The vast sums of money transferred by the governments of wealthy nations to the governments of poor nations do not help the world’s poor, for the most part. Rather, such foreign aid serves to prop up corrupt dictators, finance a giant network of Western nonprofits, disrupt local markets, and keep many of the intended beneficiaries dependent and poor. Even private aid often has deleterious effects. Or at least Poverty, Inc., a 2014 film by Michael Matheson Miller of the Christian, free-market Acton Institute, plausibly argues those points. Continue reading
As Stephen Moore points out in an article for the Heritage Foundation, “at least one million jobs . . . go begging” for employees, even as the unemployment rate remains high. Why? Undoubtedly it has much to do with the fact that the high-paying jobs in question, in manufacturing, trucking, and energy, are hard work.
Of course, the fact that the federal government pays people not to work is also a big factor, as Moore explains:
Too many Americans have come to view blue collar jobs or skilled artisan jobs as beneath them. Contributing to this attitude is the wide availability of unemployment insurance, food stamps, mortgage bailout funds and other welfare. Taking these taxpayer handouts is somehow seen as normal and a first, not a last resort.
Moore laments the widespread loss of the “old-fashioned work ethic.” But there are many signs of hope in this regard, in Dirty Jobs, in North Dakota, in the factories and offices across America where millions of people go to work every day.
Seriously, is there any good or service the left doesn’t want to turn into a welfare program? The latest example comes from California, where Assemblywoman Lorena Gonzalez has proposed Bill 1516 to start a new welfare program to provide “$80 a month to buy diapers for children under the age of 2,” Fox News reports. Even if you’re going to have forced wealth transfers, there’s no reason to make them for such specific goods and services. Or government could protect people’s rights to keep and spend their wealth as they see fit. This latest proposal sounds like something my two-year-old nephew thought up; “poopy pants” tends to be his knee-jerk response to any pressing question of the day.
The Objective Standard just published my critique of the American Enterprise Institute’s position on the welfare state (at least as expressed by its president and two of its writers): “AEI Writer Invokes ‘Implicit Contract’ and other Fantasies to Excuse Government Coercion.” Whereas representatives of AEI claim the welfare state is beneficial and moral, I point out it “relies on coercive, rights-violating confiscations of wealth.”
The Objective Standard just published my article on Paul Ryan’s anti-poverty proposal. Here’s the summary: “If Ryan’s plan reduces welfare dependency and gives taxpayers better results for their dollars, it might represent a marginal improvement over current policy. But it is still riddled with political and moral problems.” See also yesterday’s post on the subject.
With his new anti-poverty plan, Paul Ryan explicitly endorses the welfare state (which he calls a “safety net”), notes James Pethokoukis for the American Enterprise Institute—and so does Pethokoukis. Don Watkins of the Ayn Rand Institute replies that a coercive welfare state is immoral, although a voluntarily funded “safety net” is not. Pethokoukis replies that he and AEI emphatically support the welfare state, although a modified one, and think it’s not going away.
It’s a little discouraging that, after I conducted two separate “food stamp diets”—spending less on food than is available from food stamps—the Denver Post is still publishing nonsense about food stamps.
A coule days ago the Post published the following commentary:
[Newark Mayor Cory] Booker suggested they both [he and a critic] live on food stamps for a short time and see how they fare. The woman, known as TwitWit, reportedly has agreed.
Given that the average monthly food stamp benefit per person in New Jersey is somewhere around $133 a month, they’ll have their work cut out for them.
We see a lot of ramen noodles in their near future.
However, as I wrote back in 2007, the “average” figure is NOT the amount of funds available for food.
The current information is as follows. Perhaps this time the Denver Post will actually attend to the relevant facts:
SNAP [the Supplemental Nutrition Assistance Program] expects families receiving benefits to spend 30 percent of their net income on food. Families with no net income receive the maximum benefit, which equals the cost of the USDA Thrifty Food Plan (a diet plan intended to provide adequate nutrition at a minimal cost). For all other households, the monthly SNAP benefit equals the maximum benefit for that household size minus the household’s expected contribution.
The maximum amount available for a single person is $200 per month, or $6.67 per day.
Now, whether the government should actually provide food stamps is a much broader debate. That it provides food stamps to 42.4 million Americans is a disquieting reminder that the American economy remains weak as the welfare state expands.
President Obama says “we can’t wait…” for more mortgage bailouts. But political intervention in the economy is what caused the mortgage crises and our continued economic troubles.
The Objective Standard published my latest article, “Yes, President Obama, We Can’t Wait.” I write:
… In addition to bailing out those who irresponsibly bought houses beyond their means, HARP also bails out irresponsible lenders — those who willingly lent funds to those with poor credit. The federal government thus showers the irresponsible with unearned benefits while harming taxpayers and artificially propping up the price of houses. …
Recently I delivered a short talk, “Don’t Privatize Social Security!” The point is that the scheme to allegedly “privatize” it would do nothing of the sort; it would instead create investment accounts mandated and managed by federal politicians and bureaucrats. The real free-market solution is to slowly phase out the program entirely.
The information about Ida May Fuller comes from the Social Security Administration.
The government should play no role in film or art generally, for many of the same reasons it should play no role in religion. (The government should universally prevent force and fraud, as by pursuing thieves of artworks, but in such cases the government’s actions do not bear on the nature of the art.)
Earlier this month, the Denver Post published the article by Jason Blevins,“Colorado’s new film commission chief wants to boost state’s movie-making incentives.” While the first part of the piece reads like cheerleading for the idea, finally Blevins mentions a critical study. And he quotes Harris Kenny, “Basically, this thing has become an arms race. I call it a race to the bottom.”
I wrote up some comments at the time that I thought I’d reproduce here:
Getting the state involved in cinema is a bad idea. Direct subsidies, as with the proposal to impose a special tax on movie tickets, unjustly forces Coloradans to finance films against their will. This violates not only their economic liberty but their right of free speech, which includes the right not to support ideas one opposes. Discriminatory tax programs unfairly tax some businesses more than others. The government should tax everyone the same low rate, not play favorites.
Moreover, playing favorites doesn’t pay off in the long run, because it just spurs an expensive bidding war with other states. The impact on tourism is murky at best, especially given the direction of resources away from other possible tourist activities.
If the government wants to promote business in Colorado, it should offer appealingly low taxes and fewer hassles to all comers.
Today the Denver Post published a story by Jason Blevins claiming that corporate welfare for the tourism industry is responsible for the growth of Colorado tourism. I sent him the following letter:
Dear Mr. Blevins,
Your “news” article is essentially a regurgitated news release from bureaucrats and a company paid by the state to promote tourism funding.
Why didn’t you report:
a) Longwoods [the “research firm” cited in the story] is paid by the state to promote (“research”) state tourism funding.
b) Longwoods has a history of exaggerating the impacts of state tourism funding.
c) This year [meaning the previous year] Colorado also had good snow and record population (drawing visits to friends and family).
No doubt state tourism funding has increased tourism to the state. But you’re hardly reporting the whole story.
Here I add some additional points.
* As the Mercatus Center reviews, people are moving from less-free to more-free states, which also generates visits by people contemplating a move here.
* State funding for tourism crowds out private efforts to advertise tourism. Tourist attractions are perfectly free to pay for their own advertising, and to coordinate with others for broader campaigns.
* On the moral level, it is wrong to force people to finance corporate welfare for tourism against their wishes. It’s the job of government to protect people’s rights, not maximize tax revenues or tourism.
RussK commented June 16, 2011 at 10:36 AM
All good points. I’d like to mention that I have never been affected–to my knowledge–by Colorado state tourism advertisement. Everything I know about the state, and the things that I’d do there, was learned from word of mouth. Sometimes I think that state advertisement for tourism is more for promoting the state to its own residents. For example, I’ve lived in Minnesota for nearly two years, and I have seen countless advertisements about vacationing in the state; that seems absurd to me, as I’m already here.
Let’s play the game of “spot the economic fallacies” in today’s editorial by the Denver Post, which essentially advocates corporate welfare. (This follows a slanted news story on the same topic.)
The Post claims that the tax-funded National Renewable Energy Laboratory in Golden has created “efficient” solar film, windmill blades, and office buildings. What’s the fallacy? A more technically “efficient” gadget is not necessarily economically efficient to produce; often it is not. If solar and wind were cheaper than alternative sources of energy, then they would not need subsidies and mandates to “succeed.” And if companies can save money through greater energy efficiency, they’ll be more than happy to spend their own money figuring out how.
But the Post’s main argument is that subsidizing NREL creates jobs. What’s the economic fallacy? It’s what Bastiat and Hazlitt refer to as the problem of the unseen. What is seen are the jobs associated with NREL spending. What is unseen are all the jobs lost by forcibly transferring that wealth. When people pay higher taxes, and when the federal government sucks money out of market investments through deficit spending, that money is no longer available to fund what consumers want and investors see as the more productive opportunities. The result is that jobs shift from more-productive to less-productive ends, destroying wealth.
The wrinkle is that cutting federal spending only for Colorado would screw Colorado taxpayers more by forcibly transferring their wealth to less-productive jobs in other states. The solution to that is to cut spending in every state — or to simply stop forcing Colorado taxpayers to finance corporate welfare in other states. As I noted earlier this year, on net Colorado gets screwed in the wealth redistribution game, which costs the state net jobs.
There are obviously some people on the Denver Post’s editorial board who are not utterly ignorant of basic economics. Why not let them formulate the articles pertaining to economics?
Ezra Klein is very smart. Unfortunately, sometimes he allows his factual research to limit his worldview to the status quo; he becomes a conservative in the worst sense of that term. Consider his recent article on Social Security.
Klein argues, “Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP. … Social Security’s 75-year shortfall is manageable. In fact, it’d be almost completely erased by applying the payroll tax to income over $106,000.”
But “the numbers” — not actually facts but projections — obscure all the important details about the issue.
A mere fraction of a percent of GDP may not sound like much until we realize that the economy has been weighed down by many such burdens. A trillion here, a trillion there, as the saying goes. Social Security is one of several welfare entitlement programs — see also Medicare and Medicaid — threatening to drag down the American economy.
Moreover, the Congressional Budget Office’s projections that Klein cites presumes the government can predict GDP nearly a century out — which of course is quite ridiculous. Because most projections show steady GDP gains, the relative size of the Social Security burden appears much lower than its actual cost.
Further saddling “the rich” with higher taxes, of course, only discourages productive effort and thereby impedes the rate of economic growth. So does expanding a welfare program that encourages people to work and save less.
In addition, the “facts” that Klein cites contain the outright fraudulent presumption that “the current balance in the OASDI trust funds” (see page ix of the report) somehow mitigates the program’s liabilities. They do not, for reasons Paul Hsieh explains.
So the fact that Social Security threatens to erode a “mere” 0.7 percent of additional projected GDP (or CBO says 0.6 percent) is indeed quite troubling.
An even worse example of Klein’s static thinking may be found in his comment, “Without Social Security, 45 percent of seniors would be under the poverty line. With Social Security, 10 percent of seniors are under the poverty line.” But other things would definitely NOT be equal.
Here’s the big fact that Klein utterly ignores: Social Security financially devastates workers, and especially lower-income workers, by stripping off a huge portion of their paychecks to subsidize a welfare program for the elderly. This constitutes the most serious financial impediment to younger workers climbing out of debt, getting ahead financially, and starting a real investment program for themselves.
In other words, one huge reason some elderly people drop into poverty is that Social Security prevented (and discouraged) them from saving for their own retirements.
I am, however, partly sympathetic with one of Klein’s conclusions: “Raising the retirement age is the worst of all possible options for reforming Social Security. It’s not only regressive, but it also falls most heavily on those with the worst jobs. Means-testing would be much better.”
I say I’m only partly sympathetic because the tax itself is horribly regressive, so easing the tax by raising the payout age (which notably is NOT the same thing as the “retirement age”) would, on net, greatly ease the burdens of lower-income workers.
One big reason I have advocated the complete phasing out of Social Security by slowly raising the payout age is its simplicity. It’s very easy to understand and implement.
But, if Klein insists on further easing the burdens of those at lower incomes, I am more than happy to reach a compromise by means-testing our way out of the horrid program. We could phase the entire thing out simply by lowering the qualifying income line over time. But this is messy: do we count recent annual income or total assets? Wouldn’t means-testing encourage the elderly to make themselves artificially poor in order to qualify?
Honest leftists would decry the regressive nature of the Social Security tax and call to replace the entire bloated system with a simpler welfare program for the elderly. As it stands, Social Security often punishes the working poor to reward the elderly rich. That’s insanity by any coherent ideology. (The fact that the left nevertheless advocates Social Security demonstrates only that the left is more interested in using the issue to gain power than in actually helping the poor.) Update: I retract this criticism; if the left’s ideological goal is to make people dependent on the state, Social Security succeeds spectacularly.
The much broader issue is that people have a right to dispose of their own income as they see fit, whether to spend it, save it, or voluntarily donate it to charity. Thus, while I’m happy to go slow on reform, I do advocate the complete phasing out of Social Security (and indeed the entire welfare state).
To modify my compromise proposal, we could immediately means-test Social Security payments on a sliding scale, so as to mitigate wasteful gaming. Reduce the Social Security tax across the board accordingly. Then set the payout age to increase slowly over time, until the program is completely phased out.
Now that’s real reform — and one consistent with the full body of relevant facts.
The following article by Linn and Ari Armstrong originally was published March 18, 2011, by Grand Junction Free Press.
Do people have a right to food, shelter, and other basic needs? Or do people who earn wealth have a right to use it as they see fit, to donate to charity (if they wish to do so) on a voluntary basis?
An Associated Press headline last month nicely illustrates a major problem with modern welfare programs: “Colorado bill bans welfare cards at strip clubs.” Bill 1058 pertains to “public assistance payments and food stamps” that can be accessed through ATMs. It adds strip clubs to the list of other establishments where the funds may not be withdrawn: racetracks, bingo clubs, gun shops, and liquor stores.
Apparently even the Colorado legislature grants there is no fundamental right to stuff tax dollars into the garters and panties of strippers. Yet somehow we do not find the so-called “Responsible Family and Taxpayer Stewardship Act of 2011” very reassuring. What’s to stop the same welfare recipients from cashing out down the block (or illegally selling tax-funded goods) and using the money at the same establishments?
Those who would trivialize such problems need only turn to the pages of the Los Angeles Times, where we find the following headlines and summaries from last year. “$69 million in California welfare money drawn out of state: Las Vegas tops the list with $11.8 million spent at casinos or taken from ATMs, but transactions in Hawaii, Miami, Guam and elsewhere also raise questions.” “Thousands in welfare cash tapped at California strip clubs.” “California welfare recipients withdrew $1.8 million at casino ATMs over eight months.”
When politicians hand out “free” cash, there’s no way to ensure the money is spent on basic needs. But even programs that provide goods and services, such as food or health care, allow the recipients to redirect their own dollars to wasteful spending. How often do people use food stamps for food and spend their own cash on cigarettes and booze?
The bureaucrats who distribute welfare benefits cannot possibly know whether the recipients use the benefits prudently or wastefully. Even outright fraud is difficult to detect. Moreover, because political programs operate by formulas and reams of rules, bureaucrats usually couldn’t do anything about wasteful spending anyway. And, because the bureaucrats spend other people’s money, they have little incentive to provide accountability for the resources.
Contrast forced welfare with voluntary charity. Somebody who voluntarily contributes to a cause has a strong incentive to make sure the money achieves its purpose. Voluntary charity is much more flexible, ranging from helping out a family member or neighbor to funding a major nonprofit. Voluntary charities are diverse, meeting a variety of needs through different approaches. Thus, the failure of one charity will have little impact on voluntary giving as a whole.
Voluntary charities are better able to ensure recipients actually benefit from the donations, and they have an interest in improving recipients’ condition. A local charity organizer is more likely to know whether a recipient is trying hard to get back on his feet or squandering the resources on booze and strip clubs.
A local food bank is more likely to provide economical, healthy foods, as opposed to the high-sugar processed foods often obtained with food stamps. And voluntary charities are more likely to function well, as opposed to Colorado’s failed computers that caused years of welfare backlogs.
If a charity performs poorly, donors can quickly redirect their resources to more effective organizations. By contrast, the contributers to tax-funded welfare have little ability or incentive to provide any oversight for those programs.
The greatest harm of forced welfare programs is not the wasted resources, but the cultural decay they foster. When people donate voluntarily to charity, they share a sense of goodwill with the recipients and hold a sincere desire to help them achieve a better life. Forced welfare more often causes animosity and anger.
The recipients of voluntary charity are more likely to realize that the help comes with the expectation of becoming responsibly self-sufficient. Forced welfare fosters the notion that recipients somehow deserve the help simply by virtue of failing to earn a living. Recipients with this attitude are more likely to squander the resources, live irresponsible lifestyles, and grow perpetually dependent on government handouts.
Those who advocate forced welfare confuse a need with a right, ignoring the fact that a “right” to material assistance implies the ability to force somebody else to produce those resources. Welfare benefits do not come from some magical pot of gold in the sky; they must be paid by individual producers.
People have the right to use the product of their labor as they deem best. A free society is a wealthy society in which the successful majority, freed from onerous tax burdens, gladly helps those truly in need. Voluntary charity respects the rights of the donors while best ensuring the well-being of the recipients.
Evil Red Scandi commented March 25, 2011 at 3:43 PM
Well, since many of these girls swear they are paying their way through college, it could just be viewed as another government educational fund.
For decades we’ve had the G.I. Bill; now apparently we have the G-String Bill.
Anonymous commented March 27, 2011 at 9:15 AM
Check out this new study.
The chart is quite revealing. A one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year.
There are two stories here. One is that the National Renewable Energy Laboratory has put out an intellectually dishonest release touting the organization’s benefits to Colorado’s economy — without counting any of the costs in terms of tax subsidies and transferred resources. The second story is that the Denver Post reissued this release as “news” without bothering to mention its status as a copied release; the byline claims it is “by The Denver Post.”
Sure, if you totally ignore all the costs, any government expenditure looks like a great deal. Then again, if you ignore the costs, bank robbery also seems like a great deal, because look at how much the robbers are “stimulating” the economy by putting all that money into circulation! I have written about the general problem elsewhere, and economists have made the same rebuttals at least since the early 1800s.
But these sorts of releases are not intended as intellectually serious arguments; they are intended to stir up emotional support among economically illiterate (or simply dishonest) journalists, politicians, and taxpayers. So the fact that NREL would issue such a self-serving release is no surprise, even though any honest scientist working at the organization must be embarrassed by it.
I confess that I am surprised by the Post’s treatment of the release. I first heard of the story when hard-core leftist-environmentalist Pete Maysmith mentioned it on his Twitter feed: “More evidence that renewable energy is a boon for CO’s economy. #coleg http://bit.ly/g2P4Kz.” The shortened link accesses the Denver Post “story.” I got the idea that something was screwy when identical language showed up at Wind Today, and after a couple of phone calls I found the NREL release at the source.
I guess I just expected something a little more from the number thirteen newspaper in the nation.
In the context of massive federal welfare programs, “free” breakfasts for school kids in Colorado may seem like a minor issue. But the Colorado debate over breakfast welfare reveals the fundamental principles at stake regarding forced wealth transfers in general.
These are the basic facts, as reported by the Denver Post. The Colorado government faces a budget shortfall of around a billion dollars. Unlike federal politicians, state legislators cannot spend money they do not have. In this context, three Republicans on the Joint Budget Committee voted against spending $124,229 to provide around 56,000 children with “free” breakfast, “though more than 270,000 children are eligible for free breakfast and lunch outright.” Without the additional subsidy, the children must pay 30 cents for breakfast.
(According to my calculator, spending an additional $2.22 per child would finance about seven extra days of “free” lunch, so the numbers make no sense to me. Nor does the “untapped balance” mentioned by the newspaper square the figures. However, my purpose here is not to get to the bottom of the figures but to address the moral issues involved, so I’ll take the figures as reported.)
Now two of the Republicans on the committee are thinking about changing their vote and allowing the additional subsidy to go through. Republican Cheri Gerou told the Post, “We are not looking to starve the children of Colorado. We care about the children.”
Democrat Cherylin Peniston told the Denver Daily, “Being able to provide breakfast each day for our neediest kids is an important function of government.”
So, according to these popular media accounts, providing “free” breakfasts is an essential function of government, and anyone who opposes the program hates children.
On the contrary, those who truly love children want to protect their right to live their own lives and control their own income when they become adults. Those who value the education of children want to convey to them the importance of individual rights to individual autonomy and happiness and a healthy republic.
The educational function of the “free” lunches is to indoctrinate children into the primacy of the welfare state.
A government that can force today’s adults to subsidize “free” breakfasts for other people’s children can force tomorrow’s adults to devote their entire livelihoods to the state on the alter of egalitarianism. Nothing is more important for the future of today’s children than preserving liberty.
Nobody is stopping anyone in Colorado from voluntarily donating a portion of their income to pay for the breakfasts of anyone they please. But don’t try to force other people to hand over their earnings and pretend that’s morally virtuous. It’s not. It’s the moral equivalent of theft.
The only legitimate function of government is to protect individual rights. Forcibly seizing people’s income to subsidize other people’s breakfasts violates individual rights.
In economic terms, there’s no such thing as a free breakfast. A breakfast that is “free” for some parents seizes wealth from other parents and single adults.
That adequately summarizes the basic moral issues involved; however, I also have some questions about the particulars of the program.
1. Of the 270,000 children who supposedly desperately need the “free” breakfasts, how many of their parents spend their own money on any of the following: cigarettes, booze, fast food, expanded cable, outings to bars, regular trips to the mall and cinema, video games, an extra family vehicle, or extra cell phones for the kids?
2. How many of those parents, whose children legislators so desperately want to “help,” are forced by federal, states and local politicians to pay sales taxes on food and other essentials, payroll taxes to subsidize people with much greater resources, and property taxes for the education of other people’s children?
3. How many of those parents have been unable to find work because of the union-empowering wage controls of the left?
4. Why do reporters for the Denver Post and Denver Daily News believe they are doing their jobs when they completely ignore all of the additional issues mentioned above?
Update: I’ve thought of a couple of other questions.
5. State Senator Shawn Mitchell points out on Facebook, “A federal FREE meal program feeds school kids in poverty. For families who earn more, there’s a 30 cent copay.” So how much are those families actually making?
6. How many of those families also receive food stamps?
Ben DeGrow January 26, 2011 at 10:23 AM
To answer question #5: income eligibility for federal “Reduced Lunch” (or breakfast) — those students who would be obligated now to contribute the 30-cent copay currently picked up by the state — is for a family of 4, between $28,665 and $40,793 (130-185% of federal poverty line). The figures change depending on the size of the family. See page 3 of http://www.fns.usda.gov/cnd/Governance/notices/iegs/IEGs09-10.pdf
The following article by Linn and Ari Armstrong originally was published October 29 by Grand Junction Free Press.
If you think that Senate hopeful Ken Buck called Social Security a “horrible policy,” then you’ve been listening to Senator Michael Bennet’s lies.
Here’s what Buck actually said in March: “It is certainly a horrible policy in what happened in the LBJ Administration back in the 60s when they took the money out of the trust fund to fund general fund programs, and what we ended up with was a system that will be bankrupt anywhere from 10 to 25 years from now.”
Obviously what Buck called horrible was funding general programs with Social Security taxes. He was not referring to the program itself.
And that’s too bad. Because Social Security is a horrible policy. It punishes work and discourages savings. It subsidizes wealthy millionaires retired to the golf course with the sweat of impoverished workers.
It hurts those who die early, preventing them from leaving their accumulated wealth to their children or recipients of choice. Notably, this especially harms some minorities who, on average, die sooner.
The left, which glorifies progressive taxation, nevertheless loves the regressive Social Security tax, which hurts poor working families most of all. The Social Security tax currently strips a combined 12.4 percent (half paid by employers) of every worker’s paycheck. Little could be more destructive to the ability of poor and middle-class working families to get ahead financially.
Contrary to popular mythology, Social Security is not some sort of investment program. It is instead a straight wealth transfer from workers to retirees. It is a major leg of the American welfare state. And, because of changing demographics, it will impose an ever larger burden on working families over the coming decades — unless the program is seriously reformed.
Does Buck want to “privatize” Social Security? In July, Buck said, “We’ve got to peg Social Security to [younger] individuals so those individuals have the ability perhaps to invest in various funds that are approved by the government. But those individuals also own that fund.” (We drew Buck’s comments from PolitiFact.com.)
But apparently that tentative proposal is no longer on Buck’s plate. On his web page Buck states that, for current beneficiaries, “government shouldn’t change those benefits.” We agree, though we wouldn’t be opposed to curbing benefits for the wealthiest recipients in order to lighten the load on working families.
Buck continues, “For older workers approaching retirement, we need to ensure that Social Security is solvent.” Again we agree.
For younger workers, Buck wants to preserve Social Security “as a safety net” while encouraging them to “save more through tax-preferred accounts.” This is a far better option than “privatizing” Social Security.
So why do we, your faithful free market advocates, oppose “privatizing” the program? Because the proposal known as “privatization” is the opposite of real privatization.
Buck tips the hand when he acknowledges that politicians approve (and therefore control) the accounts. Accounts mandated and controlled by politicians are not part of the private, free market economy. (The accounts are still mandatory if workers’ only other choice is a welfare program.)
A major problem with mandatory accounts is that they create immediate deficit spending. The basic idea is that a portion of one’s payroll taxes are redirected from paying off current beneficiaries into the accounts. What then fills in the gap? More borrowing.
Moreover, the accounts themselves do nothing to actually reform Social Security. To understand why, consider that the money redirected to the account could instead simply be returned to those who earned it, to spend or invest as they see fit. For instance, somebody might want to put that money into his own business, rather than into a politically controlled account.
We’re glad that Buck backed off of his suggestion to “privatize” Social Security. His incremental reforms are a far better way to go. We remain a bit nervous, however, about the “tax-preferred accounts,” which could unduly restrict how people use their own money and lead to political controls over those accounts.
Let us, then, offer a suggestion for real free-market reform. We should phase out Social Security entirely.
Here’s how it could work. The benefits of current recipients would be left untouched. Every year, the payout-age for Social Security (not to be confused with one’s chosen age of retirement) would be increased by a few months. So people close to retirement would lose a little bit of their benefits, while those further away would lose more.
So what’s in it for younger workers? With a steadily increasing pay-out age, the Social Security burden would slowly diminish. The tax should be reset every year to just cover benefits. Thus, the Social Security tax would shrink over time, eventually to zero, leaving workers with an ever-growing share of their own income to spend or invest as they see fit.
We have a simple name for such a reform: freedom.
Anonymous November 16, 2010 at 3:40 PM
Not a bad idea. Here’s my Social Security dream solution.
1) Continue to pay benefits to anybody who decides to stay “in the program.”
2) Offer the alternative of giving a one-time cash disbursement, to anybody who wants it, of the moneys “paid in” to the system over their life time. You’re free to do what you want with that money, but if you take the disbursement, you are effectively resetting the clock on your benefits.
3) Allow people to opt out of the system altogether by ceasing to pay the social security tax. Eventually stop requiring them to choose, and just stop collecting the tax altogether.
As more people take options (2) and (3), this would probably result in paying (1) out of the general fund (or via deficits), but honestly, that is where the money really comes from anyway, and the extra capital from (2) and (3) would almost certainly flood the economy with investments leading to real growth.
I might take the $100k I’ve paid over my life time and go start a small business. Or invest it in dividend-paying stock, giving myself a fairly substantial raise on top of the 12.5% raise afforded by not paying SS tax any longer.
Ari November 16, 2010 at 4:30 PM
The problem with the plan outlined above is that nobody has “paid into” anything. That money is gone. So if you wanted to pay people out, where is that money going to come from? More debt?
Anonymous November 17, 2010 at 9:04 AM
People absolutely have (involuntarily) “paid in” to the Social Security system. I know I have!
The fact that the money was immediately borrowed and redirected for other purposes does not change that fact. The government already owes the SS system those funds; so if I were to cash out, they would have to find another line of credit to replace what they already owe me.
It’s not that it would be “more debt,” so much as “replacing with different debt.” Pretty much the same thing as using credit card “B” to pay off credit card “A”. Debtor’s liabilities remain constant, but creditor “A” has their money.
In our case, though, since creditor “A” is also the (involuntary) debtor (how sick, right?), creditor “A” now has capital with which to make money in order to pay off card “B”.
Ari November 17, 2010 at 9:25 AM
How is paying more general taxes to pay yourself your Social Security benefits helping you? That’s basically what you’re advocating.
Somehow, I am not surprised that Colorado Democrats are egregiously misrepresenting Stephen Bailey’s views regarding entitlements. Bailey even predicted it would happen. Bailey is the Republican running against Jared Polis in the Second Congressional District.
In attack mailers that alternately suggest Bailey’s ideas belong in the garbage or in outer space (subtle!), the Colorado Democratic Party claims, “Bailey called Social Security a ‘Ponzi scheme’ and supports abolishing it.” The Democrats further claim, “Bailey compared Medicare to ‘slavery’ even though 615,000 seniors in Colorado rely on it.”
These attack mailers wrongly imply that Bailey wants to cut off Social Security and Medicare for seniors now receiving benefits from those programs. No, the mailers do not come right out and say that — because Colorado’s Democrats are too dishonest and cowardly to actually have a serious debate about entitlement spending. No, they must resort to smearing their opponents through innuendo.
These deceptive mailers were “authorized by Friends of Jared Polis.” (Why ultra-wealthy Polis needs outside groups to fund attack mailers is another question.) While Polis is not responsible for the mailers, if he were serious about furthering honest debate about the entitlement spending that threatens to financially crush the nation’s children, he would denounce the mailers and offer a serious plan for reform. [Update: I was wrong; “Friends of Jared Polis” is “Polis’ own campaign committee,” the Denver Post reported last year. Stephen Bailey points this out in the comments. PolisForCongress.com is “Paid for by Friends of Jared Polis.”]
It is true that Bailey compared Social Security to a Ponzi scheme — a comparison that is warranted. It is also true that Bailey wants to put “the current program on a sounder financial basis to support current retirees” — yet for some reason the Democrats neglected to quote that line.
Bailey rightly predicted, “While I understand that individuals who seek to score short-term political points by denying the enormity of the social security problem will attack me for pointing out the problems with this entitlement, I am determined to help prevent this coming train wreck.”
On the other hand, I have seen no evidence that Polis is prepared to do anything other than continue shoveling coal into the train’s burners as it hurtles toward the cliff.
Regarding the “slavery” quote, Bailey was addressing the welfare state in general, not Medicare in particular. Consistent with his statement on Social Security, Bailey, I assume, is looking for long-term transitional programs. Of course we can debate whether the welfare state is akin to slavery, but, to me, Bailey’s words are among the boldest and most principled I have ever heard from an aspiring politician:
Spending on the welfare state has skyrocketed from $34.29 billion in 1965 to $395.4 billion in 2009. The promoters of the welfare state wield our virtue as a weapon against us. They know that we do not want to see others suffer, that we will help others in need. They attempt to make us feel guilty so that we back welfare spending.
I oppose welfare statists, like the incumbent, for what they are: immoral thieves who steal our wealth and then demand that we thank them for it because their theft somehow makes us more virtuous. Charity is a virtue. However, morality presumes a choice, the freedom of action. If someone steals from you and gives the proceeds to a charity, did their act of theft make you any more virtuous? No, you had no choice in the matter. Is the thief any less of a thief because he gave the stolen wealth to charity? No, he is still a thief.
The fundamental principle in politics is: Non-initiation of the use of force. Adherence to this principle is the only way to guarantee the rights of everyone. You are the only one who can determine how your property and your life is to be used and disposed. If you are moved to perform a charitable act, you decide how much money, time or property you will give. You decide who is deserving of your charity.
Our welfare state programs are called entitlements. The damage to our values and civility created by entitlement programs cannot be overstated. When people believe they are entitled to something, then they will demand that they get it. They will behave in an angry and belligerent manner as long as they perceive that their entitlement is being withheld. Instead of gratitude, the deliverers of entitlements are treated, at best, with indifference and, at worse, contempt. Entitlements make people dependent. As the opposite of independence, dependence is a form of slavery. The welfare state pits one group of citizens against another. One group is entitled. The other group is obligated. If you are a parent, did you bring your children into the world with the understanding that they will be either dependent on entitlements or enslaved to provide the entitlement?
Charity is a virtue only when it is offered voluntarily. Government enforced charity is an oxymoron that destroys freedom.
When has Polis ever come close to offering such an eloquent, fundamental discussion about anything?
But Colorado’s Democrats are not content to distort Bailey’s views on entitlements; they also invoke dishonest protectionist rhetoric to smear Bailey over a “Taxpayer Protection” pledge.
Here’s what the deceptive Democratic mailer claims: “Bailey signed a PLEDGE to protect special tax breaks for companies that send American jobs to countries like China and Mexico.”
Here’s what the pledge actually states:
I, Stephen Bailey, pledge to the taxpayers of the 2nd district of the state of Colorado, and to the American people that I will: ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
Colorado Democrats should be ashamed of themselves for funding such deceptive nonsense.
In 2008, I could not support Polis’s opponent. This year, for the first time in my life, I will vote proudly and with full respect for a Congressional candidate. I will vote for Stephen Bailey.
stephen October 27, 2010 at 10:55 PM
Friends of Jared Polis is the name of Polis’s campaign committee. He approved, probably wrote, these mailers.
Thank you for promoting the truth and Polis’s lies and deceptions. He has shown he is not an honorable person and that he will do anything to retain power.
Anonymous October 29, 2010 at 5:18 PM
Polis smells just as bad as the rest of the Democrats in Colorado this year: their “friends” and Democratic allies constantly misrepresent and lie about Tipton, Buck, and others. For example, in addition to the warped claims about social security and tax breaks, both Buck and Tipton are attacked dozens of times a day in radio ads for wanting to “raise taxes” on people and let big corporations off the hook, because Buck and Tipton have suggested Boortz’s Fair Tax to replace the income tax. This kind of lie, and the fact that NONE of the Democratic candidates are willing to denounce these ads, shows what kind of scumbags the Democrats in this state are supporting for office. I’m no fan of the GOP, but my gorge rises a LOT more when I see the Democrats: Bennett, Salazar, Hickenlooper: they ALL need to be given a parade to honor them: one which features a rail, tar, and feathers.
Anonymous October 29, 2010 at 5:19 PM
Stephen Bailey’s words are impressive and such a contrast to Polis.
Stephen: PLEASE live up to your words. For the sake of your district and the nation, please live up to them!
According to the logic of Congressman Ed Perlmutter, somebody standing in a Soviet bread line has no right to criticize Soviet bread lines, because he is after all waiting his turn for the bread.
Veteran political reporter Lynn Bartels seems to buy into Perlmutter’s “gotcha” nonsense when she writes, “The real news out of the 9News debate Saturday was that Frazier continually blasts the stimulus bill on the campaign trail, but the charter school he co-founded and helps oversee accepted stimulus funds.”
ColoradoPols carries Perlmutter’s own release, which claims that “Ed Perlmutter revealed Frazier’s hypocrisy about Frazier’s position on the stimulus bill.”
By this logic, in a totally socialized economy, in which the tax rate is 100 percent (meaning that politicians dole out every last cent of meager wealth and every resident is entirely a beggar), absolutely no one has any right to criticize any government program whatsoever, because everyone is completely dependent on political programs for every aspect of their life.
In less extreme forms, this argument often takes the following forms. “If you drive on tax-funded roads, you have no right to criticize tax-funded roads.” “If you send your children to tax-funded schools, you have no right to criticize tax-funded schools.” “If you accept Social Security benefits (or tax-subsidized student loans or whatever), then you have no right to criticize Social Security (or whatever other program).”
Perlmutter’s basic injustice is to forcibly transfer wealth away from citizens, and then claim those citizens whom he robbed cannot enjoy any of the benefits of their own stolen property, unless they are perfectly servile and sycophantic subjects.
Well, screw you, Ed. I sincerely hope that Ryan Frazier returns your prissy slap with a knockout political blow.
Ayn Rand explained the issue perfectly in her 1966 essay, “The Question of Scholarships:”
Since there is no such thing as the right of some men to vote away the rights of others, and no such thing as the right of the government to seize the property of some men for the unearned benefit of others — the advocates and supporters of the welfare state [including the corporate welfare state] are morally guilty of robbing their opponents, and the fact that the robbery is legalized makes it morally worse, not better. The victims do not have to add self-inflicted martyrdom to the injury done to them by others; they do not have to let the looters profit doubly, by letting them distribute the money exclusively to the parasites who clamored for it. Whenever the welfare-state laws offer them some small restitution, the victims should take it…
Barry Poulson, an economics professor at the University of Colorado, Boulder, and a Senior Fellow with the Independence Institute, warned that out-of-control entitlement spending threatens American prosperity.