Limiting vs. Balancing

I view the drive for a balanced-budget amendment with some misgivings. While I am sure it occupies a great many sincere tax resisters, it evades the real issue, which is spending. Our giant benevolent brother could take all our income to "balance the budget." While he would have to provide us with subsistence—food, housing, and transportation to work—no choices need be offered.

I suggest, therefore, an amendment to limit spending as more appropriate. To gain wide support there would have to be agreement on some range of limits. If you believe, as I do, that no new spending programs should be initiated, that would be the first item. If you believe, as I do, that the budget of the current year should never be increased, that could be the second item. These two provisions alone would, in my opinion, halt inflation, for the simple reason that under such a limit any inflation would reduce the real incomes of all the recipients, which, of course, would be unthinkable.

If my understanding of economics is correct, however, they could increase their incomes now by deflation. To prevent that, the dollars would have to be convertible to gold at the price prevailing at the time of ratification and at the same rate thereafter. This could be the third provision. If you believe, as I do, that the current budget is too high, a fourth provision could be included. Without undue hardship, the budget could be reduced by one percent a year. I assume that the giant benevolent brother could be comfortably shrunk to one-third his current size. Then the one percent decrease could continue for 67 years following ratification. As Milton Friedman recommends, all recipients should be reduced equally to reduce squabbling.

Frank L. Skiles
Hamilton, MT

Remembering the Left

Much in the April issue is commendable; however, I am indebted to the patience and perspicacity of Tibor Machan [Editorial] for reading the New Republic and unearthing the call to intellectual arms that Henry Fairlie issued to all the little lefties.

Traveling in Objectivist/Libertarian/ Anarchist circles has reduced, somewhat, the rages to which I was subjected when forced to attend graduate school and associate with the statists inhabiting academia. One so soon forgets! Now, Ayn Rand is being cited as a Leader of the People, by the flaming left, no less, and I can only conclude that this genre is getting nervous. One look at legislative inertia, however, indicates how much work we have to do before the Pharaohs in Washington will let their people go.

Years ago, Leonard Piekoff indicated that the Great Reconciliations of philosophy would occur by someone attempting to combine opposing works. Two of these reconciliations were St. Thomas Aquinas handling Plato and Aristotle; Kant fielding Descartes and Hume. When Mr. Fairlie sits down with Atlas Shrugged in one hand and Das Kapital in another, we'll know we've won.

Howard McConnell
Evanston, IL

Laissez-Faire for Space

REASON is to be congratulated for its excellent issue on the commercialization of space [April]—especially the article by Robert Poole.

I (and, I suspect, most libertarians) are fascinated by this topic, and I hope REASON will continue to give it coverage. However, it is important to distinguish on this topic between the role of a general magazine of information and opinion such as REASON and the role of a specifically political organization such as the Libertarian Party.

It is imperative for libertarians to realize that the only proper political action with regard to space is to demand the establishment of laissez-faire—get the government out of space exploration and exploitation and keep it out! I suggest that the LP explicitly adopt a position calling for the abolition of NASA; the immediate privatization of the space shuttle; the end of all government subsidies, regulation, or involvement in space exploration, exploitation, and colonization; and a strict policy of government noninterference with regard to private space ventures.

As Poole emphasized, if government will only get out of the way, private entrepreneurs will develop outer space in a balanced, economic, and productive process. The only proper role in that process of a political organization, such as the LP, is to demand loudly and clearly that government get out of the way.

David H. Miller
Stanford, CA

Rhodesian Correction

So pervasive are the omissions and distortions of the press that they infect even libertarian publications—unknowingly, yet the effects are there.

The May issue [Trends] has a heading "Tardy Correction," saying that the Rhodesian legislature has "at long last abolished all legally mandated racial segregation," including in schools, hospitals, and land. The "at long last" seems to imply that it should have been done long before. But this is, to say the least, controversial, given the situation existing there.

Schools. Rhodesia contains about a quarter of a million whites and 6½ million native Africans. The tax burden for education in Rhodesia falls largely on the whites—less than 4 percent of the total population. They have done much to provide education for natives, but besides the enormous financial problems of educating everyone, there are linguistic problems: many natives don't understand English, and there is not one native language but many. Education has been segregated up to now (because of the language problems) so that any education worthy of the name could survive at all.…

Hospitals. Hospital care has hitherto been segregated not because of race per se but because of differing standards of sanitation and other habits (such as wailing loudly when ill) between the races. But the separation does not mean that hospitals for Africans are inferior. Some "black" hospitals contain equipment that "white" hospitals do not possess, so that many whites are operated on in "black" hospitals. Moreover, in health as in education, most of the tax burden through the years has been borne by the whites.

Land. This is the most misleading of all. The story is a long one, but let me take one example. Some years back the Native Land Husbandry Act was passed—"white interference with lands reserved for blacks." But consider: traditionally there was no private ownership of land; it was owned communally by the tribe. The traditional mode of cultivation was to till a patch of ground until its fertility was exhausted, then move on to another patch. This worked well enough at the turn of the century when there were half a million native Africans there; but now, thanks to European medicine, there are over six million. No virgin land was left; natives were ploughing the same land over and over, and no steps were taken to protect the rapidly eroded land.…

The solution adopted was to entrust the responsibility for looking over each piece of land to specific individuals, who saw to it that the plots were contour-ridged and other conservation measures taken to prevent erosion. But for the much-vilified Land Husbandry Act, the entire land surface of all the reserves (land reserved exclusively for blacks—almost half the land in Rhodesia) would have been completely destroyed within a decade. Yet this act is now used as "proof' that all white Rhodesians are rabid racists. White Rhodesians may have violated the libertarian lexicon of virtues by providing the natives too much welfare and medicine, causing a population explosion; but the alternative would have been to let them die like flies even when the means to save their lives was available.

John Hospers
Los Angeles, CA

Ten Stars

The April 1979 special issue is a ten-star hit with me! The articles on the theme of "Goodbye, Spaceship Earth" are spectacular. How exciting that someone is actually working towards the goal of developing freeport launch areas via the free-enterprise method. My only regret is that I am not personally qualified to be of assistance in this marvelous project. Hope it succeeds and makes everybody involved with it fabulously wealthy!

Clarica Laubscher
Hollywood, CA

Restitution Reconsidered

J. Roger Lee, in his May review of three books on justice (and, by implication, Dr. Hospers) missed the main point of the restitutionists, and put down a straw man instead.

Certainly intent should play a part in the judicial decision-making process. But what is ignored is what part it should play. Barnett refers to the "culpable" offender. Nobody is held responsible—guilty—for an accident.

All the restitutionists suggest is that after responsibility has been lodged in the criminal, the decision of the magnitude—and, if possible, the nature—of the sanction to be imposed should be made primarily by considering restitution of the victim to be paramount.

Restitutionism doesn't solve all problems. The decisions of what are just compensations owed to the victims (or the victims' creditors, heirs, etc.), whether a minimum period of incarceration is advisable (to insure some punishment of a criminal rich enough to afford restitution out-of-pocket), whether restrictions should be imposed on the manner of repayment, etc., do not appear to be absolutes. They will probably be made through the same soul-searching and careful deliberation that has evolved into the common law, over a long period of time and through many cases.

Restitutionism doesn't tell a criminal what his crime will cost him; it suggests an approach to that determination, an approach which even allows retribution, utilitarianism, rehabilitation, deterrence, etc., all subject only to the guiding principle of victim-oriented justice.

After all, if the victim is ignored, is justice ever even attempted? Because it is the existence of a victim which determines that a crime has taken place. If libertarians don't admit of victimless injustice, how can we admit of victimless justice?

Dan Karlan
Englewood, NJ

Mr. Lee replies: (1) I've long thought that restitution is an important part of the proper treatment of criminals (see The Libertarian Alternative, ed. T.R. Machan, p. 65). What I argue against Barnett and Hagel is that restitution cannot be the purpose of punishment. To prove that, one need only cite the example which Karlan provides of the rich man who has made restitution but not been punished. (2) Under negligence law, we do hold people responsible for accidents.

Private Solution?

In the May Trends item on saving the environment privately, Mr. Poole writes about the Nature Conservancy. It sounds fine, but check it out in detail. One of their people was in my Toastmasters' Club for a while, and they were in the process of buying a big chunk of private land along the Fort Lauderdale beach in order to resell it at a substantial profit to the city for recreational purposes.

Find out how many times they've sold to governments. In this case, the city wasn't ready to buy when the owner was ready to sell, and then it used its political pressures to get the city to take over in a more leisurely fashion.

Thomas S. Booz
Plantation, FL

Social Security

The February issue of REASON carried an extremely adverse criticism of the Social Security system by Warren J. Shore ["The Great 1979 Social Security Heist"]. Although he was quite correct in some of the points that he made (and even, in two instances, understated his argument), certain errors in fact and in computation were made. Let us examine these points in turn.

1. Employees of the Social Security Administration "want no part of the program they administer." While it is true that the organizations of federal employees have such a view, the top SSA administrative and program planning officials (including the actuaries) have always favored universal coverage.

2. "Maximum family death benefits down nearly 20 percent" as between 1978 and 1979. Actually, in some instances the decrease was more than this! As between death in December 1978 and in January 1979, the decrease was 27% for persons aged 29 or under, although only 8% for those aged 50 or over….

3. Proper calculation of value of benefits. Mr. Shore is indeed quite correct that the SSA figures of total benefits are erroneous as to their value. Correct actuarial practice is to discount future payments by an appropriate interest rate. However, his use of 5½ percent interest is in error; such a rate is too high, because it involves the effect of inflation. If inflation is to be considered, then the effect of the automatic-adjustment provisions (for changes in the CPI) should be taken into account. Using static benefits, an interest rate of 3 percent is appropriate (being the "real" interest rate, under noninflationary conditions); if inflation were considered, the higher applicable interest rate would—as it so happens—exactly offset the effect of the automatics. On a 3 percent interest basis, the value of Williams's benefits is $235,636 (not $175,275 as per Shore, which is slightly in error for a 5½ percent interest rate, because the correct figure is $177, 819), so that the overstatement of the SSA figure is 55 percent (not 107 percent)….

4. Overstatement of value of combined death, disability, and retirement benefits. Shore is quite correct that these values (even if properly obtained by discounting at interest) cannot be added together, because all three events or risks cannot occur to one and the same person!

5. "The 31 percent Social Security tax increase for 1979 is the biggest annual payroll tax increase in history." The 31 percent increase was only for the person earning at least $22,900 in 1979 (and at least $17,700 in 1978); the person earning $17,700 or under in 1978 and the same amount in 1979 had an increase of only 1¼ percent. Moreover, much larger increases for all persons occurred in earlier years—e.g., 50 percent in 1950 and 12½ percent as recently as 1973….

6. Social Security taxes are far more than the survivor protection is worth. Shore states that a $630 annual premium would purchase the survivor protection that "costs" $2,141.70 under Social Security. The $630 figure is too low, because the true face amount of insurance is understated (see item 3), but the rate per $1,000 used is probably too high. The important point, however, is that the potential value of the disability and retirement benefits must also be considered. Although it is improper to add the values of the three types of benefits together, it is quite proper to add together the risk premiums….

7. "Social Security is simply not good protection and is overpriced." To some extent (but by no means completely so), as in any type of insurance, some people get more benefits under Social Security than they have paid in taxes—and vice versa. The real test of whether an insurance or benefits plan is overpriced is the proportion of the income that is spent for benefits, as against the proportion going for administrative expenses and overhead. Under Social Security, over the years (and currently), somewhat less than 2 percent of the tax income has been used for administration, and the other 98 percent has been used (or is available to be used) for benefits, certainly not a "bad buy."

8. "The employer tax belongs to the employee." Shore argues that the employer tax paid on an individual's wages belongs to that individual. This is by no means necessarily so. It is true that, in the aggregate, the employer taxes are part of employee remuneration, but they are not necessarily individually assignable. If there were no Social Security system, there is no assurance that the employer would increase the employee's wages by that amount.

9. "The Social Security Administration employs more than 50 full-time actuaries and many others on a part-time or consulting basis." The SSA has a capable staff of no more than about 20 full-time actuaries (defined as being members of the Society of Actuaries)—who cannot be blamed for the incorrect data referred to by Shore—and few, if any, part-time and consulting ones.

Robert J. Myers
Professor of Actuarial Science,
Temple University
Chief Actuary, SSA, 1947-70