From: Lee Corbin (lcorbin@tsoft.com)
Date: Mon Apr 07 2003 - 22:24:24 MDT
Damien S. writes
> Lee Corbin wrote:
>
> > > For 2002, this person would have had $797 in FICA taxes withheld, $186 for
> > > Medicare, and $518 for federal income tax. On top of this, depending on
>
> > or, taxes amounting to (797 + 186 + 518)/12854 = 11.7 percent.
> >
> > Shocking, really. There's no escape even for the poor---this is
> > even a little beyond the tithe extracted by theocracies!
>
> Although they're supposed to get a lot back in Social Security, possibly more
> than they 'earned' by paying in. Assuming they don't die too early, which
> they might well do, in which case their children get none of the 'saved' money.
Well, yes, there is *that* particular kind of unfairness
(dying early). But "getting your money back later, with
profit!" is the key characteristic of any pyramid scheme,
and it does work, except for those who are still owed
when the whole thing crashes.
But let's suppose that (a) people don't die early, and (b)
one particular Western country (e.g. the U.S.) never crashes.
In this case, can we really say that the pyramid scheme
enriched anyone?
I doubt it. Here is a semi-proof: suppose that the scheme
by which government seizes the money of the young and
immediately transfers it to the old appears in dollar terms
to pay the old more than it cost them in turn when they were
young.
If this assumption is true, then it means that (1) the money
properly invested would yield less, and (2) society is better-
off in the forced transfer of resources, despite the weakening
of incentives for both younger and older people.
I find both assumptions unlikely. The first is unlikely
because it discourages savings and investment, and has the
same drawbacks that usually attend artificial distortions
of the natural economy that governments are so fond of.
It also discourages the cultivation of prudence in a society.
The second is also telling, IMO. Older people who are very
possibly still able to contribute to an economy are "paid off"
not to work, and younger people, known for their short time
horizons, see less reward for their labor. (This really becomes
a strong factor when it finally requires more and more workers
per retiree to keep the scheme going.)
Lee
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