question of who owes what to whom.
If a private insurance company holds
a government bond, tbut is an asset. It
would be absurd for the company to
issue and bold bonds ol its own. claiming them as an asset. lor they would
also be a liability. The solvency of the
Social Security fund is not affected, one
way or the- other, by its holding of
bonds a- evidence that the government
i- indebted to itself.
A governmental promise is ei promise,
whether backed by a bond, or by a
Soeieil Security account, or by a whole
pyramid of promises, one upon another.
To cancel or dc-haiv the bonds held in
the Social Security fund would mil
change anyone's equity in anything. I he
preetnise of ei So. ieil Security pension bus
value onlv because the government holds
the power of taxation—not because it
issues bonds or makes promises, lhe
validity of Sett i il Si : unlv ; linn- againsl
fulure taxpayers would not be changed
if there were a thousand times us many
bonds in the Sniieil Security fund as at
present—or if there were no bonds in
the fund eit all.
THE INFLATION TAX
Inasmuch as the redemption values of
all government bonds, Social Security
benefits, eun! other governmental promises of future delivery are contingent
upon the future collection of luxe-, il
iiiu-t be seen that each added bond or
promise lends to weaken the financial
pee-itiien of tin' government. There i- ei
limit to the- tax burden which future
generations will be willing and able to
\e tiiallv tin- mushrooming of governmental promises of future delivery is a
form ol current taxation ;i method of
dipping into private savings, which is
commonly known us inflation. When the
government sells one of its bonds, or collects the Social Security lux. it obtains
a given amount of real purchasing power
from individuals.The dollars with which
the government eventually redeem- its
promises lose purchasing power in proportion to the volume of such outstanding promises. Meanwhile, all other
promises which are payable in dollars,
including the dollar obligations con-
tracted by individuals, also lose their
purchasing power. This encourage- private spending eunl discourages saving
emd priveite- ceipilul formation. Inflation
is a subtle und destructive method of
taxation. And the Sex i.d Security program is u part of that destruction of
private- enterprise in Vmerica.
The Social Security lux was initiated
in 1937 at the comparatively low level
of 2 per cent ol an employee's wages.
the employer and the employee each to
bear half of tlle amount. By January 1.
1954. the total tax bail risen lo I pel
cent, which is still low in contrast with
some of the prevailing corporate and
persona] income tax rate-. It mav be
recalled, however, lhat the early advocate- of income tetxes also scoff,,) eit the
idea that such taxes could ever amount
to as much as 10 per cent of a person's
income. The ironic truth is tbut federal
income lax rales have "progressed" upward to take as much a- '12 per cent of
personal income in some instances.
A further truth is tbut a lax of 1 per
cenl of ciirrcnl payrolls barely begins
to cover the potential claims which are
accumulating under the Social Security
program. Presenl plans call for successive future im leases until the Social
Security teix rate reaches em ultimate
of (i.S pe-i icnl bv 197(1. It is likely that
by 1970 there vvill be at least one person
over 65 years of age for every five
of those younger persons who ate sup-
posed to be productively employed, I-
6.5 per cent of the wage- ,,f Um- persons
ei total of 32.5 per cent of an average
Wage going to be enough to keep one
p,r-,eii comfortably in retirement? Or
is thi- simply another of the wondrous
examples of the higher mathematics of
Amateurs who cannot follow ul! of the
political turns in thc 6.5 per cent path
In security may find comfort in the
knowledge that -nine of the professionals haven't solved tin- magic formula
For instance, the compulsory Social
Security program which Frenchmen
have been trying to perfect for a good
many years calls f,,r a teix amounting
to 16 per cent ol payrolls. No doubt
Ihey also had hoped eil one lime that
tbe lax need be no higher them 6.5 per
Tin- Social Security features of lhe
I nited State- railroad retirement system
were initialed in 19:1.7 with a payroll tax
of 5.5 per cent, bul bv 1952 that rate
hud climbed to 12.5 per cent.
I he anthracite fund pensions hud to
be cut from 8100 to $50 a month, even
though tbe tux-like contributions lo the
fund were said to be equivalent lo more
than 15 per cenl of the wage bill of the
Such experiences tend to arouse suspicion ol either the motives or the basic
intelligence of those- who promise thai
lev 1970 retircnieni security can be
achieved at a cosl of no more than 6.5
per cent of payrolls. If it cannot be
achieved by small groups within a na
tion, and il il cannot be accompli
other nations, then why should un!
believe that il can be done on a in
wieli- basis in tin- I nited States in
or at any other time'.''
Ils proponents "hope eventual
bene eell | pie- who work for el I
covered bv- Soeieil Security." Thisl
for ee neitioneil program compelhl*!
dividual* to del what they could 1W
woulel met attempt on their own 1
live. There is a certain plausibinl
tin- rationale thai persons most like'
be dependent in their old ece *J
be obliged to help fool the bill <W
the productive years of their lives.J
reasoning, of course, presumes i' I
ih,- responsibility of the governnt*!
relieve the consequences of p°l
Prom such plausibilities, indivi
em- drawing th,- conclusion that!
have a rigbl to retire eit age 65. ul1
further personal responsibilities
earning ;i living. When one attentl
follow through III'' various leunili''1
of those iiolious. In- i- bound even'
to question the original premise!
right that (he alleviation ol pnvcr
considered a soeieil rather than
-oueil responsibility? If ibis i- acj
a- a general principle, then bow "'
society -lop itself -hurt of i-e.nipl''1'
I Compulsory Social Sei u ti I x b'n
person to invest a portion "f hi*!
ing- in a "business" which alreaoj
u debt of more than a quarter of ;1
lieu, dollar- ami which seems detefj
to operate' ell el deficit lie
Stale- government. Little wondel
participation is compulsory!
SECURITY IS AN ATTITUD*
A feeling of personal security ''"
upon something more than il"
guarantee of u bumloul in time "'
Security i- an attitude not
satisfied by em "eepiul share'' or e»
em abundance of material good*
sen ices. To be truly secure i~
without cause for anxiety, and th"
of security stems from lhe mine
individual who knows that In- h-1"
hi- very besl wilh wheel w,
hi- ow n. Such security i- It
respeel for thr rights of other?
and property, a respeel upon **■
based um**- on n claim to lli"
Though older persons ina\ "'
well in tin- armed forces. 01
plants, mi* in lln* various olhi
incidental to the support of h'r/i
ment, that need not preclude ll"'1',
(Continued on '
Facts Forum News, /(■iiii."'!''!