Not-a-Lemming : socialism, Bailout, government

The Return of Feudalism

FutbolGuru — Fri, 06 Feb 2009 16:09:00 GMT

They say things come to you in the shower. That doesn’t usually happen with me. More often, during the act of climbing into bed. Then I have to get up and write the idea down, for experience has taught me if I don’t write it down, no matter how Earth-shattering the thought, it will be gone the next morning. But this morning while I was shaving a light bulb went off.

There used to be something called a ‘Retirement Plan.’ You’d go to work for a company and they would begin a retirement plan. Basically they’d put a little money aside each month and when you were old and gray, they’d start siphoning it back to you. It would come agonizingly slow but at least it was there. Sort of like serfdom in the old Feudal systems of Europe. In exchange for work, the Lord provides care and protection.

But retirement plans became expensive. And people clamored about not having any personal control over ‘their’ money. Companies took the opportunity to eliminate the costly retirement plans in favor of giving executives larger bonuses. But our government, always looking out for the little guy, said there had to be something for the workers. (They must have known even then that Social Security wasn’t going to be there.) So they came up with the 401K. You have the option to place a portion of your income, pre-tax, into an investment vehicle over which you have ‘control.’ Some companies even put money in there for you. How nice. It can then grow with the market. Sounds good on paper. Or does it?

Think about what’s actually going on here. The portion of 401K provided by your employer isn’t a gift. It is money that could have just as well come to you in the form of compensation. Sort of like FICA which the government takes for your retirement plan. You pay 7.5% and your employer picks up the other 7.5%. Of course they don’t ‘pick it up.’ They pull it out of funds you earned for a total of 15%. So 15% of your income goes to FICA retirement. Then your company, or you, puts some money into your 401K, in my case 15% for your, uh, retirement. That’s 30% of my income for retirement. Keep in mind that all this cash is flowing monthly into the stock market, continuously, like a river. Even now.

I can’t get to any of this - my - money right now. The Social Security System has no ‘fund’ so there’s nothing there to get. And my 401K isn’t available until I’m too old to use it. I can take it out but I pay a huge penalty, close to half. So it isn’t available to use in my productive life for things like, starting a business, paying for college, or stimulating the economy. So while you can’t use your money to grow your life, there are others who can use your money to grow their lives. This may seem like swindling, but this system was set up by laws.

Yes, you heard me right. While your income isn’t available to you, it is made available to other private citizens in a process protected by U.S. law. Consider the following argument.

Keeping your 401K in a ‘safe’ money market account produces virtually no growth so isn’t a viable retirement plan. So you move it into mutual funds. Mutual funds then make the money available to companies to use as investment capital through the purchase of stocks. These mutual funds are administered by investment banks and other institutions which, as we have all seen, almost without exception, pay their executives ridiculously huge bonuses even though they lost all the money you had been forced to put aside for retirement. So while the money your earned can’t do you any good, it supports a lavish lifestyle for others.

That’s bad enough, but there’s an even more chilling revelation hidden in this web of deceit. One of the strongest arguments against socialism is always the exorbitantly high taxes needed to pay for social services. On the order of forty to fifty percent in some countries. But we’re already paying upwards of 30% for retirement alone! Add income tax and that jumps to 45%. Health care comes out of our checks too, which easily pushes the rate to 50%. State and local taxes drive it north of 60%. In California it’s more like 70%.

Friends, we’re socialist already. But it gets worse. Far worse, because for most of us, there are no social services to be had! The hallmark of the socialist state – the safety net – is missing. While other socialist countries provide retirement and health care – even if it isn’t the best – the middle class in this country has neither. Social Security is insolvent and our 401K’s are worthless. Health care is only available while you’re working. So while we’re socialist, we’re not. We have the high taxes, but not the services. Where did the money go? I hear some Wall Street execs took home in excess of 2 billion dollars in compensation last year.

In fact, we’ve come full circle. We’re back to feudalism. Bad feudalism. In a good feudal relationship, the Lord expected work but provided protection. As long as he wasn’t a cruel, greedy bastard, the system worked surprisingly well. When he was a cruel, greedy bastard the Lord rolled in lavish excess, stopped providing protection, yet demanded the serfs continue to work. The serfs starved and complained but the Lords had lost the fundamental human element of compassion so simply shut the gates on their castles.

The question is, what are we going to do about it? America isn’t feudal Europe. In feudal Europe the people had no rights and the wealthy class had no accountability. We still have rights and there is still accountability. For now. But for how much longer? Those in power have already shown their disdain for good government and good business in favor of hoarding wealth and land. They passed laws which made your money available to them and not to you. They know they have swindled us and that we’ve done nothing about it. When people behave badly without consequence they grow only more bold. Why should they not feel that they are fundamentally entitled just because the masses are still restrained by the concepts of law and ethics? Concepts which they have found to be inconvenient or never had in the first place. Will they win in their latest ruse to increase their fortunes by asking us to buy things we don’t need, made in a country not ours, to ‘jumpstart’ the economy and get money they don’t need flowing back into their coffers?

I’m not a fan of socialism, but it is better than what we have now. And unless we the people take back not only our government, but our economy, we’ll wind up with even less. What is that going to take? There are those who say that the Tree of Liberty requires blood and sometimes they are right. But it hasn’t gone that far yet. Not even close. And in fact, the solution is much simpler, won’t cost a thing, and would actually save us money.

All that in between lifting the razor to my face and pulling it down my cheek. I guess you can have a thought in the shower.

-Futbol Guru, http://mises.org/community/blogs/not-a-lemming

I'm Not One of Those

FutbolGuru — Fri, 02 Jan 2009 03:17:00 GMT

It has become unfashionable in some circles to speak out against the rich. Of course it is a hobby on the left, and it is not at all uncommon for a wealthy congressman or actor to rail against excess, such as former South Carolina Senator Ernest Hollings’, famous statement that, “There’s too much consumin’ goin’ on.” Whether he’s right or wrong, his statement smacks of pandering, and for the most part middle-class Americans have been conditioned against openly criticizing the rich. We are free in this country and part of being free is the freedom to make tons of money and live the way we want. Who’s business is it to question how much money another person makes, even if it rises into the billions betting against our own economy and helping raise oil prices? In fact, speaking out against the rich is generally considered a sign of envy or jealousy and the speaker is often cast as less ambitious/intelligent/or otherwise lucky as the one he’s attacking. Across a large segment of society it has become un-American to speak out against wealth. It is even labeled as communist or socialist.

But it is exactly what I’ve been doing on Not-a-Lemming. Especially in my previous post. And I’m no communist or socialist. Most people who know me would call me a conservative. So how can I claim to be a conservative while at the same time bashing the rich in the land of rugged individualism? Can a conservative do that? And please don’t confuse the term ‘Conservative’ with the party ‘Republican’ or the orientation, ‘Right’. They are not now, nor have they ever been congruent even if their intersection is not the empty set. I can do it because I’m not bashing the rich. I am a staunch capitalist and am strongly in favor of innovation and the entrepreneurial spirit.

I got an iPod shuffle for Christmas. Actually I bought it for myself when I was shopping for my kids. It is one of the most amazing little devices I’ve ever seen. I’m no technophobe and have been aware of, and owned, iPods since their inception. But I remember a world before iPods. A world of transistor radios that rarely worked and clunky cassette and CD Walkmans that chewed through batteries like a teenage druggy burning through an inheritance. I now have a tiny device just a little larger than a postage stamp that can deliver hours of crystal clear music. That is innovation! That is legitimate wealth. Kudos to you Mr. Jobs. Live however you like. You’ve earned it, sir. And you’ve given back.

On the other hand, I live in a town supported primarily by government money. If our spigot ever dries up, this place with shrivel like lettuce in Palm Springs. A lot of people in this town start businesses, grow them, sell them, and get rich. Then they walk around with their heads in the air, literally, and puff about their innovation, sacrifice, and entrepreneurial skill. Except they built their businesses entirely on government money. Sure there were some long days writing proposals for government contracts, but for the most part their was no real personal investment, and the seed product of the business was almost always taken (some say stolen) from a competing company when the new business owner quit and took it with him. And these business owners invariably feel they earned it entirely through their own hard work and rarely give any of it back. Choosing rather to spend their windfall of fancy cars, second homes, and glitzy vacations.

Now Mr. Jobs has a pretty nice home, and I’ll wager that he’s got some nice cars too. And maybe even vacations from time to time, but there is a fundamental difference between what he does, and what these tax-suckers do. And now we’ve taken it to an entirely different level. A level which makes government contractors look like Mother Teresa. I’ll say it again as I’ve said it before, $750,000,000,000. And who acted like we were obligated to give it to them? Banks! Banks that took trillions (that’s $1e12 for you geeks out there) of investor money and evaporated it on bad loans in get-rich-quick schemes. They literally held the international monetary system hostage when they adopted an attitude that said, “Okay, don’t give it to us and see what happens.” How dare those bastards! And after losing our money!

This isn’t capitalism. It’s bad socialism. Perhaps even closer to Hitler’s fascism where the government propped up major industries to keep the war going. Yes, it is banks getting the money, but what about the executives that got them into that position? The failed executives. Did they give back their six-figure+ bonuses? Did they lose their mansions and second homes and personal bank accounts? Did their children have to drop out of the Ivy League schools they are attending? Will they be going on vacation this summer? Are their garages still filled with Mercedes and BMWs? Are their pension plans empty?

These people remained rich, and that is wrong. It is wrong because I’m NOT a communist. It is wrong because I’m NOT a socialist. In Soviet Russia party members became fabulously wealthy by diverting public rubles to their own accounts. All it required was a law. In socialist nations, the upper-class administrates public concerns which pay their salary out of the till. The same people who happen to run the government. And now that is America, too. I'm not saying they aren't entitled to it if they have worked for it. I'm just saying they aren't entitled to 14% of the GNP if they haven't worked for it. Especially after it was their poor management and lack of fiscal responsibility that got us into this mess in the first place.

Furthermore, I can think of no greater depressing effect on innovation and entrepreneurship than the bank bailout and the likely auto bailout. It has gazed straight into the eyes of the middle class and said, “fuck you.” I don’t apologize for the expletive. Expletives have their place, and this is it. This isn’t railing against the rich. This is railing against thievery. This is railing against communism and socialism at its worst. What incentive do I have to continue working night after night on actual products I hope to one day sell to actual people, when those who have figured out how to put their hand in the public till and pull out a dollar seem to have such a higher success rate? America was the land of innovation because innovation was rewarded. But how much longer will that be true in this climate? Especially when it is noted that those who actually earned money are far more willing to capitalize others than those who stole it. As the ratio of earners to thieves tips ever more in favor of the thieves, who for some reason feel they deserve their privileged lifestyle, actual seed money will become less, and less available. Innovators will leave for other places with fewer regulation and more favorable populations, and America’s monopoly on innovation will wither.

It is already happening. Europe, as it emerges from the effects of two world wars is gaining momentum. China, momentarily set back by the economic downturn, will regain her feet. And America, with capitol tied up in the hands of thieves, will seem increasingly less attractive to the talented and ambitious. It’s happened before.

So I reject any and all assertions that I am un-American, or communist, or socialist, or even jealous. I am a capitalist American who believes in fair play, equality of opportunity, and reward for innovation. You want to find a communist, go to an investment bank. He’ll be hiding in the closet under a pile of taxpayer money.

Next: Partners in Crime

-Futbol Guru, http://mises.org/Community/blogs/not-a-lemming