By Simon Grey, on June 7th, 2012
Fox News, the bastion of modern neo-conservatism, is knee-deep in stupid:
Soft drinks have unfairly become the whipping boy of most anti-obesity campaigns. Maybe friends shouldn’t give friends Big Gulps, but to my knowledge, no one’s ever been forced to buy and drink one. People who want sweet drinks will find and consume them, regardless.
There’s an element of personal responsibility and control that this law and others like it don’t even attempt to address. At the end of the day you end up with a well-intentioned law that oversimplifies the problem and provides a correspondingly oversimplified solution.
No one’s denying that that we’re in the middle of an epidemic. Twenty-five percent of applicants are deemed too fat to serve in the Armed Forces. The implications for the defense of the country as well as for the future competitiveness of the American workforce are catastrophic.
But taxing, limiting and legislating soft drinks will not solve this crisis. Our history of isolating, demonizing and replacing ingredients in a quest for health proves that.
Here’s the thing: the government pays for health care* and as a natural consequence is the one who gets to create ways to keep down the cost of paying for said health care. Most people understand this when it comes to families: daddy pays the doctor bills, and so daddy makes little Tommy eat spinach and beets instead of Snickers and Butterfingers because daddy doesn’t want to pay for diabetes meds for little Tommy for six, ten, or fifteen years. No one has a problem with this because everyone understand that whoever pays the bills makes the rules.
Of course, the government is the one paying the doctor bills. If it assumed that legislators actually represent the people who elect them, the government is paying the doctors’ bills at its citizens’ request. Thus, it is well within the right of the government to limit what people consume because the government is stuck paying for the consequences of people’s consumption. When fatties decide to load up on sugary soft drinks, it’s the government that pays for diabetes medicine and cavity fillings.
It would be irresponsible for the government to let costs get out of control, and there are only two ways to prevent it: the government can stop paying for health care or the government can try to prevent people from needing health care in the first place. My personal preference is that the government simply does not pay for health care at all. However, if people demand that the government pays for health care, then I’m going to demand that the government find some way to limit costs.
The problem, ultimately is that conservatives, like liberals, have unreasonable expectations. We cannot have everything we want. There are limits. These limits can be self-imposed voluntarily in the market, or they can be imposed coercively by the state. But make no mistake, these will be imposed at some point. Thus, it is foolish and unrealistic to demand a system that has no limits. And yet, this is exactly what conservatives want.
* And don’t give me any nonsense about Obamacare. The government has been paying for health care on a large scale in some form since the advent of Medicaid and Medicare, both of which receive strong support from conservatives.
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By Simon Grey, on June 6th, 2012
Here’s a waste of analysis:
A much better alternative is for the household to “buy” an annuity from Social Security. They can make this “purchase” by using their savings to pay current expenses and delaying claiming to get a higher monthly benefit at an older age. The savings used is the “price” and the increase in monthly benefits is the annuity it “buys.”
For example, consider a retiree who could claim $12,000 a year at age 65 and $12,860 at age 66 – $860 more. If he delays claiming for a year and uses $12,860 from savings to pay the bills that year, $12,860 is the price of the extra $860 annuity income.[1] The annuity rate – the additional annuity income as a percent of the purchase price – would be 6.7 percent ($860/$12,860). Remember that Social Security benefits are indexed for inflation, so the retiree is buying a real annuity. Vanguard – a wonderful company – also sells real annuities but it pays much lower rates.
This is all a lot of wonderful math, but the validity of the analysis is predicated on the assumption that Social Security is a reliable source of income. Currently, it is. However, it’s long-term reliability is very much in doubt.
The reason for this is simple, and two-fold. First, Social Security is primarily redistributive, in that it distributes current taxes instead of invested savings that were paid in by participants. Second, and more perniciously, a good portion of Social Security’s investments consist of owning federal government debt. As Social Security continues to run a deficit, it will have to sell the US bonds it currently holds. There are a couple of things that can happen. The government can raise taxes in order to buy back the bonds, the fed can print money to buy the bonds, private investors can forego investing in productive ventures, or consumer can forego consumption. With the exception of inflation, all of the choices require taking at least a short-run hit in aggregate standard of living. Inflation merely requires taking that hit in the long-run. To put it more simply, Social Security’s continued success as an investment is contingent on screwing taxpayers over. Needless to say, this may not make for the most reliable of investment programs. Just ask Bernie Madoff.
By Simon Grey, on April 6th, 2012
The guarantee of landline telephone service at almost any address, a legal right many Americans may not even know they have, is quietly being legislated away in our U.S. state capitals.
AT&T and Verizon, the dominant telephone companies, want to end their 99-year-old universal service obligation known as “provider of last resort.” They say universal landline service is a costly and unfair anachronism that is no longer justified because of a competitive market for voice services.
The new rules AT&T and Verizon drafted would enhance profits by letting them serve only the customers they want. Their focus, and that of smaller phone companies that have the same universal service obligation, is on well-populated areas where people can afford profitable packages that combine telephone, Internet and cable television.
Disclaimer: I don’t know if Johnston is a liberal. I do know that this opening sentence personifies quite nicely liberals’ view of rights.
The liberal dichotomy—and corresponding hypocrisy—is typified by how they desire for everyone to have everything while simultaneously condemning everyone for materialism (talk about projection!). In this case, liberals would agree with Johnston’s assertion that basic telephone service is a right. This positive view of rights implies that someone will have to provide them with the service, even if it isn’t profitable.
This view of rights extends to everything—education, health care, internet service, wages, employee benefits, etc. Everyone should have everything they want.
Unfortunately, not everyone wants the same things, and so what people do with their newly-acquired positive rights is try to get whatever they can for themselves. This behavior is individualistically rational, and entirely predictable. It also tends to promote materialism, which is often condemned by liberals.
The modern condemnation of materialism is seen in the environmental movement. Consumption is condemned, as evidenced in the condemnation of burning fossil fuels, which is an essential source of energy, particularly in regards to the propulsion of automobiles. The solution to our current environmental problems is to burn less fuel in particular by driving less.
Interestingly, one reason why we drive so much is because it is cheaper to live in areas that are not as population-dense, thanks in no small part to federal subsidies. One contributing federal subsidy is that of mandated telephone service (seriously, how many people would live in the country if there were no communication infrastructure?). There are other subsidies besides this, like FDR’s programs to bring electricity to rural areas, or other programs to bring urban levels of infrastructure to rural areas.
And so, this is liberalism’s incoherence in a nutshell. First they demand all sorts of subsidies for everyone (like with phone service), then they get upset at people being wasteful. Solving the first “problem” begets the latter problem and also its solution. Ironically, they’d have what they wanted if they simply left everything alone. Of course, I’m assuming that they want a specific outcome, and not merely the power to control other people’s lives.
By Simon Grey, on March 7th, 2012
While the findings are not directly comparable because of differences in methodology, the new study suggests that the recent recession did not cause any significant increase in the share of benefits flowing to the poor, as might once have been expected.
The study found that older people received slightly more than half of government benefits, while the nonelderly with disabilities received an additional 20 percent. These benefits are not means-tested – indeed, better-paid workers get more in Social Security.
My general point from before still stands, as removing illegal immigrants, reducing immigration, and cutting down the guest worker program will cut the labor supply, making American workers more desirable to employers, and thus reducing unemployment, which in turn reduces safety net spending.
What’s more depressing is that a good portion of safety net spending has increased because the Boomers have finally decided to claim their government benefits. The only way to reduce this spending is to cut the benefits (which hilariously is more likely under Obama than Romney, at least if Romney is to be believed) or kill the recipients. On the hand, we’ll reduce government entitlements; on the other hand, the Boomers will be dead. Frankly, this is not a bad choice to have.
One thing’s for sure: with the increase in federal safety spending being due to changing demographics, this trend is unsustainable. The end of this trend will not be pleasant.
By Simon Grey, on February 22nd, 2012
In addition Mr. Krugman cites evidence suggesting large percentages of Social Security and Medicare beneficiaries are confused about their use of these government programs. They don’t seem to think they’re getting handouts.
Maybe that’s because they’re in fact not getting handouts. As they were reminded every time they looked at their paycheck stub and saw the Social Security and Medicare tax deductions, they were forced to sacrifice part of their income for these programs through their working lives. The programs are compulsory; there is no opting out of them; the taxes come out of your paycheck whether you like it or not.
Therefore the notion that people who don’t like big government should not get Social Security and Medicare is utter nonsense. What are they supposed to do? Refuse the benefits that they already paid for? You’d have to be rich to do that. But one can see why left-liberals keep bringing up this humbug. People who don’t share their love of big government are labeled inconsistent for doing what by law they are coerced to do, mocked for complaining about a government apparatus from which they can’t escape.
But why do regions that rely on the safety net elect politicians who want to tear it down? I’ve seen three main explanations.
First, there is Thomas Frank’s thesis in his book “What’s the Matter With Kansas?”: working-class Americans are induced to vote against their own interests by the G.O.P.’s exploitation of social issues. And it’s true that, for example, Americans who regularly attend church are much more likely to vote Republican, at any given level of income, than those who don’t.
Alternatively, as I proposed before, they may simply see this as sunk costs to be recovered. They can’t avoid paying taxes, so they might as well try to recover as much as they can. Furthermore, opposing the political program one uses makes sense because political programs tend to be monopolies for the poor. If the government offers medical care for poor people, they are going to have an impossible time trying to refuse it, especially since taxes (both direct and indirect) eat up a decent portion of their budget. In a sense, the only people who can refuse government programs are the sufficiently wealthy because they can afford to bite the bullet on taxes while also avoiding government programs. The poor cannot do this. The only way a poor person can opt out of a suboptimal government program is vote against it. Thus, it should make sense that some poor people oppose the government programs from which they receive benefits because they would much prefer to simply not go through the government to get their benefits.
By Thomas Knapp, on February 13th, 2012
I’m not going to post the whole letter here — you can read it at Independent Political Report. And you should. As a teaser, here’s the opening:
Main libertarian objections to the Fair Tax:
1. The prebate would start a new welfare entitlement.
2. The transition would redistribute from savers to borrowers.
3. There is a danger of getting BOTH an income AND a consumption tax.
4. Advocates disingenuously quote a 23% rate when it is actually 30%.
5. Advocates use protectionist rhetoric to sway populists.
Also well worth a read is Jason Gonella’s open letter to Johnson, which covers some other issues.
And two pieces on the “Fair” Tax by LP presidential nomination candidate R. Lee Wrights (here and here).
And finally, while I don’t by any means claim to be “the father of libertarian opposition to the ‘Fair’ Tax,’” I can claim to have done a bit of writing on it long before it became a football in the Libertarian Party’s 2012 presidential nomination process — see here and here.
By Simon Grey, on October 7th, 2011
I believe that a person who is 65 years old and has been forced into Social Security is owed something. But the question is, Who owes it to him? Congress has spent every penny of his Social Security “contribution.” Young workers have no obligation to be fleeced in order to make up for the dishonesty and dereliction of Congress. The tragedy is that most seniors just want their money and couldn’t care less about whom Congress takes it from.
Here’s what might be a temporary fix: The federal government owns huge quantities of wasting assets – assets that are not producing anything – 650 million acres of land, almost 30 percent of the land area of the United States. In exchange for those who choose to opt out of Social Security and forsake any future claim, why not pay them off with 40 or so acres of land? Doing so would give us breathing room to develop a free choice method to finance retirement.
This seems like a very good way to handle the current mess known as Social Security because it’s rather fair to both those who have already paid in and those who are currently paying. Best of all, it takes power away from the federal government, which is reason enough in my book to go forward with this plan.
By Simon Grey, on July 15th, 2011
President Obama on Tuesday said he cannot guarantee that retirees will receive their Social Security checks August 3 if Democrats and Republicans in Washington do not reach an agreement on reducing the deficit in the coming weeks.
“I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it,” Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.
If one were to look at box 4 of IRS form W-2, one would see that part of their pay goes specifically to Social Security. Why, then, if part of one’s taxes are earmarked for specifically for Social Security, is the government unable to mail out Social Security checks as promised? They claim on everyone’s W-2s that they have earmarked a certain amount of tax money for Social Security. Why are they suddenly unable to pay it?
Yes, people, you’ve been lied to. For all intents and purposes, there is no Social Security fund. There are simply a bunch of empty promises made by soulless parasites, and now there is no denying the fact that Social Security was a Ponzi scheme from the get-go. We were all suckers for believing politicians about Social Security, and we get what we deserve. Let’s not make the same mistake about the debt ceiling.
By Rok Spruk, on November 22nd, 2010
In 2001 and 2003, former U.S president George W. Bush signed Economic Growth and Tax Relief Act (EGTRAA) and Jobs and Growth Tax Relief Reconciliation Act (JGTRAA). EGTRAA reduced personal income tax rates, increased child tax credit, decreased estate tax and introduced a various range of tax-favored retirement savings plans. In 2003 when EGTRAA was enacted, the Congress cut the top capital gains tax rate from 20 percent to 15 percent while the individual dividend tax rate was reduced from 35 percent to 15 percent.
Bush tax cuts are set to expire in 2011. Hence, a bold increase in marginal tax rates is expected. David Leonhardt recently asked whether the Bush tax cuts were good for economic growth amid the fact that under Bush administration, the U.S economic growth was the lowest since the World War II. Eight years of Bush administration were known for the largest expansion of federal government spending compared to the six preceding presidents. In eight years, President Bush increased discretionary federal outlays by 104 percent compared to 11 percent increase under President Clinton.
Under Bush tax cuts, the reduction in personal income tax rates was imposed across all income brackets. Tax Policy Center estimated that extending Bush tax cuts in 2011 would increase the after-tax income across all income quintiles but it differed substantially. For instance, the increase in after-tax income in the lowest quintile would represent 12.19 percent of the increase in after-tax income of the highest quintile. The average federal tax rate would decrease by 2.5 percentage points. The reduction in average federal tax rate would be the most significant for top 1 percent and 0.1 percent cash income percentile, -3.8 percentage points and -4.4 percentage points respectively. Assuming the extension of the Bush tax cuts, the average federal tax rate, which includes individual income tax rate, corporate income tax rate, social security, Medicare and estate tax, would be substantially lower compared to Obama Administration’s FY2011 Budget Proposal. The increase in the average federal tax rate would be roughly proportional across the cash income distribution. The federal tax rate would increase by 1 percentage point for the lowest quintile and 3.1 percentage point for the top quintile. The federal tax rate would for earners in top 1 percent of cash income distribution would increase by 4.2 percentage point. The chart shows the distribution of average effective tax rates and current law and current policy of Bush tax cuts not assumed to expire in 2011. The current proposal would increase the effective tax rate across all income quintiles. The highest increase (3.3 percentage points) would hit the earners in top 20 percent of income distribution.
Effective Tax Rates: A Comparison
Source: Urban-Brookings Tax Policy Center Microsimulation Model
The expiration of the Bush tax cuts would substantially increase the effective tax burden across the cash income distribution. Recently, Center on Budget and Policy Priorities estimated that letting the Bush tax cuts expire would create a net gain of $22 billion in economic activity. Hence, allowing high-income tax cuts expire would, on impact, result in a net gain of $42 billion in economic activity which is about five times the economic stimulus from extending high-income tax cuts.
The years of the Bush administration were earmarked by the escalation of federal government spending both in absolute and relative terms. The growth in federal government spending was driven mostly by discretionary defense spending while non-discretionary federal outlays increased as well. Since 2001, the federal government spending in the Bush administration increased by 28.8 percent with a 35.7 percent growth in non-defense discretionary spending. The growth of the federal government under Bush administration was the highest since the presidency of Lyndon B. Johnson and Richard Nixon. The Independent Institute compared the growth of federal government spending from Lyndon B. Johnson onwards.
Letting the Bush tax cuts expire would probably not impose a negative effect on small businesses since less than 2 percent of tax returns in the top 2 income brackets are filed by taxpayers reporting small business. William Gale contends that the Bush tax cuts significantly raised the government debt. The economic consequences of the 9/11 and wars in Iraq and Afghanistan were detrimental. William Nordhaus estimated that the total cost of war in Iraq between 2003 and 2012 could exceed $1 trillion in 2002 dollars considering unfavorable and protracted cost scenario. To a large extent, the wars in Iraq and Afghanistan have added substantially to the increase in government spending. However, even after excluding defense outlays from the spending structure, the increase in non-defense discretionary spending exceeded the growth of the federal government spending by 5.6 percentage points. Between 2000 and 2008, the number of federal subsidy programs increased from 1,425 to 1,804 – a 26 percent increase compared to 21 percent increase during Clinton years.
The Bush tax cuts failed to result in a Laffer curve effect mostly because they were implemented alongside a bold and significant increase in federal government spending. Had a substantial reduction in government spending been enforced, the tax cuts would not place should an enormous weight in the growth of federal debt. Higher federal debt would inevitably ponder the structural fiscal imbalance. Since debt interest payments would increase, a combination of tax cuts and spending growth would stimulate investment demand, creating an upward pressure on interest rates, especially during the economic recovery when the difference between potential output and real output is expected to diminish.
Critics of the Bush tax cuts often claim that cuts amassed a growing fiscal deficit. However, in 2007, the fiscal deficit stood at 1.2 percent of the U.S GDP while in 2009, the deficit increased to 9.9 percent of the GDP as a result of $787 billion fiscal stimulus from Obama Administration. Since tax cuts were enacted in 2001 and 2003 respectively, something else is to blame for the deficit.
U.S Federal Debt: Long-Term Forecast
Source: Office of Budget and Management; author’s own estimate
The main premise of the economic policy of the Bush administration had been a significant increase in federal government spending. Spending policies were mostly aimed at covering the growing cost of the Iraqi war. In addition, domestic non-defense outlays on social security and domestic priorities grew significantly, creating an upward pressue on federal debt. The growth of entitlments such as Social Security and Medicare poses a serious long-term risk regarding the sustainability of federal government spending. In the upper chart built a simple forecasting framework to estimate the long-run level of U.S federal government debt as a percent of the GDP. Surprisingly, time trend accounts for 85 percent of the variability of the share of federal debt in the GDP. A more robust framework would include the lagged dependent variable and several regressors in the set of explanatory variables to increase the share of variance explained by independent effects of regressors. The results indicate that by 2020, the federal debt could easily reach the 90 percent thresold.
The growing stock of entitlements such as Social Security and Medicare are central to understanding the looming pressure on federal budget to tackle the challenges of ageing population and demand for health care. The tax cuts imposed by the Bush administration reduced average federal tax rates across quintiles in cash income distribution. However, tax cuts were no supplemented by the reduction in federal government spending. Consequently, the growth of federal government spending increased future interest debt payments and failed to take into account the long-term pressure of Medicare and Social Security on federal budget set. Extending the Bush tax cuts would be superior to letting them expire. But lowering tax burden should nevertheless be comprehended by the reduction in federal government spending.
By Richard Daughty, on April 5th, 2010
The fact is that Social Security is seemingly doomed, as, for the first time, this year more money will be paid out to beneficiaries than will be collected from workers.
I am trying not to laugh as I tell you this, but a lot of people are idiotically-unaware that this is a lot of bad news for many reasons, one of which being that the federal government has always spent all those excess Social Security contributions of the last half century or so, by simply taking the money and exchanging some new Treasury bonds for it! Hahahaha!
I laugh because it reminds me of when I tried that crap with my kids. I mean, how could I not? They had all this “idle” money in their piggy banks, or stashed in their “secret hiding places”, or stashed in their college funds, or jingling in their pockets, or left in their wallets and purses which were just lying around unattended.
Naturally, as they are all moronic Democrats, I thought they would appreciate my kindness in exchanging my personal IOUs for their money, under the theory that everyone could have a nicer life by my spreading their money around, and as a result, my esteem would grow, and my income would grow so that I could later redeem the IOUs, with interest, and everyone would live happily ever after.
Well, I will save you all the hysterical screaming and death threats when they discovered my scheme and they tried to force me to redeem the IOUs, which I couldn’t do because I didn’t have any money, which caused their crying and wailing to get worse, even after I patiently explained to them, so that they would understand and just shut up, “If I had any money, I would not have taken yours, you morons! You think the money to support a drinking problem and a golfing problem grows on trees or something?”
Well, the same thing is happening to Social Security, as there are now trillions and trillions of Social Security contribution dollars tied up in these bonds, some of which must now be, theoretically, sold to get the money to pay the Social Security beneficiaries, and soon the wailing and whining and finger-pointing will begin, making me live that nightmare all over again.
This at the same time that the idiotic Marxist-yahoo Obama administration is deficit-spending $1.6 trillion this year – 12% of GDP! – and almost another $9 trillion over the next 10 years! And then these trillions in ObamaCare on top of that! The utter preposterousness of it makes me laugh again! Hahahahaha!
So, at a stroke, the federal government has less money to spend and they are supposed to find buyers for bonds clogging up the Social Security system, although, of course, nothing like that will happen, as that is the magic of a fiat currency!
The government can just force the Federal Reserve to print up as much money, to buy up as many bonds, as is needed or even wanted, plus more to give itself as much money in excess of receipts as the government wants to spend, right up until the day when prices are so high because the buying power of the dollar is so low as a result of this monetary and fiscal insanity that the dollar falls to, literally, worthlessness! Hahahaha! Easy!
And don’t count on making more money to offset the higher prices that are coming as a result of all this massive expansion of the money supply by the Federal Reserve, as a new analysis by the US Bureau of Economic Analysis finds that the average per capita (every man, woman and child) personal income fell a whopping 2.6% nationally in 2009, which means that a man with a job and a woman with a job raising two kids who do not have jobs saw their income fall by 5.2%.
This is, beyond the catastrophe of a huge fall in income, but also a clear, clarion call to reexamine those pesky child-labor laws and put those kids to work!
It makes you wonder how we have done as well as we have when you read that they also found that the national average of net earnings declined 3.7% in 2009, too.
I’ve said it before and I’ll say it again; buy gold, silver and oil to protect yourself against terrifying, bankrupting, ruinous inflation in prices that is surely coming, or be the kind of person who stands around, terrified, bankrupted and ruined, muttering, “I should have bought gold, silver and oil, but I was too stupid to listen to that Wonderful Mogambo Fellow (WMF), or I could have looked at what happened all the other times in the last 4,500 years of history when thousands of other governments did this Same Stupid Crap (SSC)!”
If you had done either, you would know, clear as a bell, “Whee! This investing stuff is easy!”
National Income Decline: Time to Put Your Kids to Work? originally appeared in the Daily Reckoning.
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