The Time Bomb

Robert Higgs has a 10 September 2008 Beacon post about the public's refusal to face reality, "Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state's Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants. Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else". Here's a link: http://www.independent.org/blog/?p=186. Part of what facilitates these frauds is: bad accounting.

An IA war story. Social Security (SS) started in 1937. When it began, an employer and employee each paid in 1% of wages up to a $3,000 per year limit. This meant a SS participant might have paid in $90 ($3,000 x 3 x .01) by 1 January 1940, when the first SS recipients began collecting checks. The most one could collect in 1940 was $27 per month. Someone said something to the effect, "That's impossible. The recipient at most could have a 'fund' of $200 including some interest. The fund would be exhausted in about eight months!". Who said this in 1940? IA's mother who then was 14 years old. My mother at 14 would have made a better chief actuary for the SS administration than anyone whose ever held the office.