I hope you're tucked in. Get used to the feeling of being tucked
in. Don't you feel safer now? Settle down. I'll tell you a story.
Once upon
a time, there were two United States Senators. One was a Democrat.
The other was a Republican.
They were
very concerned. The government's deficit was up again this year.
Of course, it was always up again, every year. But this was becoming
a problem. It was making it harder to borrow money. Creditors
wanted evidence that the government could pay its bills without
facing the nasty trolls called bond vigilantes.
They had
to find ways to bring in more revenues.
B. We've
got to get more money out of them. Any ideas?
A. We
can give them a tax deduction each year to invest money for
their old age.
B. Why
would that get more money out of them?
A. We'll
tell them they can defer paying any income tax on the profits
until age 70.
B. But
then we can't get their money.
A. Sure
we can. We'll borrow against it. We'll use their future tax
payments as collateral.
B. You
mean the old "full faith & credit of the United States"
routine?
A. We'll
raise the tax rates later. We'll tell them it's necessary for
debt reduction.
B. But
we never reduce the debt.
A. Of
course not. But the suckers always go for it. They'll pay more
taxes "just this once."
B. So
we can borrow even more.
B. But
they may start hiding their profits. Money will get hard to
collect.
A. That's
the beauty of giving a tax deduction now. We will tell them
they have to report whatever they invest in every year until
they cash out.
B. So,
they can't hide it.
B. I am
beginning to understand this. How about this? We can tell them
their money has to go into government-approved investments.
A. You're
right. The investments must be Wall Street approved. We'll go
to the Wall Street political action committees and ask for some
advance money.
B. But
can it really work? Won't the rubes know the taxes must be paid
eventually?
A. Because
they are present-oriented. They want their free marshmallow
now. They will ignore that they can never get out without paying
a tax.
B. You
mean they will regard the money as theirs, tax-free, as long
as they don't take it out, even when it's ours?
B. You
mean they will regard it as tax-free money forever?
A. Because
present-oriented people care nothing about the future. They
care only about today. They will let us control what they do
with their assets, because they don't want to pay the tax.
B. But
they know they must pay the taxes at some point.
A. In
theory, they will know this. Emotionally, they will ignore it.
These people are like children. They really will let us have
control of their money if they think they must pay us what they
owe today instead of later.
B. In
other words, once in the trap, they will never do anything to
get out.
A. That's
exactly right. We can leave the door wide open. All we need
is a sign. "To get out, you must pay the tax, plus a 10%
penalty." They will not get out.
B. I see
another angle. When the government gets in a jam over the debt,
Congress and the President can declare a national emergency.
We will force the management firms to hand over the assets under
their management in exchange for government-guaranteed retirement
bonds.
A. Yes,
we could. But what could the government do with all those confiscated
stocks and bonds? It could not sell them. That would collapse
their price.
B. We
can do this before prices collapse. Then we can sell the stocks
and bonds in our personal accounts. No one with government-approved
retirement fund money will be able to do this.
A. I've
got it. Johnny Cochran would put it this way: "The market
will hold until we unload."
B.
That doesn't rhyme well, but it does sound like Cochran.
A. Then
we can tell the Federal Reserve to inflate. We can use the new
money to pay off the retirement bonds. The money won't be worth
much, but dollars are great for paying off fixed-interest rate
bonds.
B. So,
that eliminates the federal debt. We can start over.
A. But
they probably won't go into tax-deferred retirement accounts
again.
B. We'll
think of something. We always do.
