How would you “stimulate” the economy? March 7, 2009
Posted by Jeff Block in Business, Economics, News, Politics and Culture.Tags: Barack Obama, capitalism, dependence on government, Economic Stimulus Plan, George Bush, socialism
28 comments
As much as I’ve tried not to watch the news any more than I have to, it’s hard to get away from all the talk about Washington’s “stimulus package” and the subsequent unbelievable spending that’s followed in its wake. President Bush, proving once again not really to be a fiscal conservative, participated in the first “rescue plan” last year for hundreds of billions of dollars, which was at that time the largest single charges against the federal credit card in the history of the nation. Now, President Obama, in no way conservative, has broken the record with a second package at about $800 billion dollars. Both will top $1T easily when you include interest payments. Democrats and Republicans alike (shame on those calling themselves conservatives!) have taken us from $6T to $10T in national debt under President Bush, which took 8 years. Now we’re likely to jump another $1T in the first MONTH of President Obama’s presidency, and the new budget has the deficit at $1.6T, so the debt will be climbing from this point at a rate of over $1T per year, unless something changes. Now, there’s talk of TARP 2.0, government taking over healthcare and the banks, the auto industry asking for more money, mortgage bailouts, and STILL the Omnibus for 2009-10 is packed with pork. I think the latest estimate is like 8,500 to 9,000 earmarks.
I don’t know about you, but my head’s starting to spin … and my stomach’s starting to churn.
Not only is this amount of debt totally irresponsible, it’s ridiculous. It’s borrowing against the future and writing checks our children and grandchildren and great grandchildren will have to try to cover, and likely won’t be able to. But what’s even more ridiculous to me is what we’re spending the money on, which in my view will NOT “stimulate the economy”. I didn’t like the first stimulus/rescue/crazy spending plan (whatever you want to call it) under Bush, and I like the official Obama stimulus plan even less. And I don’t even want to think about a third, which DC is already doing. If it were up to me, I’d recommend less government involvement in the free markets, not more. In my view, it’s not capitalism that’s failed here, it’s government’s interference with capitalism that’s (once again) been clearly shown to lead us down the wrong road. My concern is that we’re finally getting to the stretch of road where Socialism replaces Capitalism, and we get to be like France and Canada … yippee!
So, as much as I’ve tried not to blog political lately, I really do want to try to understand how what we’re doing right now makes any sense at all. I have a few ideas on what I’d do to stimulate the economy if I was king for a day, and they’re all totally opposite what we’re doing. But rather than posting those (and fighting over them), I’m more interested in getting answers to two basic questions…
First, how will what we’re doing actually stimulate the economy? I truly don’t understand the thinking here. First, it seems like we’re spending when we’ve already overspent. It’s like gorging yourself on the all you can eat buffet, and then when you feel sick to your stomach, someone prescribes that the solution is to chase lunch with a 3/4 pounder from Fuddruckers (with extra fries and those awesome cookies). How does that make any sense? If you came to me and said that you had credit card debt equal to 2/3 of your annual income, and I told you that what you should do is increase your spending by 60%, you’d laugh in my face. But that’s exactly what we’re doing. National debt is $10T, 2/3 of the GDP which is roughly $15T. 2008-09 budget was $2.9T (already insane). Obama’s proposed 2009-10 budget is $4.6T, an increase of 60%. How does that make any sense?
And Obama’s stimulus plan doesn’t make any sense to me. Even if I concede to his declaration that there are NO earmarks (a debatable point) and believe every word about the jobs he claims he it will create (another debatable point), still all the jobs will be government jobs and temporary at best. If the bill funds building a new road, then the government pays a construction company to build a road. That’s good. But when the road is done, the construction company is no better off than before the road was built. It seems like we’re asking for a cycle like the auto industry is in… Come ask Uncle Sam for money, spend it, then come ask for more. That’s the wrong idea. Wouldn’t it be better to use government money (if we’re going to use it at all) to give private industry the tools to create more jobs, open more lines of business, create new markets, etc? Doesn’t seem like we’re doing much of that.
All I see when I look at the current “stimulus” plans are short term fixes and more dependency. What am I missing?
Second, what would you do if you were in charge? How would you guide / lead America right now?
I’ll give you an example to get us started. If I were in charge, I would create a couple year window during which you could deduct 100% of capital investments. Currently, you have to ammortize your deduction over several years. If all of a sudden companies could buy a new piece of equipment or build a building and deduct the whole expense immediately, wouldn’t they be incented to expand NOW rather than wait to do so. Wouldn’t that create new jobs and expand business immediately and entirely in the private sector, without creating increased dependence on the government?
Another example: I’d increase military spending by 10%, not decrease it. Then we’d spend more money on planes and tanks and other equipment, which American companies could build. Why wouldn’t that stimulate the economy?
But I want to hear your ideas. What would you do?
Philippines Observation 1: The socioeconomic conditions of the country October 15, 2008
Posted by Jeff Block in Economics, Travel.Tags: Economics, minimum wage, Philippines
3 comments
Part 1 of an eight part series on observations of the Philippines. View the index of all eight entries.
I have to admit that prior to our consideration to adopt from the Philippines, I neither thought much nor knew alot about the country. I’m embarassed to say that I don’t even think I could have located it on an unlabeled map. I knew it was a pacific island nation, that it was an Asian country and culture, and that it was very impoverished. Since then, I have basically considered it to be A) a third world nation, and B) full of very kind and courteous people. I was pretty much correct on both fronts.
The poverty of many of the people in the Philippines is not obvious from the airport, as would be the case in many nations. However, my first clue was the time I spent in the Philippine Airlines ticketing office. The giveaway was the computers. They were *ancient* green screen monitors that clearly gave me the impression that brand new Dells running the latest in airline reservation software technology was probably not something they were able or willing to afford.
The hotel in Manila, and surrounding restaurants, malls and commercial buildings (many skyscrapers) were also deceptively posh. We were located in Makati, the financial district of the city, so it’s no surprise things were pretty upscale. There were lots of nice cars there, nice parking garages, even a few nice parks (which I never really saw elsewhere).
Driving to the hotel from the airport was a different story. We were in a nice car (sent from the hotel), but there were lots of jeepneys and tricycles on the road that catered to a lower economic class. The roads were lined with shanties, both where people lived and where they sold their wares. Even the 20 minute drive to the hotel had the same feel as driving in some of the poorer areas of Chicago – the feeling that things are generally rundown; that there is no ability to repair and keep maintained the buildings or vehicles or sidewalks, etc; and that you generally wouldn’t be safe walking the streets.
Back to the shanties… Of course I’d heard of shanty towns and seen them in movies / on TV. The example that springs to mind is the recent Hulk movie, in which David Banner is hiding in Honduras. In the movie, they show pictures of hillsides just covered in wall-to-wall little houses, which clearly indicates that a lot of people are packed like rats into a very small area. I saw many stretches of road in the Philippines (particularly around the cities) which felt like they were created and maintained (and ultimately made necessary) by even fewer resources than I would assume those had who lived in those houses in Honduras. Many of the homes I saw in these shanty towns were little more than wooden boxes with some kind of roof – like a piece of metal or some thatch. The most predominant other dwellings I saw were single story houses, scattered throughout the countryside. They were similar to houses in the US, but clearly rundown most of the time. There were also high-rise residential areas in Manila, some nice, some not. Just like Chicago. And also in the country we drove once on a private road as a shortcut between two highways (to avoid construction; I’m sure we were not really supposed to be there), and I saw some mansions (comparatively). Also saw one (what I would call) plantation off the road north to Laoag from Manila. But clearly the majority of the homes I saw housed impoverished people.
The exchange rate between USD and PHP was about 1:47. So, a $100 bill translated to 4700 pesos. The smallest bill there was 20 pesos, but they also had 1, 5 and 10 peso coins, as well as their version of “cents”, called “centavos” (Spanish). Even natives didn’t care much about centavos, but the Philippines does the same thing we do in pricing products at P99.95 instead of P100, so you get a 5 centavo piece back (which you can almost throw away, given that it translates to about 1/10th of a cent).
To give you a sense of comparison… Food was typically cheaper. You could get a value meal at McDo for P120, which translates to $2.55. A bottle of water was about P20, or $0.43. Gas was about the same as here, actually. It was 90% ethanol and cost about P50 per liter, which translates to $4.03 per gallon. I was fascinated by that. Electronics were actually more expensive than in the US by about 10%. I priced TV’s, portable DVD players, and a couple other things I don’t even remember and consistently came to that conclusion. Clothes were also very cheap. We bought John-John shoes for the equivalent of about $7, and priced pants (but didn’t buy them) for him at about $10. But we bought luggage locks at a wopping $10/piece (equivalent). I found the exact same locks on Amazon for $7 when we got home. Lastly, when we bought souvenirs, most of them felt very reasonably priced to me (read: cheap). We bought quite a few things for not a lot of cash.
To put the value of money into perspective, let’s talk about wages. Obviously, I have very little frame of reference here because people didn’t go around talking about and I didn’t go around asking what people made. However, I did learn from one man who was a server at the poolside restaurant at the InterContinental that he works for minimum wage. I later found out that minimum wage is P350 a day … not per hour, per day. That’s $7.50 or so. I also learned that his days were 12 hours long, 6 days a week. So, it costs P120 ($2.55) for a McDonald’s value meal in the Philippines, compared to a minimum wage of P350 ($7.50) a day. By comparison, it costs $6 or so in America to buy the same value meal (which is actually bigger from a portions perspective) compared to a minimum wage of $6.55 an hour or $52.40 for an 8 hour day, or $104.80 for a 12 hour day, considering that the last 4 hours would be time-and-a-half overtime in most places. So, in the Philippines, the McDo value meal costs 35% of a days wage. In America, the same worker would only pay 5.8% of his daily wage for the same value meal. That means the Philippino spent > 6 times as much on his McDonalds compared to his salary.
Now that’s not a perfect analysis, but it definitely drives the point home that there’s a big ole’ honkin’ gap. I think it also drives home the point that we’re not as bad off here in America as some people want you to believe, but that’s another topic all together.
Moving on… Another economic observation was related to the food. All the food had pork fat or pig knuckles or fish in it. Obviously, taste, tradition, and a bunch of other things play into the contents of meals, but almost everywhere the selection of food seemed like it was rooted in being cheap. Rice and leftover pig parts don’t sound very expensive to me.
Another indicator of poverty was a lack of heavy equipment on the roads. This is a technology thing too and I might discuss it more on that observation, but the net is that I saw very few big machines. Roads were always under construction, and instead of seeing high-tech machinery operated by a few people working on the roads, I saw 50 guys out there with picks and shovels. This also indicates lower economic status to me.
The markets indicated poverty as well. Meat hanging in the open air. Eggs not refrigerated. A/C was practically non-existent. Dirt floors. You just felt like you were somewhere very poor when walking through the markets. We bought a few trinkets for souvenirs in the market in Laoag, and Jackie tried to haggle over price for us (which is their custom and totally expected). But I was totally uncomfortable, given all we have, bickering over a few pennies for a hand-crafted basket someone probably slaved over for hours.
The last thing that spoke to me on an economic basis there was the prolific use of jeepneys and tricycles for transportation. Most of these things were clearly old and run down, made a lot of polution, and were very much utilitary in nature, not owned for style. What was very interesting to me as well was that every 20th vehicle was a brand-new, polished-with-a-diaper Japanese or European car. So, I felt clearly connected to a sense of class division watching the traffic flow by.
The Unbelievable Cost of Free Health Care December 1, 2006
Posted by Jeff Block in Economics, News, Politics and Culture.13 comments
Okay, gang, here it is… The long-awaited discussion on universal health care. You’ve been clamoring for it, and I’m game, so let’s chat. First, what I believe…
Unbelievably Expensive / Taxes Through the Roof
I believe that pulling health care under the umbrella of the federal government and paying for it with tax dollars will create an unbelievably expensive line item on the federal budget. As it stands already (without universal health care), the cost of Medicare and Medicaid is unbelievable. The 2007 federal budget allocates $387B for Medicare and $205B for Medicaid, totaling $592B … larger than any single line item on the budget. For comparison, we are allocating $503B for defense in ’07. This is to cover medical expenses for the 55 million poorest Americans — roughly 18% of the country. So, even if we were only going to provide the same service to the rest of the country (which we won’t; it’ll be way more), that means we’d have to increase the budget for medical by about 450% to about $3.3T. Total tax income in 2007 is projected at about $2.5T. Do the math, your taxes would triple.
Don’t Rely on a Massively Inefficient Government
I also feel that (echoing some of Bill Woessner‘s comments) the federal government has proven that it’s absolutely terrible at managing large complex processes, and in the attempt would descend expertly into a massively inefficient, massively overpriced bureaucracy. It would make Social Security or the IRS look like well-oiled machines. We already pay for some of the basic elements of health care (in Medicare and Medicaid) for the elderly and the down-and-out, and we can’t even run that system efficiently (wrought with bureaucracy), let alone make it financially solvent. Can you imagine how this would be exaggerated in attempting to establish a system that handed everything for everyone?
And speaking of inefficiency, isn’t it a well-known fact that universal health care systems in places like Canada, the UK, France and elsewhere take forever to get things done? People from all over the world clamor to come to our country for surgery that can’t wait, because (among other reasons) in their progressively advanced universal health care system, waiting is all their doing.
Not a Fundamental Right
I also believe that universal health care is not a RIGHT in this country. We are endowed by our Creator with the inalienable rights of life, liberty and the pursuit of happiness. We are guaranteed the opportunity and freedom to do with our lives what we will. Nowhere is the basic human right of “good health” or “health care” guaranteed.
Let’s get an (easy) extreme case out of the way… Many choose to use their freedom to indulge self-destructive patterns - reaping the rewards of everything from obesity to physical addictions to sexually transmitted diseases. As a taxpayer, should it be my obligation to pay for these choices?
But this group is a small percentage of the people who would be covered by a universal health care system. For everyone else, I think the government has an obligation to provide clean water and sewage, basic food needs, a fundamental level of health (fight the most pervasive diseases, etc). This is all part of a living in a modern, wealthy society. I also think the government is an excellent oversight mechanism (organizations like the CDC or the Office of the Surgeon General), and should have that authority. However, we have to draw the line somewhere. I just don’t think that the feds should RUN any more programs than they have to. They most certainly should not absorb the responsibility for everyone’s health and well-being. That’s just crazy expensive and crazy impractical. I have to believe there are other ways to make health care affordable for everyone.
We’re not Just Talking about Minimums
Brad has repeated focused on minimums (the government should provide minimal health care for everyone), but that’s not the proposal on the table, is it? Someone like Hillary Clinton would replace our current system with one run entirely by the State. That’s a far cry from “minimal”, isn’t it? Don’t we already provide for “a minimum standard” by making Emergency Room treatment mandatory – regardless of insurance coverage, etc? This alone is an incredible drain on the system, because it’s taken advantage of left, right and center. Also, the existing Medicare / Medicaid infrastructure provides for the health care needs of over 1/6th of the nation’s population as it stands. Doesn’t this also constitute providing “a minimum standard”?
People Will Take Advantage of “Free”
And speaking of that… When something’s free, it’s taken for granted and abused. Period. That’s human nature. If I have to pay for my doctor’s visit, then I’m more likely only to go when I actually need to. If it’s free, I’d go for even the slightest thing. I can’t tell you how many people I’ve known who took 45 minute showers when they were renting and water was included, but suddenly started taking 10 min showers once they had to pay the water bill themselves in their newly-purchased home. The same is true at a restaurant – you eat more at the buffet than when you order off the menu, or if someone else is buying then most will order the more expensive entree. The same is true with a car – you don’t invest in preventative maintenance on a car you were given. How many people do you know who treat a rental car with far less care than their own? On and on it goes. Wouldn’t making our system (appear to be) free cause it to immediately be overrun and beaten down by the trivial “needs” of every person with a hangnail? Wouldn’t that just exacerbate the cost and inefficiency concerns I’ve already mentioned?
It Doesn’t Work Elsewhere
Lastly, haven’t universal systems like the ones in Europe and Canada proven that this just doesn’t work? Federalizing the system kills its quality. How many people fight their way from Minnesota into Canada for major heart or brain surgery each year? How many fight to get into our system from Canada (or all over the rest of the world) each year? Doesn’t that tell you something? Broader topic (an aside), but… Why are we always trying to model after failed and failing systems?
Conclusion
Don’t do it. It’s too expensive. It’s inefficient. It will encourage abuse. It doesn’t work elsewhere. It’s a bad idea.
Your Turn
Okay, I’m had my say, now it’s your turn. Open shot… What do you think? Pros? Cons? Reasons for? Reasons against? I want to hear your opinion!
Technorati tags: universal health care, us budget, medicare, medicaid, hillary clinton
“Democrats Target Wealth Gap and Hope Not to Hit Economy” November 30, 2006
Posted by Jeff Block in Business, Economics, News, Politics and Culture.5 comments
That was the title of a frontpage story in the Wall Street Journal on Tuesday, November 22nd. The gist of the article is that the gap between the wealthy and the poor in America has been widening over the last 20 years (which I concede is true), and that Democrats – having won the house and senate in the recent election – are now in a place where they can (and intend to) do something about it (which can be a good thing, if done well). The Dems’ plans to fix the gap (many of them potential plans, not likely to become realities) include but not limited to the following (according to the article).
I thought these topics might be interesting to discuss, even though some have already gotten some air time here…
- Raise the minimum wage. I can’t really argue witht his, since it’s SO low ($5.15), and hasn’t been changed in 20 years, while inflation has increased the cost of everyday goods by about 25% in that time. I have no real beef with this approach, though I agree with the WSJ that this will do little to actually close the gap between the salaries of CEO’s and the salaries of dock workers (for example). An increase in the earned income tax credit would be another option to which I wouldn’t necessarily be apposed, and is on the agenda of many democratic lawmakers going into January. However, I have to admit that I haven’t spent much time thinking about the implications of an increased EITC.
- Limit the amount people can earn. This effectively boils down to instituting a “maximum wage”, similar to the minimum wage, but on the other end. This is straight off the Marxist “redistribute the wealth” page of the San Francisco values handbook, and would be a disaster. Not only would this work toward crippling the economy by undermining the incentive to succeed, but is an afront to freedom and capitalism. Really really really bad idea (in my opinion), but some libs love it.
- Institute a windfall profit tax. If you make too much, then you get exorbitantly taxed for it on top of standard income tax. See my objections in #2.
- Lower the cutoff for the death tax. This would undo recent legislation that increased the cutoff (from $650k to $3.5M) for paying estate tax (also affectionately called the “death tax”). The percentage of the tax has also dropped from 55% to 47% in recent years, and this change would potentially roll that back as well. These were key components of the infamous “tax cuts for the rich”, which we’ve talked about and which gets a lot of air time in liberal circles. Summary from my perspective: I think the estate tax is morally wrong and punishes people for having accumulated in life – and at that, does so a second time (because it’s taking half of what they managed to accumulate after having paid all manor of taxes on what they earned, spent, lived in, bought, talked on, used to heat their homes, breathed, etc). I am *not* a big fan of second generation wealth, and have seen up close the disaster that people who get a lot for little work can make of their lives. However, this is not the solution to that. Freedom has some challenging by-products (a statement I know most liberals would accept and agree to), and I feel this is just one of them. It takes something really really wrong like the death tax to address it, so we just need to live with it.
- Strengthening labor unions. The goal here would be to give the labor unions more power, so that they can avoid being stepped on by management. As I’ve said before, I think it’s unfortunate that labor unions are even necessary, but they are. If management was more generous and considerate and supportive of their workers, we wouldn’t have many of the problems we have in the marketplace. My fear is that workers with more powerful unions would use this power to “stick it to the man”. Like much of what passes these days for the search for “racial equality”, I fear this will translate to “revenge” instead of stopping at “equality”. I guess I have a “can’t we all just get along” attitude here, which I know is unrealistic. So, in the final analysis, I support strong labor unions. They’re something management will just have to live with. Mostly, they brought it on themselves. For what little good it will do, I would call on both sides to be reasonable.
- Raise the income tax brackets. This just ticks me off. Where’s the end of this? So called “wealthy” Americans are already shouldering an enormous percentage of the tax burden in America. At what point do you begin to break the back of the machine that’s creating all the jobs and wealth and opportunity for the lower- and middle class? People think that when the Democrats talk about “tax cuts for the rich”, they’re only talking about billionaires. Not hardly. If you make $100k a year (putting you in the bracket 2nd from the top), you’re paying 22% of your salary to federal income tax alone, then about 3% to state, then 6.2% to social security, then 1.5% to medicare. Totally forgetting about property tax, the 30% tax on your cell phone, exhorbinant taxes on all your utilities, and on and on and on and on, that’s a total of almost exactly one-third of your salary down the black whole of income taxes (before we even get started on all the other taxes). And the Dems are saying that’s not enough. If you make $250k / year (putting you $80k into the top bracket … right in the sweet spot for the small business owner, employing 6-10 lower- to middle class workers), you’re getting close to 40% just to income tax (plus another 6.2% for social security, unemployment, and a bunch of other taxes) for every employee in your company. This not already an unbelievable strain on the people creating the jobs. How is raising tax brackets going to make that better? Yes, it would create more tax revenue in the short run, but would be one more stone around the economy’s neck in the long run. What will make these people happy? Jack the top bracket up to 70% like it was before Reagan cut it in ’81? Btw, just for the sake of reference, the guy making $10M a year pays 44% income tax, only 4% more than the small business owner paying 40%, who’s also in the top bracket. If you want to add another bracket to the top at say $500 and up, great. Then I can get on board calling that a tax for the rich. But the current definition of “the rich” gets all the way down to the guy making $94k/yr at the bottom of bracket 2 – not exactly the exobitantly wealthy. (Interested in playing with a tax bracket calculator, here’s a good one.)
- Raise the dividend tax rate. Lowered to 15% by Bush’s tax cuts (“for the rich”), this played an enormous role in rehabilitating our economy after the tech bubble crash, 9/11, and the various Enron-et-al scandals. Now, the Dems want to role it back, because I guess they feel creating more capital for business expansion (which generates wealth and creates jobs) is a bad thing. Actually, that’s unfair. What they really want is more equity (admirable, if unrealistic at the level they’re thinking), but I believe that they fail to see that having this rate low so that businesses can grow and expand dramatically helps the lower- and middle class. More jobs and more assets are good, right? Like #6, this has short term benefits, but constitutes a serious long-term liability – in my opinion.
- Collect unpaid taxes. I’m all over this one. If someone owes taxes, they should pay them. If they don’t, they should be penalized. If we just had a more effective system for collecting taxes (*cough* simplify! *cough* flat tax! *cough*), then we could generate quite a bit of extra revenue just by collecting what’s already due the government. (Btw, we had a lively debate about taxes a while back that might interest you.)
- Increase the ceiling for social security. This year, you pay social security only on your first $94k of income. It already goes up every year. It feels like such a short-term, short-sighted solution to the social security solvency problem, but yes, I guess we could raise those limits even faster and bring in more money. Yes, this punishes Bill Gates, but it also punishes the same small business owner we’ve been talking about in the last few paragraphs. And while we’re on the topic, why *should* Bill Gates be punished? The poor guy we’re “robbing the rich” for? How many jobs has he created? How many companies has he built? Do we really believe that Bill Gates is exorbitantly wealthy because he lucked out, not because he had amazing ideas, was craftier than others, took huge risks, worked himself half to death, AND was lucky? Just seems wrong to punish people like him for their success. America is the only country on earth where a person can drop out of high school, build something amazing in their garage, and parlay that into a $100 billion empire. Why does that somehow intrinsically give us the right to take whatever we want from him, just because he has money? I agree he should shoulder a significant burden, but don’t you think he already does? (Also, feel free to join the social security debate from a last week.)
- Universal health care. I’m not sure I even want to get into this (okay I’m sure, and I don’t – this is already a long post). Suffice it to say, from my perspective, if this passes, you’ll pay more for something “free” than you have for almost anything else in your life. I can’t even imagine the tax increases that would be required to even begin to cover this – double all the income tax brackets, maybe? Makes me sweat just thinking about it. (Here’s a very interesting analysis of the pros and cons of universal health care.)
Here’s a free-radical kind of thought… It really gets under my skin that many of the liberals calling for sweeping economic reform – including much of the “rob the rich to feed the poor” legislation – are extremely wealthy themselves, and are well-known to have much of their personal wealth in off-shore bank accounts, outside the reach of taxes. The Kennedy’s, George Soros, and others.
In addition to all this, I found the following interesting. Quoting the article…
“Barney Frank, the Massachusetts Democrat in line to chair the House Financial Services Commitee, vows to push legislation that would force companies to provide more and clearer details of CEO pay, devise policies to recapture incentive pay if earnings are later restated, and require shareholder approval of ‘golden parachute’ payments to dismissed executives.”
To sum it up, Frank asks the question, “How do you do a better job of sharing overall economic growth with the average worker?” I’m not necessarily apposed to any of the three things for which he’s pushing in the above paragraph, but this “fundamental question” smacks way too much of “it’s the government’s responsibility to provide” for my taste. For the 100th time, I’m way more comfortable with having the government provide freedom and equal opportunity, so that people determine their own standing in society through their hard work, smarts, and ambition. Legislating “fairness” will never be achieved, and in my opinion we risk destroying the country in the process. So, let’s minimize (not eliminate) the legislation of fairness, and try to get out of the way of peoples’ entrepreneurial drive as much as possible.
Some of the dems’ proposals in this article do that, some really don’t. But it’s that question I use to draw the lines around what I like and don’t like in their plans.
Technorati tags: minimum wage, windfall profits tax, income tax, estate tax, social security, labor unions, universal health care
Social Security: Strengthened the Country, or Sapped its Initative? November 14, 2006
Posted by Jeff Block in Economics, News, Politics and Culture.25 comments
In a recent post, Brad put forth the idea that our country is what it is (extremely strong and extremely powerful) in part because it has effectively blended capitalism and socialism. As I understand it, he argues that socialism has some great ideas, and when you extract the best of what socialism has to offer, and mix it with capitalism, then you get a strong country like the US. Here are his words…
Many socialist beliefs are very admirable. The idea to take the best of these and incorporate them into capitalism has made us the stable power we are today. Tax exemptions, unemployment insurance, WPA, Social Security, almost any federal regulatory agency, these all augment pure capitalism to give us a strong and stable economy.
There are lots of things we could talk about here. Some of what he says here, I agree with. An example would be in government-enforced anti-monopoly laws. But for this post, I want to focus on social security. Brad is making the point that “social security … has given us a strong and stable economy.” It has “made us the stable power we are today.” So, this post has a strong question / poll component… Do you agree?
Here’s my position… I totally disagree. (shock!)
I disagree with the entire concept of a social safety net in the form it exists today. We are a wealthy society, and as such we do have an obligation to protect the weak and poor in our midst. If someone gets hurt at work and cannot provide for themselves, then we (as a society) should help them. If someone loses their job and needs temporary assistance to help them get back on their feet, then we should help them do that too. Education through the 12th grade should be free, so that everyone has equal opportunity to make something of their lives – not just those who can afford school. When a disaster strikes (such as Hurricane Katrina), we should help those who were wiped out by the disaster (although I would have executed many of the details far differently – but that’s a distraction). All these programs, which could be labeled “entitlements”, I support. A wealthy nation such as ours has obligations to the poor and weak and underprivileged among us.
What I don’t like is the idea that the government will provide for my retirement or give me a paycheck if I’m too poor. Neither was that the original vision for the program, nor is it reasonable / feasible to execute, nor is it good for the country. The social security program in its current form effectively communicates to (especially poorer, less educated) people that their retirement is taken care of. Don’t worry about fiscal responsibility. Don’t worry about saving. Don’t worry about being wise with or taking care of your money. The government’s got your back. There’s a safety net. If you don’t save or don’t try or don’t hold down the job, no big deal. You are entitled to a liviing wage in retirement.
Social security was formed in 1948 after the war, which followed the Great Depression. In the face of new-found economy prosperity, a generation of people who had had nothing now wanted security – assurances that something like the 30′s would never happen again. Now, 60 years later, there exist people who have lived off the system for generations, children who grow up knowing nothing else than to expect the monthly check from Uncle Sam, etc. And we have to keep raising the amounts we collect and shell out, because what the elderly are getting out of social security isn’t providing enough to be a living wage. Plus there are far fewer people putting money into the system now per person taking money out than there were 50 years ago. This doesn’t mean that we keep raising the anti, it means we need to realize that this thing is broken – a flawed idea from the get-go, and put together a different plan.
I believe social security saps initiative, as do so many of socialism’s tenants. They are idealistic, assuming that people are self-motivated, regardless of their circumstance. This is simply not true. Human nature is greedy, lazy, selfish – unless motivated to be otherwise. In my mind, social security falls under the general category of “welfare” for this reason. Perhaps I define welfare differently than others, but here’s my definition… Paying people what you feel they deserve to have instead of in response to what they earn. Social security is an example, albeit a retirement-centric one. Many other welfare programs are more direct, such as food-stamps, etc.
Here’s the why-Jeff-believes-welfare-in-general-is-bad-for-our-country story…
My grandfather was born in 1907. He was the 2nd oldest of 7 children – one older brother, and 5 younger siblings. His parents both died before he finished high school – in the same year. Actually, his mother was committed to a TB sanitarium, which was essentially the same as death. He was 16, his brother had just graduated, and his youngest sister was 2 years old. His older brother took off, because he had his diploma, and saw the way out, leaving my grandfather to care for his 5 younger siblings (ages 2 through 14) at the age of 16. There was no welfare, no social security, no safety net. By today’s standards – if we listen to the message of many liberals - he should have starved to death in the streets along with his siblings. How could anyone survive under such horrible conditions unless we start giving them stuff?! Instead, he rose to the occasion.
Grandpa dropped out of high school (never finished his education), and worked as everything from a coal miner to a wheat farmer to a millwright to an electrician. He found work wherever he could and did what it took to raise his siblings, even through WWI and into the Depression. His neighbors helped. He grew a lot of his own food (which he had to learn how to do) in a garden in the backyard. The kids all helped with taking care of the house, and each other. Every other child got a high school education. My grandfather sacrificed incredibly to make it happen.
And eventually, my mother (an only child) went to college. The first in that family. And now I have much of what I have today, because this man (my grandfather) worked his butt off to provide – to make a life for his family, and for future generations. His work ethic, passed down through my mother, and my father’s work ethic that came from his parents, has been passed on to me. Now, I work my tail off for what I have. Out of every dollar I earn, I give some away, and I save some for the future - which has been true no matter what my salary has been, even when I worked at Taco Bell in college. Only after that, do I spend anything.
My question… Was it social security and other welfare programs that made this country great, or was it my grandfather and his work ethic and the hundreds of millions of men and women like him that worked their butts off like he did to build a life in the context of freedom? Does social security teach this kind of work ethic? Does a safety net make a man work and sacrifice like this?
My father was a mailman. For over 20 years, he walked 9 miles a day to deliver mail in the small town in which I grew up. Before that, before I was born, he worked two jobs to get ahead (no assistance from anyone) – but that’s an aside. When he would deliver the mail in the hot summer, sweating like a pig, walking mile after mile, he would share with me several things he noticed that I think are worth mentioning in the context of this discussion. Many of the houses to which he brought welfare checks had the following things in common in the hot summer. Not every house, but there was a strong correlation between getting a welfare check and one or more of the following…
- The man of the house was home in the middle of the day watching TV. I guess if they’ll send you a check for doing nothing, why not do nothing?
- The air conditioning was on and the windows were open. I guess if you’re not working hard to pay your electric bill, you don’t really care.
- They gambled. Many a time when Mrs. Jones was “so glad the check’s here”, it was because “I’ve been waiting for it so I can meet my friends at the boat this afternoon.”
- They smoked. Can’t afford lots of things, but can definitely afford cigarettes.
This kind of stuff is very real. It’s not everybody. I doubt it’s even the majority. But it’s real, and it destroys lives. Can you picture my grandfather, with all those mouths to feed blowing money at a casino or on cigarettes or on air conditioning (let alone A/C that was trying to cool the front yard)? No way! And my question is very simple, does giving people stuff also give them a strong work ethic, or do you have to work hard to get that? I see it in my own life. If you give it to me, I don’t value it nearly as much as if I had to work for it. Too big a safety net undermines work ethic, to say nothing of principles like the value of delayed gratification.
What say you?
Technorati tags: social security, welfare, the great depression
Step 7: Long-Term Economic Viability at Home October 26, 2006
Posted by Jeff Block in Economics, Military, News, Politics and Culture.3 comments
After a mere six weeks of hiatus from our far-from-legendary-but-still-interesting (at least to me) discussion about how to win the war on terror, I would like to return to the topic with step 7. It’s interesting to me (certainly not lost on me) that while we’ve been away from this topic, the US has actually implemented several of the suggestions I made. Obviously there’s no connection, probably not even worth mentioning, but I did so anyway. So there. Kinda makes me feel good. 
We started out long-term and strategic. So far, we’ve talked about ridding the nation of our dependence on oil as a dominant fuel source (step 1). Second, we talked about getting more human intelligence on the ground in the Middle East (step 2). Then we shifted to the more tactical… From fervent prayer (step 3), to making sure our leaders are casting a clear vision (step 4) for our involvement in the conflict (step 4), to cyber warfare (step 5), to getting much tougher in Iraq by declaring marshall law and cleaning up the insurgents (step 6). Maybe these aren’t so much “tactical” as they are “immediate”. Certainly, the next step is going to take awhile.
Without further adieu, it’s time to move on to step 7… Restoring America to a place of true economic strength. Why do I think we’re not already at that point? Well, several reasons. Here they are…
1) We are managing an insane level of debt
Both personally and nationally, America is way too far in debt. We use credit cards like they’re water, have a negative savings rate as a people, and can’t seem to get our government (either Republican or Democrat) to stop spending like there’s no tomorrow. I submit that the average household in the average suburb has a mortgage totalling > 80% of the value of their home, 2 car payments, a few thousand on a credit card, several department store cards, and 2-3 pieces of furniture on buy-now-pay-later plans. If we don’t bring down the national debt, tear up the credit cards, and start putting some cash in the bank, I fear for how it will eventually weaken our country.
2) We are absorbing Mexico’s poverty problem
Illegal immigration is totally out of control. This is, of course, a matter of some debate, and contains more than enough punch to stand as its own blog entry. And maybe someday I’ll address it directly. Until then, an abbrievated discussion will do…
As a nation, we need to gain control of (notice that I didn’t say “stop”) the flow of people across the border and return order to the chaotic immigration situation. There are too many drugs, too many diseases, too many criminals, and too many people who aren’t loyal to our country (who just want our money even without assimilating into our culture) pouring across the border at record levels. Of course, there are some great people making their way here as their always have been — hard working, honest folk. But there’s too much unwanted baggage coming with them. Plus, it’s both our government’s duty and right to secure its borders and control the flow of immigration across them.
The fact is that we’re absorbing Mexico’s poverty problem (because their “government” doesn’t want it). All you have to do is make it here, and social services galore are yours — to say nothing of the kids that immediately become citizens when born here. Not enough taxes are being paid, too many social services are being taken for granted, and the system is getting worked a bit too hard for my taste. Add to this that these hard working people are afraid all the time of getting caught and are being exploited by workers who have no reason to give them a fair shake, and I’m forced to conclude that we have to do something … immediately.
America simply cannot absorb endless streams of foreign-borne, mostly poor people. No economy can, no matter how strong it is.
3) We are too focused on entitlement
We’ve talked about this before, but America’s entitlement system is hugely broken. Way too much money gets spent (exacerbating #1 above) on way too many people who don’t need it or who don’t deserve it (in the case of illegal immigrants). Some do, of course (both need- and deserve it), and we have an obligation to care for them — since we are indeed a very wealthy society. But unfortunately, the effect of our entitlement mindset in America does far more harm than good. More than anything else, it saps the iniative of people who would otherwise have to work to survive. It drains them of their motivation to work hard, to innovate, to appreciate what they have, to be generous. And on and on. And what’s worst is that it does so generationally — creating entire classes of people who have only known living on the public till.
This fundamentally weakens the nation, and makes us vulnerable in the face of enemies like Al-Qaeda. While the terrorists will do absolutely anything to see America defeated, far too many of us would sacrifice NOTHING to defeat them. Many of us think that we deserve to have whatever we want, whether we work for it or not. Frankly, this is where the negative savings rate and the credit card problem (again back to #1) comes from too … “I deserve it! How dare anyone tell me that I have to wait to have it, or (God forbid) that I can’t have it!” It’s the same mindset that allows someone sit at home watching reality TV on the Social Security dime. (Obviously this isn’t everyone, but you can’t deny that too many of those folks are out there.)
If everyone in America thought like JFK (“Ask not what your country can do for you! Ask what you can do for your country!”), we’d have far fewer problems.
4) We have a failing education system
This is huge. We are spending record cash on education in this country, and it’s quite disheartening to realize that our school system is getting worse not better. The option to discipline kids has been taken away from teachers. Parents are too busy making money to even police their kids, let alone effectively raise them. The value system that made our country great is eroding (we want less and less to do with God; I guess we’re assuming kids will pick up civility and virtue from the TV, right?). The television and daycare raise kids more than parents do. And kids have absorbed the same message adults have — that the world owes them whatever they want. There are other factors, but I’m getting a headache. At the end of the day, one (in my mind) undeniable result of all this is that the education system is failing. Most teachers try hard, and certainly work a LOT, but too many kids make the classroom situation impossible — especially in the big cities. Got any friends that teach in the inner city? Ask them what they think about education.
Where this leads us…
There are many important results of these factors. But the one I’m focused on today is economic instability. Our nation’s great industrial, creative, entroprenurial engine is losing steam. In time, we will be more like Western Europe — with a stagnant economy, high unemployment, few values, and generally quite weak … and probably a socialistic perspective on how to fix things which will just make matters worse, if Europe is any model.
If this indeed becomes our fate, then we will be in no position to defeat the blood-thirsty terrorist killers we’re facing. Without strong moral fiber, deep integrity, an industrious work ethic, and a willingness to sacrifice, we simply can’t defeat an enemy like this one.
Technorati tags: war on terror, debt, welfare, entitlement, immigration, education
