Congressional hubris: Exhibit A

In my article, “Congressional hubris,” I pointed out the government’s  tendency to pass ridiculous laws from which they are exempt. This was in the context of Congress passing out blame for the American automobile industry being in sad financial shape while Congress is probably more responsible than any other entity involved.

shellgameLittle did I realize a golden example of government arrogance was right around the corner. Consider the recent news about Bernard Madoff, a long-time fixture in the financial world, who has been running a fraudulent investment scheme for years. In essence, his investment plan was nothing more than an elaborate Ponzi scheme.

A Ponzi scheme is a fraudulent investment operation where older investors are paid with the money of newer investors. But the whole thing is bound for failure at some point because nothing is produced.

Now, Madoff is going to face prosecution for this crime — and rightfully so. He stole from others. What’s remarkable is this: The very government that is going to prosecute Madoff for running a Ponzi scheme has been running one of the world’s largest Ponzi schemes for years. It’s just called Social Security.

Economist Thomas Sowell characterizes Social Security like this:

Social Security has been a pyramid scheme from the beginning. Those who paid in first received money from those who paid in second — and so on, generation after generation. This was great so long as the small generation when Social Security began was being supported by larger generations resulting from the baby boom.

But, like all pyramid schemes, the whole thing is in big trouble once the pyramid stops growing. When the baby boomers retire, that will be the moment of truth — or of more artful lies.

With Social Security many people will pay far more into the system than they ever get out. If you die before the government’s approved “retirement age” you’re heirs will get next to nothing. So, in typical fashion, the federal government has reserved for itself the right to engage in activity that it outlaws for everyone else.

If you discover yourself being duped by a Ponzi scheme run by a private citizen you can get your money out. Or, at the very least, stop paying in. With the government’s Ponzi scheme you must continue to pay, even after you realize it is a giant fraud — because the government has reserved for itself the right to coerce you to continue in the scheme by use of force.

We’ll call this example of Congressional hubris “Exhibit A.” I wonder how long we’ll have to watch the news for Exhibit B. My guess is not very long.

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Congressional hubris

Senator Chris Dodd (D-Conn.) has made the grand pronouncement that it is time for General Motors CEO, Richard Wagoner, “to move on.” His reasoning for such a statement is “those who created this problem should not be a part of fixing it.”

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Now, I will assume that Senator Dodd makes such a statement on the same basis as all other government dictates — it applies to everyone, except the government. You see, congress is just as much to blame for the current problem in the auto industry as anyone. Their enforcement of CAFE standards on American built automobiles has not accomplished its stated purpose and has, instead, wrought unintended consequences that continue to cripple American automobile makers.

So, if anyone who has had a hand in creating this problem is to be excluded from coming up with a solution, then I would expect congress to be first in line in excusing itself from the process.

I’m not holding my breath.

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