Social Security - the Greatest Scam Ever Sold

Today we have a guest blogger, a friend of mine who wishes to remain anonymous. Here are his thoughts on Social Security:

The myth of the Social Security Trust Fund is one of the most pernicious bald-faced lies in political and financial history.

The "Payroll Tax" has been spent in real time as normal revenue for generations, creating a debt--not an asset that can be drawn upon--that will not be paid or will be partially paid by taxing future generations.  I have known this for 25 years, but very few people believed me when I tried to explain it.  They trusted the lies about a Trust Fund that the government and the mainstream press were telling them, and they couldn't believe that I could be right when Al Gore said it was all true in a national campaign on national television.

Any attempt by financially responsible individuals, whether Republican or Democrat, to try to rectify the situation over the decades has been demagogued by the Democrats, who fraudulently scare old people by claiming that the reformers are trying to steal their money paid in over the years.  In reality, their money had long since been stolen by a free-spending Congress.  What the Dems didn't want was a cut in their own tax revenues, which are used to purchase re-election.  

Yes, there have been Republican leaders complicit in this scheme over time, and Republican legislators have helped spend the money.  But the attempts to reform have generally come from conservative Republicans and the absolutely dishonest scare-tactic propaganda has always come from the left.  

It is inconceivable to me that only journalists from the Wall Street Journal editorial page, Forbes, and The National Review were able to stumble upon this truth over the last 30 years.  All the investigative journalists at the NY Times, The Washington Post, The Boston Globe, etc. have chosen to ignore or soft pedal this very important and verifiable fact.  Draw your own conclusions as to whether they are stupid and incompetent or committed to liberal orthodoxy.

It is not hyperbole to say that the myth of the Social Security Trust Fund makes Bernie Madoff look like a lousy three-card monte dealer on a  street corner in Des Moines, Iowa.

Make sure you save your own money for retirement.  Link to a good article about this below, which is what got me on my high horse this morning.

http://blogs.forbes.com/merrillmatthews/2011/07/13/what-happened-to-the-2-6-trillion-social-security-trust-fund/

The Latest Prediction Market Odds

Those of you who have followed the Naked Dollar know we like prediction markets, which can be found at Intrade. These are continuously trading contracts where speculators make markets on the odds of certain binary future outcomes, e.g. the U.S. gets hit by a Cat 5 hurricane this year or not. If the contract trades at, say, 42, it means the "market" thinks there is a 42% probability of the event occuring.

Prediction markets are interesting because they give a "best available" probability on all sorts of events. They are particularly interesting for politics; since they involve actual money, they tend to be more accurate than polls.

Here are some current probablities and whether I am (hypotheitically) long or short:

Obama re-elected                                  57%   (short)

Romney nominated                                34%   (long)
Bachmann nominated                            16%    (neutral)
Huntsman nominated                              9%    (big time short)
Perry nominated                                    17%    (long)
Pawlenty nominated                                8%    (short)
Cain nominated                                       2%    (long)

Euro dropped by any nation by 2013       25%   (long)

Note that the event doesn't have to actually happen to make money since the market is continuous. For instance, if the probability of Cain's nomination rises from 2% to 4%, one doubles their money (assuming the trade is unwound at that time).

Why Republicans Don't Need to Nominate a Moderate to Win

Independents. That vaunted group that the politicos obsess over. Those discerning people who carefully weigh the issues and the candidates before descending from the mountain top to let know the "answer."

As readers of The Naked Dollar know, we think that's a total pant load. Most independents are such because they don't follow matters very closely and they never, ever want to be in a position where they have to defend their view on anything. If you are a Republican or Democrat, someone at a dinner party might say, "How can you defend tax cuts for the rich?" or "Do you really think the U.S. should cede authority to supra-national organizations?"

Rut-roh. Suddenly you have to defend positions you don't really have your arms around. Can't we talk about the Casey Anthony trial? Better to be bland, so know one exposes the fact you haven't read a paper in...how long has it been?

I wrote about this more expansively in this piece:

Elections and the Gravity of the Cocktail Party Middle

It is received wisdom that to win back the White House, Republicans must nominate someone who will appeal to "the middle," i.e. independents. Never mind that Reagan won by large margins twice. Never mind that Ford, Dole, Bush the Elder, and McCain - all moderates - all lost.

Bush the Elder won the first time running as a conservative, the heir to Reagan's mantle. When it turned out he was center-left, he lost.

Bush the Younger won twice running as a conservative (albeit a more marginal one than Reagan).

40% of Americans consistently identify themselves as conservatives versus 20% for liberals. It should be no surprise that conservatives win.

But back to the role of independents. About forty percent of the electorate does not affiliate with a party. Surely, this is the battleground, no?

No. An excellent new piece by Alan Abramowitz (here) explodes this myth. It turns out the vast majority of independents are closet partisans. In fact, according to the National American Election Study, in 2008 fully 87% voted for the party towards which they were clear leaners based on their views on various issues. This means that only 13% of independents were truly up for grabs.

Also, independents don't vote as often as party-affiliated voters. In 2008, despite being 40% of the electorate, they represented only 33% of the people who actually showed up on election day. This is consistent with The Naked Dollar's view that independents are the least engaged slice of the electorate. Some group to fight over!

(Note: as always, there are exceptions to rules. There are intelligent, engaged independents out there. If you are one of them, don't take it out on this blog. But you are not legion.)

Abramowitz also points out that presidential elections don't always go the way of independents, either. In fact, if you examine the last three elections that were decided by less than 5 points, none of the winners were supported by a majority of independents. Gerald Ford, George Bush (2000), and John Kerry all carried independents and all lost the popular vote.

So, what's the key to winning a presidential election if it's not winning over independents? Simple, you have to energize your base. In 2008, Barack Obama was highly successful at this while Republicans were dispirited and exhausted. In 2004, Bush was successful in turning out the base, especially in key states like Ohio. Over and over, it's the party with the more motivated base that wins. The important thing to remember is that only about half of eligible voters actually vote in presidential elections. You want to make sure it's your half.

So what does this mean for Republicans? It means they don't have to nominate a moderate (i.e. Romney). In fact, they shouldn't, if they want to win. While it's possible that white hot anger over the rampant radicalism and general ineptitude of the Obama administration will be enough to turn out Republicans on election day, it's not a given. The GOP should nominate someone who excites the base. That means that Michelle Bachmann should be taken seriously and Rick Perry should think about throwing his hat in. And it also means Herman Cain can't be written off as a novelty candidate. No one has excited the base as much as Cain thus far.

While the evidence on this is incontrovertible, it does not mean the GOP will embrace it. The Naked Dollar puts this down to timidity; simply, Republicans are frequently afraid to nominate someone they think will get mocked and belittled by the liberal elites in editorial rooms (read: Bachmann).

They should get over it, because the Republican nominee will get crushed by the media irrespective of his or her moderate credentials. Just ask John McCain, the media's best friend, right up until the day he got nominated. The same will be true for Mitt.

Greece Crumbles But U.S. Will Pay

So roughly $8 billion of the IMF bailout of Greece will be paid for by the U.S.

One problem: we don't have the money.

Which means we will borrow it.

Which means our kids will pay tomorrow so Greek workers can retire at 50 today.

Actually, that's quite analogous to what's happening with public sector unions in the U.S. right now.

(Best recent SNL joke: "You know what Greece's #1 export is? Hard working Greeks.")

Keynes Schmeynes

Note: the following was my rebuttal to a letter written to my local paper by one Robert Schewior, Ph.D., who took issue with my congresswoman's call to cut government spending in the name of economic growth. Dr. Schewior stated that every Econ 101 student knows - knows - that increasing government spending increases a nation's wealth. Uh huh.

Father of a Thousand Textbooks, All Wrong

Robert Schewior - Ph.D., Economics - wrote a rebuttal last week of Nan Hayworth's call to cut government spending to save our economy. It's a good thing Dr. Schewior told us about his credentials otherwise I'd have to dismiss his argument as tired academic tripe.

No wait, I'm going to do exactly that. His arguments are thoroughly discredited Keynesianism, the sort of nonsense no one takes seriously anymore outside of faculty lounges and the Obama administration. In fact, I went back to college to teach as an Adjunct Professor of Economics (there, slipped in my own credentials!) just to debunk this sort of nonsense, the sort of intellectual gruel that was force fed to me as an undergraduate. This edifice of 20th century economic thought fell to pieces the moment you left campus, but no one seemed to notice.

(Hey, wait, my parents paid good money for that degree! Well, I had a lot of fun, anyway, and I figured out pretty quickly that my economics profs would have trouble running a lemonade stand.)

Dr. Schewior, being a good Keynesian, believes that there's a simple, immutable formula that says the more money the government spends, the higher national income will rise. There's even a multiplier effect! If this were true, I submit that Greece wouldn't need a bailout and the old Soviet Union would have been the richest country on the planet. Hoover and Roosevelt boosted government massively and yet the Great Depression lasted a decade. Japan keeps spending and spending and remains an economic basket case. Even George Bush tried a dose of Keynes in 2001 and 2008 in the form of rebate checks, to no effect. And now Obama has tried one of the most massive Keynesian experiments in human history, the trillion dollar stimulus, and the economy has worsened. Doh!

The ever-dwindling number of Keynesians miss an obvious point: the money has to come from somewhere. The three options are print it, tax it, or borrow it. Printing it causes inflation. Taxing it means the private economy has less to invest and spend. Borrowing it, the most popular option, crowds out private borrowing and creates a liability our children must meet. Any way you slice it, government can't create wealth, and it can't stimulate the economy. "Aggregate demand," as the economists like to say, remains zero.

Actually, less than zero; government spending is a net drag on the economy. Think about it, when was the last time the government allocated money better than the private sector? The Obama stimulus is a great example. All that was stimulated was more government, not any sort of real investment. Government, at all levels, used the trillion dollars to go on a hiring binge, creating even more liabilities down the road in the form of pensions. How many bridges do you see being built? How many roads repaired? Government, remember, is run by politicians, and they never spend money without first considering its vote-buying potential.

Nan Hayworth has it exactly right: we need to decrease the size and scope of government if the economy is to grow again.

Don't let your kids major in economics if you value critical thinking.

What Happens When your Town Truly Runs Out of Money

No more people to tax, no subsidies, no bailouts. Welcome to Central Falls, RI, also know as the Island of Mayor Moreau. A glimpse into our future unless public pensions - teachers, cops, everybody - are curbed. Misery for all, but mostly the teachers and cops.

Read about it here.

The Real Reason Anthony Weiner Had to Resign

Bill Clinton and Anthony Weiner: compare and contrast.

• Both were involved in sex scandals with young women, although Clinton's actually involved real sex, in the Oval Office no less
• Both lied about their activities at some length, although Clinton lied under oath

Arguably, President Clinton's actions were more deplorable, if that's possible, than Weiner's, and yet only Weiner had to resign.

Here's why:

The pictures. Weiner making 80s porn-face. This is in-your-face ickiness, and there's no way to dance around it. The left can rationalize just about any sex scandal but they can never, ever, brook such an egregious violation of taste.

Bill Clinton is very fortunate to have lived his political life in the pre-digital era.

Why Political Sex Scandals Aren't Just About Morality

The Digital Weiner

Let's say we lived in a world where there was zero personal judgment of others. Anything goes, particularly where matters of sex are concerned. (We could call this world "France," but we'll leave that for another day.) What we do behind closed doors is nobody's business, period.

Morality, is, after all, a relative judgment, and if no one is getting hurt, we shouldn't care.

One often hears this argument from people when a politician with whom they are sympathetic is caught with his zipper down. I remember this chorus was particularly loud during the Monica Lewinsky follies, but Republicans occasionally make excuses for their guys, too.

The problem is that when politicians fool around, people are potentially hurt, and those people are you and me. No, I'm not talking about the uncomfortable ickiness of having to explain what the headlines are talking about to your eight year old. No, I'm talking about hard matters of policy, because if we did live in this world, there would still be a reason that politicians, in particular, should be held to a different, higher, standard. A practical, non-moralistic standard, and one I have been arguing for years. Kyle Smith, in today's New York Post, was the first columnist I have seen mention it.

The reason is called extortion, for any politician who fools around, particularly when they are leaving a digital trail, has set themselves up for it.

Don't think it's likely? I argue that it's already happened. What else can explain why this person...

...didn't fire this person...

The Kennedys hated J. Edgar Hoover. Bobby, in particular, had strong feelings, and running the Justice Department, he was forced to work closely with Hoover. Hoover had actively supported Nixon in 1960 and was arguably a tyrant, having run the FBI as his personal fiefdom since its founding. Why didn't JFK simply fire Hoover?

The answer is one of two things. The first possibility is that Hoover, undoubtedly possessing evidence of JFK's and RFK's varied affairs, was blackmailing the administration. The second is that the Kennedys simply feared that Hoover had the goods. Either way, America had to live under an unchecked, tyrannical FBI director for longer than it should have, all because the Kennedys couldn't keep it in their pants.

There you have it, an actual real life example of why the personal behavior of politicians matters.

And now we are in the digital age, where evidence is so much easier to obtain. Think about it: ack in the day, someone had to sneak around with a camera and catch you in the act. That required real work.

Now, we have emails, texts, tweets, and digital photographs, each potentially damning and impossible to control once the "send" button is hit.

And how much easier, today, is it to set a "honey" trap. Even just ten years ago, the services of an attractive girl would have been necessary, and she would have had to be willing to bed the target. Today, all you need is a photo!

How? Simple. Just follow these easy steps:

1. Find a picture of a random hot chick on the internet.
2. Create a fake facebook or twitter account using the picture of the girl.
3. Start friending politicians and flirting with them online.
4. Steer the flirtation in a sexual direction (assuming the pol doesn't do it first).
5. Inform the politician that he will vote a certain way on a crucial bill or he will be exposed and his career ended.

Do you know how easy this would be to do? I'd be shocked if it wasn't happening already. Consider that a woman recently discovered that her ex-husband was trying to hire a hit man to kill her by creating a fake facebook account (as a slutty looking high school girl) and friending the ex. He's on his way to jail.

Don't get me wrong, I think character in one's personal life does matter, and there are plenty of politicians who manage to keep to the straight and narrow. Fidelity is not unheard of, and we should desire it in our leaders. But there are plenty of people, mostly liberals of a more libertine bent, who don't put much stock in this argument. Fine, that's their prerogative. But I can only assume that they don't think extortion is a desirable course of events. Extortion is not a moral position that one is for or against, it's just a dangerous potential subversion of the democratic process.

Here's to hoping we can start holding our leaders to a higher standard.

The Palin Fixation

Thousands of emails from Palin's term as Governor are about to be released, and the media is swooning. The Washington Post and the New York Times are going so far as to enlist their readers' help so they can root out the good stuff faster. Rest assured, they will find quotes that will make her look bad, particularly if taken out of context. Think about it, how would you like your entire email history scrutinized by people who hate you and have a platform from which to project that hatred? None of us would hold up very well. Trust me, this will be the "big story" that knocks Weiner out of the headlines.

All this is quite fascinating. Sarah Palin has not announced she is running for office, nor will she. And yet the media feels they must traipse around the country following her every move. It's beyond a fixation, more of an obsession. Call it Palin-oira.

When Palin was selected as McCain's running mate, the mainstream media sent 40 full-time reporters up to Wasilla, Alaska to turn over every possible rock. How many reporters do you suppose were sent to Indonesia, Hawaii, or Chicago to vet the presidential candidate from the other party?

To my knowledge, none. Barack Obama was accepted as a matter of faith, and thus we elected a man with virtually no resume about whom less was known than any president in our country's history.

Frankly, this misappropriation of media assets is a gross dereliction of duty. The Fourth Estate is meant to play a vital roll in our democracy, one of skeptic and fact checker. That the mainstream media now only sees this roll as one meant to be applied in only one direction is as sadly obvious as ever.

With Palin, they desperately hope she will run, and they are getting played. That part, at least, I find amusing.

Bin Laden or Weiner - Burning Question

A friend of the Naked Dollar has posed this question:

Which photograph will reach the public domain first, the x-rated Weiner shot or the Bin Laden death shot?

Please weigh in. My money is on Weiner. (For the record, I'm talking about the full monty shot, not the jockey shot.)

As an aside, the current odds on Weiner resigning on intrade are 39%. This strikes me as low since it is now apparent he was lying even yesterday at his press conference.