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OpEdNews Op Eds    H2'ed 4/29/15

The Public Sector Is A Milk Cow For Private Enterprise

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The way to attack the entitlements problem is to bring the jobs home. This could be done by taxing corporations according to the location, domestic or foreign, at which they add value to their product. If they produce in the US, a low tax rate would apply. If they produce abroad, a high tax rate would be applied that negated the savings from producing offshore.

But this would not suit the interests of the owners and managers of capital. Their solutions are to raise the retirement age, to further falsify the Consumer Price Index by using the Chained CPI to understate Social Security cost of living adjustments, and to privatize Social Security and Medicare.

The first falsification of the CPI was the work of the Boskin Commission during the Clinton administration. The Boskin Commission destroyed the CPI as a measure of the cost of a constant standard of living by introducing "substitution." To keep it simple and brief, if a price of an item in the weighted basket of goods used to compute inflation rises, a lower priced item is substituted for it. The effect, and most likely the intention, of "substitution" was to make more money available for non-entitlement programs by reducing cost-of-living adjustments for Social Security. Payroll tax revenues are lumped together with other tax revenues, and the government funds itself from the total.

Three decades ago I was an advocate of privatizing Social Security or part of it. In those days returns from investments exceeded returns to Social Security. Moreover, private nest eggs not used up in retirement would become stakes for heirs, thus raising the wealth of the population. As the supply-side macroeconomic policy had cured stagflation, there was a strong prospect of a sustained market rise from which Social Security privatization would benefit.

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However, after observing the deregulation of the financial system, the financialization of the economy, and the subservience of the Federal Reserve and US Treasury to "banks too big to fail," it is impossible today to support for honest reasons the privatization of entitlements. Today financial markets are rigged by manipulation and a fantastic creation of money. Rigged markets can continue until the currencies that are being created in profusion collapse.

The reason Wall Street wants Social Security privatized is in order to collect fees for managing the money. Insurance companies want Medicare privatized in order to collect premiums, whether paid by individuals or the government as under Obamacare. Conservatives want to be rid of entitlements because they think they are welfare, underserved, the cause of the budget deficit, and because they are hard-hearted and lack compassion and any sense of social cohesion.

Free market ideologues do not like Social Security, because although it is paid for by the recipients of the benefits it is a government program. Alan Greenspan wanted to do more with his commission than to accelerate the Carter payroll tax increases. Greenspan stated his dislike of the Social Security system and thought it was inconsistent with a free or ideal society. However, he understood that Social Security could not be abolished at that time: "Our type of economy is far removed from where I would like to see it, but you have to be careful about moving from one type of society to another."

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The ideological attack on entitlements is again underway. Wall Street is funding it and egging it on. Wall Street is looking forward to fees that will eat up all gains and in these days of negative interest rates eat up capital as well.

Privatization is one of the neoliberal hallmarks of Globalization. In the US prisons have been privatized and prisoners turned into almost free labor for private businesses. Privatized prisons and almost free labor have created a demand for more incarceration, which is the reason that the "free, democratic" US has the highest incarceration rate in the entire world, both in absolute numbers and as a percentage of the population.

The claim is always that it is cheaper to privatize than for the government to do it, but the evidence contradicts this claim. Consider the military, for example. Many of the functions that the military formerly performed itself are now contracted to private corporations, which is the reason for the extremely high cost of the US military. Russia, for example, is about twice the land mass of the US and defends itself with a small fraction of US military expenditures.

The privatized US health system is much more costly than national health systems. Privatized health care requires profits for every element in the system. In contrast, national health care systems require no profits.

The reason privatization is popular in Republican and conservative ranks is that it creates lucrative incomes for connected private corporations. It is a way of shoveling public tax monies into private hands who return the favor with political campaign contributions and donations to conservative and free market think tanks.

Every privatization has been a scam, and the privatization of entitlements will be the biggest scam yet.

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Paul Craig Roberts Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His books, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available (more...)
 

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