Every now and then we like to do things nice and easy; somehow, we never, ever seem to do nothing, completely, nice…and easy…. And we like to do it nice and rough.
Tina Turner singing Proud Mary
I wish I could find a way to do this nice and easy; I don’t know how; the facts are rough. Many of you won’t accept this at first, if ever.
The social security system we have in the United States is part of a historical phenomenon that swept through Europe, North America and prosperous nations everywhere. Examining the system’s origins and traits in a neutral light can lead to a less emotionally-charged debate and consideration of changes that might be made. Herewith is an unbiased description of the program without any indication of the author’s opinion that the social security system should be repealed and replaced.
“Social Security” as we know it in the United States is a government-run pension for the elderly paid for by taxes on workers and employers. It didn’t begin here; rather, it began with Kaiser Wilhelm and Chancellor Otto von Bismarck in 1889 Germany. Some say they were motivated to buy peace with a block of German voters by granting them a pension plan in exchange for their acquiescence to an authoritarian government. Whatever the motivation, the program began as assistance to the elderly provided by the government and financed through taxes on workers, businesses and general tax revenue of the government.
There were several other nations that enacted old age pension plans prior to the United States. One was Chile, which adopted its program in 1925, ten years before the United States. Old age pension systems spread to prosperous nations all over the globe, as well as some not so prosperous nations such as Chile and Russia. How much the system pays in benefits is related to how rich the nation is because a nation cannot long pay benefits in excess of its own wealth; there is just no way to keep the revenue coming in to pay for generous benefits when the nation is poor.
Russia is a dramatic illustration of a poor nation that attempted to provide benefits that are more generous than its small economy could afford. There probably isn’t enough wealth in the entire land to pay the promised benefits. The government has “cut” benefits through indirect rather than direct means, such as delaying checks for long periods and then paying the beneficiaries with an inflation-ravaged currency.
The old age pension systems go under various names and they all began with payments to the elderly financed by taxes on everyone else. We might not initially recognize an “old age” pension system as the same as our “Social Security” system and the Japanese might not recognize their system as conceptually the same as ours, but all these systems have common origins. In the U.S. we have superimposed numerous features on the program, such as provisions for disability and death benefits. There is a means-tested component to the U.S. system that was added relatively recently, called “SSI” for Supplemental Security Income. SSI pays benefits to low-income persons only.
Two recent, and humongous additions are Medicare and Medicaid. Medicare provides healthcare benefits to the elderly and Medicaid provides such benefits to low-income people. They aren’t strictly part of the social security retirement program but are so closely intertwined with it that they are at least siblings.
President Roosevelt, with a little help from Congress, enacted Social Security in 1935. Some Republicans argued the program was actuarially unsound and voted against it. The benefits in those days were small by today’s standards. Dollars paid in the 1930’s were worth a lot more than today’s dollars, but even after taking away inflation the benefits were less than today. Yet, the program provided immense benefits to the early recipients in one respect; they got a lot more out of it than they paid into it.
Ida Mae Fuller was the first recipient of Social Security. She and her employer paid $24.75 to the system during the three years before her retirement in 1940 and she collected $22,889 during the next 35 years (Citation: Michael Cannon, “Common Sense, Common Dreams,” Cato Institute; Wikipedia). Was this just an example of “good luck” similar to what can happen with a life insurance policy? For example, someone who buys life insurance one day and dies the next can be said to have had good luck with respect to the insurance company. The Social Security system is not good luck in this sense. Ida Mae Fuller received an immense subsidy from taxpayers. No insurance company would have sold such an annuity to a person three years from retirement for $24.75. Her subsidy was larger than some because she lived to 100.
Ms. Fuller was not an exception; most recipients in those days received a HUGE subsidy paid for not by proceeds or earnings from their “contributions” but by working persons. I place “contributions” in quotes because the government calls your Social Security taxes “contributions” instead of what they really are; taxes. For two generations retirees received, on average, huge subsidies compared to what they paid in to the system.
There are exceptions to this generalization because some groups did NOT receive subsidies, but paid in more than they received; Blacks are a prominent example. Why? Because the longevity of Blacks was so much less than Whites. Blacks did not collect, on average, what they paid into the system. That was true then and is true today.
Why did I say above that the subsidies lasted for two generations? Because approximately 50 years after the program commenced people began receiving much less than what they would have received had they been able to invest the money in conservative investments. Different economists calculate this in different ways so there is no exact date when Social Security turned from generally being a subsidy to being a net loss for most people.
How can that be, when benefits were often increased by subsequent Congresses and when benefits were eventually indexed to increase with inflation? The reason isn’t that the benefits declined over the years; in fact, they increased even in real dollar terms. What has increased at a much faster rate are taxes. So today people do not, on average, receive a good deal from Social Security because the increase in taxes over the years vastly exceeds the increase in benefits.
I have read that the average person retiring today will receive Social Security in the amount of 2% more than inflation. That is, if the person had been able to invest his or her own money, as in a 401(k), the Social Security payout would be equal to an average yearly 2% real dollar return on the person’s investments in the 401(k). If the individual had been able to control his own money and invest it, a very conservative yield would have been twice that. In other words, if I had been able to invest my Social Security taxes myself, I would receive at least twice what Social Security provides me.
For today’s young people, the projections are that AT BEST the average person will receive no additional real dollar return on his or her Social Security taxes. That is, the taxes, had they been invested for the individual, will be as if they simply stayed even with inflation but no more than that.
Think of that; young people today will receive no real dollar increase on their taxes when Social Security pays them, meaning their ‘contributions’ will have gained nothing in real dollar terms even after 40+ years of work.
Social Security is a “pay as you go” system, meaning that money paid into it by working taxpayers and their employers is paid out to beneficiaries shortly after the government receives the money. Ida Mae Fuller didn’t receive her windfall because her taxes were invested in productive assets. She received the money because many working taxpayers were paying into the system after she retired.
There is a type of investment that has probably existed almost as long as prostitution and politicians; it is called a “pyramid scheme.” The promoter takes in a few investors for a payment, of e.g. $10 each and then pays a handsome return to these investors of, e.g. $20. He does this by obtaining new investors and using their money to pay the initial investors. The investment thus looks like a very good deal to people on the outside. The investors in the second wave make out well too if the promoter brings in enough new investors to pay $20 to each person in the second wave. This can go on for some time as long as the promoter brings in more and more investors. It can’t go on forever because at some point the promoter would have to bring in more people than there are on the planet to pay the most recent wave of investors. The game is to collect lots of money based on the tremendous reception garnered from paying so much money to early investors and then ceasing all payments while absconding with the money collected but not paid out.
In the United States most people have heard of a “Ponzi scheme.” Ponzi was a real person who started his investment scheme in Boston in 1919. It was just another variation on a pyramid scheme where he paid off the initial investors well and then ran of gas when he couldn’t keep it going by getting enough new investors. He was imprisoned for several years and then deported to his native Italy. He died impoverished in Brazil in 1949.
Social Security is not “like that;” it IS that, i.e., a pyramid scheme. Social Security makes no investments, paid early entrants a windfall and is now in the position where it is impossible for it to pay future retires what they will pay into it. Unlike Ida Mae Fuller, we have been paying into the system all our working lives. And we can’t get ever increasing numbers of “investors,” i.e. taxpayers, to pay us off. In fact, the system is going the wrong way; when Ida retired there were 16 workers for every recipient. Now there are 3.
The U.S. Social Security system is literally, unequivocally, without hyperbole, indubitably a Ponzi scheme. So are the old age pension systems in many other countries.
One writer ingeniously pointed out that the U.S. Social Security system is illegal in all 50 states. What the author meant is that an identical system run by a private individual or business is illegal in all states because it meets the criteria of a pyramid scheme, that is, it constitutes criminal fraud. It isn’t illegal for the government to do it because the government allows itself to do things you and I can’t do.
Another writer described how a Ponzi scheme works in the cryptocurrency world; “a multilevel marketing fraud that pays early investors with funds from new marks.” Andrea O’Sullivan in Scamcoin, an article in the August/September 2022 Reason Magazine.
Many people say that Social Security’s main problem is demographics, i.e., the ratio of workers to retirees has gone down a lot. The ratio was much higher in 1935 when the program began than now, largely because people live so much longer and have fewer children.
Let’s do a “thought experiment” as Einstein suggested in physics. What if Social Security had been from the beginning a program where people put their money into their own retirement accounts and owned the accounts, similar to 401 (k)s and IRA’s? Even if it were a compulsory government program whereby people put a percentage of each paycheck into the program. As in Chile and some other countries.
Then there would be no demographic problem; people would have their own money available to them at retirement and it would not matter what the worker-retiree ratio was. It could be 1 worker for every 10 retirees for that matter; it wouldn’t matter because the retirees would not be relying on taxes collected from workers.
That is why I contend that demographic changes are not the cause of Social Security’s problem. It is true that the aging of the population has exacerbated Social Security’s problems, but the system would run out of money even without this; it would just take longer. And, as noted above, a properly designed retirement system would not be dependent on workers’ taxes.
If you do view longevity as the problem with Social Security, consider these facts; life expectancy in 1935, the year Social Security became law, was 62. Today life expectancy is 82. When Social Security began, the retirement age for full benefits was 65. It is gradually being raised to 67. If Social Security began this year in an equivalent manner the full benefit age would be over 80.
I understand the view that longevity is one of the problems; my point is that the problem could have been avoided with a properly designed program where people actually owned their retirement funds, as in an IRA.
Below is part of an article by Chris Pope that supports contentions above that Social Security was a boon to early recipients and a loss to later generations. Private Accounts are no Silver Bullet, September 15, 2022. Article appeared in City Journal of September 17, 2022.
“The Social Security Act of 1935’s Old Age and Survivor’s Insurance (OASI) program was originally a fully funded system: it imposed payroll taxes on workers and set the revenues aside for benefits in retirement. But congressional Democrats wanted the system to pay out benefits immediately, while Republicans wished to prevent the accumulation of enormous investment reserves for the federal government to manage. As a result, bipartisan legislation in 1939 transformed the program into a pay-as-you-go system, under which retirees’ benefits are usually out of proportion to their prior contributions as workers.
This arrangement was very appealing to the initial cohort of retirees. Those reaching the age of 65 in the 1960s, for instance, received benefits averaging 8.8 times their prior contributions—after accounting for interest. But subsequent generations have had to pay for their forebears, as well as their own benefits, and so Americans retiring since the year 2000 have received less than they paid in. As a result of increased longevity and falling birthrates, the ratio of workers to retirees is also falling—from five-to-one in 1960 to two-to-one in 2040—and the system will lack the funds to pay benefits as promised starting in 2034.”
The Social Security Trust Fund
Ah, the Trust Fund. The fund is said to have had approximately $3 trillion dollars at its peak. This fund will at least keep benefits at their current level for a number of years and then benefits might be slashed because taxes won’t pay for all the retirees.
The Trust Fund comes from years when the Social Security system had more taxes coming in than it paid to retirees. For example, the system might have had $80 billion more in tax receipts in one year than it paid out.
That money was turned over to the United States Treasury and the United States spent it on other things because the overall budget was (and is) in deficit. If this is true, how can we say there is a Trust Fund? Here is what happens mechanically; The surplus tax receipts in a year when Social Security taxes brought in more than was paid out were turned over to the Treasury for other spending programs and the Social Security system got a bond, referred to as a “special issue Treasury Bond.”
Where did the bond physically originate? It was printed on a Social Security Administration printer and then filed in a cabinet in a Social Security office! The cabinet is locked sometimes! The bond is not marketable and has no specific assets behind it. You can’t make this stuff up! What I mean is government does specious accounting that you rarely see in the private sector.
When the Social Security Administration needs to cash in one of these bonds (when Social Security tax receipts are less than money paid to retirees) the Social Security Administration takes one of these bonds and turns it over to the Treasury and says “I need X dollars to meet this year’s retiree obligations.” The Treasury then goes out and borrows the money. I say “borrow” because our government has deficits almost every year.
What happens is no different than if the “Trust Fund” never existed; the Social Security Administration simply goes to the Treasury for supplemental funds whenever it needs them.
In reality, Social Security and other taxes go to the Treasury and the Treasury pays for government expenditures. The United States Treasury simply makes a book-keeping entry of surplus or deficit for the Social Security Administration; Social Security tax receipts and payments to beneficiaries are nothing more than accounting entries on the Treasury’s books.
I realize the above paragraph is repetitive but I believe it is of monumental importance for our country’ financial health.
One time I explained this to an acquaintance. When I got to the end I asked if he still believed there is a trust fund. He said yes. That is an illustration of how difficult it is for many people to accept that Social Security has all the problems it has.
Later I thought of something I wish I had said to my acquaintance; “IT JUST DOESN’T MATTER; IT JUST DOESN’T MATTER.” I use that expression because I liked it so much when Bill Murray said it in a different context in one of his movies.
It doesn’t matter because even if we assume the “Trust Fund” is real and had $3 trillion in it, Social Security has unfunded liabilities of approximately $30 trillion. What that means is that if it were properly funded, as most private sector retirement plans are, it would have $30 trillion dollars in assets, not $3 trillion. We are in deep trouble even if we assume the “Trust Fund” is real.
Medicare and Medicaid
So why am I not complaining about the treatment of today’s elderly when we are receiving such a lousy return from Social Security? Because a much bigger pyramid scheme came along later that is providing us with such a windfall that it knocks out any deficit we experience from Social Security and still gives us a whopping subsidy. MEDICARE. Medicare is 30 years younger than Social Security and is still in the stage of providing a windfall for the first two generations of recipients. That won’t last much longer but people my age currently receive a huge subsidy under Medicare. Jeff Flake stated that the average senior citizen has paid $150,000 into the program and receives $390,000 in benefits. That figure is higher today because of inflation. It can’t last much longer; no Ponzi scheme does.
Another estimate, by Jagadeesh Gokhale**, shows estimated net taxes paid by males and females into Medicare and is further divided by age group. For a 30-year-old male the estimated net taxes paid (i.e. after taking into account Medicare benefits that will be received) is $246,000; this means a LOSS for the 30-year-old. The net benefit for a 70-year-old male is $285,000, i.e. benefit over and above what taxes the 70-year-old paid. The reason I picked these age groups from the author’s table is that I have a daughter and son-in-law in their early 30’s and I was 70 at one time.
What these means is that I am, as an average person my age, receiving a net subsidy of $285,000 under Medicare and my son-in-law, assuming he is average for his age, is paying for most of my subsidy ($246,000). The additional $39,000 of my subsidy comes from other age groups.
These figures are from 2013 and are 70% higher as of 2024 because of inflation, i.e. $485,000 subsidy for me and a $418,000 loss for my son-in-law.
Medicare and Medicaid are vast programs, much more expensive even than Social Security. Economists peg Medicare’s unfunded liability at more than $80 trillion! Trillion, not billion. When you take into account the unfunded liability of Social Security and Medicare you reach an unfunded liability well over $100 Trillion. That measure of our nation’s indebtedness should be added to the official 2023 deficit of $33+ Trillion.
Social Security, Medicare and Medicaid are often referred to as “Entitlement Programs.” That is because people think they are programs that will continue automatically. That is not true. Our government can modify or terminate any and all of these programs by simple legislation.
There is one difference between Social Security and the two medical programs of Medicare and Medicaid; the medical programs are funded to a large extent from general tax revenue. Social Security is partly funded that way now in a way because it too has to go to the Treasure to get money. But as stated above the whole thing is really accounting entries on the Treasury’s books.
Another author put it this way:
In any case, the crowd loved it. Many them were in their 60s and 70s, O’Reilly’s core demographic these days, and clearly Factor fans, possibly secret Tea Partiers who seemed to bear little resemblance to the socially progressive Manhattanites who usually fill these seats. Perhaps that’s why O’Reilly happily shared his distaste for “people on the dole,” i.e. welfare and food stamps, but specifically excluded from his criticisms anybody enjoying the far more expensive entitlements Medicare and Social Security.
This appeared online on June 19, 2014. It is about Bill O’Reilly’s (former Fox television commentator) appearance at the 92nd Street Y, as interviewed by Geraldo Rivera (a reporter who has worked for various networks.) I thought it interesting how the article noted O’Reilly excluded from criticism the more expensive programs Medicare and Social Security. O’Reilly is typical of many conservatives or populists.
I am critical of welfare (it provides damaging incentives for some of the recipients, especially if they stay on for long periods of time) and food stamps because the program has been expanded so much that it is close to being another middle class entitlement program.* However, I know that they are not the budget-busters that Social Security and Medicare are and that those programs are a far greater “dole” i.e. windfall, to past and current generations than welfare or food stamps.
*Occasionally the program experiences cuts as well as expansions. The trend is expansion.
Another thing about “poverty programs” is that we use the poor as an excuse to expand government. The poor should be outraged at how they are used as justification for expansive government yet receive little benefit. Two statistics I have read point this out; 70% of money spent on poverty programs goes to providers, not the poor. Some of us refer to this as the “poverty industry.”
The other statistic is that the poor actually pay more in taxes than they receive in direct benefits. We could end all poverty programs and at the same time terminate all taxes on the poor and the poor would be better off.
Fungible commodities
I’d like to upset the apple cart more by pointing out some of what I said above is incorrect and that is because money is a “fungible” commodity. That means one unit of money can be substituted for another unit of money and there is no difference. For example, I can give you a dollar bill from my billfold or one from my safe deposit box and it makes no difference; one can be substituted for the other.
When retirees receive their Social Security check or deposit, there is no way to determine where that money originated. Dollars coming into the government from Social Security taxes and from other taxes and fees are all part of one barrel called “revenue.” Then the money is paid out and you cannot tell in any way shape or form where the money originated. The government also borrows money and all this money gets put into one barrel and then it comes out as spending. All we know is that the government takes in X amount of dollars and spends Y, and if Y is larger than X (i.e. a deficit) then the government borrows money.
What is the implication of all this? the Social Security system, as with all specific government programs, is an accounting convention and nothing more. It bears repeating; a government check sent to a retiree cannot be traced to any specific tax or funding mechanism; it is just some portion of the money that came into the government and nothing more nor less.
This characteristic of fungible commodities has other applications; for example, if politicians justify a state lottery based on the contention the proceeds kept by the state will go for education you can now understand this isn’t true because there is no way to trace money budgeted for education as coming from a specific source. All we know is the state takes in X dollars and spends Y dollars and some of that spending goes to education.
Exchange with Harvard’s President regarding climate change and US financial condition. I was pleased by his thoughtful response.
On Thursday, September 9, 2021, 02:13:21 PM EDT, Lawrence S. Bacow <president@harvard.edu> wrote:
Climate change is the most consequential threat facing humanity. The last several months have laid at our feet undeniable evidence of the world to come—massive fires that consume entire towns, unprecedented flooding that inundates major urban areas, record heat waves and drought that devastate food supplies and increase water scarcity. Few, if any, parts of the globe are being spared as livelihoods are dashed, lives are lost, and regions are rendered unlivable. Moreover, as the latest report of the UN Intergovernmental Panel on Climate Change suggests, without concerted action, this dire situation is only going to get worse. We must act now as citizens, as scholars, and as an institution to address this crisis on as many fronts as we have at our disposal. I write today to describe what Harvard has done—and will do—to ensure that our community is fully engaged in the critical work ahead. Investment Strategy For some time now, Harvard Management Company (HMC) has been reducing its exposure to fossil fuels. As we reported last June, HMC has no direct investments in companies that explore for or develop further reserves of fossil fuels. Moreover, HMC does not intend to make such investments in the future. Given the need to decarbonize the economy and our responsibility as fiduciaries to make long-term investment decisions that support our teaching and research mission, we do not believe such investments are prudent. HMC has legacy investments as a limited partner in a number of private equity funds with holdings in the fossil fuel industry. These indirect investments constitute less than two percent of the endowment, a number that continues to decline. HMC has not made any new commitments to these limited partnerships since 2019 and has no intention to do so going forward.i These legacy investments are in runoff mode and will end as these partnerships are liquidated. HMC is building a portfolio of investments in funds that support the transition to a green economy. In addition, the University has made investments alongside MIT in The Engine, a fund that, among other things, seeks to accelerate the development of technologies that promise to address the challenges posed by climate change. HMC was the first endowment in the country to commit to achieving net-zero greenhouse gas emissions across the entire investment portfolio by 2050. Since we announced this commitment, a number of other endowments have followed our lead. We will work with them and others to achieve greater transparency in the greenhouse gas footprint of all of our investment managers, along with the development of protocols for assessing and reducing the footprint for entire investment portfolios. We must continue to work with our investment managers and with industry if we are to bring about the transformation of our economy that climate change demands. Finally, HMC has pledged to render its own operations greenhouse gas neutral by June 30, 2022. It will also continue its work with organizations like Climate Action 100+, Principles for Responsible Investment, and CDP (formerly the Carbon Disclosure Project), all of which seek to engage other institutional investors in helping to speed change towards a decarbonized economy. Research and Teaching The principal way we influence the world is through our research and teaching. We are fortunate to have enormous strength in environmental science, medicine, public health, engineering, policy, ethics, business, and law at Harvard. Through efforts such as the Harvard University Center for the Environment and the Climate Change Solutions Fund, we have made important progress toward connecting and amplifying distributed efforts, but we must do more if we hope to move with the speed and focus that the moment demands. Earlier this week, we announced the appointment of our first-ever Vice Provost for Climate and Sustainability. Professor James Stock will work across University boundaries to accelerate and coordinate research and education, and to accelerate our University-wide strategy with the potential to transform Harvard’s capacity to produce crucial new knowledge on climate and sustainability. I have provided significant resources to seed this effort and have pledged to work with Jim and our faculty to raise substantial incremental resources to support our work on climate change. Harvard must stand among world leaders in addressing this challenge. On-Campus Sustainability Efforts We must look not only to our work but also to every aspect of our lives as we chart a path forward, and we will continue to scrutinize our own campus activities. Harvard was also one of the first organizations to announce in 2018 a goal to eliminate the use of all fossil fuels to heat, cool, and power buildings and vehicles on our campus by 2050 along with a short-term goal to be fossil fuel-neutral by 2026. This unique approach, informed by input from faculty, students, and staff, aims to reduce emissions and address health impacts. In 2019, I created a Presidential Committee on Sustainability—currently co-chaired by Professors Jody Freeman and Mike Toffel with Executive Vice President Katie Lapp and managed by the Office for Sustainability—to inform our sustainability priorities and advise how the University achieves our goals and generates transformational solutions. To that end, Harvard’s campus serves as a testbed for experimentation that evolves with our knowledge of climate change and sustainable development. From the construction and maintenance of our buildings; to the design of our transportation systems, including new EV buses; to the sourcing and preparation of our food; and more, Harvard uses our strengths to translate research and teaching into practice to pilot, prove, and implement solutions that can be replicated and scaled locally and globally. The University is also leveraging our faculty and research to translate public health and building materials research to help drive market transformation through the Harvard Healthier Building Academy (HHBA). The HHBA has collaborated on more than 40 capital projects representing three million square feet to generate transparency for building material ingredients and worked with hundreds of manufacturers to optimize products for health. The University has more than 140 LEED-certified buildings, including the new Harvard Science and Engineering Complex (SEC). LEED Platinum certified, it is the largest building—and the first research building—in the world to achieve Living Building Challenge Materials Petal Certification. None of us will be spared the realities of climate change, which means we are all in this together. Global progress will depend on a collective effort to see one another not as adversaries but as partners, not as caricatures but as people. It used to be that this was easier said than done—now it seems easier thought than said—but we must find a way to work side by side to have any hope of changing behaviors, adopting policies, and decarbonizing the economy. After a career among some of the most creative and talented individuals in the world, I believe that any problem caused by people can be solved by people too. If that seems overly optimistic, so be it. We are going to need a little optimism to preserve life on Earth as we know and cherish it today. All the best, Larry i Under the terms of some of these partnerships, HMC is legally obligated to fund capital calls if requested by the general partner up to the maximum capital committed at the time of the investment. © 2021 The President and Fellows of Harvard College | Harvard.edu Harvard University | Massachusetts Hall | Cambridge, MA 02138 Harvard respects your privacy. Please see our privacy statement for more information. Removal Instructions: If you no longer wish to receive Special Announcement email messages from Harvard University Leadership, please unsubscribe. |
Rick Miller <rickyraccoon@yahoo.com>
To:Lawrence S. Bacow
Tue, Sep 28, 2021 at 12:03 PM
President Bacow
I take issue with some of the points you make in your letter. Scientists disagree about how many extreme weather events are due to global warming and even if we have more extreme weather than in the past century. I did not accept the idea of human-induced global warming for many years because of unscientific statements ascribing chance weather events to global warming. It was only after reading articles by people who do not have an axe to grind that I accepted the fact that science indicates humans are helping to cause global warming.
As an academic you can see there are many pressures to exaggerate global warming, just as some others have incentives to minimize it. The grant-making function of the Federal government places much more credibility on those who promote the idea of severe global warming than on those who are less alarmist. Failure to recognize the distortion caused by government funding is a serious error.
When our government dramatically increased funding for cancer research we received an avalanche of studies that claimed many substances were carcinogenic. We now know that many of these studies cannot be replicated and that some were fraudulently conducted in order to receive funding. I repeat; I am not saying the science of global warming is bunk. I am saying that attributing every severe weather event to global warming is not justified because we don’t yet know enough to make these connections.
Some forms of global warming beliefs are so exaggerated that they can be viewed as religion instead of science.
I submit to you that there is an issue more threatening than global warming; our nation’s insolvency. The combination of the official debt plus the unfunded liabilities of Social Security ($30 trillion) and Medicare ($80+ trillion) mean our nation is over $140 trillion in debt. Nations have gotten into much trouble in this scenario. We are risking our financial well-being and even our republic.
Few people want to admit their contribution to the debt problem. I am elderly, as you can tell from my class year, and I acknowledge that subsidies for the elderly in such programs as Medicare are the largest share of the problem. Institutions of higher learning are not exempt from benefiting from government largesse, such as easy student loans that in turn have allowed universities to increase tuition much faster than inflation. Will you recognize that Harvard is part of the problem?
Frederick L. Miller ’67
Dear Frederick,
I appreciate having your perspective on this issue. Not everyone agrees on the topic of climate change, but thank you for caring enough to share your perspective. I will keep your thoughts on our country’s problem of insolvency in mind. Stay safe and be well.
All the best,
Larry
____________________
Lawrence S. Bacow
President
Harvard University
Front page of the paper edition, right hand column July 28, 2020:
G.O.P. Relief Plan Slices Extra Pay for Unemployed
Suggested edit for the Times to make the headline neutral:
G.O.P. Relief Plan reduces unemployment payments
The bias of The Times creeps into its news stories and the paper seems unaware of it. It is one thing for columns labeled “Analysis” or “Editorial” to reflect a specific viewpoint and another to have supposed ‘reporting’ reflecting one view.
I read many publications with a specific viewpoint; think tank papers, magazines etc. The difference is those publications acknowledge their bias. News articles reflect The Times viewpoint even when the paper thinks it is providing objective coverage.
I don’t give the Republicans (or the Democrats) credit for much but this proposal makes sense; under the current Federal program unemployed people receive $600 per week in supplemental funds from the Federal government. More than 70% of unemployed persons are receiving more than they were when working. Thus, there is an incentive to stay on the program and delay returning to work. The G.O.P. proposal reduces that incentive.
Diversity
I want to begin by saying diversity is important to me. I remember when growing up it was a big deal when two blacks (“negroes” at the time) joined my senior high school. And I remember how women were limited in the choice of occupations; not by law for the most part, but by custom. De facto, not de jure, as we lawyers say.
BUT; I get tired of “Diversity” as a mantra, as a value superior to all others. I was reminded of this today (April 7, 2020) when walking in New York City’s Riverside Park past one of the dog runs. There was a banner touting the dog run that began with
Riverside Park serves a large and diverse community of dog owners who value its dog runs and enjoy the off-leash hours, pathways, scenic views, and the neighborhood feeling the Park provides.
It seems that every level of government and almost every college has to claim it values “diversity.” Sometimes I hate this political correctness so much that I want to say I am against diversity. But I’m not. It’s just that there are other important things too, such as liberty, limited government, spending restraint, civil liberties. We are losing all these things at the present time. Each crisis, (such as the current one) leads to expansion of government and seldom any retraction once the crisis has ended.
By the way, the dog runs are closed now because of coronavirus. The authorities concluded that people using the runs were not abiding by the requirement of staying at least 6 feet apart. It is sad to not see the dogs there. Plus, the owners walk them and there is more poop in the pedestrian areas.
On March 3, 2020 the Federal Reserve lowered the interest rate it controls by 0.5 %. This rate is the rate at which banks lend money to each other for short terms.
Rates are already near historic lows. The rate on the 10 year Treasury bond is slightly below 1% per year. Does this make sense when inflation is at 2% or slightly higher? If you invest in a 10 year Treasury you are almost guaranteed to lose money.
These rates are manipulated by our Central Bank, i.e. Federal Reserve, in an effort to manage our economy. One reason income inequality might be rising (it isn’t as certain as some believe, but it probably is) is that these artificially low rates force savers to invest in riskier assets such as the stock market. Thus, the stock market has risen for 10 years partly because of an easy money policy by the Fed.
If I were the Fed I would gradually raise rates to above the inflation rate so that there is a positive return for investors. But wait; isn’t there something wrong with this picture of the Fed or this author determining interest rates?
The economist Friedrich Hayek pointed out the “fatal conceit” of one person or bureaucracy setting prices or indeed economic policy because they could not possibly have all the information necessary to make intelligent decisions. My take on the appropriate interest rate and that of the Fed might be equally erroneous. The only way to get the proper rate is for the marketplace to decide, because that takes into account the vast information held by all the participants.
So let us abolish the Fed’s rate setting ability and let market forces determine interest rates. I suspect this will remove one factor driving increased income inequality.
N.B.: Later in March the Federal Reserve lowered rates even more.
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The other big topic in the news is the coronavirus. The topic is related to the Federal Reserve because the Fed lowered rates in response to stock market swoons caused by fears of effects from the virus.
The Trump Administration initially proposed spending an additional $2.5 billion on Federal agencies such as the Center for Disease Control and the National Institutes of Health. This proposal has been ridiculed by Democrats and the bidding is now up to many times that in new spending.
How can anyone oppose such funding? I can, for several reasons. One, who knows what the proper amount of spending should be? Politicians are throwing out big numbers as a form of virtue signaling. Secondly, the United States cannot possibly survive on its present spending path, mainly because of entitlement spending. So, where are the cuts in other parts of the budget to make this new spending feasible?
The next reason might be hard to hear, especially for believers in government, but special interest groups are heavily involved in the healthcare agencies. This is true for these agencies as it is for the Pentagon. Every single department, bureau and agency is chock full of interest group spending and we must cut spending everywhere because our nation is truly insolvent.
I do not rely on the Federal government to help us. I rely on money-seeking capitalists to come up with better drugs and vaccines in response to their motivation to make money.
I heard the other night from one of my tennis partners that President Trump decimated the budgets for the healthcare agencies. I suspected this was one of those accusations needing a fact check. I looked it up when I got home and a fact check revealed that Trump proposed cuts to NIH and the CDC but bipartisan majorities in Congress prevailed and gave large increases to these agencies during every year of President Trump’s presidency.
Conclusion
Let markets set interest rates and don’t believe everything you hear from government agencies seeking money.
Recently, on January 23rd, 2020, President Trump said he would consider cuts to entitlement programs. According to the news media this is big news because it violates a position he took during the 2016 campaign and the Democrats can use this against him in the upcoming campaign.
I don’t like Trump. Sometimes he does say things I like and this is one of them. Cutting entitlements, or reforming them if that sounds better, is absolutely necessary. We cannot afford these programs as they stand and informed people have known that for some time.
Those damn Democrats! Most of the Democratic Presidential Candidates want to EXPAND entitlement programs, not contract them; Elizabeth Warren, Bernie Sanders, among others. This is deceiving the American people and ruining the lives of future generations, including our children.
Might I add; Damn those Republicans! A few of them have talked about entitlement reform, to their credit. However, when Republicans have had complete control of the government they not only didn’t cut these programs but expanded them, such as Bush’s Medicare drug program.
Ricks views 