Why Government Doesn't Work by Harry Browne

Author:Harry Browne
Language: eng
Format: mobi, pdf
Tags: political theory
Published: 0101-01-01T00:00:00+00:00

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A Freedom Budget

191

The cost of the annuities to replace Social Security is estimated as $13.02 for each $1 currently spent yearly by the Social Security Administration. At current spending rates, 1998’s Social Security cost is estimated to be $403 billion —

which, multiplied by $13.02, equals $5,245 billion as the total cost of the annuities. This is based on rates prevailing in 1995 for annuities for 65-year-olds of either sex from State Farm Insurance Company. To arrive at a precise total cost would require an audit of the Social Security books. The cost will be less if the annuities are means-tested and some retirees forgo the annuities voluntarily.

Interest expense is assumed to be 5% of the total debt — the average rate in 1995.

Source of the Purchasing Power

Where will the $12 trillion come from to buy these assets? Over $5 trillion in new capital will come from the cashing in of government bonds — by pension plans, individual investors, and others. Bids will come as well from foreigners, because we should maximize the proceeds by allowing everyone to bid on the properties. We desperately need the money.

And American entrepreneurs, freed of the income tax and crippling regulation, will be eager to acquire these assets and put them to good use — as people with larger take-home pay will demand new products and services.

Not Enough Assets?

We don’t know how much the assets are worth, and we won’t know until they’re put on the auction block and people bid for them.

What if it turns out they aren’t worth $12 trillion?

If that’s the case, it will mean the government is now insolvent — as is any individual or business with more liabilities than assets. It means government has been surviving only by promising its creditors to force you to pay whatever taxes are necessary to cover its obligations as they come due.

If the government is effectively insolvent, we need to know that as soon as possible.

But whether or not it is insolvent, we need to stop the bleeding immediately

— stop letting the debt grow, and stop allowing the government to heap further obligations upon us and our children. The longer we wait, the harder it will be to fix things without imposing enormous hardships on you, me, and other Americans.

If there aren’t sufficient assets to pay off the debt, the job will be more difficult — but it won’t be impossible if we act quickly.

192

Harry Browne / Why Government Doesn’t Work

The first proceeds from the asset sales should go to liquidate the Social Security system and get the government completely out of it. Additional proceeds beyond that should be used to pay down the debt as far as possible.

If the proceeds can’t wipe out the accumulated debt in six years, we will need to budget an amount every year to pay down the principal. That would mean we couldn’t repeal taxes as cleanly and quickly as proposed.

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