The Self-Destruction of American Capitalism
The historic realm of Capitalism, which underpins our economy, has been the ownership of resources and control of manufacturing of everything we consume in support of life. Since every raw material gathered from the earth and every tool contrived to modify raw materials into desired consumables are the result of the productive labor of animals, workers, and machines built by workers; Capitalism has for the past few centuries made its profit and expanded its wealth by controlling productive labor. Wages paid for production have always been only a portion of the value generated in the goods produced by the labor of workers; the other portion being the profit garnished by the capitalist. This Paradigm of exclusive ownership, labor control, wages below the full value of productive labor, has been the foundation of our Capitalist economy since before the Revolutionary War.
The impending doom of the Capitalist Paradigm is that productive labor is being transferred from people to machines, and therefore the human labor to produce all that we consume is diminishing. Initially machines replaced animal labor that was being harnessed alongside human labor at the beginning of Capitalism. It is wrong to think that machines increase the productivity of human workers; machines are constantly being engineered to increase their own productivity to produce and transport goods with less aid from humans. The industrial revolution that has sought to increase productivity via machine efficiency, has been lumbering along for more than one hundred and fifty years; but it has, since the 1970's, been accelerating the pace of machine productivity controlled by computers, such that human labor is becoming obsolete. The accelerating pace of advancement in robotics and integrated manufacturing and transportation systems will render human labor unnecessary in less than a generation. People will be put out to pasture, so to speak, just like horses were.
There has been a great effort, since the financial crash of 2008, for all businesses great and small to automate production for two purposes; first to reduce the number of employees required to produce goods, and secondly to have machines do all critical manufacturing operations, tests, and communications about production, such that what remains of human labor is being dumbed-down to just monitoring and maintaining machines, receiving lower and lower wages as machines become more autonomous; in the short run these changes in manufacturing add increased profits to a company's bottom line, but five to ten years down the road consumption will fall off as wages continue to fall and employment declines. Ultimately, if machines manufacture and transport all goods, there will be no one earning a wage that can be spent consuming what the machines produce; so machines will replace human labor and then be idled in increasing numbers as there will be declining demand for their produce; this will be the legacy of the dying Capitalist Paradigm. The past five years has seen millions of jobs lost in our economy and wages reduced for all skilled, unskilled, and professional labor. The middle class (the producing class) is rewarded less, while profits increase. At the very least we are headed toward a society where consumption drops for everything except subsistence goods, and service industries and even mainstream manufacturing lose customers, causing massive layoffs of the menial employed and a severe depression that will linger much longer than the most recent recession.
The mandate of the banking system that shores up our Capitalist Paradigm is to maintain stable money, I.e. unchanging purchasing power (no inflation), and also promote maximum employment through monetary policy that furnishes money to banks to promote lending and business expansion; this mandate has failed throughout the history of the Federal Reserve Banking System. The Federal Reserve is 100 years old and during the past 100-years it has stewarded the purchasing power of the dollar from 100-cents in 1914 to less than 2-cents today relative to that 1914 dollar. The Federal Reserve has never been able to maintain a stable value of our currency; admitting publicly that it seeks a 2-percent reduction in purchasing power every year, year in and year out, as its monetary goal. The Fed's other mandate, full employment, has had its ups and downs throughout its reign over the dollar. The spotlight placed on the unemployment number has recently exaggerated its economic forecasting value, because it does not reflect the large number of unemployed who are not seeking jobs and even more importantly it does not reflect the decrease in wages and benefits throughout the whole range of skilled, unskilled, and professional jobs in our economy; nor does it reflect the fact that a large portion of the "employed" are only part-time workers; and that medical and pension benefits are disappearing for a large portion of our workforce. Being employed does not mean a person is financially secure, in the sense the government tries to relate when it publishes employment figures.
The Capitalist Paradigm has always been at war with labor over wages and benefits, but each recession and depression makes the unemployed and under-employed more desperate to hold a job to support themselves, accepting lower wages and fewer benefits seems to indicate that Capitalism is winning its battle with labor. But the Capitalist Paradigm is up against two tidal waves of social costs that are growing rapidly and inexorably. The first will be the cost of supplying the food, clothes, shelter, education, and medical needs of the growing number of non-working and under-employed citizens; this cost will ultimately have to come from increased taxes on corporate profits and individual wealth. Political and economic socialism will rise to consume wealth and severely weaken the Capitalist Paradigm. The second tidal wave of social expense that will also divert wealth and profits to the social needs of the rapidly growing numbers of elderly; in particular the Baby-Boomers, who have been retiring at a rate above 10,000 per day, every day, (365 days a year) for two years now and will continue to do so for at least another eight years. The cost of providing Social Security income and Medicare coverage to the explosion of retiring "Boomers" will also have to come from increased taxes on corporate and private wealth; the wages being paid to workers today simply will not generate enough FICA taxes to cover these ballooning costs. We need to keep in mind that employers match the FICA tax paid by each employee; so reductions in employment and reductions in wages may benefit the employer, but they are a disaster for Social Security and Medicare.
With more than 300,000 baby-boomers retiring each month, an economy that is only hiring, on average, 200,000 people a month is still losing more than 100,000 jobs each month; our economy is not gaining jobs, it is losing jobs and has been since the start of the last recession in the summer of 2008. While the income disparity between those retiring and those being newly hired is enormous. When a lower class person retires from a job paying say $14.00 per hour, they are replaced by a new person starting around $9.00 per hour; and even the retiring upper class executive receiving a salary of $150,000.00 per year, as well as a company car, a paid membership at the country club or yacht club, and full medical coverage, is being replaced by an underling who will accept a salary around $65,000.00 per year, no company car, no paid memberships to private clubs, and have to pay premiums for less medical coverage. None of these changing labor conditions is showing up in the Federal Reserve's analysis or published employment statistics; and yet the Federal Reserve and Wall Street attach the same significance to these employment statistics that they did thirty to fifty years ago. Unemployment at 6.2%, 5%, 3% or whatever, is meaningless because it has no context that informs us about the changing distribution of wealth and poverty in our society.
On a similar note of more mistaken analysis, the Federal Reserve has had a so-called "Quantitative Easing" program that has pumped a large amount of money into the economy in an attempt to stave off overall monetary deflation. Essentially the Federal Reserve offers banks, corporations, mutual funds, hedge funds, foreign countries, and wealthy individuals that hold US government bonds an incentive of immediate profit to sell some of those bonds now and receive a higher price from the Federal Reserve than the private market would offer. The bond seller will receive payment in US Dollars to re-invest in other markets; and since interest rates are essentially zero for cash held in savings accounts, these dollars will be spent competing to buy stocks, commodities, real estate, etc.; causing inflation in these markets that the Federal Reserve can average against the wage deflation in the workforce to achieve its target of 1-2% inflation annually in our economy overall. The problem, not reported and little understood, is that there are inflations and deflations continually showing up throughout our economy; the inflation figure reported by the Fed each month is the net sum of all inflations and deflations occurring in the economy. The reader will need to read other articles by this author within this website to understand that all business profits and all employee income are wages; and that wages are the only thing in our economy that can inflate or deflate. Goods and services do not inflate or deflate, it is the labor (wages plus profits) that produces and distributes goods and services that can inflate or deflate; the price of anything is the sum of labors to manufacture, transport, and distribute. So when the Fed pumps money into the economy to produce a net wage inflation, it is doing so to offset one or several wage deflations occurring in our economy. All the Fed has achieved in this QE debacle is to inflate (increase) corporate wages and the wages of wealthy individuals to offset the ongoing deflation (decrease) of labor wages in the middle and lower classes. This action by the Fed to ignore growing poverty and provide unearned wealth to the already rich will only hasten a socialism that will ultimately and certainly destroy the Capitalist Paradigm. It is the Federal Reserve that is leading the way toward a social abyss. The reliance on vacuous employment figures and the unknown social trends underlying those figures will not permit any useful monetary decisions by the Fed., or useful fiscal decisions by the Congress, nor will Wall Street discover solutions to wealth disparity that could ameliorate the direction our society is headed.
The Quantitative Easing actions of the Federal Reserve do not belie the fact that the labor force in general is still, and has for several years, been experiencing monetary deflation, even if the overall average sum of wages in our economy indicates a small net annual inflation. When is, an inflation looked at from one perspective, a deflation when looked at from a different perspective? When a person's wages do not keep pace with annual price increases, those wages are being deflated (reduced); and those on fixed income (pensions, welfare, etc.) are having their purchasing power deflated as well. Prices going up equate to wages going down. Inflation for producers is deflation for consumers. The Federal Reserve can shore up the wealthy with QE, but only at the expense of expanding the number of citizens that are impoverished; while Congress can shore up the impoverished with welfare, but only at the expense of the wealthy.
Another major problem for the Capitalist Paradigm will be a continual decrease in consumption as computer controlled machine technology increasingly replaces humans, causing those who own the machines to produce less, thereby using less and less raw materials that will affect jobs in other industries, creating a spiral decline in production and consumption. The Capitalist Paradigm worked well when the indentured working class was the focus of both production and consumption. As human labor becomes obsolete and Capitalism shifts its focus to profits only, ignoring consumption, the economy will limp along until it fails at every level everywhere. Although Capitalism has, since its beginning, expanded consumption by issuing credit to the working class; the expanded use of credit to non-working persons (poor, elderly, students, under-employed) is creating a personal debt that will be unpayable along with corporate debt, municipal debt, national debt, student loan debt, under-funded pension debt, and mortgage debt; Capitalism functions when there is an abundance of human labor that can be taxed to return profits to the capitalists and income to government to build and manage our infrastructure. The complete transition from human labor to machine labor is at best a short-term stop-gap measure to shore up profits for corporations, before consumption collapses.
The only remedy to expand human labor participation (jobs) and maintain consumption capable of expanding our economy is to shorten the full-time work day from eight hours per day (a 40-hour week) to six hours per day (a 30-hour week) offering wages and benefits that allow workers to live debt free, purchase homes, revitalize our infrastructure and educate their children. This has been done twice in our past to create jobs and reduce social unrest; the government reduced the work day from 12-hours per day, 6-days per week to 10-hours per day, 6-days per week around the beginning of the 20th century, along with new laws putting limits on child labor; and during the great depression of the 1930's, the work day was further reduced to 8-hours per day, and a 5-day work week was imposed to create more jobs and keep the Capitalist Paradigm going. Either we are all going into the future together, sharing the labor required to sustain our society while limiting corporate profits on that labor, or we are not going at all.
It would be wrong to assume that the champions of the Capitalist Paradigm are people of above average intellects or who have special insight into the workings of governments and economies. The most renowned champion in the recent past was Ronald Reagan, who by his actions as President was either a simpleton or a crook. President Reagan, having promised to lower taxes and still pay the government's bills, conjured up a scheme to offset the lowering of tax on income, by raising the Social Security tax (FICA) under the guise that Social Security would otherwise become underfunded in the future and needed a trust fund to provide future income for the Social Security system. However, the increased Social Security tax revenue was spent as soon as it was collected, it was not invested in any ventures with businesses or loaned to other societies that would pay back the principle raised in that tax surplus, let alone return a profit of interest for its use. The surplus Social Security tax was used to offset the persistent annual shortage of income tax. This government endeavor that overtaxed workers for trillions of dollars and issued government I.O.U.s to the Social Security Administration was perpetrating an utter and complete fraud on the American people. There is not one penny in the so-called Social Security Trust Fund that will not come from future taxes on wages; there is nothing in the bank and never has been. Money spent once cannot be resurrected to be spent a second time. A person cannot be in debt to their self and a society cannot be in debt to itself. A trust fund must invest its money in a separate second party that will in the future pay back whatever it borrows with interest and do so out of its future profits. The lender gains when the borrower loses, because they are separate economic entities. The people behind the Social Security Trust Fund would have you believe that our society can tax itself, loan those taxes to itself, spend the taxes borrowed, and then in the future require society to again tax itself to pay back the taxes borrowed and thereby raise funds to support society's needs, and ultimately come out ahead in this scheme. Society cannot be in debt to itself in any profitable way; this scheme only transferred more of the cost of funding our government to the middle class, through lowering income tax on high wage earners and raising FICA tax on hourly wage earners, on a year by year basis since the 1980's. The money raised is gone, spent, history. The people that orchestrated this fraud are no more capable of saving, or even understanding, the Capitalist Paradigm than they are of understanding the relationship between government income and government spending.
Government must always tax as much as it plans on spending. To lower taxes under the guise that it will put more private money into the economy that will then be put to work expanding the economy is a complete fallacy. As soon as government fails to tax what it will spend, it borrows the very same shortfall from those it would have taxed to raise the funds required. Only instead of simply taking the required funds, it now has created a debt that requires rewarding those that should have been taxed; with the profit to them of interest payments on principle sums that should never have remained in their possession. Is it stupidity, malevolence, greed, or just short-sighted Capitalism? In any case government borrowing is terminal and so are those who hope to profit by continuous loans to governments.
The economic destruction we are headed for does not require any catastrophic event to trigger it. Only a small percentage of speculators in stocks and bonds deciding they no longer want to own stocks and bonds would crash those markets; only a small percentage of the workforce, unable to find work, would consume all state and municipal welfare, crashing local economies; only a small percentage of citizens going hungry would lead to riots and destruction that would affect the lives and future of everyone. Oddly enough, when it all falls apart it will be a surprise to the majority that anything was wrong. Just one example of how a segment of society can be overwhelmed; in the winter of 2013-2014 the Boston hospitals experienced an influx of 700 influenza patients and reached its capacity to treat illness; with more than a million people depending on these medical facilities the reality shows that only a few in need can deplete medical resources into a condition of being in-effectual or non-existent. The same is true of law enforcement during isolated riots or wide spread social unrest. Even things like water purification, sewage treatment, and power generation all fail when over utilized or poorly maintained; when municipal, state, and federal funds decline. They do not just fail a little bit, power is not interrupted for a few; everyone is affected when over use and insufficient maintenance lead only to system failure. Improper and insufficient taxation of all who participate in our economy simply hastens the decay of Capitalism. Our economy has declined to a point that we depend on the welfare payments (loans) of foreigners to pay our bills year-in and year-out; we are either incapable or unwilling to tax ourselves to pay our bills; going forth as beggars seeking charity so that a few can continue to have more, while most have much less. Unfortunately charity is not always available, while chaos and revolution will become camp followers of our decaying Capitalist Paradigm.
Article Source: http://EzineArticles.com/?expert=Craig_Hanks
Article Source: http://EzineArticles.com/8667464
The historic realm of Capitalism, which underpins our economy, has been the ownership of resources and control of manufacturing of everything we consume in support of life. Since every raw material gathered from the earth and every tool contrived to modify raw materials into desired consumables are the result of the productive labor of animals, workers, and machines built by workers; Capitalism has for the past few centuries made its profit and expanded its wealth by controlling productive labor. Wages paid for production have always been only a portion of the value generated in the goods produced by the labor of workers; the other portion being the profit garnished by the capitalist. This Paradigm of exclusive ownership, labor control, wages below the full value of productive labor, has been the foundation of our Capitalist economy since before the Revolutionary War.
The impending doom of the Capitalist Paradigm is that productive labor is being transferred from people to machines, and therefore the human labor to produce all that we consume is diminishing. Initially machines replaced animal labor that was being harnessed alongside human labor at the beginning of Capitalism. It is wrong to think that machines increase the productivity of human workers; machines are constantly being engineered to increase their own productivity to produce and transport goods with less aid from humans. The industrial revolution that has sought to increase productivity via machine efficiency, has been lumbering along for more than one hundred and fifty years; but it has, since the 1970's, been accelerating the pace of machine productivity controlled by computers, such that human labor is becoming obsolete. The accelerating pace of advancement in robotics and integrated manufacturing and transportation systems will render human labor unnecessary in less than a generation. People will be put out to pasture, so to speak, just like horses were.
There has been a great effort, since the financial crash of 2008, for all businesses great and small to automate production for two purposes; first to reduce the number of employees required to produce goods, and secondly to have machines do all critical manufacturing operations, tests, and communications about production, such that what remains of human labor is being dumbed-down to just monitoring and maintaining machines, receiving lower and lower wages as machines become more autonomous; in the short run these changes in manufacturing add increased profits to a company's bottom line, but five to ten years down the road consumption will fall off as wages continue to fall and employment declines. Ultimately, if machines manufacture and transport all goods, there will be no one earning a wage that can be spent consuming what the machines produce; so machines will replace human labor and then be idled in increasing numbers as there will be declining demand for their produce; this will be the legacy of the dying Capitalist Paradigm. The past five years has seen millions of jobs lost in our economy and wages reduced for all skilled, unskilled, and professional labor. The middle class (the producing class) is rewarded less, while profits increase. At the very least we are headed toward a society where consumption drops for everything except subsistence goods, and service industries and even mainstream manufacturing lose customers, causing massive layoffs of the menial employed and a severe depression that will linger much longer than the most recent recession.
The mandate of the banking system that shores up our Capitalist Paradigm is to maintain stable money, I.e. unchanging purchasing power (no inflation), and also promote maximum employment through monetary policy that furnishes money to banks to promote lending and business expansion; this mandate has failed throughout the history of the Federal Reserve Banking System. The Federal Reserve is 100 years old and during the past 100-years it has stewarded the purchasing power of the dollar from 100-cents in 1914 to less than 2-cents today relative to that 1914 dollar. The Federal Reserve has never been able to maintain a stable value of our currency; admitting publicly that it seeks a 2-percent reduction in purchasing power every year, year in and year out, as its monetary goal. The Fed's other mandate, full employment, has had its ups and downs throughout its reign over the dollar. The spotlight placed on the unemployment number has recently exaggerated its economic forecasting value, because it does not reflect the large number of unemployed who are not seeking jobs and even more importantly it does not reflect the decrease in wages and benefits throughout the whole range of skilled, unskilled, and professional jobs in our economy; nor does it reflect the fact that a large portion of the "employed" are only part-time workers; and that medical and pension benefits are disappearing for a large portion of our workforce. Being employed does not mean a person is financially secure, in the sense the government tries to relate when it publishes employment figures.
The Capitalist Paradigm has always been at war with labor over wages and benefits, but each recession and depression makes the unemployed and under-employed more desperate to hold a job to support themselves, accepting lower wages and fewer benefits seems to indicate that Capitalism is winning its battle with labor. But the Capitalist Paradigm is up against two tidal waves of social costs that are growing rapidly and inexorably. The first will be the cost of supplying the food, clothes, shelter, education, and medical needs of the growing number of non-working and under-employed citizens; this cost will ultimately have to come from increased taxes on corporate profits and individual wealth. Political and economic socialism will rise to consume wealth and severely weaken the Capitalist Paradigm. The second tidal wave of social expense that will also divert wealth and profits to the social needs of the rapidly growing numbers of elderly; in particular the Baby-Boomers, who have been retiring at a rate above 10,000 per day, every day, (365 days a year) for two years now and will continue to do so for at least another eight years. The cost of providing Social Security income and Medicare coverage to the explosion of retiring "Boomers" will also have to come from increased taxes on corporate and private wealth; the wages being paid to workers today simply will not generate enough FICA taxes to cover these ballooning costs. We need to keep in mind that employers match the FICA tax paid by each employee; so reductions in employment and reductions in wages may benefit the employer, but they are a disaster for Social Security and Medicare.
With more than 300,000 baby-boomers retiring each month, an economy that is only hiring, on average, 200,000 people a month is still losing more than 100,000 jobs each month; our economy is not gaining jobs, it is losing jobs and has been since the start of the last recession in the summer of 2008. While the income disparity between those retiring and those being newly hired is enormous. When a lower class person retires from a job paying say $14.00 per hour, they are replaced by a new person starting around $9.00 per hour; and even the retiring upper class executive receiving a salary of $150,000.00 per year, as well as a company car, a paid membership at the country club or yacht club, and full medical coverage, is being replaced by an underling who will accept a salary around $65,000.00 per year, no company car, no paid memberships to private clubs, and have to pay premiums for less medical coverage. None of these changing labor conditions is showing up in the Federal Reserve's analysis or published employment statistics; and yet the Federal Reserve and Wall Street attach the same significance to these employment statistics that they did thirty to fifty years ago. Unemployment at 6.2%, 5%, 3% or whatever, is meaningless because it has no context that informs us about the changing distribution of wealth and poverty in our society.
On a similar note of more mistaken analysis, the Federal Reserve has had a so-called "Quantitative Easing" program that has pumped a large amount of money into the economy in an attempt to stave off overall monetary deflation. Essentially the Federal Reserve offers banks, corporations, mutual funds, hedge funds, foreign countries, and wealthy individuals that hold US government bonds an incentive of immediate profit to sell some of those bonds now and receive a higher price from the Federal Reserve than the private market would offer. The bond seller will receive payment in US Dollars to re-invest in other markets; and since interest rates are essentially zero for cash held in savings accounts, these dollars will be spent competing to buy stocks, commodities, real estate, etc.; causing inflation in these markets that the Federal Reserve can average against the wage deflation in the workforce to achieve its target of 1-2% inflation annually in our economy overall. The problem, not reported and little understood, is that there are inflations and deflations continually showing up throughout our economy; the inflation figure reported by the Fed each month is the net sum of all inflations and deflations occurring in the economy. The reader will need to read other articles by this author within this website to understand that all business profits and all employee income are wages; and that wages are the only thing in our economy that can inflate or deflate. Goods and services do not inflate or deflate, it is the labor (wages plus profits) that produces and distributes goods and services that can inflate or deflate; the price of anything is the sum of labors to manufacture, transport, and distribute. So when the Fed pumps money into the economy to produce a net wage inflation, it is doing so to offset one or several wage deflations occurring in our economy. All the Fed has achieved in this QE debacle is to inflate (increase) corporate wages and the wages of wealthy individuals to offset the ongoing deflation (decrease) of labor wages in the middle and lower classes. This action by the Fed to ignore growing poverty and provide unearned wealth to the already rich will only hasten a socialism that will ultimately and certainly destroy the Capitalist Paradigm. It is the Federal Reserve that is leading the way toward a social abyss. The reliance on vacuous employment figures and the unknown social trends underlying those figures will not permit any useful monetary decisions by the Fed., or useful fiscal decisions by the Congress, nor will Wall Street discover solutions to wealth disparity that could ameliorate the direction our society is headed.
The Quantitative Easing actions of the Federal Reserve do not belie the fact that the labor force in general is still, and has for several years, been experiencing monetary deflation, even if the overall average sum of wages in our economy indicates a small net annual inflation. When is, an inflation looked at from one perspective, a deflation when looked at from a different perspective? When a person's wages do not keep pace with annual price increases, those wages are being deflated (reduced); and those on fixed income (pensions, welfare, etc.) are having their purchasing power deflated as well. Prices going up equate to wages going down. Inflation for producers is deflation for consumers. The Federal Reserve can shore up the wealthy with QE, but only at the expense of expanding the number of citizens that are impoverished; while Congress can shore up the impoverished with welfare, but only at the expense of the wealthy.
Another major problem for the Capitalist Paradigm will be a continual decrease in consumption as computer controlled machine technology increasingly replaces humans, causing those who own the machines to produce less, thereby using less and less raw materials that will affect jobs in other industries, creating a spiral decline in production and consumption. The Capitalist Paradigm worked well when the indentured working class was the focus of both production and consumption. As human labor becomes obsolete and Capitalism shifts its focus to profits only, ignoring consumption, the economy will limp along until it fails at every level everywhere. Although Capitalism has, since its beginning, expanded consumption by issuing credit to the working class; the expanded use of credit to non-working persons (poor, elderly, students, under-employed) is creating a personal debt that will be unpayable along with corporate debt, municipal debt, national debt, student loan debt, under-funded pension debt, and mortgage debt; Capitalism functions when there is an abundance of human labor that can be taxed to return profits to the capitalists and income to government to build and manage our infrastructure. The complete transition from human labor to machine labor is at best a short-term stop-gap measure to shore up profits for corporations, before consumption collapses.
The only remedy to expand human labor participation (jobs) and maintain consumption capable of expanding our economy is to shorten the full-time work day from eight hours per day (a 40-hour week) to six hours per day (a 30-hour week) offering wages and benefits that allow workers to live debt free, purchase homes, revitalize our infrastructure and educate their children. This has been done twice in our past to create jobs and reduce social unrest; the government reduced the work day from 12-hours per day, 6-days per week to 10-hours per day, 6-days per week around the beginning of the 20th century, along with new laws putting limits on child labor; and during the great depression of the 1930's, the work day was further reduced to 8-hours per day, and a 5-day work week was imposed to create more jobs and keep the Capitalist Paradigm going. Either we are all going into the future together, sharing the labor required to sustain our society while limiting corporate profits on that labor, or we are not going at all.
It would be wrong to assume that the champions of the Capitalist Paradigm are people of above average intellects or who have special insight into the workings of governments and economies. The most renowned champion in the recent past was Ronald Reagan, who by his actions as President was either a simpleton or a crook. President Reagan, having promised to lower taxes and still pay the government's bills, conjured up a scheme to offset the lowering of tax on income, by raising the Social Security tax (FICA) under the guise that Social Security would otherwise become underfunded in the future and needed a trust fund to provide future income for the Social Security system. However, the increased Social Security tax revenue was spent as soon as it was collected, it was not invested in any ventures with businesses or loaned to other societies that would pay back the principle raised in that tax surplus, let alone return a profit of interest for its use. The surplus Social Security tax was used to offset the persistent annual shortage of income tax. This government endeavor that overtaxed workers for trillions of dollars and issued government I.O.U.s to the Social Security Administration was perpetrating an utter and complete fraud on the American people. There is not one penny in the so-called Social Security Trust Fund that will not come from future taxes on wages; there is nothing in the bank and never has been. Money spent once cannot be resurrected to be spent a second time. A person cannot be in debt to their self and a society cannot be in debt to itself. A trust fund must invest its money in a separate second party that will in the future pay back whatever it borrows with interest and do so out of its future profits. The lender gains when the borrower loses, because they are separate economic entities. The people behind the Social Security Trust Fund would have you believe that our society can tax itself, loan those taxes to itself, spend the taxes borrowed, and then in the future require society to again tax itself to pay back the taxes borrowed and thereby raise funds to support society's needs, and ultimately come out ahead in this scheme. Society cannot be in debt to itself in any profitable way; this scheme only transferred more of the cost of funding our government to the middle class, through lowering income tax on high wage earners and raising FICA tax on hourly wage earners, on a year by year basis since the 1980's. The money raised is gone, spent, history. The people that orchestrated this fraud are no more capable of saving, or even understanding, the Capitalist Paradigm than they are of understanding the relationship between government income and government spending.
Government must always tax as much as it plans on spending. To lower taxes under the guise that it will put more private money into the economy that will then be put to work expanding the economy is a complete fallacy. As soon as government fails to tax what it will spend, it borrows the very same shortfall from those it would have taxed to raise the funds required. Only instead of simply taking the required funds, it now has created a debt that requires rewarding those that should have been taxed; with the profit to them of interest payments on principle sums that should never have remained in their possession. Is it stupidity, malevolence, greed, or just short-sighted Capitalism? In any case government borrowing is terminal and so are those who hope to profit by continuous loans to governments.
The economic destruction we are headed for does not require any catastrophic event to trigger it. Only a small percentage of speculators in stocks and bonds deciding they no longer want to own stocks and bonds would crash those markets; only a small percentage of the workforce, unable to find work, would consume all state and municipal welfare, crashing local economies; only a small percentage of citizens going hungry would lead to riots and destruction that would affect the lives and future of everyone. Oddly enough, when it all falls apart it will be a surprise to the majority that anything was wrong. Just one example of how a segment of society can be overwhelmed; in the winter of 2013-2014 the Boston hospitals experienced an influx of 700 influenza patients and reached its capacity to treat illness; with more than a million people depending on these medical facilities the reality shows that only a few in need can deplete medical resources into a condition of being in-effectual or non-existent. The same is true of law enforcement during isolated riots or wide spread social unrest. Even things like water purification, sewage treatment, and power generation all fail when over utilized or poorly maintained; when municipal, state, and federal funds decline. They do not just fail a little bit, power is not interrupted for a few; everyone is affected when over use and insufficient maintenance lead only to system failure. Improper and insufficient taxation of all who participate in our economy simply hastens the decay of Capitalism. Our economy has declined to a point that we depend on the welfare payments (loans) of foreigners to pay our bills year-in and year-out; we are either incapable or unwilling to tax ourselves to pay our bills; going forth as beggars seeking charity so that a few can continue to have more, while most have much less. Unfortunately charity is not always available, while chaos and revolution will become camp followers of our decaying Capitalist Paradigm.
Article Source: http://EzineArticles.com/?expert=Craig_Hanks
Article Source: http://EzineArticles.com/8667464
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