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By George P. Brockway, originally published March/April 2000

2000-3-4-why-free-trade-is-not-fair-title

LET ME SAY at once that aside from a few broken windows, I believe the recent World Trade  Organization (WTO) meeting in Seattle, because of the demonstrations it sparked, was as near perfect as could have been expected. Perfection would have been for the WTO to abolish itself and start over, and with luck we may come to that.

Let me say next that I’m not impressed, and never have been, with the argument that it’s wrong to oppose child labor in India (a nation that deplores America’s crass commercialism and lack of spirituality) on the grounds that if the children didn’t work, their parents would starve. Arguments of that kind have been used since the beginning of time to justify every conceivable example of man’s inhumanity to children, to women and even to other men. If it is impossible to make rugs of the highest-that is, most traditional-quality unless the knots are tied by juvenile fingers, it would be no hardship for us to walk on broadloom carpets.

I am not, furthermore, abashed by the debater’s point that if I want to protect several million American jobs, I can do so only by throwing several million (and probably more) workers out of work on the other side of the world. The late Sidney Weintraub, a longtime contributor to this magazine, had the answer to that one. He asked whether any free-trade publicist or professor ever felt obligated to resign in favor of a jobless scribbler or savant half a world away. If not, why not?

I am willing to entertain, for purposes of illustration (since I am showing, not arguing), the exceedingly remote possibility that American environmentalists thought up dolphin-safe tuna nets and turtle-safe shrimp nets to interfere with the ability of Central American fishermen to compete with ours. Whether the new nets impede trade or not, though, they certainly promote diversity of life and so, in the general interest, should be required by any responsible authority.

On the other hand, I submit that it is none of our business where France buys its bananas (especially since we don’t grow them). It is preposterous to the point of idiocy that we should have the right, because France insists on buying bananas from its former colonies, to impose tariffs of 100 per cent on brie and foie gras and other delicacies I happen to like-whose producers, to the best of my knowledge, do not now have, and never have had, anything to do with bananas.

All such nonsense, and much more, was foreseen by Ralph Nader, Senator Ernest F. Hollings (D.-S.C.) and others who testified against Congressional approval of the World Trade Organization (the new, friendlier sounding name of GATT, or the General Agreement on Tariffs and Trade). Brief hearings were hastily held over a few days around Thanksgiving in 1994. Unfortunately, it was agreed that the question would go to the floor on a “fast track” basis, with limited debate and no opportunity for amendment: just a simple vote up or down. The whole thing was a done deal by December 8. It would not be outrageous to suggest that few legislators had a detailed understanding of what the WTO was about, although it sounded good, and most citizens did not know how their senators and representatives had voted, let alone why.

The fast track was not an altogether bum idea, for tariffs are even more subject to logrolling than military appropriations. The trouble was, and is, not that the WTO has a few sloppily drafted passages of the sort that are almost unavoidable in any large piece of legislation. No, the trouble is that the World Trade Organization is not merely foolish, but dangerous.

Unhappily, what’s done is not so easy to undo, especially in an organization that was conceived in secrecy, does most of its business in secret ad hoc committees, and can overturn its secretly arrived-at decisions only by a unanimous vote. (A vote of 148-to-nothing is hard to achieve in the best of conditions, and is practically certain to prove impossible when the “ayes” must include both the plaintiff and the defendant.)

As I said at the outset, the best thing the WTO could have done in Seattle was abolish itself and start over. Somewhere on the desk before me I have suggestions for an alternative approach. My idea was designed to protect the interests of workers and consumers in both developed and underdeveloped nations. It first appeared in this column about 18 years ago.[1]

WE BEGIN with the workers in the developed countries, for the WTO is taking away something they once had-namely, reasonably decent jobs. At the least, they had much better jobs than many millions of them have today in this prosperous millennium. Let me repeat two dicta that I hold self-evident: (1) The citizen’s right to make an honorable contribution to the common wealth is equal to the state’s right to hold him or her to its laws. (2) No full-time work that does not support a life of honor and decency is worth doing except as a favor or a hobby, as training or punishment, or in defense of the realm.

No American official-nor any official of any other nation-is entitled to take these dicta lightly. Bearing them in mind, I say the way to protect is to protect directly and openly.

First, we recognize that a few of our important (not necessarily our largest) industries are threatened in their home market by severe competition from foreign industries. Second, we determine whether that competition is made possible by wages or working conditions that we should consider exploitative or dangerous. Third, we simply and absolutely refuse admittance to commodities produced under such conditions. We don’t fiddle with the tariff on foie gras or anything else; we simply forbid the importation of offending stuff.

The proposal is not complicated. It does not cover all industries or any other nation (although we would not object if the possibility helps improve conditions in other countries anywhere in the world). It does not dictate where France buys its bananas. It does not require elaborately contentious cost accounting, as do the WTO rules against “dumping.” It turns on straightforward questions of fact. What are the working conditions? Is child labor employed? What are the wage scales? (And don’t try to kid us that the serfs are happy; it’s our happiness that we are protecting.)

The proposal does not interfere with foreigners’ or multinationals’ trade anywhere else in the world. In every respect it is analogous to laws currently in effect that refuse entry to contaminated foods or drugs we consider dangerous (regardless of what anyone else thinks), or automobiles that do not meet our emissions standards, or books that violate our copyright laws, or foreign-made assault rifles. Such laws protect Americans as consumers and citizens. The proposal will protect Americans as workers and as entrepreneurs.

Some will object that it can’t work, because it is impossible to compare foreign wage scales and working conditions with ours. If the comparisons can’t be made, how do the critics of American workers know they are overpaid? The objection misses the point anyhow. The proposal is not trying to change foreigners’ conditions but to protect ours. The WTO tries to run the world in accordance with an archaic economic dogma. The proposal is intended to protect our right to follow our vision of the good life in our own way.

The crucial question is, as the lawyers say, who has the burden of proof? In the present case, we can reasonably ask those seeking access to our markets to prove that their workers are fairly paid and fairly treated by our standards. As the Wall Street Journal might proclaim, we insist on a level playing field for all our home games. American companies and American unions and even committees of American workers would have the right to challenge the proof. No need to make a big fuss over it, any more than a fuss is now made about determining that certain foreign automobiles do not meet our emissions standards, or that certain drugs are legally inadmissible.

There are many who will argue against protecting the American standard of living. Some will be devoted to consumers. Cheap imports, they will say, benefit everyone. If so, how do we repay those who lose their jobs so that the rest of us can be free to choose among low priced commodities? Or don’t we care?

NOW CONSIDER the situation of the underdeveloped countries and peoples of the globe. Today, as in the 18th and 19th centuries, the more developed countries need the less developed countries as sources of raw materials, some of which are not available elsewhere. The multinational corporations also use certain less developed countries as sources of cheap labor and working conditions. The banks of the First World have found the weak nations of the Third World eager borrowers of money at high interest rates. What was imperialism before independence has become neoimperialism.

The social and political domination of imperialism is largely gone, but the economic extraction of neoimperialism grows and festers. The irony is that what is mainly extracted is labor power. This comes about because the goods the multinationals manufacture in the Third World are sold in the First World. Steel produced by Brazilian mills is bought in markets formerly served by Pittsburgh. Plastic frame irons General Electric manufactures in Singapore are sold in American discount stores. American textbooks printed in Hong Kong are studied in British classrooms. California sports shirts stitched together in China are sold in resorts on the Florida Keys.

As a result of all this activity, the Third World has goods to export, but never seems to have enough.  The reason is that the exports to the First World are paid for with imports from the First World. It is at this point that the extraction of labor power shows itself, for many times more labor goes into the exports as into the imports.

The wage differential varies from industry to industry, from country to country, and from time to time, but a rough idea of comparative wage scales can be gathered from the Gross National Product per capita. Today that figure is $2,800 in the Peoples’ Republic of China, $1,350 in Nigeria, and $3,300 in Brazil. In the United States it is about $32,000. On the basis of these figures, we will not be overstating the case if we say that a dollar commands at least five times as much labor in the Third World as it does in the First World.

Thus when the two “worlds” exchange goods, the Third World is the net loser of four-fifths of the labor involved. This four-fifths is extracted and gone forever. The Third World nations will escape from neoimperialism only when they are able to sharply reduce manufacturing things for the First World and increase manufacturing things for trading with one another. For many and obvious reasons, this will not be easy to do. Their situation is only superficially like that, say, of the fledgling United States in the 19th century.

Two differences are crucial. First, although Europe (mainly Britain) invested heavily in the United States, the investments were either in factories for things like sewing thread or pig iron that were largely consumed in the U.S., or for dams, railroads and other infrastructure, which necessarily remained in the U.S. Early on the United States exported agricultural products, but comparatively little else.

Second, the United States was thinly populated, the frontier was open, and the egalitarian tradition was strong; so labor was in great demand, and American wages were the highest in the world (a boast, incidentally, that we can no longer make).

There was, in short, no possibility that Europe might extract American labor power. Any extraction ran the other way. The Third World has been enticed, by faulty economic theory, into producing primarily for export. On such a foundation, they can have little hope of an early escape from neoimperialism.

Providentially they can be helped if we help ourselves. That is to say, they may be nudged into trading among themselves if we reduce our labor-extracting trade with them. It is in our interest to protect ourselves from such trade because it hurts our fellow citizens. The citizens of a nation have, in the grand old phrase, certain rights, privileges and immunities that are denied to foreigners. If we who are citizens are not distinguished in this way from outsiders, of what meaning is citizenship to us? And if national citizenship is without meaning, of what meaning is the nation?

2000-3-4-say-no-to-the-wtoPerhaps we don’t want a nation. Perhaps we reserve our loyalty for those who are very near and very dear to us. Perhaps, as D.H. Lawrence put it in Aaron’s Rod, we “love-whoosh for humanity.” But if we have a nation, then the well-being of our fellow citizens has to be vital to us. We can’t demand respect for our own well-being unless we, at the same time, to the same extent, and for the same reasons, respect theirs.

In contrast, the theory of free trade is concerned only with commerce. Like classical economics, it has no respect for persons, except possibly as consumers. It sees no need for government beyond minimal police protection. As was demonstrated in Seattle, the World Trade Organization is not prepared even to consider questions concerning human rights, labor rights, the environment, or the use of natural resources. Even after the financial debacle of Southeast Asia, no attempt will be made to rationalize the surge and countersurge of money around the globe. In a free trade world, politics stops at the cash register.

Before we pursue policies that deny citizens the right to make a particular contribution to the common wealth, we have a duty to guarantee that they have an actual opportunity to make a contribution in another way. This duty is not satisfied by colorful references to sunset industries or to hoped- for results from research and development that somebody may be undertaking at some unspecified time. This duty is not satisfied by vague programs, even if well-funded (and they seldom are), to retrain people for new jobs that do not yet exist. This duty can be satisfied only with alternatives that are specific, real, and at least equivalent.

And time is of the essence. Since such alternatives are exceedingly unlikely-at least no one has bothered to name one-we have a duty to protect our fellow citizens by regulating our participation in foreign trade, even if it means forgoing an extra sports shirt or a better sports car.

By exploiting their cheap labor to produce things for export to the developed nations, the developing nations condemn themselves to a neocolonial status. By encouraging this sort of exploitation, the developed nations condemn themselves to the stagnation and decline that has been the fate of all imperialisms the world has yet seen.

The New Leader

[1] Ed:  the author isn’t here to ask which article he refers to but this seems correct.

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By George P. Brockway, originally published August 23, 1999

1999-8-23-why-we-must-have-a-recession-titlePROBABLY at least once in every one of the 18 years I’ve been writing this column, I have made fun of an obiter dictum[1] of President Calvin Coolidge: “When many people are out of work, unemployment results.” I think it is still good for a laugh, although of course it is undeniably true, and so is my variant: When many people raise prices, inflation results.

I’ll go a step further: It is only when many people raise prices that we (including the Federal Reserve Board) know we have inflation. And I’ll take another small step for man but a momentous step for understanding the economy: Except in time of war or disaster, we have inflation only when the central bank (the Federal Reserve Board) brings it about.

Let’s heed Deep Throat‘s advice and follow the money.

If you (as an individual or a corporation) plan to start anew business, or to expand an old one, or to merely keep an old one going, the first thing you have to do is look for financing. As Iago said, put money in thy purse.

You can get money in lots of ways. You can borrow it from a bank or from a venture fund. You can sell shares or unneeded assets to a more venturesome fund or to a friend or on an exchange. You can use money you have on hand or your company has on hand. It does not make much difference how you finance your enterprise, but you have to do it, and it will cost you. Even money that you or the company may have on hand has an opportunity cost-that is, what you might have made if you had invested it in some other way.

In short, borrowing comes first and its price depends on the interest rate. Interest rates have to be set before the financing of any good or service is agreed to; financing precedes manufacturing; manufacturing precedes delivery to customers; delivery requires prices, which must be set to cover all the previous costs, plus, it is hoped, a profit. This is the way capitalist business runs, and there is no better way to run it.

To be sure, different companies follow different routines to achieve the same result. Many arrange a line of credit with a bank to prepare for the needs of a year or a season or a project. Special projects may be planned all at once. An automobile company may glimpse a chance for a new sports utility maxivan. All that exists at the beginning is a price range, a schedule of standard specifications, and a menu of desired special features. The engineering and design departments see what they can do; the sales department does market research; but the car is not built unless the finance department can be reasonably sure of necessary monetary support at a feasible interest rate.

That is not to say that finance is more important than (or even as important as) engineering or design or advertising or sales. It is simply to say that finance is primary. After all, the name of our system is finance capitalism.

I have been belaboring the obvious because it is essential for understanding one of the crucial problems of our time-the relation of the interest rate to the price level in a modem economy. The interest rate has an effect on prices, because it is a cost, and costs have to be covered by prices. The causation goes only from interest rate to prices, not vice versa. Prices may affect the sensibilities of the Federal Reserve’s governors, and they do in fact set the interest rate. Nevertheless, this is not a chicken-and-egg question.

A chicken makes an egg, and the egg makes a chicken, and that chicken makes an egg, and so on. Leaving aside the Reserve’s sensibilities, prices do not affect the interest rate, because the interest rate is set before prices are.

It is possible to assemble the statistics and plot curves showing the fluctuations of the interest rate and the price level. Depending on where you start, the peaks and valleys of one will necessarily follow those of the other with, as they say, a lag. If you then start with the other one, their roles will be reversed, and the lag will be different. There is absolutely no way of telling from the statistics or the graphs themselves which “really” comes first, the interest rate or the price level.

In this, the question is like that of the three-way colonial trade (guns and calico for slaves, slaves for cotton and rum; cotton and rum for guns and calico). These are not statistical problems; they are analytical problems. We know from our analysis that the interest rate affects prices, but there is no way for prices to affect the interest rate.

Well, I’ll take that, or a little of it, back. Banks and other lenders have to make ends meet, too; so their prices (the interest rates) have to be high enough to cover their labor, capital and rent costs. But the basic price of their product is set by the Federal Reserve Board. Their overheads merely account for the differences between the rates of your friendly neighborhood banker and those of the snobbish bank in the next town. The dictum stands: Interest rates affect prices, but the Reserve, not prices, affects interest rates.

The business press frequently writes that in certain situations (usually good news, like increasing employment and more prosperous businesses) the Reserve “will have to raise rates,” but there is no natural law or legal requirement that forces it to take the specified action. If the Reserve does raise rates, it is because of the governors’ own free will, guided by their own economic theory, which in this case happens to be fallacious.

PLEASE NOTE that it does not matter whether inflation is thought to be demand-pull or cost-push. A strong argument can be made that in a modem economy inflation, when it occurs, is practically always cost-push. For demand-pull inflation to work, supply has to be rigidly limited, and in a modem economy there is practically nothing that cannot be readily and indefinitely replicated within a reasonable span of time.

In other words, while the hallowed law of supply and demand was plausible enough in the isolated market towns of Adam Smith‘s day, it no longer is absolute —except in the narrow confines of Wall Street, where the supply of investment grade securities is strictly limited. Even international cartels controlling natural resources, such as the Organization of Petroleum Exporting Countries, are of bounded effectiveness because of the development of substitutes and the threat of military reprisal.

To be sure, the Federal Reserve worries publicly about the supply of labor, and that is certainly at least biologically limited, although relaxed immigration laws could provide short-run solutions and expanded education could extend the long run. Yet the experience of the last few years should have taught us that neither the wisest statesmen nor the most erudite economists have the faintest idea where or whether there actually is a natural rate of unemployment (that most barbarous notion), beyond which inflation must rage uncontrolled.

However all this may be, the fact remains that the interest rate must be agreed to by each enterprise before the enterprise is able to make a responsible attempt at setting its own prices. Thus the price level, an aggregation of all the prices in the economy, is systematically subsequent to the interest rate. Following the money, we see that when the interest rate goes up so does the price level.

No precise formula guides the process. Some entrepreneurs will hold their prices down and be satisfied with a lower profit. Some will manage to cut other costs technological, administrative, sales, advertising, and so on. In general, though, even a small interest hike will result in a noticeable hike in the price level.

In any case, the country is full of inflation hawks-and that includes many governors of the Federal Reserve Board -who are constantly on the lookout for the most obscure forecast of the inflation they fear. Recently they raised the rate, and they threaten to raise it further, despite their admission that there is no significant evidence of coming inflation. Instead, there is much talk of pre-emptive strikes, and of the importance of being ahead of the curve. Indeed, it is widely said that the Reserve must act now.

What happens in these circumstances? The price level inches up, and actual inflation shows itself. The hawks demand a further interest rate increase. The scene is like Zeno’s paradox of Achilles and the tortoise, except that the Achilles of the interest rate can’t catch up with the tortoise of inflation, because Achilles is carrying the tortoise and even pushing it out ahead of him.

Well, we’ve seen how the story ends. In fact, we’ve seen the ending nine times since World War II.  Raising the interest rate can only slow down inflation if the Reserve keeps raising it until the whole economy is put into reverse-until, that is, millions of men and women lose their jobs, hundreds of thousands of businesses go bankrupt, and public works languish.

We’re on our way. If we keep it up, we must have a recession. When former Federal Reserve Chairman Paul A. Volcker was asked if his policies might lead to recession, he replied, “Yes, and the sooner the better.” He showed how it was done. Why do we have to do it again?

The New Leader

[1] Ed:  Really?  “Obiter dictum”?  Really?

By George P. Brockway, originally published August 9, 1999

1999-8-9-lessons-from-the-depression-titleTHE NEW Congressional committee created ostensibly to reach a nonpartisan solution to the Social Security “crisis” may not really be intended to do anything, except perhaps issue a report calling for further study of the problem. In fact, I think it is probably a device for changing the subject whenever some humorless member of Congress tries to make an “issue” out of Social Security. “We must wait until the committee reports,” will be the ready response. If I’m right, Social Security will be effectively eliminated from the front lines of the November general election campaign, and no one will have to take a possibly unpopular stand either for or against any of the myriad “reform” schemes lurking on the horizon.

My junior high school civics teacher would be saddened to hear of my lapse from her innocent teaching, but I, for one, am enthusiastically in favor of another do-nothing committee on Social Security. A little over a year ago the much larger National Commission on Retirement Policy, made up of presumed experts business leaders, academics, Congressmen- managed to split three ways on which reform should be endorsed; so nothing was done. That was fine, because all of them would have gotten Social Security mixed up with the stock market in one way or another. Since the stock market is still dangerous, our need for a do-nothing committee is still great.

Nevertheless, I have not forgotten all I learned in those dear, departed civics classes, where we were taught to analyze legislation under three headings: (1) the need for the law, (2) the constitutionality of the law, and (3) the proper taxation to pay for it. That continues to strike me as a good, systematic approach, and I hereby suggest that the committee spend its time looking at the existing Social Security Act accordingly. This will give it something to do that no prior committee has done and keep the matter bottled up until after the balloting. Let me demonstrate.

1. Why was the Social Security Act needed? Well, there was a jim-dandy depression on. There being no official or semi-official definition of “depression,” one has to be supplied: A depression is a massive, comprehensive and persisting breakdown of the economic system. The economy does not recover without major changes or a major shock or both.

In the 1930s, millions and millions of people were out of work; the municipal poorhouses and charity soup kitchens were overwhelmed; beggars were everywhere; bands of hobos hitched long journeys on freight trains, tracking the seasons or wandering aimlessly. In most towns, near the freight yards or in the gashouse district, there appeared “Hoovervilles” of shacks made from old cartons and discarded (or stolen) boards, furnished with broken furniture from the town dump. In many cities a portion of the local jail was used as a temporary shelter for the more respectable homeless. I myself spent a night as a guest of the Hudson, New York, jail in the course of a hitchhiking journey to search for a job that I didn’t find.

The Great Depression was not a pretty time. Millions suffered, despite having worked long and hard and faithfully. Their dependents, of course, suffered along with them. So did young people coming fresh to a labor market that had no place for them. The society had failed, not a particular individual or group or class. Thus the Social Security Act was needed to deal with at least one aspect of the collapse of the social system-namely its effects on the elderly, the disabled and the orphaned.

2. Was the act constitutional? That proved to be a tough question for a Congress dominated by Southern Dixiecrats and Northern Republicans, and for a Supreme Court possessed of states’ rights notions that had become obsolete at Appomattox Court House on April 9, 1865. It took six years of depression for Congress and the Supreme Court to follow the election returns and take the general welfare seriously. Follow they eventually did, and our second question was answered in the affirmative.

3. Is the taxation appropriate? That question is still with us. The dispute today concerns the adequacy of the present payroll tax. No one wants to increase the rate. Some want to increase the income by putting a portion of the money in the stock market; others argue that income will be more than sufficient as long as the economy remains robust. The real trouble, however, is in the method of taxation itself.

A payroll tax has nothing going for it. It is comparatively easy to evade, especially by those in domestic or casual work. It also discourages employment. If you have a job, that laudable fact triggers a tax on you or your employer or both. On the other hand, if you are a professional gambler, or if all you do for a living is clip coupons and play the market, you don’t pay any payroll tax.

To be sure, aid for the needy is a responsibility of the state; and all businesses-manufacturing, wholesale or retail –owe their existence to the state. In some cases the state licenses or charters or franchises them; and in every case the state protects the society that is the source both of their work force and their market. Consequently, it is reasonable for businesses to be taxed to help pay for the general welfare of the government that nourishes them.

But a payroll tax is a poor way to do it. It is an up-front cost that must be met with the first employee hired, that increases with each additional employee and each wage increase given, and that continues until the last hour of the last employee’s employment. In his book The Next Left, the late Michael Harrington argued that French President Francois Mitterrand‘s bold, popular and promising social policies resulted in economic stagnation because he financed them by levying payroll tax after payroll tax. Instead of expanding, French industries cut employment to the bone in a largely vain attempt to keep their prices competitive with those of neighboring countries. The failure of Mitterrand’s programs had nothing to do with the fact that he was a Socialist. Their effect would have been the same even if the programs had been private fringe benefits.1999-8-9-lessons-from-the-depression-tight-money

OUR Social Security system, although in many respects the most successful legacy of the New Deal, has twice the vices of an ordinary payroll tax, since both employee and employer are taxed. Wage negotiations are rendered more difficult because the employees’ present value of any wage is reduced by the 6.2 per cent Social Security tax plus the 1.45 per cent Medicare tax, while for employers labor costs are increased by the same 7.65 per cent (called, no doubt to spare their delicate sensibilities, a “contribution”).

In addition, the Social Security tax has the extraordinary effect of being a radically regressive tax on the nation’s workers, especially the working poor. It is, to begin with, a flat tax–even flatter (as far as it goes) than the various flat tax proposals of current Republican politicians. It has no exemptions or credits, and starts with the first penny a worker earns. It continues at 7.65 per cent on both employee and employer until the employee earns $72,600, whereupon only the Medicare portion remains. A Fortune 500 CEO who pulls down $10 million a year therefore pays a rate that is less than one ten-thousandth of the rate paid by the charwoman whose job it is to clean up after him.

Nor are these the only indefensible unfairnesses of the Social Security tax. More important in the long run is the fact that the tax has been used to eliminate the higher brackets of the personal and corporate income taxes, and hence exacerbates the widening gap between the rich and the poor in the United States.

The Social Security system is said to be a pay-as-you-go plan, but of course it isn’t. It is a pay-years-before you go plan. The Trust Fund that is being paid for now will not be used up before 2029, and probably much later, if ever. In next year’s budget, the total of employee taxes, employer contributions, and interest earned by the Trust Fund is $636.5 billion, while the entire cost of Social Security (beneficiaries, bureaucrats and all) is only $408.6 billion. The $227.9 billion Social Security surplus not only goes to make possible the budget balance everyone is so proud of, but also accounts for the entire budget surplus that Congress is squabbling about.

The trouble with Social Security; in short, is the method of meeting the costs. A payroll tax is adverse to national employment and investment, and is unreasonable in its incidence. Moreover, the present payroll tax may be incapable of paying the bills. It is anticipation of the last that has caused today’s uproar. But speculating on the stock exchange, whatever else may be said for or against it, is almost guaranteed to fail at the most critical moment. A booming stock market does not guarantee a booming economy, but a crashing market is sure to bring the economy down with it.

Again I can offer a personal reminiscence. My father put together a satisfactory nest egg by playing the boom market of the 1920s. When the ’30s began he believed President Herbert Hoover and did not “sell America short.” In August 1933 he died broke. As the HMO lobby’s ads say, “There must be a better way.” And there is: The Social Security Act addresses a national need and it should be funded by a national tax. The income tax does not inhibit employment and investment, because it falls only on persons and enterprises capable of sustaining employment and investment.

It is often argued that the income tax is too subject to the cold and shifting winds of politics to be the support for something as vital as Social Security. But the raucous history of the present debate has surely demonstrated that Social Security is in any event buffeted by the very same winds as the rest of our political life.

The New Leader

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