Wednesday, November 24, 2004

The Costs of Privatizing Social Security

The 'cost of transition' is the latest buzz phrase bandied about by Democrats. Social Security was once referred to as 'the third rail' of politics. For non-New Yorkers this typical Eastcoast shorthand phrase needs explanation. New York Subways are electrically powered in three rails including a ground rail track. When an unfortunate victim, either accidently or deliberately, falls from a loading ramp and touches the third rail he is grounded and immediately fried. Such has happened to many reformers over the past half century. The opponents of change now have come to the hard reality that Americans want a discussion about a law passed before most of us were born.
Social Security withholding takes 12.4% of all wage & salary earnings. There is no personal exemption, standard or itemized deduction. It is withheld on the first dollar of income. Thus on $20,000 of income it is $2480 the worker never sees. Contrary to popular belief the money is not held in a 'Trust Account', as the myth the New Deal lawmakers have perpetrated since 1936, the money is paid out instantaneously to others. But what does this transaction between the worker and the government do to government? It leaves the government with an unpaid debt.
Herein is the structural flaw. Each $1 of Social Security Tax withheld from a workers paycheck is $1 added to the National Debt. In fact, it can be argued Social Security is the single largest component of the National Debt. Most people think of the National Debt like home mortgage, you work hard, save money and eventually reduce the amount of money you owe. The problem is the debt grows 12.4% for each 1 minute of labor performed, multiplied by 130 million workers. In other words, the more we work, the harder we work, the more people employed, the greater the National Debt becomes. Here's the hard truth in a conclusion: we cannot 'payoff' the National Debt by labor, i.e. working. The growth of debt is tied to labor by the withholding tax.
Milton Friedman in his 1980 treaties 'Free to Choose' gave us the simple solution to 'transition costs' in privitizing Social Security, and reducing the astronomical growth of government debt. Repeal the withholding tax (or at least allow workers to redirect a portion of their withholding into private managed accounts) and secondly float a bond issue to payoff existing beneficiaries. Repealing the withholding tax would have the immediate affect of 'capping' the existing debt, rather than its untrammelled growth tied to how productive we are. The existing debt, or 'transition costs' would immediately become finite, and then could be paid off as government has always financed its debts. Herein is the rub, the proponents of the status quo are for expanding debt, as more & more workers join the work force each year, and as all workers work harder. Their view is one of infinite exploding debt. By 'capping' the debt, to use more Washington & Eastcoast shorthand, the largest cause of out of control debt suddenly becomes a fixed number. The differance is between fixed transition costs and limitless debt than can never be paid off by working.

Monday, November 22, 2004

The Case For Intervention In Iraq

Britain’s War With Saddam Had The Law On Its Side
The Times, 22 October 2003
Professor Christopher Greenwood QC

Today’s House of Commons debate on Iraq will raise the question of whether Britain broke international law. It is an important question because in a democracy people expect their government to act within the law. Contrary to what critics claim, however, the military action was not illegal, nor was the Government’s legal case made up on the hoof. Lord Alexander of Weedon, QC, was right to emphasise in The Times the importance of the legal issue but he was wrong to liken Iraq to Suez and to characterise it as military adventurism. Britain’s actions over Suez had no semblance of legality and the Prime Minister of the day was openly dismissive of international law. In sharp contrast, the present Government has gone to great lengths to ensure that it acted within the law and to explain the legal basis for its actions. In doing so it consistently relied on a legal justification that successive governments have advanced for more than ten years. The action in Iraq was a lawful measure to remove a serious threat to international peace that had festered since Iraq’s invasion of Kuwait in 1990. Not only was that invasion a manifestly unlawful act, but the Security Council concluded that Iraq, which had twice invaded a neighbour and used poison gas to devastating effect against its own people, posed a threat to peace that went beyond the situation in Kuwait. That was why the council (in Resolution 678) authorised a coalition of states to use force against Iraq. That mandate was not only the legal basis for the military action that freed Kuwait in 1991, it remained central to the legal position thereafter, because Resolution 678 was not limited to the liberation of Kuwait but it authorised the coalition states to use force for the broader goal of restoring “international peace and security in the area”. To achieve that broader goal, the council decided that Iraq must rid itself not only of all weapons of mass destruction but of all raw materials and programmes for the development of such weapons and do so under close international supervision. These steps were made conditions of the ceasefire, laid down in Resolution 687, after the liberation of Kuwait. They were legally binding on Iraq and were accepted by Saddam Hussein’s Government, although it never honoured them. Importantly, the council did not repeal Resolution 678. The authorisation of military action could therefore be revived if Iraq violated the ceasefire terms.
That was the legal justification relied on by the Conservative Government, as well as by the American and French governments, when they took military action against Iraq in 1993. Their view was endorsed by
Boutros Boutros Ghali, then UN Secretary-General. The same justification for action was relied on by the Government in December 1998 when UN weapons inspectors were forced out of Iraq.
More recently,Resolution 1441, unanimously adopted last November, made clear that the council considered that the earlier resolution was still in force. It also held that Iraq was in material breach of ceasefire obligations. The legal basis for military action thus existed without the need for a further resolution. The council nevertheless gave Iraq “final opportunity” to comply, saying that serious consequences would follow if it failed to do so. That Iraq did not take that opportunity was demonstrated by the successive reports of the UN weapons inspectors. When those reports were debated, in March 2003, not one of the 15 council members questioned the proposition that Iraq was still in breach of resolution 687. The council was not, however, able to agree on what to do next. The consequences of the council’s well-publicised failure to agree have been widely misunderstood. The council did not decide to reject military action. It was unable, because of divisions that existed among members, to take any decision at all. But no new decision was required as a matter of law. Resolution 1441 made clear that continuing violations by Iraq had to be reported back to the council for consideration, but, crucially, proposals that would have required a further decision by the council were not included when the text of Resolution 1441 was adopted. The lack of a fresh decision in March this year did not alter what the council had already decided. It had already confirmed its earlier authority to use force for the restoration of peace and security; it had already decided that Iraq had still not done what the council had considered for 12 years was essential for the restoration of peace and security. In those circumstances, for Britain and America to rely on the existing authorisation was entirely lawful. Nor does the fact that no “smoking gun” has yet been discovered in Iraq affect the legal basis for the action. The Security Council resolutions make clear that the critical question was not whether Iraq might possess a prohibited weapon capable of immediate use. Rather, what the council consistently required was that the inspectors it appointed be able to certify that all such weapons had gone and that there were no programmes in place by which new ones could be created. Iraq was required to take positive steps, of disclosure and co-operation, as part of this process. In the event, Iraq had still not complied after 12 years. The legal case for action against Iraq rested on its persistent failure to take the steps that the council had decided were necessary to secure peace in the area, a goal for which the council had given authority to use force and which it later reaffirmed. There is nothing of Suez or military adventurism about the action that was taken by the British Government.

Professor Greenwood is Professor of International Law at the London School of Economics. He assisted the government on the Iraq conflict. He has taught previously at the University of Cambridge and his publications include: contributing articles in British Year Book of International Law, International and Comparative Law Quarterly and SCSI No 4 - Command and The Laws of Armed Conflict.

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