A Weekly Dose of Hazlitt: Bipartisan Inflation

Bipartisan Inflation” is the title of Henry Hazlitt’s Newsweek column from September 22, 1958. What is interesting about this column is a report of an increase in social security benefits and taxes to pay for them. Because there was never any effort to end social security, noting that it should have been considered as a temporary measure to assist those whose savings had been wiped out by the bank failures of the early 1930s, or an effort to means test the program, resulting in wealthy people getting welfare checks, it has created a fiscal mess that will have dire consequences. The failure to reign in this welfare program is a large contributor to the estimated $100 to $200 trillion net present value of liabilities of the federal government.

So far as economic principles are concerned, it grows
increasingly difficult to detect any difference between
the two major parties. The President has said that he is
going to stress “getting down these deficits and keeping
our money sound.” A look at the record does show that
the Democrats are more openly the party of inflation
and massive spending than the Republicans. But it does
not show any excessive devotion to economy on the part
of the Republicans.

Let us glance back at the economic record of the
last session of Congress, and begin with the credits. The
list is short. It extended the Reciprocal Trade Act. It
alleviated some of the difficulties of the railroads and
other taxpayers by repealing the 3 percent tax on freight
transportation and the 10 percent tax on passenger fares.
Most important of all, as a result of the courage and
persistence of Secretary Benson, it reduced the price
supports for cotton, rice, and corn, and gave us a less
expensive and outrageous farm law.

Super-Spending

On the debit side the list is much longer. Congress
began furiously to “fight the recession,” i.e., to start
a new round of inflation. It hastily passed a spate of
“emergency” spending measures, including $1.8 billion
for Federal housing loans and another $1.8 billion
to speed up Federally aided highway programs. It
increased and prolonged unemployment-insurance benefits.
It offered a $500 million Federal loan guaranty
program to rescue railroads from the results of excessive
Federal regulation. It appropriated another $3.5 billion
for foreign aid. It voted Federal aid (which the President
fortunately vetoed) for “depressed areas.

Nobody in Congress had time to keep count.
When the session was over, the Tax Foundation, a
private research group, announced that a peacetime
record of $83 billion in appropriations and other forms
of spending authority had been voted. The Treasury
looks forward to a $12 billion deficit for the current
fiscal year. So Congress raised the Federal debt limit
to $228 billion.

The Kennedy-Ives labor bill did not become law,
but that was fortunate. The bill contained no effort
whatever to deal with the basic sources of union
monopoly and coercion. Under the pretense of correcting
union abuses it placed more burdens and restrictions
on management.

Social Insecurity

But if the record of the last session of Congress, and
of both political parties, was typified by any one measure,
it was the new social-security amendments. For
the fourth successive election year, Congress approved a
bill to “liberalize” the benefits. It had done this substantially
in 1950, 1952, 1954, and 1956. This year’s amendments
provided another 7 percent general increase. The
one thing to be said in extenuation was that Congress
did have the candor to provide higher social-security
taxes to pay for the higher benefits. Effective next Jan.
1, employers will each have to pay 2.5 percent in payroll
taxes, and the self employed 3.5 percent.

This is a tax on employment. It reduces the current
living standards of self-supporting people. It does not
increase the supply of goods and services, but places
added burdens on production. There is no serious discussion
of the long-range costs of this program or the
dangers of overexpansion. Once more Peter is robbed
to pay—Peter.

Worse, for the fifth time in twelve years, Congress
provided for an increase in the Federal share in state
public-assistance programs. The President not only
signed this bill but hailed it as “a significant forward
step.” He did object to the successive increases that have
raised the Federal share of old-age assistance from 45
percent in 1956 to an estimated 58.5 percent under the
new bill Last January he recommended gradual reduction
in the Federal share to 50 percent. But why not, in
accordance with the moderate suggestions of the Life
Insurance Association of America, and in accordance
with a purpose of the original Social Security Act, a
gradual but complete elimination of any Federal contribution
to state old-age assistance?

As of now, a vote for either party is a vote for more
inflation.

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