Susan Pendergrass speaks with Andrew G. Biggs, senior fellow at the American Enterprise Institute, about the Social Security trustees’ latest report and what it means for the program’s future. They discuss the projected 2032 insolvency of the retirement trust fund, why the trustees’ birth rate assumptions may be too optimistic, the proposed Moreno-Warren plan to eliminate the payroll tax ceiling, the Cassidy-Kaine plan, and why pension experts oppose it, what would actually happen if the trust fund ran out, and more.

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Episode Transcript

Susan Pendergrass (00:00):
I feel fortunate to have grabbed some of your time. Andrew Biggs from the American Enterprise Institute, I appreciate you coming on to talk to us. Social security has been nothing but in the news recently, and you know more than anyone else. So thank you for taking the time.

Andrew Biggs (00:14):
That’s why I’m so cheerful. The more you know about Social Security, the happier you are. But thanks for having me, Susan. It has been busy. I’m really happy to be with you today.

Susan Pendergrass (00:16):
I’m in my sixties. I see something about Social Security running out of money and I pay attention. So just to bring us all up to speed: in the last week, there was a news flash that Social Security is going to run out of money sooner. What does it really mean?

Andrew Biggs (00:39):
Every year the Social Security trustees, which is mostly members of the cabinet, the Secretary of the Treasury, the Social Security Commissioner, and so on, come out with a report projecting the program’s financial health, both in the short term and the long term. That happens every year, and it’s been getting worse every year. In this year’s report, they projected that the retirement trust fund will go insolvent, or run out of money, in 2032. They also projected a significantly larger long-term funding gap in the years thereafter, and this is worth explaining.

When the trust fund runs out, it doesn’t mean there’s zero money to pay benefits. As long as we’re paying a trillion dollars a year in payroll taxes, there will be money to pay benefits. But when the trust fund runs out, it means benefits will be cut, and their projection is somewhere around 22%. The size of that long-term funding gap dictates how big the cuts are going to be in the years thereafter. The trustees lowered their projections for birth rates, and they found that the One Big Beautiful Bill has worsened Social Security’s finances. A variety of things made this long-term funding gap worse. It’s really hard to paint a happy picture. The trust fund can be running out in about six years, and the funding gap and the benefit cuts in years thereafter are going to be larger. It’s a sobering picture.

Susan Pendergrass (02:16):
I’m not trying to pile on, but I think I saw that they extended the time when they expect birth rates to bounce back. Is that true? Because I have not seen anything anywhere, and I’ve spoken to some demographers, to suggest birth rates are ever going to bounce back.

Andrew Biggs (02:35):
Here’s the interesting thing. If you look at the Congressional Budget Office or the US Census Bureau, right now the fertility rate is about 1.6 children per woman on average, and both the CBO and the Census project that’s going to remain pretty much steady, declining a little bit over coming decades. Social Security had a very different picture. As of last year, they thought the birth rate, which is 1.6 now, was going to immediately start rising and go back up to 1.9 children per woman in the next several decades. That makes Social Security’s finances better. More kids being born means more people paying into the system. What they did in this year’s report is moderate a bit on fertility. They said, okay, it’s not going to rise back to 1.9, it’ll rise back to 1.75. So they are still over-optimistic. I’ve talked to some demographers and economists who’ve really focused on the birth rate, and they described the trustees’ assumptions as, quote, fanciful, meaning they just weren’t plausible. Now they’re somewhat more plausible, but they still tend

Susan Pendergrass (03:32):
Okay.

Andrew Biggs (03:48):
to be more optimistic than other agencies. And to me, frankly, this is a concern. You really want the people who are the scorekeepers, the umpires, to be playing it as straight as they possibly can. We know that these guesses are going to be wrong because this stuff is impossible to predict with certainty, but most demographers think the best guess is we’ll stay around 1.6 going forward. You’ve seen a decline, and a good predictor of birth rates is religiosity, the level of religious belief in a country. The US has typically been much more religious than Western Europe, and that’s played into fertility. There has been a big decline in religious belief, particularly among younger Americans, along with all the other pessimism you see among younger people. When people are pessimistic, they tend not to have a lot of kids. So the best guess is we’re going to stay about where we are.

I wrote something the other day saying the bad news in this trustees report is even worse than last year’s, but it could have been even worse. They project a long-term funding gap above 4.4 percent of payroll. What that means is if you took the 12.4% payroll tax today and raised it immediately and permanently by 4.4 percentage points, from 12.4 to 16.8, that would in theory keep the trust fund solvent for 75 years. But a better guess would be a funding gap of around 4.8 to 5 percent. This is real money. For years, people on the left have said, well, okay, we know Social Security has a solvency problem, but it’s a manageable issue. They were saying that when the funding gap was 2% of payroll. Now you’re looking at four to five percent. That’s a lot of money, at a time when a lot of other things are making claims on the budget. We have some difficult choices to make and we really have to start thinking hard about this.

Susan Pendergrass (06:09):
Okay, so what about this idea that’s been floated in the last week of getting rid of the payroll cap? First of all, explain the payroll cap, and then this idea of getting rid of it.

Andrew Biggs (06:17):
Sure. Social Security has a 12.4% payroll tax, half paid by you and half paid by your employer. That applies only to wages up to $184,500. That’s called the payroll tax ceiling, or the tax max. That dollar figure goes up every year, but this year it’s $184,000. You only pay taxes on those wages, and you also earn benefits only on those wages. People say, well, Bill Gates doesn’t pay more taxes than that. But he doesn’t earn any benefits either. So you’re capping both the taxes and the benefits.

To fast forward a little bit: there’s an op-ed in the Washington Post this week from Senator Bernie Moreno, a Republican from Ohio, and Elizabeth Warren, a Democrat from Massachusetts. They say it’s just common sense to eliminate that cap and tax all earnings for Social Security. The interesting thing is how uncommon that would actually be. Our payroll tax ceiling is $184,000. Almost every other country has a ceiling on their payroll taxes for their pension system, and in almost every other country that ceiling is lower. In Canada, you only pay taxes and earn benefits up to around $60,000 in earnings. In the UK it’s about $70,000. In Germany it’s about $70,000. We are already an outlier for how high up the income ladder we tax people. To eliminate the cap entirely is a big deal. It’s effectively a 12 percentage point increase in the top marginal tax rate. I pulled an example of somebody living in New York City. A high-income person already pays 37% in federal income taxes, plus regular Medicare taxes, the additional Medicare tax, state taxes, and city taxes. If you add another 12 percentage points on top of that, their marginal tax rate would be in the mid-60s. And that’s before we’ve fixed Medicare or done anything else. The federal budget is still broke, and you’ve taxed these people as high as you possibly can. So these things that look like common sense, why don’t we just tax everybody,

Susan Pendergrass (08:37):
Right, right.

Andrew Biggs (08:46):
look, there are reasons for that.

Susan Pendergrass (08:49):
And were they suggesting that if I make $300,000 and I pay my 6.2 percent, totaling 12.4 with my employer, on my entire salary, that my Social Security benefit one day would be higher? Are they talking about capping the benefit or just getting rid of the cap on contributions?

Andrew Biggs (09:06):
They haven’t been very specific. They say Social Security would continue to be an earned benefit, which kind of implies you would continue to earn benefits on the additional taxes you would pay. Let’s say if we uncap the payroll tax and base your taxes on your total earnings, you’d also base your benefits on your total earnings. What you get then is, okay, you’re getting all this money from people in the short term, but you have to pay them higher benefits in the long term. That offsets some of the savings. And this morning I was running some numbers looking back to the 1970s. We had a huge run-up in benefit levels from Social Security in the 1970s. The benefit formula we have today is not the one FDR invented. It really happened in the 1970s, where they jacked up benefits in a really foolish way, and then to help pay for it, they increased the payroll tax ceiling. Right now you pay taxes on earnings up to $180,000. If we had just kept the tax max from 1970 and indexed it to wages, it would have been only $95,000. So they essentially doubled the wages on which you pay Social Security taxes. But what happens is they also doubled the wages on which people earn benefits. I’ve highlighted the point that if you have a high-income

Susan Pendergrass (10:38):
Mm-hmm.

Andrew Biggs (10:43):
couple retiring today, they could get almost $100,000 in total benefits, which is absurd. There’s no reason a government program should be paying anybody that amount. If you want that kind of income in retirement, you save more in your 401k. It’s better for you, better for the economy. But it was a result of this short-term step they took in the 70s. They said, hey, we raised benefits too high, let’s jack up the tax max. And they didn’t worry about the fact that in the future you’d have to pay benefits on that. Well, the future is today.

Susan Pendergrass (11:05):
Okay.

Andrew Biggs (11:13):
Now we’re broke again, we need extra money again, and these guys say, well let’s just jack up the tax max. But then you’ll pay extra benefits in the future. It becomes this chasing-your-tail kind of thing.

Susan Pendergrass (11:16):
Yeah. Yeah.

Andrew Biggs (11:25):
And the problem when you do it is there’s no country on earth paying $100,000 a year from a social insurance program, except for us. And the reason we do is these stupid historical decisions. If you’ve got this high-income couple in the US retiring today, they can get almost $100,000 from Social Security. If they lived in Canada, they’d get like $35,000. And that’s perfectly fine. Nobody’s starving to death in Canada in retirement. They just save more on their own.

Susan Pendergrass (11:35):
I’ll say.

Andrew Biggs (11:55):
The irony is that we think of ourselves as a free-market, small-government country, and our Social Security program is enormous, primarily because we’re paying benefits to people that other countries say, yeah, we don’t need to pay benefits to these guys.

Susan Pendergrass (12:11):
And yet people say, I put my money in, I get my money out.

Andrew Biggs (12:14):
Yeah, and I understand it. When I say we shouldn’t be paying $100,000 a year to a high-income couple, you get the email saying, well, I paid in. And if you paid in, you feel you have this moral claim on benefits. The problem is Social Security is still broke. We still need higher taxes or lower benefits. The idea that you’re just going to get your full benefits with the taxes you paid doesn’t work because the system can’t afford to do it. So you have to make the choice: do I want to pay higher taxes or get lower benefits? I’ve got to pick my poison. Most high-income people would prefer to get lower benefits. They care more about their taxes than their benefits. But people are still living in this dream world where this system, which is $30 trillion in the hole, is somehow going to pay them everything they’ve been promised and just screw somebody else. Everybody thinks they’re the guy who’s going to get everything and somebody else is going to get screwed.

Susan Pendergrass (13:14):
Yeah. I definitely hear people saying today, maybe I should go ahead and take it early and then I’ll get grandfathered in and my benefits won’t get lowered.

Andrew Biggs (13:26):
It probably won’t make a difference. In general, the Social Security benefit formula works based on your birth cohort, the year in which you’re born, not really the year in which you claim benefits. And people who are going to do Social Security reform understand the incentives. They don’t want to make it easy for people to game the system. So Social Security reform will probably work itself out in such a way that

Susan Pendergrass (13:42):
Right.

Andrew Biggs (14:03):
you can’t get some big advantage by claiming early. I could think of some conceivable possibilities, but I still would not encourage people to claim early.

Susan Pendergrass (14:14):
Okay, I want to talk about two more things I read in the last week. One was a letter from Tim Kaine about his idea with Senator Cassidy. What’s that idea for fixing it?

Andrew Biggs (14:24):
The interesting thing is people say Social Security reform has to be bipartisan. So we have two bipartisan ideas. We have Moreno and Elizabeth Warren, a Republican and a Democrat. They’ve got one idea, eliminating the payroll tax ceiling.

Susan Pendergrass (14:39):
Third rail.

Andrew Biggs (14:49):
Cassidy, a Republican from Louisiana, and Tim Kaine, a Democrat from Virginia, they’ve got a bipartisan plan. And guess what? Their plan is also terrible. If there’s any lesson from this, it’s that bipartisan doesn’t mean good.

Susan Pendergrass (15:00):
Bipartisanly terrible.

Andrew Biggs (15:04):
Yeah. Look, ultimately Social Security reform is going to have to be bipartisan, given the way the political system works. On the other hand, there is some lesson that if both Republicans and Democrats can agree on something, it might be a terrible idea. With Cassidy and Kaine, they are explicitly, and Cassidy said this, solving a political problem. The political problem is that neither Republicans nor Democrats want to vote for either tax increases or benefit cuts. You’d think Democrats want to raise your taxes and Republicans want to cut your benefits. The reality is they don’t want to do either of those things because they realize both are politically unpopular, which is why we’ve gone 40 years literally doing nothing. So their solution is that we don’t have to make these difficult votes. Instead, the federal government will borrow about $2 trillion, invest that money

Susan Pendergrass (16:02):
Tough.

Andrew Biggs (16:04):
in stocks and private equity, high-risk, high-return stuff. Then they claim they’re going to hold this fund for 75 years so it can build up value. In the meantime, when Social Security’s trust fund runs out in 2032, the federal government will borrow against the assumed gains on this investment fund.

Susan Pendergrass (16:06):
Right. Mm-hmm.

Andrew Biggs (16:29):
They say the borrowing will be at a lower rate because it’s the federal government. And they say after 75 years, all the gains in this investment fund will pay back all the borrowing and we’re all good. And let me count the ways there are problems with that. If you work at the state level,

Susan Pendergrass (16:45):
It’s just kicking the can.

Andrew Biggs (16:52):
state-based think tanks almost know more about this than federal people. A lot of underfunded state pension systems do things called pension obligation bonds. Their pension system is underfunded, they don’t want to raise contributions or cut benefits, so they borrow and invest in the stock market and hope it works. The pension obligation bond is the hallmark of a poorly funded, poorly run pension system. Think New Jersey, Illinois, things like that.

Susan Pendergrass (17:21):
Yeah.

Andrew Biggs (17:23):
There’s a national group of state budget officers that has come out and basically said as an institution, don’t do this. Borrowing for your pension is a bad idea. So it really is fitting for the times that the Cassidy-Kaine plan says, let’s take this worst idea from state and local government

Susan Pendergrass (17:45):
Yeah.

Andrew Biggs (17:47):
employee pensions, which has been condemned as bad practice, and put it on steroids and do that for Social Security. And what it really gets to is they just don’t understand the finances of it. And to be frank, they won’t listen. They have talked to every pension expert I know, and this Social Security world is pretty small. We all know each other on both sides. We may not agree on everything. Literally every pension expert I know says this is a terrible idea.

Susan Pendergrass (17:54):
Yeah.

Andrew Biggs (18:17):
But their political considerations are more important than policy, and that’s the problem with all of them.

Susan Pendergrass (18:24):
I mean, it feels free. They’re basically saying it’s like a timeshare. It just feels free right now. We just borrow the money. Okay, so

Andrew Biggs (18:31):
It’s been pointed out to them that if you can fund Social Security this way, you could fund the entire federal government this way and never collect any taxes. At one point Senator Cassidy was quoted in a newspaper article saying, well, yeah, sure, in theory you could. And I’m like, if something implies there’s a free money machine, maybe you need to question your assumptions.

Susan Pendergrass (18:38):
Sure. Okay.

Andrew Biggs (18:54):
I could give you a whole variety of reasons why this doesn’t work, but one macro point that’s come to me: I’ve been doing Social Security for a long time. I worked in the Bush administration in 2005 when they tried and failed to do Social Security reform. One of the problems we face today is that your elected officials understand Social Security policy much less well than they did 20 years ago. They just don’t understand how the system works. Going back to the Moreno-Warren idea of applying the payroll tax to all earnings,

Susan Pendergrass (19:22):
Yeah.

Andrew Biggs (19:37):
okay, you’re adding 12 percentage points to your top tax rate. There’s a reason Sweden and France and others don’t do this anymore. They used to have incredibly high tax rates. They don’t now. We would end up in many cases with a higher tax rate than most European countries. We have some philosophical dedication to small government and things like that. They don’t. And so if they’re not doing it,

Susan Pendergrass (19:43):
Yes. Yeah, yeah.

Andrew Biggs (20:02):
it’s because there’s a practical reason this isn’t a good idea. The same applies to wealth taxes. That’s been tried in Europe. They’re like, yeah, we’re not doing that anymore because it doesn’t work. But your average senator now

Susan Pendergrass (20:14):
It is happening around the country, the billionaire tax. What happens in 2032 if no one is either brave enough or smart enough to take this on in the next six years?

Andrew Biggs (20:17):
They’re just not aware of these policy issues, and that’s a real problem. It’s like having a guy fix your car who doesn’t know how to fix cars. 2032 is the date. If you have a recession, it might be 2031. It’s not certain, but it is certain it’s happening soon.

Susan Pendergrass (20:47):
Yeah. Okay.

Andrew Biggs (20:53):
There’s a literal reading of the law, which is that Social Security can’t pay out benefits it doesn’t have dedicated resources for. Once the trust fund runs out, the only dedicated resources are mostly the payroll tax, plus a little bit of money from income taxes levied on retirement benefits. And those were cut as part of the One Big Beautiful Bill. So if the trust fund runs out, they’d have to rely on the money they have on hand, which implies around a 22% benefit cut.

A lot of times people assume that benefit cut has to be across the board. If you did it that way, you’d throw a lot of people into poverty. I did some work a year or so ago with a lawyer in DC named Kristen Shapiro, and what we found is that the legal precedent shows the executive branch, meaning the president working through the Social Security Commissioner, would have some discretion. What we found is you could maintain full benefits for about 50% of people, the poorest 50% of seniors, and then cap benefits above that. If you cap the maximum benefit at about $24,000 per year for a single person or $48,000 for a couple, that is enough to make Social Security solid without raising taxes. So the point is simply you have some discretion.

The reality is Congress isn’t going to allow big benefit cuts, for political reasons. On the other hand, are they willing to have the size of tax increases needed, all in one go, to keep Social Security paying full benefits? I don’t think they want that either. So the reality is probably they’re going to borrow a lot of the money. And that’s where you get to the issue of how much more borrowing the financial markets will swallow. We effectively borrow from the public to repay the Social Security Trust Fund, but there’s an end to that. You say, okay, 2032, we have to do something. We have to raise taxes or cut benefits. If in 2032 the stated policy of the federal government is, well, we’re just going to keep borrowing to pay Social Security even though we have no prospect of paying it back, you wouldn’t blame some big market players for saying, yeah, I’m out, because you don’t want to lend money at low interest rates to someone who says they can’t pay it back. Then you start getting a couple of things. One is more federal borrowing squeezes out capital in the rest of the economy, and so interest rates naturally rise.

Susan Pendergrass (23:18):
Right.

Andrew Biggs (23:31):
But then there’s a second element: if you’re afraid the federal government can’t pay you back, over and above that natural increase in the interest rate, you’d apply a risk premium to treasury debt. You’d say, look, Treasury is not this rock-solid investment anymore. It’s more like a junk bond, or like borrowing from Illinois, and you make them pay a premium. That’s going to drive up

Susan Pendergrass (23:43):
US government borrowing. Yeah, yeah, yeah.

Andrew Biggs (24:01):
interest rates, and that makes it tougher not just for the federal government but for everybody. If you want to buy a car or a house, all your interest rates rise. There’s also going to be real temptation to inflate away the debt. The federal government doesn’t want to default on its debt, but

Susan Pendergrass (24:24):
Yeah, yeah.

Andrew Biggs (24:25):
historically the way you deal with this is inflation. Think about all the debt we took on during COVID, shoveling money out the door to everybody, and then we had massive inflation after it. A lot of those people who bought treasury debt didn’t get a good deal, because if you get 20% inflation on

Susan Pendergrass (24:34):
Absolutely. Yeah.

Andrew Biggs (24:47):
a treasury bond with a nominal fixed interest rate, that’s a real problem. So inflation becomes increasingly tempting. You look at this scenario and you’re like, can’t anybody here play this game? Every other country is not going bankrupt. We just have to do what they do.

Susan Pendergrass (24:51):
Yeah, yeah. So could we, if we really got our heads around it and started today or next year, incrementally raise the 12.4%, or incrementally get people used to lower benefits after a certain income or wealth level?

Andrew Biggs (25:18):
Sure. Yes. The way I think about it, there are two ways people think about it: the wrong way and my way. The wrong way is, let’s just pick from this menu of options to make Social Security solvent. We can raise the payroll tax a bit, raise the retirement age a bit, cut cost-of-living adjustments a bit, raise the tax cap a bit, and do these things until the system is solvent.

Susan Pendergrass (25:34):
Yes. Yeah.

Andrew Biggs (25:54):
That’ll get you a solvent program, but it won’t be a program that particularly works very well or is good for the economy. A more effective way is to ask, what do we want this system to do? If you talk about Social Security reform, what you hear is that it’s a social insurance program, a safety net, an anti-poverty program. Okay, it has to do that. And that part is really very cheap, because we don’t literally have that many poor seniors, their benefits aren’t very high, and it’s not a problem to maintain benefits for low-income seniors. When you ask what Social Security should do, nobody is saying we need to be paying high-income seniors $100,000 a year. There’s no public purpose for it. Nobody thought it out in advance. It was simply an unintended consequence. So if you’ve got things that are really costing a lot of money and have no public purpose, and those people can save for retirement on their own, you start scaling that back. The distinction I’m making is between policy changes simply for the purposes of keeping Social Security solvent, and policy changes for the purpose of making Social Security do what it needs to do, the real public purpose, and not doing things that serve no public purpose. My point is the things I’m talking about are things you should do whether Social Security is insolvent or not.

I’ll give you an example: Australia’s retirement system. Australia is a lot like us, not particularly more conservative or liberal, just sort of normal. Their Social Security program essentially is targeted at eliminating poverty in old age. It’s actually a better safety net than Social Security provides, but the benefits decline down to zero once you get above the poverty level. And to help people above that level save for retirement, everybody is enrolled in a 401k-type account. What that says is, if everybody’s participating in retirement plans as they should, the government’s job becomes easier. Their Social Security system costs about two percent of GDP. Ours costs about six percent. It’s a third as costly, provides a better safety net, and it comes because they’re actually thinking about what they’re doing.

Susan Pendergrass (28:18):
Mm-hmm.

Andrew Biggs (28:26):
We’re literally not thinking about what we’re doing. There’s a saying in business: the worst reason to do something is because we’re already doing it. That is literally how Social Security policymaking works. Nobody knows why our benefit formula is what it is or why the tax max is what it is. It’s all just stuff we inherited from the 1970s from people who were not in any way thinking clearly about what they were doing. It was people in the 70s trying to win elections, and we end up with the bag.

Susan Pendergrass (28:52):
Speaking of 2005, there was an attempt to offload a small portion of people’s contributions into the market, right? That failed.

Andrew Biggs (29:09):
That was the Bush proposal. I was in the White House then, kind of in a number-cruncher role, so I knew that stuff pretty well. I did a lot of events with President Bush around the country. When we came up on the 20th anniversary of Bush’s proposal in 2025, I started thinking to myself, what if his plan had passed? What would have happened? So I built a model. Back then they were saying, okay, you’re going to have some reductions in traditional Social Security benefits for middle and high-income people, and then you’re going to have a personal account where you can invest part of your existing payroll tax in stocks and bonds. The total benefit you get at retirement is a combination of those two. People were speculating. Well, we don’t know what the stock market’s going to do. But 20 years later, we’ve got some data, so let’s just see what happened. The results were that for people

Susan Pendergrass (30:01):
Now we do.

Andrew Biggs (30:07):
retiring today, low and middle-income people would have had higher total benefits by a little bit. The very highest-income people, their benefits would be down by a couple percent because the cuts to their traditional benefits would be larger than the gains from their personal account. But even they would be fine; it’s not a big deal. Going forward, it looked like people would do a little bit better with the Bush plan than with the traditional system. But here’s the important thing: the traditional system is broke. We just talked about how it goes broke in 2032, with huge deficits. The Bush proposal wouldn’t have made Social Security totally solvent, but it would have addressed half or two-thirds of the long-term funding gap. So you’d get a system that would have paid you benefits around the same as, or maybe a little bit better than, Social Security, but would be in much more solid financial shape. Today the times are different, and I don’t think personal accounts are really viable. But the point is, if they had done something back then, everything could be easier today. But members of

Congress were just too afraid. Republicans were afraid of taking the political hit. For Democrats, it was too tempting to give the political hit. They knew they had to do something, but they couldn’t swallow hard and say, look, let’s just go in on this thing together. They didn’t want to give Bush the win because by that point Iraq was going badly and they really didn’t like him. So they beat him up. But the problem is Bush served his term and is happily retired in Texas. The people who really got screwed were the ones who depend on Social Security, because we didn’t fix it. And you just hope that’s not what we do again.

Susan Pendergrass (31:42):
Yeah. Somebody not us in 2045 could be having the same conversation, right? Like, if only in 2025 or 2026 we’d gotten serious. And I do think people mix up the trust fund with the whole program. A lot of people think all of Social Security is going to be bankrupt in six years, versus the reality that we’re still taking in a trillion dollars, we just need about 22% more than what we’re taking in.

Andrew Biggs (32:14):
Yeah. If you go back 20 or 25 years, there were all these arguments about whether the trust fund is real or fair or whatever. The trust fund is essentially IOUs written from one side of the government to the other. I thought at the time the trust fund is not real in an economic sense. It doesn’t make it easier for the government to pay Social Security benefits. It is a pledge that we will pay them, but it doesn’t make it easier to pay them. But here’s the interesting thing:

Susan Pendergrass (32:25):
Right. Al Gore. The lock box.

Andrew Biggs (32:50):
if having a trust fund doesn’t make it easier to pay benefits, then not having a trust fund doesn’t make it harder. The trust fund runs out, we still have taxes coming in, we can still pay 80% of what is owed. If we retarget that, you can maintain the safety net. It’s not like you’re totally insolvent or broke. All those long debates over whether the trust fund is real get resolved because the trust fund itself is gone in six years. So that doesn’t matter very much anymore. But I do hope that, as you said, we’re not in 2045 looking back on a solution of just borrowing $500 billion a year or whatever it’s going to be. People in 2045, when the federal government is bankrupt, the dollar is dropping, and all these financial crisis things we think only happen to other countries are happening to us, they would look back and say, I wish those people were more responsible. The Social Security problem, in a sense, if we went back 25 or 30 years ago, was a manageable problem. The real issue is not the demographics or the benefit growth or whatever. The real issue is just poor stewardship of this program by Congress and respective presidents. It is absolutely a governance problem. It is not a problem of economic or demographic fundamentals. All of that can be handled.

Susan Pendergrass (34:19):
Everyone wants to be Santa Claus, right? No one wants to be the Grinch.

Andrew Biggs (34:22):
It’s very true, but leadership is about giving people bad news. Good news kind of tells itself. Bad news has to be told and people have to be convinced that this is going to hurt, but we’ve got to do it. And we just didn’t have the willingness. President Clinton in the late nineties tried to do some stuff, but he didn’t deliver much bad news because we had surpluses. President Bush was willing to tell people, okay, look, you’re not going to get every penny you’ve been promised. Beyond that, the level of leadership has been very poor.

Susan Pendergrass (35:01):
Hasn’t been good. All right, well, next year when the trustees report comes out, come back and give us more bad news.

Andrew Biggs (35:09):
Yeah, until then, things are looking up. But no, it’s something people want to be aware of, and I think that’s the key thing.

Susan Pendergrass (35:13):
Well, I think one of the more important things you said is that no one understands it. People are upset and arguing over something they don’t understand the mechanics of. I do know people who think they have an account with their name on it that their Social Security taxes went into, and they’re just going to start taking the money out.

Andrew Biggs (35:23):
I have some bad news for that. Your taxes go into Social Security and go straight out the door to pay for your grandmother’s benefits. If you want to know where your taxes are, they’re in your grandmother’s bank account. So go ask her.

Susan Pendergrass (35:45):
That’s right. That’s right. All right, thank you so much. I really appreciate the time.

Andrew Biggs (35:51):
Thank you, Susan. It’s a pleasure to be with you.

Produced by Show-Me Opportunity

The post The Social Security Crisis Is Worse Than You Think with Andrew G. Biggs appeared first on Show-Me Institute.

The United States is known for its diversity: from our landscapes, to our immigrants, and to the different states across the nation—the United States truly has a wide range of interests, individuals, and industries. Our energy sources are no different, and as shown below, we use a diverse assortment of energy sources to power our nation.

Created with mapchart.net; Source: Nuclear Energy Institute (NEI)

In order to better understand energy policy for Missouri, it is important to know some background about each energy source.

Natural Gas

According to 2022 preliminary data from the U.S. Energy Information Administration (EIA), natural gas generated 39.8 percent of electricity in the United States—the largest generator in our country. Natural gas is a fossil fuel, meaning it is formed from decomposing plants and animals. Companies use seismic surveys to determine where to drill for natural gas, similar to the process used for oil. The captured natural gas is then processed, and a chemical called Mercaptan is added. Mercaptan adds the smell that makes natural gas smell like rotten eggs so leaks can be detected. This now smelly natural gas is then used for combustion turbines or steam turbines to generate electricity. In recent times, combined-cycle natural gas plants have greatly increased efficiency by using both processes together. Natural gas is burned to power combustion turbines, and the heat byproduct from the combustion turbine (think of how a car engine releases heat) is used to heat water, create steam, and turn a steam turbine.

Coal

At 19.5 percent of electricity generation, coal is the second-largest energy source in the United States. Once used primarily to power locomotives and heat homes, coal is now mostly used to generate electricity by heating water to turn steam turbines. Coal, like natural gas, emerged as an electricity generator in the 1950s and grew quickly in the 1970s and 80s. However, coal emits much higher emissions than natural gas, and thus its usage is shrinking in modern times as natural gas continues to capture more market share.

Hydroelectric

Speaking of old energy sources, hydroelectric (or hydropower) is one of the oldest forms of electricity generation—with 1880 marking its first year of industrial use. President Franklin D. Roosevelt was a big proponent of hydropower, which uses moving water to spin turbines. By 1940, it generated 40 percent of our nation’s electricity. However, in 2022, it only generated 6.3 percent. American hydropower has largely fallen out of favor due to safety and environmental regulations, legal obligations to Native American tribes, and the economic costs associated with them. For example, two hydroelectric dams on the Elwha River came under attack due to environmental and legal concerns over the salmon population. The owners would have been forced to add expensive fish ladders, and continued legal pressure from the tribes persisted until they decided the dam was not worth the cost.

Nuclear Energy

Making up 18.2 percent of electricity generation, nuclear is the largest clean energy source in the United States. The first commercial reactor was built in Shippingport, Pennsylvania in 1958, and the nuclear industry grew rapidly in the 1970s, 80s, and 90s. With nuclear fission, uranium atoms are split, which causes a chain-reaction and generates an immense amount of heat—which boils water and creates steam that turns a turbine. As time has passed, stringent regulations have slowed down the construction of nuclear power plants; the average age of a reactor for the remaining 93 reactors in the United States is 42 years old. Currently, the industry is regaining momentum as it transitions from large plants built during the Cold War to safer and cheaper small-modular reactors.

Wind

Wind energy makes up 10.2 percent of electricity generation. The mechanics of wind energy are relatively straightforward. The cycle of wind is used to turn turbines which generate electricity without creating greenhouse gas. In the olden days, windmills were used to cut wood, pump water, and grind grain—but now wind turbines are used to generate electricity. Financial incentives and requirements to use renewable energy in the 1990s spurred the development of wind power, with similar incentives continuing today. These wind turbines can also be located offshore in the ocean—such as ones taller than the Statue of Liberty in Rhode Island.

Solar

Enough energy from the sun hits the planet every hour to power the entire world for a year. Comprising 3.4 percent of our electricity generation, solar energy is a relatively small source of energy in the United States. Solar energy can be harnessed in two ways—through solar thermal or solar photovoltaic. Solar thermal technology is like the hot metal slide on the playground that would make you pay for foolishly venturing down it during recess. The sun heats up metal, which heats water—creating steam and turning a turbine. Solar photovoltaic is what most people think of when they think of solar energy—panels made up of a great number of cells turned towards the sun and capturing light energy to charge up like a battery. America’s largest solar photovoltaic farm is the Solar Star Farm in California.

Petroleum

Oil is typically used in transportation, but it can also be used in electricity generation—although it makes up only a tiny 0.9 percent of generation in the United States. The process to create electricity from petroleum is similar to the process for natural gas, as it can be used in steam, combustion engines, or in a combined-cycle power plant.

Biomass

Biomass is a fancy term for burning wood or using biofuels created with corn, soybeans, etc., to turn turbines. Although it is a large U.S. export commodity, our nation only relies on biomass energy for 1.3 percent of electricity generation. Developments are in the works for converting municipal solid waste (paper, shirts, furniture), animal manure, and human sewage into electricity sources.

Geothermal

Accounting for only 0.4 percent of electricity generation, geothermal is the smallest energy source in our nation. Since the earth has an inner core, outer core, mantle, and crust (where we live), heat from pressure and magma in the outer core and mantle produce heat that we can harness for electricity. Wells are drilled into the earth’s surface (some going 2 miles deep) and the heat is used to boil water and turn a steam turbine.

Now that we have a foundation on all of America’s top energy sources, we can further explore how energy is produced and transmitted and consider what would be the best energy policies for our nation and Missouri.

The post Show-Me Energy: Today’s Energy Sources appeared first on Show-Me Institute.

• Nuclear War
• Total Surrender
• Recommended State Department policy

The understanding of the joke is that whatever policy or ideas elected officials want to enact, it is the government employees—the bureaucrats—who have to carry it out. Too often, the bureaucrats carry it out in a manner that benefits them, not the elected officials or the public. (I care more about the latter.)

The City of St. Louis is experiencing a problem like that right now, with its efforts to combine its three 911 systems into one. Consolidating 911 centers should be one of the low-hanging fruits for service sharing among local governments. There are numerous examples of it benefitting communities in Missouri. Unfortunately, while many efforts have succeeded, a few have been stalled due to resistance from local bureaucrats.

The problems in St. Louis are all the more confusing because this effort is entirely within the same city government. In theory, it should be easier to implement service sharing in one government rather than sharing 911 services across different governments (which isn’t really that hard, either.) But, shockingly, the various city employee unions have thus far been able to stall the reform efforts. The mayor’s plans to consolidate and improve the 911 system have been blocked, thus far, by the unions representing the dispatchers who are currently within different departments. From the article:

One union represents police dispatchers, and another represents EMS and fire dispatchers. The unions have demanded bargaining over any dispatcher cross-training. Uncertainty about which union would represent a combined dispatcher position slowed attempts by Mayor Tishaura Jones and her former public safety director, Dan Isom, to allow dispatchers to handle all types of emergency calls.

The unions complained Jones and Isom’s plans for consolidation were made without consulting them and that the changes in job duties were clearly something that should be covered in contract negotiations. [emphasis mine]

Missouri attempted major public-sector union reforms a few years ago. While some reforms were passed into law, a lawsuit unfortunately led to the reforms being overturned by the Missouri Supreme Court.

St. Louis has public sector unions delaying improvements to a system that would improve the city’s currently terrible 911 system and spend tax dollars more efficiently. But hey, fiefdoms have to be protected, right?

FDR was right about public sector unions. They shouldn’t exist.

The post Looking For Bureaucratic Efficiencies in All the Wrong Places appeared first on Show-Me Institute.

The post Government Union Reform Passes the Legislature appeared first on Show-Me Institute.

That isn’t to say the issue doesn’t crop up from time to time. In 2013 non-union officers in Kansas City had their employment threatened by the union when they refused to cough up money for the union’s activities. And while that incident is an exception to the Missouri rule, it’s an episode that supporters of good government in Missouri have to keep in mind as they survey the policy landscape post-Janus. 

Indeed, Janus brings with it the opportunity to reassess public policies that generally provide considerable latitude to government unions. Most states have a laws on the subject that are literally to the left of Franklin Delano Roosevelt, since Roosevelt himself was highly skeptical of collective bargaining and traditional unionization among government workers. Not only does the risk persist that a union could elect members into government to negotiate them sweetheart contracts, but the prospect of a company’s failure that faces private labor negotiations hardly ever truly attaches to a government agency—if economic conditions go sideways, taxes can be raised, services can be reduced, or some combination of the two could take place to protect the government union’s interests.

Point being, government unions have been given a wide berth to operate over the last half-century, and it is overdue that the latitude they’ve been granted was reviewed—in light not only of the law and the Constitution, as will happen in Janus, but of good policy as well. Government union members, non-union government employees, and taxpayers certainly deserve better than the status quo.

The post In Janus, A National Reexamination of Government Unions appeared first on Show-Me Institute.

Government unions—the unions representing government employees such as teachers, firefighters, and state workers—bargain in a much different setting than private sector unions. Rather than negotiating with private companies, government unions negotiate with public officials. This means that public sector collective bargaining affects everyone—not just the few who happen to be associated with a specific business.

In the public sector, unions can use political muscle to help elect politicians favorable to their interests. When it comes time to negotiate pay and pension benefits, politicians are often willing to return the favor.

Franklin D. Roosevelt, a great advocate of organized labor, understood the differences between unions in the government and unions in the private sector. According to FDR, when it comes to government labor, “the employer is the whole people, who speak by means of laws enacted by their representatives in Congress.” For this reason FDR thought that “the process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

Roosevelt was right. The labor laws we use in the private sector are a poor fit in government. Instead, the laws that allow public employees to bargain with their managers should have special features that protect both government workers and the public at large.

I welcome reform introduced in this spirit. Look for more posts from me on this subject in the coming weeks.

The post Missouri Legislature Takes Up New Roosevelt Laws appeared first on Show-Me Institute.

In 1937, Roosevelt wrote to the President of the National Federation of Federal Employees, a government union, and gave his opinion that employee organizations have a “logical” role in government. Roosevelt believed that government employees should organize in order to ensure “fair and adequate pay, reasonable hours of work, safe and suitable working conditions . . . and impartial consideration and review of grievances.”

However, Roosevelt was careful to clarify that “meticulous attention should be paid to the special relationships and obligations of public servants to the public itself and to the Government.” In particular, he believed that collective bargaining agreements were incompatible with public sector work:

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

FDR’s issue with government collective bargaining is that in our system of government, “we the people” set public policy through the democratic process. Binding the people to a collective bargaining agreement takes authority away from the people.

FDR applies similar logic to the topic of strikes:

. . . a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. 

The issues FDR was concerned about affect us today. For example, the Monarch Fire Protection District is still bound by the terms of a collective bargaining agreement signed years ago, before voters put a new, pro-taxpayer board in charge of the district. And in University City, unrest with the firefighters union has caused a couple of incidents imperiling public safety. Now the University City firefighters union is using a collective bargaining agreement to try to limit the city manager’s discretion in contracting out for basic services and managing public safety.

Regardless of whether we should go as far as Roosevelt and prohibit collective bargaining in our government, it is important to craft labor relations laws in light of the important differences between the public and private sectors. Laws ensuring that government remains accountable, even when government workers are unionized, could be called Roosevelt laws in honor of FDR’s legacy.

The post What Was FDR’s Stance on Government Unions? appeared first on Show-Me Institute.

As first appearing in the Kansas City Star and the American Spectator:

A surprised and outraged Franklin D. Roosevelt called it “a date which will live in infamy.” But Dec. 7, 1941, may also be remembered as one of the great turning points (for the better) in world history. It had the startling effect of rousing a sleeping giant (the United States) into purposeful action, and that was the primary factor in stopping the forces of evil from cruising to an easy triumph in World War II. In Churchill’s words, the world was in danger of entering “a new dark age made more sinister, and perhaps more protracted, by the lights of perverted science.”

The Japanese Imperial Navy struck Pearl Harbor in two waves beginning at 7:48 a.m. Hawaiian Time. Japanese aircraft destroyed much of the U.S. Pacific fleet and killed a total of 2,403 Americans – which compares to the 2,605 Americans and 372 U.S. residents from other countries who lost their lives in the surprise attack on the United States launched by al Qaeda on 9-11-2001.

As the Japanese readied for their attack, Hitler was sitting pretty – perilously close to winning a two-front war. Having already conquered France and other smaller European nations in 1940, German troops scored one victory after another against the poorly equipped and outmanned British Army in Southern Europe and North Africa in 1941. “Evacuation going fairly well – that’s all we’re really good at!” Alexander Cadogan, at the British Foreign Office, observed in his diary during the British withdrawal from Greece. “Our soldiers are the most pathetic amateurs, pitted against professionals.”

Things looked no better on the eastern front – with the German army on the outskirts of Moscow. In three parallel offenses, German forces invaded Russia in late June – sweeping across the vast countryside with the same lightning speed that marked the earlier invasions of Poland and Western Europe. Desperately short of every kind of war materiel from boots and rifles to tanks and planes, the Russian army was saved by the onset of winter.

Pearl Harbor changed everything – ending the long, enfeebling debate inside the U.S. between isolationists and interventionists. Suddenly, America was at war, and almost everyone – from FDR on down to Charles Lindbergh, hitherto an arch isolationist – agreed that this was a war that had to be fought with everything we had. Overnight Lindbergh turned from dove to hawk. Though unable to regain the Army Air Corps commission which he had resigned in April 1941, Lindbergh flew 50 combat missions in the Pacific Theater as a civilian consultant.

Within days of Pearl Harbor, hundreds of thousands of Americans made up their minds to join the armed forces. That included the two oldest sons of Joseph Kennedy, another isolationist and outspoken advocate of the appeasement of Nazi Germany, whose departure from London where he had served as U.S. ambassador to the Court of St. James’s was a major addition by subtraction for both Roosevelt and Churchill. The older Kennedy left England in October 1940, at the height of the Battle of Britain, which reduced much of London and other cities to rubble.

My late father – then 24, a reporter with the Kansas City Star, with a wife and baby daughter – was one of the many who rushed to serve. He failed his first Navy physical – being exceedingly thin – but passed the second time after gorging on food and water. He was one of the “ninety-day wonders” – sent to officer training school for just 90 days of rigorous physical and classroom training – and went on to skipper a submarine chaser that saw action along the eastern seaboard, off the coast of North Africa, and in the North Atlantic.

If any disaster may be called a good disaster, it was Pearl Harbor, which awakened America with a violent start and averted what might easily have been the greatest setback to human freedom, joy, and advancement in world history.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute.

The post Remembering Pearl Harbor appeared first on Show-Me Institute.

This presentation covers three main points: what caused the Great Depression; what caused it to go on for so long; and how did we finally get out of it.

Many believe that the cause was the stock market crash of 1929, which caused the Great Depression and a laissez-faire approach toward the crisis, ultimately making things worse. However, that is incorrect. In fact, while the crash started the crisis, it was a series of well-intentioned but poorly thought-out government actions that turned a sharp recession into a depression.

This presentation details how, in fact, President Roosevelt built upon the policies of President Hoover to combat the Depression. However, these policies did not get the country out of the Depression. In reality, it took a combination of events, including World War II, to actually end the Depression and restore strong economic growth. After watching this presentation, you will have a better understanding of that era in American history and the effects of public policy on the economy.

Download the slide show

The post Why Was The Depression So Great? appeared first on Show-Me Institute.

Nevertheless, economist Robert Murphy catches several writers — who should know better — repeating this hoary old myth. For instance, Nobel laureate economist Paul Krugman recently compared the current Republican position on federal spending to Hoover’s during the Depression:

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into depression. To be fair, there’s some question about whether Mellon actually said that; all we have is Hoover’s version, written many years later.

But one thing is clear: Mellon-style liquidationism is now the official doctrine of the G.O.P.

To which Murphy responds:

To his credit, Krugman acknowledges that this quote comes from Hoover’s own memoirs, written well after the fact. But to his discredit, Krugman fails to notify us that on the very next page of Hoover’s memoirs, after he explains the liquidationist advice he got from his treasury secretary, Hoover wrote,

“But other members of the Administration, also having economic responsibilities — Under Secretary of the Treasury Mills, Governor Young of the Reserve Board, Secretary of Commerce Lamont and Secretary of Agriculture Hyde — believed with me that we should use the powers of government to cushion the situation.“[2]

If you read Hoover’s memoirs in context, you see that his whole point in bringing up the Mellon doctrine was to tell his readers that he rejected the advice. Hoover was trying to show people (and of course I’m paraphrasing here), “Hey, I did everything I could to get us out of that awful downturn! You should have seen the crazy laissez-faire stuff my treasury secretary was recommending.”

And Hoover was not exaggerating when it came to his expansion of the government. It’s relatively well-known that Hoover endorsed and signed the Smoot-Hawley Tariff into law, causing American exports and imports to decrease by more than 60 percent by the end of his term. However, Hoover’s meddling was hardly limited to the sphere of international trade. He increased federal spending by almost 50 percent and dramatically increased taxes, including raising the top income tax rate from 25 to 63 percent. Perhaps most disastrously, Hoover urged businessmen to keep wages up, which they did even amid serious deflation. These artificially inflated wages forced businesses to lay off workers. Soon, the country experienced the greatest mass unemployment in history, with a quarter of the labor force out of work.

It was Hoover’s dramatic interventions into the economy that turned what would have been a severe recession into the Great Depression. In a 2009 article, UCLA economist Lee Ohanian estimated that Hoover’s high-wage policies accounted for two thirds of the 27-percent drop in GDP from 1929 to 1931. Unfortunately, Franklin Roosevelt built on Hoover’s mistakes instead of learning from them. Rexford Tugwell, a leading member of FDR’s brain trust, later remarked that “[t]he ideas embodied in the New Deal legislation were a compilation of those which had come to maturity under Hoover’s aegis.” Not surprisingly, the continuation of bad policy did nothing to remedy the economic situation, and the country stayed mired in depression until after World War II.

The post Herbert Hoover the Interventionist appeared first on Show-Me Institute.

FDR’s Second Bill of Rights includes:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

The framers of the Constitution saw the need for a Bill of Rights as a means of protecting the people from an overbearing and oppressive government. They drafted a bill of negative liberties, or protections that define what the government cannot do. They gave no guarantee of housing, food, or employment because they saw the dangers that the notion of positive rights pose as a potential threat to liberty — the idea that, just by being born, people are entitled for others to provide them a comfortable life.

Because the government does not produce any wealth, even the most basic obligation to one individual must be paid for by taking from another. In order to guarantee one person a profitable job, a decent home, or adequate food, wealth must first be taken from those who have rightfully earned it, infringing on their liberty to do as they wish with their own money.

Unfortunate individuals who receive assistance do not receive those benefits because it is their inalienable right, but because it is irresponsible to let them starve or freeze in the streets. No one is entitled to anything that is not their own, no matter how basic of a necessity; however, it is the responsible duty of able individuals to help those in need through their charitable impulses.

Although the end result may be the same, in terms of the needy receiving necessary aid, there is a stark distinction between an unalienable right to something and the responsibility of an able man to care for their fellow man. The difference can be summed up in one word: liberty. The liberty of every individual to do as he pleases with his own money and resources. Although it is repulsive — and, at the very least, irresponsible — for an able individual to let those less fortunate starve, I have no right to infringe upon their liberty to do as they please with their own money.

This is by no means an argument against all government assistance. Obviously, the government cannot allow its citizens to starve or children to live on the streets, homeless. Rather, my objection is with the larger issue of entitlements justified through a notion of positive rights. When fully implemented positive rights lead to socialism, a concept that has been tried and found ineffective at growing economies, raising standards of living, or even helping the very poor. To paraphrase Margaret Thatcher, “The trouble with Socialism is that eventually you run out of other people’s money.”

The post An Economic Bill of Rights? appeared first on Show-Me Institute.

I’ll start by saying that I agree that there exists a moral and ethical obligation to see to the well-being of our neighbors. As I noted in a speech I delivered a couple of months ago, this was also an opinion shared by most of our nation’s founders, and it bears no small significance for the approach they took in shaping our Constitution. As they were debating how the American republic should be structured, one of their major influences was Montesquieu’s The Spirit of the Laws, in which the French philosopher described the attributes that must be cultivated for different types of government to be successful. In regard to a republic, virtue was deemed to be the most important quality that citizens could possess.

Virtue, as the founders understood it, was displayed when individuals willingly set aside their own personal interest and, fully understanding the risks and possibility of mistakes, voluntarily acted for the improvement of those around them. The virtuous person understood that they had a responsibility to assist their neighbors and community when the circumstances called for it, and they would not shrink from this duty. A major reason that the founders insisted on high levels of individual liberty was because they recognized that virtue could not exist without liberty. People may be compelled to take action that has a positive outcome, but if they do so unwillingly it is merely obedience, with no moral value. In the eyes of the founders, only a people free to make choices for themselves can truly be virtuous.

From a policy standpoint, this sort of virtue is the ideal way to try to address society’s challenges, for a couple of reasons. The first is efficiency. Private organizations, like private businesses, are more immediately accountable to the people giving them money than are government agencies. If a private organization is doing a poor job, people will simply quit funding that group and either identify or create another organization that will use their money more wisely. A government agency, on the other hand, does not face the same pressure because its funding is not usually dependent on its effectiveness. People are required to fund government projects regardless of whether they agree with them and regardless of whether they prove to be beneficial. Thus, private voluntary organizations have a much stronger incentive to become as efficient as possible.

The second reason that private virtue is favorable to government-driven charity is that government funding does not grow on trees. Every dollar that government spends is a dollar that will ultimately come from one of its citizens. And the consequence of that dollar going to the government is that the citizen cannot spend it on a good or service that will improve his own life — or, as the case may be, the lives of those around them.

This leads directly to the third reason that private virtue is favorable: It gives individuals a sense of personal investment in the causes to which their charitable dollars are flowing. When the government forces citizens to pay taxes, those citizens may have no clear idea as to how that money will be spent, and therefore they are unlikely to take any pride in or ownership of the programs they are funding. On the other hand, when people contribute to private charity — especially local charities — they are far more likely to take a personal interest in helping them to succeed.

For much of our nation’s history, virtue as expressed through private charity was a very important aspect of the American way of life. Alexis de Tocqueville, whose Democracy in America offered the definitive outside assessment of society in the early United States, was stunned to find the prevalence of voluntary associations dedicated to assisting the needy and accomplishing public goods. Indeed, this sort of voluntary philanthropic association remained the status quo through the 19th century and into the early 20th century.

Every once in a while, however, a disaster would arise that inspired Congress to dedicate taxpayer dollars toward recovery efforts. Especially early on, these efforts did meet with considerable opposition. My favorite example comes from when Davy Crockett (a native East Tennessean like myself) served in the House of Representatives. A bill arose that would have appropriated $20,000 to help citizens in Georgetown recover from a devastating fire, and Crockett voted in favor of the bill. At a later date, a similar bill was proposed. This time, Crockett opposed the measure — but he also offered to contribute a week’s worth of his own pay to the recovery effort. Asked about his reasoning, Crockett explained that after the first vote, one of his constituents had confronted him, reminding him that even if there was great cause for charity, it was the responsibility of the private citizens to provide it. As the constituent put it to the congressman, elected officials must remember that unless an expenditure was being made for the common good of all citizens, rather than the targeted subset of citizens toward which charity is directed, the tax money was not within the elected officials’ purview to give.

Precisely 100 years after Davy Crockett explained his opposition to federally funded charity efforts, Congress confronted with a much larger concern. In 1927, the Mississippi River overflowed its banks, killing hundreds, rendering thousands homeless, and destroying hundreds of millions of dollars’ worth of property throughout the Midwest and South. Concern quickly mounted that private charity alone would not be able to address the needs of those suffering, and many in Congress believed that if any situation ever justified the application of tax dollars, this one did. President Calvin Coolidge expressed major reservations about allowing the federal government to intervene in the matter, but he ultimately acquiesced to the political pressure and signed the bill.

From that point forward, most lawmakers (and, increasingly, private citizens) took it for granted that the federal government should be able to require taxpayers to foot the bill for charitable programs of various stripes. This led to Franklin Roosevelt’s “New Deal,” which arguably prolonged the Great Depression, and later Lyndon Johnson’s catastrophic “War on Poverty.” Even though the American impulse toward private charity has remained present, private voluntary organizations have ceded more and more ground to government-driven charitable efforts.

And so this all comes back around to the current health care debate and the role being played by some religious leaders. Churches and other religiously affiliated organizations used to dominate the charitable scene in the United States. If someone was hungry, homeless, or otherwise in need of help, they would look to a religiously affiliated organization for help — which was good, because it allowed those organizations and the private individuals who supported them to live out the virtue that our founders believed was so important, and it kept individual citizens personally invested in their neighbors’ well-being.

Eighty years later, we should be very concerned that we now have religious leaders and people of faith — for whom acts of virtue should have an even higher spiritual significance — calling upon the government to do their charitable work for them. I understand — and share! — these leaders’ desires to see an alleviation of suffering in the world, but where charity, virtue, and morality are involved the means are every bit as important as the ends. A work that would have been good if accomplished as a result of funds and labor willingly given can itself become evil if accomplished with stolen resources and slave labor.

I hope that these faith leaders will realize that abdicating the charitable roles to which they have been called to a government that will accomplish its goals by compulsion is directly destructive of the virtue and moral development that should be their objective.

The post Virtue and Government-Compelled Charity appeared first on Show-Me Institute.

Now, such competition needn’t always be dramatic. When my buddies and I play Wiffle Ball, it is hardly a fierce competition, but we do divide teams and make a game of it. The alternative — the cooperative game — involves giving everyone the same amount of swings at the ball, not keeping any score, not really trying, etc. That alternative is stupid and boring. The competitive game — and, I repeat, this is only barely competitive — is much preferable. Don’t get me started on how much fun it is to play competitive baseball, basketball, etc. Even when I ski, I always pay to do the slalom course a few times to compete against myself.

Years ago, I read a quote from a biographer of FDR who stated how we needed to create a cooperative society, not a competitive society — although I can’t now find this quote on the web. I am sure I had some type of gagging reflex when I read that. Obviously, there is a need for a great deal of both cooperation and competition in life, but would you rather live in a place where the primary goal involved everyone helping out everyone else, or everyone trying to be the best they can be? I know I prefer the latter, and that is how societies evolve, advance, change, and grow.  

Where I am going with this? Well, Mizzou researchers have found that the human brain grows most when associated with evolutionary competition. We all need cooperation in life, but it is competition that brings out the best in us and makes life the challenge and blessing it is.

The post Do We Need a Competitive Society or a Cooperative Society? appeared first on Show-Me Institute.