget unbalanced could counteract a depression/downswing, thus slowing the implosion. All in all, the New Deal was ineffective and only the war saved the economy by increasing deficit spending and exports.

So why the ruckus over Bush’s attempt to grapple with the new conditions we face? Because of the CBO report saying all is rosy for the next 70 years or so? The fact that the Dems control the CBO doesn’t belie the fact that even the rosiest projection still indicate action sooner or later — snooze, we all lose, a little more every day. Of course the Dems hope that by stonewalling, they get to implement their vison of the way it ought to be fixed once they get back into power and can raise taxes. Face it, it ain’t gonna happen soon, and the truth has them over a barrel.

So back to FDR, to illustrate the talent he had around him. In 1944, Henry Morgenthau, Jr. proposed a plan for postwar Germany that called for Germany to be forced into an agrarian economy by stripping the industry. Fortunately for W. Germany, that plan was rejected, over the strenous objections of France (Wait a minute, how did France get any say in the matter? But that’s another story) and the Marshall Plan institued by Truman. On the other hand, that plan was pursued vigorously by the Russians and history is plin on the wreck that was E. Germany. In spite of getting shot down, Morgenthau went on to become influential at the Bretton Woods Conference, i.e. founding of the International Monetary Fund and the International Bank for Reconstruction and Development which over the years would become the World Bank.

To bring the law of unintended consequence full-circle, thanks to FDR & friends, Africa and other 3rd World countries remain stunted and wrecked by flawed economic principles, espoused nowadays by the likes of Krugman.

To wit, take Kwame Nkrumah, please. Trained at Lincoln University in Pennsylvannia — don’t believe the hype on their web page — he returned to Ghana with great intentions and aspirations for helping Ghana along with it’s efforts to become the 1st African nation to gain independence from the Colonial Powers. Unfortunately, his head was stuffed with flawed economic theories that postulated that the government could manage the economy in perpetuity. One of his first acts upon taking power was to nationalize industry, starting with agricultural export by establishing a national board by which all cocoa farmers would sell their products to. The idea was to dampen market price fluctuations. Sounds good in principle, however, it only promoted greed and corruption evidenced by the rampant pillaging of surpluses. Like all “good” bureaucracies, it wasn’t enough to leave well enough alone. Plenty of Nkrumah key supporters wanted a piece of the action and soon, there was a national board for timber, coffee, you name it. (Disclaimer: after education was nationalized, my dad was hired by Nkrumah to head up the “Dept of Deaf Education”. Like the good American entrepreneur that he was, it didn’t take long for him to establish and oversee 12 schools across the land).

Long story short, within a few years, the Ghanian economy was devastated, by 1963, basic foods became scarce and millions suffered malnutrition. Simultaneously, Nkrumah gravitated to marxism and flirted heavily with Russia & China. While visiting China, the Ghanian Army launched a coup and Nkrumah was forced into exile in nearby Guinea where he would die. Ironically, in retrospect, colonialism under British rule was better than the chaotic aftermath of demand-side economics and centralized socialism. To add insult to injury, what the colonials failed to “exploit” in natural resources, the IMF and World Bank succeeded in bankrupting financially under utopian ideas of dead socialist white men, specifically Marx, Keynes et al.

Ponder that before you rush to defend the misbegotten legacy of FDR and socialist attitudes that the government is somehow responsible for taking care of you and yours. Next time your professors sell you a load of leftist blarney, please do try to apply a little critical thinking instead of swallowing their tripe whole. Of course, being too critical could affect your GPA, but that’s for your conscience to deal with.

Here’s your homework assignment.
* An example of Affirmative Action in Malaysia: http://blog.mises.org/blog/archives/003092.asp
* Frédéric Bastiat(1801-1850) a French economist and his Selected Essays on Political Economy (Government has no business taking money away from the income earner for economic purposes): http://www.econlib.org/library/Bastiat/basEss1.html
* A reformed SS should be compared to what it can currently afford, not what it promises: http://www.ncpa.org/prs/rel/2004/20041107mm.htm

La Shawn thanks for the bandwidth, I didn’t mean to go on so long. I’ll try to do better next time

Go ahead and modify what he said to today, but don’t say that was what he wanted. This would apply to any historical figure. FDR, Lincoln, Jesus.

‘I dare say the average biz/econ student today knows more than the sum of FDR’s admin.’

If I didn’t think you lived in la-la land before, I do now.

‘Only as long as there is an economy around to back it up.’

Of course. If the US economy is gone, we’ll have bigger fish to fry.

‘Plus you miss the finer point. Insurance is designed to be a hedge against something happening.’

Yes. The loss of an income stream which results from retirement, and the possibility that you haven’t accumulated enough assets, or that you don’t have the capability to properly annuitize your asset-holdings into a drawdown to provide a comfortable income for the rest of your life.

‘How else would insurance companies be able to cover your losses without spreading their risk among as many investments as possible?’

Sure. Insurance companies spread risk and invest their holdings in order to make some money off that risk. They have the size and actuarial ability to pull it off. I don’t think individuals do.

Ring the bell, suckah, school’s in session.

Only as long as there is an economy around to back it up. Plus you miss the finer point. Insurance is designed to be a hedge against something happening. IOW, you hope you never have to use it, but if it happens, you have something to fall back on.

Investment is banking on a future outcome, ie economic growth, 99.9999% positive if diversified.

How else would insurance companies be able to cover your losses without spreading their risk among as many investments as possible? Without the ability to invest, the rates on everything you insure would easily triple or quadruple.

Dismissed.

I dare say the average biz/econ student today knows more than the sum of FDR’s admin.

So when we want to tweak or outright dismantle a FDR legacy, you scream bloody murder. But when it comes to activist judges parsing, divining and twisting the founding documents, you turn around and say, “Hey, they’re just being progressive and that it’s really the rightist fundies are trying to subvert the constitution”.

Your thot prossess are truly pathetic. But I don’t really blame you since you’re just another victim of our sorry education system — purged of any critical thinking and raised on rote recitation of ilLiberal talking points.

I wouldn’t say insurance=good. I’d say insurance is guaranteed. good is a mixture of the two, that would vary from person to person.

‘Now, we’re being told that for just a small payment of 15%, we can get “insurance” that may or may not even match our total payment.’

We’re also taking responsibility for caring for today’s aged and infirm.

‘actus, your distraction attempt failed. Eason resigned.’

I think you assign more power to my intents than I ever do. Lets see if Hume goes too, but something tells me no.

Now I’ll quibble with what you’ve been maintaining for a while, insurance=good, investment=risky. From the Dem POV, I suppose you’re right, insurance in the event one should have the misfortune of surviving their working phase. I on the other hand, prefer to invest for the liklihood or intent to retire. If I should not make it, at least I own it and can bequeath it to whomever.

But back to your insurance is good. A generation ago, people were told that for the small payment of 4% of their income, they could purchase insurance, whose payout would be greater than they ever paid into. Now, we’re being told that for just a small payment of 15%, we can get “insurance” that may or may not even match our total payment. In fact, those at the upper end of the scale will indeed get a negative return. I suppose in your scheme of things, that serves them right for being so rich. Since everything is so hunky-dory, I guess that means my kids will be compelled to set aside 25%, not to enjoy life in their golden age, but to support the Soylent Green infrastructure.

For an edumacated leagle beagle, I must say that anyone who thinks a Ponzi scheme can last into perpetuity is 1) gullible — the PT Barnum adage applies here, 2) must be one of the 5 virgins asking the wise to subsidize their foolishness — tough luck, not my responsibility, and 3) must have felt short-changed when God was handing out talents — to hell with your wicked laziness Matthew 25:1-30.

To refresh your memory of the definitions, I’ll refer you to the follwoing
==============
“Webster’s Revised Unabridged Dictionary (1913)”
Insurance \In*sur”ance\, n. [From Insure.]
1. The act of insuring, or assuring, against loss or damage
by a contingent event; a contract whereby, for a
stipulated consideration, called premium, one party
undertakes to indemnify or guarantee another against loss
by certain specified risks. Cf. Assurance, n., 6.

Note: The person who undertakes to pay in case of loss is
termed the insurer; the danger against which he
undertakes, the risk; the person protected, the
insured; the sum which he pays for the protection, the
premium; and the contract itself, when reduced to form,
the policy. –Johnson’s Cyc.

2. The premium paid for insuring property or life.
3. The sum for which life or property is insured.
4. A guaranty, security, or pledge; assurance. [Obs.]

Investment \In*vest”ment\, n.
1. The act of investing, or the state of being invested.
2. That with which anyone is invested; a vestment.
3. (Mil.) The act of surrounding, blocking up, or besieging
by an armed force, or the state of being so surrounded.
4. The laying out of money in the purchase of some species of
property; the amount of money invested, or that in which
money is invested.

“THE DEVIL’S DICTIONARY ((C)1911 Released April 15 1993)”
INSURANCE, n. An ingenious modern game of chance in which the player
is permitted to enjoy the comfortable conviction that he is beating
the man who keeps the table.

INSURANCE AGENT: My dear sir, that is a fine house — pray let me
insure it.
HOUSE OWNER: With pleasure. Please make the annual premium so
low that by the time when, according to the tables of your
actuary, it will probably be destroyed by fire I will have
paid you considerably less than the face of the policy.
INSURANCE AGENT: O dear, no — we could not afford to do that.
We must fix the premium so that you will have paid more.
HOUSE OWNER: How, then, can _I_ afford _that_?
INSURANCE AGENT: Why, your house may burn down at any time.
There was Smith’s house, for example, which –
HOUSE OWNER: Spare me — there were Brown’s house, on the
contrary, and Jones’s house, and Robinson’s house, which –
INSURANCE AGENT: Spare _me_!
HOUSE OWNER: Let us understand each other. You want me to pay
you money on the supposition that something will occur
previously to the time set by yourself for its occurrence. In
other words, you expect me to bet that my house will not last
so long as you say that it will probably last.
INSURANCE AGENT: But if your house burns without insurance it
will be a total loss.
HOUSE OWNER: Beg your pardon — by your own actuary’s tables I
shall probably have saved, when it burns, all the premiums I
would otherwise have paid to you — amounting to more than the
face of the policy they would have bought. But suppose it to
burn, uninsured, before the time upon which your figures are
based. If I could not afford that, how could you if it were
insured?
INSURANCE AGENT: O, we should make ourselves whole from our
luckier ventures with other clients. Virtually, they pay your
loss.
HOUSE OWNER: And virtually, then, don’t I help to pay their
losses? Are not their houses as likely as mine to burn before
they have paid you as much as you must pay them? The case
stands this way: you expect to take more money from your
clients than you pay to them, do you not?
INSURANCE AGENT: Certainly; if we did not –
HOUSE OWNER: I would not trust you with my money. Very well
then. If it is _certain_, with reference to the whole body of
your clients, that they lose money on you it is _probable_,
with reference to any one of them, that _he_ will. It is
these individual probabilities that make the aggregate
certainty.
INSURANCE AGENT: I will not deny it — but look at the figures in
this pamph –
HOUSE OWNER: Heaven forbid!
INSURANCE AGENT: You spoke of saving the premiums which you would
otherwise pay to me. Will you not be more likely to squander
them? We offer you an incentive to thrift.
HOUSE OWNER: The willingness of A to take care of B’s money is
not peculiar to insurance, but as a charitable institution you
command esteem. Deign to accept its expression from a
Deserving Object.
================

Sigh, I really must stop feeding the trolls.

I did concede that he’s either lying or an idiot.

‘Now, for your interp of FDR and the transistion scheme – does it matter that the assumptions that were common wisdom at the time, turned out to be less than right?’

Those might matter for the wisdom of the proposal today, but they don’t change how FDR felt about things back then.

‘Can you at least admit, that SS, as FDR and co wrote and implemented it, can not work going forward? That it is broken. A ponzi scheme, and the critical mass has been reached’

Absolutely not. Its working fine and with not that much change it can last into perpetuity. The most popular proposal — lifting the cap on the taxable income — is also the one that goes the furthest to fixing this problem. Probably all the way.

I like how as evidence, rather than to say, quote the text, you try to murder the message via the messenger — media matters.

The text is clear, and there is no nuance about it. A transition scheme was to lead to the program that FDR envisioned: a guaranteed social security program on top of which people could have private retirement schemes.

Please go over the text and tell me how Hume’s interpretation is not wrong.

More significantly, in the context of the discussion for which this quote from FDR was mentioned, Hume was correct in using it to rebut the Democrat claims that Bush’s plans were so foreign to the original purposes of social security and to rebut silly claims that FDR would have opposed this reform. A silly claim you seem to want to repeat. And your attempt to refer to FDR’s “ideology” is pretty hilarious. If you had any sense of history, you would know that FDR shifted positions with the wind.

Hume’s interpretation is simply not “so wrong” that it has to be a lie. You and MM are really pieces of work. Adding to Hume’s side is that he is being called a liar by Media Matters. That’s like being called a child molestor by Michael Jackson.

But lets sum up, actus. You felt so threatened that Eason Jordan might have to pay the consequences for his slander of the US military that you thought you had to take this comment thread into this ridiculous digression over a literally meaningless comment that was at best a mistake by Hume that didn’t undermine Hume’s actual purpose in making it. Thank you for confirming so much.