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04/11/2010

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Chris Graves

Another possible solution is to let things go until the entire economic and political system implodes, and then start over with an eye to avoiding the drift that we have taken from our founding principles. Such an appreciation of classically liberal principles, which are not uniquely applicable to the Eighteenth Century as Judge Posner and other modernists falsely presume, would be reinforced by a time of hardship as we come to face the constraints reality would force upon us.

Rick

Chris, how very Darwinian of you. Presumably you're hoping most of the elderly and disabled die in the riots? You're right; that would reduce reduce the fiscal burden on whatever post-apocalyptic State arose from the chaos. As a bonus, your new political leaders would probably also have formidable knife-fighting and looting skills.

Becker makes excellent points. I'll offer the UK perspective.

Since the end of the Second World War both public and private sectors offered 'final salary' pensions as the norm. There were promises made by people, politicians and organisations that would not have to deliver them. Of course, it is today's working people that are paying for those over-generous, under-funded pension commitments of long ago. They pay through low inflation (their debts are not eroded at the same rate as their parents' were), unstable employment (thanks to short-term cannibal capitalism persued by desperate pension funds), high taxes and poorer public services.

The UK is already raising its retirement age for state pensions and is harmonising the ages for men and women. But it's clear that, even when the Boomers' parasitical fiscal blip is removed from the equation in 25 years' time, pension provision will remain under-funded. We have moved toward a culture so poisoned by the burden of historic pension commitments that neither the private nor public sectors want anything to do with pensions at all. And today's young graduates find themselves under-employed, £20,000 in debt - and asked to invest the money they don't have in pensions they have no confidence in, encouraged to hope that compound interest alone will solve all (when it plainly did not for the Boomer pension pots).

In healthcare, the current government has found a sneaky way of avoiding much political fallout from the essential task of limiting expectations of the NHS. The quasi-independent body called the National Institute for Clinical Excellence (NICE) writes an academic report on various new drugs and treatments before talling the country that we can't afford them most of them. It works quite well, despite being a complete democratic dodge. It avoids MPs spending their way out of a confrontation with a cancer pressure group.

The other attempt to reign-in long term health spending has been to encourage healthier lifestyles. There are public information campaigns (5-a-day fruit and vegetables) and a ban on smoking in public places (which will save us £billions), to give just two examples.

Morgan

Certainly I'll agree with the difficult economics of protecting those who can't afford to care for themselves. But I've always believed in the basic tenets of human compassion. What ever happen to helping others simply for the sake of doing so? Take the Supreme Court, they've done much over the past 100 years to change this country toward more of a progressive mindset, as noted in this post I stumbled across: http://lawblog.legalmatch.com/2010/04/08/the-last-100-years-of-the-supreme-court/

Supply/Demand

Low birth rates will continue to also be a problem in Europe -- as they have experienced. And here and we are experiencing and in the future. Why do we not remove barriers to larger families? If not then only immigrants and illegals will repopulate and they do not contribute to our Social Security or tax pools. They support an underground economy. Perhaps remove all income taxes for families with children.

Tom Rekdal

In one of his few valid insights, the political philosopher Joseph de Maistre once wrote that every people gets the government it deserves. So they do, and we now have ours. In only two centuries we have managed to go from a government of reflection and choice to one of impulse and stalemate. This situation is unlikely to be changed by the election of a few more fiscal conservatives to Congress or another messianic president to the White House. So long as a majority of the voting public insists upon public benefits for which they are unwilling to pay we are headed for a fiscal train wreck that no institutional reform or economic theory will be clever enough to avert.

Michael J. Szanto

I believe that we are at least fortunate that our Demographics age wise is looking better than most of Europe, Japan, and even China.

Jack

As both our proffs offer few viable alternatives, I guess this one is handwringing about problems long known that could have and should have been ameliorated by reasonable actions when they first appeared, as to a major extent was SS 25 years ago.

Becker sez:
"In 2010, spending on social security retirement benefits amounted to about 4.3% of American GDP, while Medicare and Medicaid added another 5 ½ %. This gives a total federal spending on health and retirement benefits of about 10% of GDP...."

"Without incorporating the effects on spending of the new health care bill, and with no further changes in retirement ages and other aspects of social security benefits, the combined spending on these entitlements is expected to rise in twenty years to about 15% of projected GDP."

.......... So an additional 5% of GDP in the most costly years of the baby boom bulge? Would it be at all better were these predicted costs foisted off to the individual? Perhaps we've a generation having forgotten the pre-Medicare years when some mid-life families were heavily impacted by medical costs of their parents, not spread by the risk pool of society in general.

While it won't solve all the problems, after the boomers our nation will have a declining average age with fewer retirees and Medicare/Aid patients. Politically what I'm seeing of the "Millenium" generation is a less ideologically driven, more community spirited that were a great help to the election of President Obama. Who knows?

They, with changes in the world may prioritize differently......... I've seen precious few laments of the soaring costs of defense now clearly turned to offense or some other ill-defined and costly "goals". While I'm not particularly opposed to 20 year military retirements, I'd think those receiving retirement pay in their 40's would be a subject of discussion.

"It could be increased by raising sharply both deductible levels required of most Medicare recipients and their co-pay rates. As a result of the low out-of-pocket expenses under the present system, neither patients nor their physicians have strong incentives to make serious benefit-cost calculations of whether expensive treatments are desirable.

......... Oh? And in a world where defined benefit retirements are going the way of buggy wheels, where would the sharply raised deductibles come from? As for physicians while some of the Medicare "procedures" are fairly lucrative more and more GP's and others don't even want to take Medicare patients.

How about looking into why "treatments" are so costly? For one small example, why a cat-scan is $400 under Medicare, but $1400 to insurance companies while they are under $200 in Japan and most likely in other nations that have long enjoyed universal H/C. Surely, with spending nearly twice what other nations spend there IS room for more efficient utilization of H/C delivery factors and cost compression.


"Another useful reform would be to extend the minimum age of Medicare coverage to age 70, whereas during recent Congressional discussions of health care bills, opponents had to beat back efforts to lower rather than raise the minimum age at which a person becomes eligible for Medicare."

...........If we are to have universal H/C does it really matter whether for those few years the premiums are paid via taxes or born individually in and area that has proven not to be influenced much by "shopping" or supply and demand?

............ Social Security: Much of the (still manageable) problem of SS is that the "rising tide" of productivity has not raised the incomes of MOST of our working folk as much as Moynihan and others projected. The problem shows up clearly in the 2nd graph:

http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/

For whatever reason, including lower income folk often "competing" with low wage workers of other nations and having next to no market power, those of higher incomes are typically not impacted by the reality or threat of their jobs going to China et al. and they do have market power. For SS since so much income predicted to accrue to those under the $100,000 contribution cap, some slice should be taken out of the incomes above $100,000 that would "fix" SS and serve slow the soaring trend of wage inequality.

"If GDP could grow by ½ percent per year faster than it would otherwise, the effects on GDP and the tax burden of given government spending in twenty and thirty years would be enormous."

" and.....more, not less, encouragement to entrepreneurial activities,"

...... Yes!! Where do we begin? More incentives and basic research on biotech which could huge in the global market place as well as extending the productive years of life? Soon millions of square feet of commercial space will be foreclosed and available at much lower prices. What productive endeavors can we do with them and millions of unemployed workers before the foreclosing banks and/or new owners go broke twice? Energy seems another opportunity both in generation and conservation. Half of all US homes have single pane, and most likely leaky windows, and an even higher fraction would benefit from just blowing more insulation into their attics. Most malls and commercial buildings have black tar roofs that get extremely hot in sunbelt areas though fairly inexpensive reflective white coatings are available that would save energy and estend the life of the roofs. The sooner we make such improvements the sooner we begin saving on imported fuels to our advantage.

Could a commission of businessmen and academics speed the identification of productive "new economy" areas that would gin up some portion of 5 million jobs?

" instead of bailouts of companies like GM, Chrysler, and Citibank that were badly managed."

........ I doubt we'd have benefited by letting the automakers go broke and am not so sure that in recent years they were "badly managed" but victims of their own productivity increases and building cars that go many more miles than ever thus reducing their market. Well! at least one of our WS outfits made the list! I'd like to see some numbers confirming my strong suspicion that those like Goldman, largely trading for their own benefit, are one of least productive endeavors in the US in terms of gleanings vs added value to the rest of us. I KNOW that at least a few firms saw the meltdown coming and jiggered their CDO options in a manner to cash in on the crash. Many took their gleanings as low taxed "capital gains." Further the lure of becoming a millionaire by thirty and able to retire at forty has taken all too many of our best students to "finance" who might otherwise put their talents to better use in other industries that might lower our trade deficit.

While our profs favor lower taxes I'd suggest more progressivity at the topmost levels will help lower our deficits as well as to perhaps limit self-indulgent avarice and the irresponsible risk taking that tanked a number of nearly century old businesses.

Chris Graves

Rick, thanks for your comments on my proposal. As I suggested in my post a couple of weeks ago on the topic of government involvement in health care, the social contract we set up in America empowers the central government to establish justice and basic rules of order that facilitates peaceful and cooperative human interactions. The central government is not established to pursue the good. Rather, its rightful activities allow individuals and the institutions that they voluntarily create to pursue their own conception of the good. Notice the key difference here between the right and the good. The Federal government should be focused on establishing and maintaining the right that makes possible the pursuit of the good in a host of endeavors by free individuals.

Caring for one's own health as well as how best to care for the elderly and otherwise ailing relatives, neighbors, friends, or church members should be framed in terms of how best to pursue the good of good health, not as a matter of the right or justice.

The expanded role of the Federal government that reaches beyond its mandate that it has taken on since the 1930's cannot be sustained. That brutal fact of reality is what we are now facing.

James Thomas

@Jack

" Politically what I'm seeing of the "Millenium" generation is a less ideologically driven, more community spirited that were a great help to the election of President Obama. Who knows? "

And how has that Obama thing worked out for you? Judging from the sluggish and jobless recovery and his flat spin in the polls, I'd say it hasn't worked too well for the average American.

"I'd suggest more progressivity at the topmost levels will help lower our deficits as well as to perhaps limit self-indulgent avarice and the irresponsible risk taking..."

1. Do the math. And be sure to look at both sides of the equation. Taxing the screaming bejesus out of the top, say, 10% makes precious little impact on the deficit and it will damp an already sluggish economy. This isn't radical thinking. It has all been done before.

2. Your suggestion that more progressivity would have an impact on "self-indulgent avarice and irresponsible risk-taking" is just dumb.

Jack

James: For the most part I mentioned the interesting, grassroots, internet campaign of Obama as his campaign appealed to the youth and "more community spirit" and less devil-take-the-hindmost "globalism" that clearly has pitted lower and middle income US working folk against those nations of the least wages, miserable, even criminal work stds, with manipulated currencies to top it off, while most upper income Americans whose incomes have greatly benefited over the last 20 years, and from tax cuts for the last 8 years, are much more protected, say lawyers, doctors, CPA's, lobbyists, and at the top of all our WS scammers and CEO's taking 500 times the wages of their employees. The outcome is clearly shown in the wage graphs I linked and makes the contributions to SS much too lean.

1. Do the math. And be sure to look at both sides of the equation. Taxing the screaming bejesus out of the top, say, 10% makes precious little impact on the deficit and it will damp an already sluggish economy. This isn't radical thinking. It has all been done before.

.......Good idea! "The aggregate income distribution is highly concentrated towards the top, with the top 6.37% earning roughly one third of all income, and those with upper-middle incomes control a large, though declining, share of the total earned income."

http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Let's see, so the top earners are paying the same rate as barely upper middle income earnere, and after pitching in $7k to SS matched by their employer, both are exempt from any further contribution. A nice little slice out of that third of the income would surely fix SS. But how would you address the small SS problem and the much larger Medicare problem?

2. Your suggestion that more progressivity would have an impact on "self-indulgent avarice and irresponsible risk-taking" is just dumb.

........... perhaps, but I'd be willing to bet the 90% rate on the highest incomes during WWII went a long way toward discouraging discouraging war profiteering and limiting inflation, and a lot of the bills got paid. But then, in those years we were all in it together with not a fraction of the wage inequality of today.

Needless to say I'm not advocating anything close to those confiscatory rates or "beejeesus -- though I'd have danced a jig in my cul de sac had the bailout bill slapped a 90 percenter on "performance and retention" bonuses or those who negilently? ignorantly? or criminally? created the meltdown. Kinda conservate, eh? Holding people accountable? As are the owners of small businesses who don't profit from ruining their company?

As for President Obama being in a "flat spin" in the polls Gallup has him steady at about 50% approval and 43% disapproval with some considerable fraction of the disapproval coming from the "left" who were disappointed about losing the cost compressing public option. Not bad in a mess like this one with so many hurting badly.

BTW sans walking on water, what do you think the President and Congress COULD do to lower unemployment? Would you favor more aggessive Keynesian spurring? And debt? Or more government intervention via incentives? Or direct hiring to address long delayed infrastucture maintenance and needed improvements?

Chris Graves

P.S. on my reply to Rick. Here is a link to an editorial on the Associated Baptist Press blog where the author, a professor at Mercer University, tells of his experience with competing wings of the Baptist church and how they both attended to his family's health problems. That is the kind of thing I am referring to above when I speak of freeing people to pursue their own conception of the good as private institutions and individuals are more able to immediately and personally meet the needs of those they have a face-to-face relationship with.

These kinds of practices provide a more personalistic response to social concerns than the welfare state. By the way, your solution to budgetary problems due to social welfare spending seems to be exactly what you were chiding me for in your praise of NICE in Britain.

http://www.abpnews.com/content/view/5039/9/

Rick

Hi Chris,

I'm not praising NICE, since in my view it is an abrogation of democratic accountability. Ministers should decide the limits of NHS provision, not unelected bureaucrats.

The difference between controlling public expenditure in Europe versus the US seems to be to be a function of both the starting points and the level of inequality. For example, in healthcare the UK must decide what new treatments and procedures it is not willing to afford. In the US, you are still determining the level of your initial investment in public healthcare.

As Jack points out, income inequality determines the affordability of public spending. Public spending is not paid for by the richest, who are best able to avoid tax. It's not paid for by the poor, who are net beneficiaries of public spending. It's the middle classes who always fund the bulk of public spending - and as inequality increases, the size of the middle class cash cow shrinks as a share of the overall economy. When income is distributed more equally, the middle class can fund a much bigger public sector at the same marginal rate of tax than otherwise.

It's optimistic of you to put such faith in individual and voluntary sector provision for retirement and healthcare. Yet the historical evidence suggests that the most prosperous period in human history - the post-WWII 20th century - was also the period which saw the greatest expansion of public provision. The Cold War historian John Lewis Gaddis points out that Western capitalism was only able to withstand ideological assault from socialism by persuing inequality reduction and full employment after the Great Depression. Unless capitalism could be shown to work for the ordinary person, they would be tempted by socialism.

I wouldn't go as far as to say that justifies active redistribution, but I would argue that 'natural redistribution' is currently broken: the Boomer generation is living longer, effectively deferring inheritance transfers, consuming more pensions and ringfencing their wealth better. That's a big skew. It means more of the economy is represented by old rich people spending money on themselves than younger people supporting children, the unemployed, the ill and the elderly through their taxes.

Philanthropy is good for filling gaps, but it has never been a viable substitute for public or private provision. Victorian Britain was a terrible place to live, by today's standards, unless you were wealthy. And America is seen as a terrible place to live by European standards unless you are wealthy too.

Structuring a country's economy and its public spending choices for the benefit of the richest 10% will lead you straight back to kind of pre-WWII societies the West has spent 70 years trying to move away from.

Jack

Rick: Great post and:

"Structuring a country's economy and its public spending choices for the benefit of the richest 10% will lead you straight back to kind of pre-WWII societies the West has spent 70 years trying to move away from."

......... Yes! If the top few percent wanted to preserve "Roaring 20's" levels of inequality and privilege it would be wise of them to weigh in for universal H/C and a min wage for adults that bore some resemblance to the cost of maintaining the most basic standard of living. Tolerance for the current situation would surely be enhanced were a much higher percentage of those near the bottom to have access to H/C and able to house and feed themselves w/o a myriad of clumsy and costly transfer programs.

Instead, our Profs here, along with many others favor pounding down the long neglected min wage which had more purchasing power decades ago in a much less wealthy and productive era. If a job can't gin up more than the $58/day of productivity perhaps it's not worthy of doing. These low wages are putting heavy burdens on the localities and transfer payments are a part of the "entitlements" of concern here.

Or better? That the bean counters who can't justify paying the janitor come in on Saturday to mop up. The unemployed janitors? Perhaps they should become ethical counselors on WS or teach our "best and brightest" what they're doing to America as they cart off millions for having parted out our companies and gleefully participated in the complex Ponzi scheme that has tanked most of the economies of the world.

We've yet to know the social ramifications of 15% unemployment and double that rate for "blacks", plus waves of regular college kids coming out to find nothing to do with their costly degrees, skills and youthful ambition. Fifteen million unemployed or barely hanging on, losing homes, and an unemployed intelligentsia? Sounds ripe for community organizing and change one way or another.

NEH

Come now Jack. Waves of College kids coming out with nothing to do? I know a number of graduates from Big Ten Univesities with degrees in such things as Bio-chem, Agronomy, Agriculture, and other esoteric diciplines, even Economics, Business and Accounting. They have since found jobs as "Groundpounders" in Afganistan and Iraq. Talk about the new "Peace Corps". Hey! It's a growth industry. Now if we can only get the rest of the World to pay it's fair share. We might even be able too maintain our social programs. I wonder if Economic Departments still teach with an eye to the "Guns or Butter" analogy?

You're correct. We have some major systemic problems financially, economically, and socially. But this constant mentality of "cut, cut, cut - deregulate, deregulate, deregulate" is the most problematic and insidious of all. Even the amatuer arborist knows full well that if you cut too much, you'll eventually kill the plant. Maybe that's their plan..., destroy the Nation, then we can have it all for ourselves. Ever heard of the fable, "The Goose that Laid the Golden Egg"?

Chris Graves

Thank you, Rick, for your thought provoking reply to my latest two posts. It seems to me that you have fallen into the consequentialist trap of conflating political questions of how to establish justice with those of pursuing the good as I alluded to above. Your country and mine, which my ancestors immigrated here from while we were still colonies, share a similar tradition of limited government and the rule of law. If you conflate these questions of maintaining the right and pursuing the good, then the breaks on governmental power will fail thereby weakening these bedrock principles of liberal government. That is especially true if you replace the focal concern of government protecting the rights of the individual with forcing people into a specified social and economic pattern, from your and Jack's perspective- equality of result. When the state is mandated to achieve a certain social result, then the government must continually and unpredictably intervene in the private affairs of otherwise law-abiding individuals to arrange people into the pattern of equality and keep them there. At the heart of this political quagmire is governmental social welfare programs' violating the principle of self-ownership and the principle of acquiring private property by mixing one's labor that serves as a basis for all individual rights and limits on the power of the state.

As to whether the programs that you identify being brought about by the demands of a more inclusive democracy actually serve the purpose of improving the fortune of the average person, i.e. achieving the good, I think the case can be made that they fail on this score as well as violating the principles of right that Locke articulated should be the foundation of law. As economist Mancur Olson has argued in his *The Rise and Decline of Nations,* democracies that have been freed from constraints imposed by the demands of justice (such as self-ownership and the right to acquire property) to collectively pursue a vision of the good (such as greater economic security in old age or wider availability of health care) over time devolve into a system dominated by interest groups which favor redistributional policies that destroy the productive capacities of a nation. Tocqueville made a similar warning about America's future without the economic jargon. That is what we are seeing in the unfolding budgetary crises in England, the United States, and other democratic countries that have moved away from their Lockean roots. This process has been going on in England, especially, for much of the past century as it ceased to be a world power. The primary way that people improve their condition is through increased levels of wealth. The growth of welfare state has restricted that avenue for people to improve their lives.

I might also respond here to your point about ordinary people in the U.S. and Britain coming to question the value of freedom during and following the Great Depression. Of course, as you may know, the Great Depression was so severe and lasted so long because of government involvement in mismanaging the money supply, disrupting the corrective mechanisms of the market, and hampering trade.

As for private institutions not being able to meet people's needs as effectively as the welfare state, we need to first consider that many of the problems that you mention above such as older people having a disproportionate share of wealth that diminishes the opportunities of young people, these problems are directly due to programs such as Social Security. The drain on savings and investment of these government funded pyramid schemes lowers the total amount of saving and, hence, investment that does harm the opportunities of the young. Consider Martin Feldstein's well-known study of the American Social Security system that he found lowers the savings rate of Americans leading to less capital and lower economic growth.

Finally, as for the supposed inadequacy of private charity to meet the needs of those who are disadvantaged, let's consider that the amount of money along with time and energy of volunteers in the United States tops $300 billion per year. Many times these charities are much more flexible and responsive to the contingencies of the various situations people find themselves in. Private charities are also freer to hold their recipients accountable in a way that state agencies are not legally able to do. In the past, we would term this process as distinguishing the "deserving poor" from the "undeserving poor." In disasters such as hurricanes, floods, and earthquakes, American charities are in place and helping people faster and more effectively than Federal efforts in providing relief. Here is a discussion of the effectiveness of private charities from the Cato Institute:

http://www.cato.org/pub_display.php?pub_id=6128

In addition to charity, private institutions can provide help to the poor in a number of other ways such as price discrimination (i.e., lowering prices for the poor and charging the wealthy a bit more), which doctors and hospitals practiced for years before insurance and Medicaid made such aid less feasible. Discount stores such as Walmart have found it profitable to offer low price goods to people living in rural and other under-served areas as they earn huge amounts of money doing so.

When the government leaves its original mission of protecting the rights of individuals to pursue social goals revolving around equality of result, then not only are the social goals not achieved in an effective, personal, and sustainable manner, but we lose our liberty in the bargain. That is the track record of the Twentieth Century that we may be seeing coming to an end as these bad seeds come to full fruition.

Chris Graves

Correction to my previous post. The last sentence of the first paragraph should read:

At the heart of this political quagmire is governmental social welfare programs' violating the principle of self-ownership and the principle of acquiring private property by mixing one's labor WITH NATURE that serves as a basis for all individual rights and limits on the power of the state.

NEH

Chris, Glad to hear that your forebears were here before the founding of the Nation (what ever that has to do with the current crisis). As for mine, some of them were here before the colonies were set up and were involved in issuing the initial orders for the "shots heard round the world". Any of yours winter over at Vallev Forge or were KIA at Cowpens or Guilford Court House? We were Federalists then and are Federalists still.

As for your claim to a Lockian Analysis to support your contention, I suggest a closer read of Locke's "Second Treatise on Government". Not too mention, a critical read of the "Preamble to the Constitution". Pay close attention to the clauses about perfecting the Union; and other clauses involving the "establishment of Justice, "ensuring domestic tranquilty", "providing for the common defense", and especially, "promoting the general welfare".

Remember, "Liberty is not Liscense or Anarcho-Capitalism".

As for the "Cato Institute" as a line of authority, God help us.

Jack

Chris, "That is especially true if you replace the focal concern of government protecting the rights of the individual with forcing people into a specified social and economic pattern, from your and Jack's perspective- equality of result."

......... a giant au contraire!! My warnings of the soaring rate of inequality of wages, and more so that of wealth being consolidated in fewer and fewer hands are derived from the obvious symptoms of a "capitalism" (for some) gone badly wrong and meant as a harbinger of the entire game collapsing ala the final rounds of a Monopoly.

I guess what came before and after 1929 and a close brush with chucking the whole lot in favor of socialism serves to illustrate Marx' prescient prediction of capitalism being unstable, prone to the excesses of the 20's and today, followed by a revolution of those who had "no market power".

To properly harness the innate power of capitalism (to develop OUR resources for OUR benefit) it requires rules, maintenance, at times limitations, and certainly variable rewards based on productive and creative contributions. Hefty penalties for those individual and companies who play outside the lines must be a part of the system and it will be a sad chapter for America if those who knowingly conspired in the CDO Ponzi scheme are allowed to leave the field with their ill-gained lucre and are not punished.

We've already gone too far toward a nation of lords and serfs than would please even the wealthier of our founders. We're no longer close to being number one in upward mobility, which means we're lagging in terms of a claimed meritocracy as well.

Most of the local options for entrepreneurship such as retail and food service have been consolidated in the hands of wealthy corporations that "compete", perhaps, one against the other, but in concert in holding down the poverty level wages of the serfs doing the work. You'll recall Ray Kroc of McD's having set the record for his political contribution to Nixon to "keep the cap on min wage".

As for "result" it is the half-baked "Libertarians" of CATO, and worse, who shill for those favoring the status quo of soaring wage and wealth inequality. There is a danger of becoming overly imbued with "the principle of ownership" and "forget" that the labors and creativity of employees too are the inputs of capitalism.

Wages for most have been stagnant during a period of productivity doubling. With nearly all of those gains having gone to the top 10% it's clear that the working folk have lost market power, political power or both.

BTW I'm not opposed to private charities and old enough to remember them running not-for-profit hospitals. But with the anonymity of a mobile workforce in some megalopolis I don't see any efficiencies or increase in "caring" by adding individual charity seeking to the specter of getting sick in the USA. As for "fee discrimination" it looks as though the H/C bill takes a big step at a global level.

Lastly in our badly damaged democracy wealth can be turned into political power and special privilege, so rather than fearing any "equality of result," working folk, be they "right" or "left" should be far more concerned that they retain any shot at the American Dream at all.

Chris Graves

Well, NEH, thanks for your input. I shall address each of your points in turn. First, a common tradition provides a common frame to understand the background assumptions that we take for granted in discussing these issues. Constitutions, statutory laws, policy prescriptions all work from a set of unstated premises that develop from a common history, people, and place. Taking ideas in the abstract and trying to apply them without regard to social context leads to a misapplication of universal principles at best and a perversion of the principles at worst. For instance, I see people in this discussion as confusing all sorts of issues that should be distinguished such as conceptions of justice and the good as well as a democracy as a fundamentally guiding principle and democratic institutions that are intended to work within the constraints of natural law. Both British and the American political and legal systems have traditionally worked from a similar understanding of these principles until various times in the Twentieth Century. Since Britain departed from these principles to a greater extent and did so earlier on, we can see the results more clearly there. We are headed for the same decline if we fail to learn from the British example.

Next, certainly Locke’s work does clearly lay out the basis for self-ownership and the right to private property as well as limited government. As you may know, on Locke’s view, the state has no more power than individuals delegate to it. He clearly offered a philosophical account of a political structure for individuals to retain their rights and pursue their own conception of the good within in accordance with natural law. So, no it is not license that Locke is defending as you brought up in your post just above. On this very matter, I have commented frequently on this blog when relevant issues are raised that I strongly disagree with many contemporary libertarians who seem to take a nihilistic view of the good.

As for the phrases you cite taken from the United States Constitution, if we read them in the context of the Founders all being informed not only by the practices and attitudes but also the prominent theorists of the time, they were certainly advocates of classical liberalism, not social democracy. The Declaration of Independence is straight Locke applied to the contemporary situation of the American colonies. It is well documented that the Founders’ understanding of erecting a government grew from their reading of the Bible, Montesquieu, Blackstone, and Locke who have been identified as their most frequently cited sources. See Donald S. Lutz and Charles S. Hyneman "The Relative Influence of European Writers on Late Eighteenth-Century American Political Thought," American Political Science Review, Vol. 78 (1984): 189-97.

So, each of the phrases from Constitution that you remind us of bears out my claim that the Federal government is constitutionally restricted to matters of justice and basic order. “Providing for a common defense,” “establishing justice,” and “ensuring domestic tranquility” can all be read in terms of protecting individuals’ rights defined in Lockean terms and providing basic rules of order for people to pursue their own conception of the good within. I think that is the way that the Founders understood these phrases accompanied by some practical wiggle room. “General welfare” should be taken to mean providing a broad, predictable framework for people to interact peacefully and cooperatively with one another within without forcible interference from other individuals or arbitrary edicts of government. Notice that the phrase in question does not say anything like, “particular welfare of some groups to bolster their standing.” This phrase is getting at the same principle F.A. Hayek terms the “rule of law” where the government lays out broad rules for people to go about their own business within without those in power dictating what ends should be pursued or exactly how they should be pursued. As Hayek goes on to point out, if the government is constantly regulating the conduct of individuals to ensure a certain outcome, say equality of result, these constantly fluctuating actions violate the rule of law. As John Rawls points out, if the government does not constantly make adjustments to rearrange the distribution of economic and social rewards, then there will be a natural tendency to drift away from maintaining the prescribed social and economic pattern of equality (or his "difference principle").

Finally, your reference to the Cato Institute was ad hominem. It did not deal with the arguments or the statistics the author presented. I used the Cato article because it had the statistics that I referred to above. I do assume that they are a credible factual source, but the arguments stand or fall on their own merit. When I cite a source, I do not intend to endorse everything the author has to say on every possible issue.

Chris Graves

Here are other sources verifying the numbers for charitable giving in the United States provided by Michael Tanner at Cato that I provided a link to above:

http://www.usatoday.com/news/nation/2007-06-25-charitable_N.htm

http://foundationcenter.org/getstarted/faqs/html/givingstats.html

http://www.arthurbrooks.net/whoreallycares/excerpt.html

Additionally, Arthur Brooks points out that conservatives donate more to charity than do left liberals. Americans give considerably more to charity than do Europeans. So, we can conclude that charitable donations and social welfare spending by government are substitutes not complements in most cases. By the way, to head off ad hominem attacks on Professor Brooks, as you can see if you take a look at his website, he is Professor of Public Administration and Director of the Nonprofit Studies Program at Syracuse University’s Maxwell School of Citizenship and Public Affairs.

Rick

Chris,

I think you'll find that Britain's economic decline has rather more to do with my country no longer having the luxury of exploiting the rest of the world and instead having to learn how to pay its own way. We created the Industrial Revolution: the biggest first-mover advantage in human history. That advantage ran its course a while back. We also had the largest empire in human history, supported early on by slavery. Your country's revolution, mine's abolition of the slave trade and finally WWII put an end to that. I'd rather you didn't use the headline success of our parasitic Imperial past as a fig leaf for an otherwise under-performing economy based on opium-running, child labour, mass ignorance, the oppression of women, low life expectancy and a pernicious class structure where the concentration of wealth was a key structural weakness.

Much as I admire your constitution, I'm puzzled by the reverence some Americans hold for the Founding Fathers. Have you no desire to move your society on? Why are you so bedazzled by the anachronistic notions of tax-dodgers from 400-odd years ago? It's nice that they were inspired by Locke, Blackstone and the Bible - but I'm rather glad that Enlightenment thinking didn't stop there. Perhaps today's politics would be better informed by the works of Dennet, Darwin, Popper and Keynes? Consider it a modest proposal.

I am a classical liberal. I like smaller States, but I want to challenge them to be more effective. I'm also an empiricist, which means that when I see a strong correlation between inequality of outcome and social problems such as crime and ill health, I'm forced to accept that reducing inequality of outcome is a valid objective for society, through the instrument of State intervention. The traditional liberal means of addressing this is through ensuring equality of opportunity - or 'meritocracy'. You might call it 'The American Dream'.

The question is therefore whether one's society and economy are in fact meritocratic. In other words, what proportion of poor people improve their prosperity, health, education and welbeing over the course of their lives, and by how much? To what extent is parental income predictive of children's social mobility?

Upward social mobility in the UK is declining. If you're born into poverty today, you have less chance of getting ahead in life than your parents did. This is clearly perverse to liberals.

The vast body of research suggests strongly that meritocracy correlates with a more even income distribution. In other words, either a concentration of wealth among a small proportion of the population impedes meritocracy, or barriers to meritocracy lead to a concentration of wealth at the top. If you want a meritocratic society, wealth concentration is either a key indicator (liberal analysis) or a key lever (socialist analysis). Liberals see the concentration of prosperity and argue for State intervention to improve social mobility at the bottom: better education, free healthcare, pension provision, assistance for deprived regions.

The classic conservative position is to ignore the evidence and claim there's no problem. If today's poor are less upwardly mobile, they must have done something to deserve it - moral decline and laziness, typically. And rather than invest in social mobility, conservatives would prefer to invest in prisons, gated communities and police officers. Welfare dependency is often blamed for a lack of social mobility - and it's true that there have always been marginal disincentives to work if one is in receipt of benefits. But there are many countries which provide State welfare and have done so for a long time - and there's no historical evidence that social mobility and welfare levels have a two-way correlation. It may be that more generous welfare causes lower social mobility - but there's no evidence that lowering welfare will increase social mobility; that surely depends on the supply of relevant jobs. Cut the welfare bill by all means, but spend the savings on re-training your former automotive workers to build wind turbines (or whatever). Otherwise, the evidence strongly suggests that you will merely entrench disadvantage.

Dr. A. Bajaj

Here are some steps to alleviate the fiscal crisis. I won;t discuss the political ramifications of each, or how to achieve them, but will simply describe each desirable process & outcome.

1. Have national referendum on each government department, where citizens have to rank order them in order from 1 (most essential) to n, where n is the last government department.
Once the mean rankings are obtained, then cut 95% of the department ranked 'n', and so on, all the way till 5% of the department ranked 1. This should slash government spending very very significantly.

2. Make a pure free market for medical goods & services, allowing insurance only for catastrophic illness. Reduce punitive damages for medical malpractice. Limit what drug companies can charge to a multiple of the average price charged in other countries. Compensation for providers must be outcome based, and not on the number of procedures performed.

3. Start reducing social security to zero, and replacing it instead with more generous 401 K limits. People below a certain income may be given 5% of their salary as retirement money, to be invested in index funds comprising a stock/bond mix depending on their age to retirement. People who save their own money should be allowed to invest it wherever they want.


These 3 steps will dramatically reduce the government budget and spending, cause massive government shrinkage, and bring us into the red almost immediately. Our taxes will go down dramatically. Medical costs will go down dramatically.
More people will work in the free market private sector and less people will be involved in implementing onerous government regulations.
Overall, after this, we should consider a flat tax, or elimination of income tax and a national sales tax (not a VAT: simply a retail sales tax).

I understand we can't seriously expect the current clowns in Washington (on both sides) to do any of this, but these are the steps that are needed. Perhaps complete recycling of our politicians when they come up for re-election may achieve these goals.

3.

Dr. A. Bajaj

I meant bring us into the black almost immediately.

Jack

Dr Bajaj: A few problems:

1. Our founders wisely skipped the option of direct democracy. As you can imagine it would lead to government of the most popular... kinda like the quality of the most popular shows on TV. In our most recent local election, (city council, school board and a host of bond issues) we had only an 18% turnout on issues and costs closer and more important in most ways than a national election. Needless to say getting an informed vote on the worth of the EPA, SEC, or whether military budgets, which is often pork to many areas, are sufficient or not.

2. Had we started down a market based approach to medicine back in the 50's when they weren't able to do much, and the costs were typically far less intrusive, my guess is it MIGHT have constrained costs over the "insurance" system and lasted for a while. But I doubt is as neither the patient nor the Doc seems prone to negotiated prices.

Trouble is today a $100k episode is not uncommon and even were "market forces" to cut it by half it would most often bankrupt those of median incomes and below. Even WITH "insurance" medical bills are the number one cause of personal bankrupties. Thus no one gets paid and the family has been greatly disrupted.

In teaching and other endeavors there's quite a cry for "accountability" and being paid for outcomes. Tough to do. In Anchorage our "worst" school is one that happens to have a 100% per year turnover. In medicine I'm sure you know that at times the best doctors have the highest failure rates for tackling tough cases perhaps with experimental medicine.

3. Why would anyone favor phasing out SS? Perhaps for the oft claimed higher returns on equity? With the exception of the surplus planned in 1982 to deal with the boomers bulge there is no equity as it's a pass through program. Also SS functions as a disability insurance for many. Further as we are borrowers too, in some fashion, we're all benefiting from the SS "surplus" having been loaned at minimal cost to cover some of our massive debt.

The 401K as most of your suggestions primarily benefit upper income folk who CAN save a portion of their income. As one goes down from the median household income of just $50k, to half that or the $12,000 of min wage, a lifelong savings account becomes increasingly ludicrous. In this meltdown many middle class folk are either raiding their 401's, and of course most of the rest would be wiped out in mid-life by H/C costs were we take your prescription.

"Flat tax?" Forbes spent $100 million of his inherited wealth answering "flat tax" to every political question and NEVER got into the greatly flawed details like "flat tax of what?" Say one guy is a wholesaler running a costly fleet of delivery trucks and working on razor thin margins. The other, who grosses about the same, has a small law office of low overhead and gets home with 50% or more of his gross. You'd wipe out the wholesaler on a gross tax while the lawyer would greatly benefit. See? you're back to dealing with deductions. After figuring one's deductions it's not much trouble to look up the progressive rate.

A national sales tax? Government costs us about 20% of the entire GDP (it's a bit higher today since we have to service the huge debt run up as, claimed, conservatives yielded to their base, and cut taxes w/o the, claimed, cuts to the budget. Tough for 'em since they are fond of military expenditures, especially hardware that often results in benefits to their regions.

Since not all sales and services would be captured by a sales tax the rate would have to be north of 25%. Can you imagine the chilling effect on sales were that $400,000 home now $500,000? Tack another 25% atop the current cost of H/C? Would Mercedes quit selling and only lease to duck the hefty tax? Would all sorts of barter arrangements take place in services? Would private party sales of things? Would the IRS have to be enlarged to capture cash sales of home repairs, household help, and imported goods of varying mark-ups?

Get rid of a high percentage of currently elected representatives? Ha! those out of power always like that one! The impetus for term limits died immediately once Republicans held Congress and the WH.

BTW am wishing Sen Gramm had NOT eliminated the "onerous government regulation" of Glass-Steagal, and that regulators not snoozed while "bankers" stole us blind and tanked the economy of the world, but what regulations do you find of more cost than benefit?

Jack

Chris: I'm still trying to get handle on your fears of infiltratiing us w/o sharing a "common tradition". Is it directed at our "black" minority? Or the long history of Hispanic immigration that seems to be well integrated in one generation? Or newer and more diverse immigration from Asia whose next generation seems to excel here?

BTW, I think it high time for reviewing many of our long held assumptions. For one example, we imprison our people at over five times the rate of other advanced nations and lock-up folks at higher rates than even, runner up, Russia. Yet we have similar
rates of crime and five times the rate of gun slaughter.

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