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Old October 8th, 2009 #21
Alex Linder
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Join Date: Nov 2003
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Alex Linder
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[Government = fail.]

The New Middle Class Contract

JAMES C. CAPRETTA

America's post-war prosperity has been a wonder of the modern world. Flexible and adaptable labor and capital markets, a culture that values entrepreneurial initiative and risk-taking, and an openness to the increasingly global economy have all helped create the wealthiest society in history. Above all, though, America owes its bounty to its vast and robust middle class: a skilled, efficient, and ever-expanding work force upon which American companies have built immense success.

The severe economic contraction of the past year has left many Americans wondering if we are witnessing the end of this age of affluence. Far more than other recent recessions, the present crisis appears to have exposed underlying weaknesses in our economic foundations, and has involved failures of institutions long taken for granted. These failures were not simply the result of the burst housing bubble and credit meltdown; the financial crisis was the straw that broke the backs of *long-teetering giants. Americans have now been left to ask if our entire economic system might be similarly vulnerable. If General Motors can collapse into a heap, what other pillars of our post-war order may yet fall?

That question is hardly trivial. In fact, the downfall of GM in particular — which has been very long in coming — offers a disturbingly apt metaphor for America's post-war economic order. At the height of its success, GM understood that the company's booming growth depended on its large and able work force. And this realization — together with effective lobbying by the unions representing those workers — led to an extensive array of worker entitlements, ranging from generous health-insurance coverage to comprehensive retirement pensions to *job-security guarantees.

Premised on the growing labor and consumer markets of the boom years, these arrangements over time began to weigh down the company. But once offered, the benefits proved almost impossible to roll back — and rather than make the difficult choices involved in revising longstanding contracts and face unhappy workers and unions, the company pretended its books could somehow fall into balance by magic. The old joke that GM was a health-insurance company that made cars on the side increasingly became the company's grim reality. As its commitments grew while its profits shrank, GM became unsustainable.

Over the same period, the United States government came to a similar arrangement with the country's growing and industrious middle class. To offer some security to the workers powering America's prosperity, a series of entitlement programs took shape, aimed especially at providing for retirement income and health-care expenses. These programs' finances were built on demographic and economic trends that could not have been expected to go on forever; yet even as their underlying logic has grown obsolete, these arrangements have proven extremely difficult to change. Today, America's political leaders are essentially in the position that GM's management was a decade or two ago: They have made a contract with the middle class that now threatens to bankrupt all involved, but seem unable to do anything about it.

The dire consequences of failing to change this arrangement are clear. According to the Congressional Budget Office, the trajectory of spending laid out in President Barack Obama's first budget would push the nation's debt to 82% of gross domestic product at the end of 2019 — up from 41% at the end of 2008. (And that's before the retirement of the Baby Boom generation hits with full force.) Politicians of both parties routinely decry this mounting debt and urge a thorough scrubbing of the budget. But while there is certainly much fat to trim around the edges, the great bulk of America's debt burden will come from three key entitlement programs: Medicare, Medicaid, and Social Security — the core of the middle-class contract.

For perspective, consider that in 1970 — just a few years after Medicare's enactment — the defense budget stood at 8.1% of the nation's economic output, as measured by GDP. Combined spending on Social Security, Medicare, and Medicaid, meanwhile, stood at 3.9% of GDP. But in 2019, almost a half-century later, defense is expected to fall to about 5% of GDP, while the big three entitlement programs will approach 12%. By 2050, they will exceed 18% of GDP — which is about the historical average of total revenue collection each year. The U.S. government, like GM today, will then be mainly in the business of providing health and pension benefits, and will struggle to perform its other basic functions — maintaining a standing army, for example — on the side.

The paradox of our entitlement system is that although it is designed to mitigate risk at the individual level, it is now creating a massive *economy-wide risk. For years, economists across the political spectrum have been warning that unconstrained federal borrowing will ultimately leave the country unable to issue debt at favorable and affordable rates of interest. When that point is reached, there will be little choice but to embark on a long period of painful fiscal contraction and austerity, with deep and immediate cuts in benefits and steep rises in taxes.

Like any large political undertaking in our democracy, our entitlement system depends on the loyalty and support of the broad middle class. It is, after all, fundamentally an arrangement with middle-class voters. Its benefits accrue largely to them (with the exception of Medicaid, which nonetheless exists only because of their backing). And the consequences of the system's fiscal decline — especially the tax burden required to contend with it — will affect the middle class above all, and through them the larger economic engine they make possible.

To sustain American prosperity and pass along a healthy economy to the next generation, the middle-class contract of the post-war years must be revised. Our entitlement programs need not be abolished — but they do need to be reformed so that they are economically viable, and bolster a thriving free-market economy instead of undermining it. For such an overhaul to happen, middle-class voters will need to be persuaded that change is necessary, and that it can be undertaken rationally, responsibly, and fairly. This may be the foremost political challenge of our time.

DEMOGRAPHY IS DESTINY

Social Security, the oldest of our major entitlement programs, aims to provide retirees with a modest income — partly as insurance against poverty in old age, but also to see to it that retired workers receive a base pension bearing some relation to what they earned in their working years. The program is funded by a dedicated payroll tax of just over 12% (half of which is paid by the employer, and half by the employee). This tax has risen significantly over the years — today's rate is roughly twice what it was in 1960 — as have Social Security benefits. Although the program is designed to resemble a pension savings plan — in which workers put aside money through taxes and then receive it when they retire — Social Security is in fact a "pay-as-you-go" system: Tax payments from current workers finance benefits for current retirees.

There is a mathematical limit to what any pay-as-you-go pension system can churn out in benefits, as the implied real rate of return for the average worker over the long run cannot exceed the sum of population growth and real productivity improvement in the economy. Put simply, what comes in must keep pace with what goes out. In practice, this means that what will be affordable in the future will depend entirely on the size of the future work force relative to the size of the retiree population, and on the capacity of that work force to produce marketable goods and services.

The world's richest economies still have the ability to grow through improved productivity, but the sizes of the working and retired populations are another matter entirely. Since the 1960s, the developed world — and now even newly emerging economies — have seen unprecedented declines in fertility just as life expectancies have risen. We are living much longer than ever before, and having far fewer children.

In 1940, men who reached age 65 — the first year of eligibility for Social Security retirement benefits — could expect to live to about age 77. Today, a man turning 65 will live, on average, to age 82. At the same time, birth rates have plummeted. In 1955, at the height of the Baby Boom, the average American woman had 3.5 children (the so-called total fertility rate, or TFR). Today, the U.S. TFR has fallen to 2.1 — just barely enough to prevent population decline.

To be sure, the problem is far worse in other countries. Germany, Italy, and Spain all have TFRs below 1.5. Japan's has fallen to an astonishing 1.27. Between 2010 and 2050, Japan's working-age population is expected to decline by nearly 33 million people, or almost 40%.

But even in comparatively fertile America, rapid increases in our retiree population combined with dwindling growth in the number of workers will put tremendous pressure on government finances and overall economic performance. Between 2010 and 2050, the number of Americans aged 65 and older is expected to more than double, growing from 40.5 million to 81.6 million. Meanwhile, the working-age population — those persons between the ages of 20 and 64 — will increase by only 37 million. The result is a large decrease in the all-important *measure of pay-as-you-go pension viability: the ratio of workers to retirees. Between 2010 and 2050, it will decrease from about five workers for every retiree to about three.

This demographic shift makes the mathematics of Social Security simply unsustainable. And the first serious problems are very near at hand. The program's trustees now project that the Social Security trust fund will run cash deficits (that is, will take less in through taxes than must be put out in benefits) every year after 2016. The outlook only gets worse over time: Social Security's projected unfunded liability is a whopping $5.3 trillion over the next 75 years.

Faced with massive imbalances in their state-run pay-as-you-go pension schemes, some other countries are trying to close the gap with *payroll-tax increases on the current generation of workers, in the hope that more revenue will lessen the pressure for unpopular benefit reductions for current retirees. The Japanese government, for example, has begun a nearly five-percentage-point increase in that country's payroll-tax rate, phased in between 2004 and 2017.

But these kinds of tax-heavy solutions are counterproductive because they will exacerbate the trends causing the pension imbalances in the first place. The primary problem in these pension systems is that birth rates have fallen, so that the work force is simply too small to carry the full weight of an unreformed pension entitlement. And overly large pay-as-you-go pension programs are themselves one of the reasons for suppressed fertility. A large body of economic research confirms that the countries with the most expensive state-run pensions have seen the sharpest drops in birth rates. A 2005 study by economists Michele Boldrin, Mariacristina De Nardi, and Larry Jones found that a government-run pension system equal to 10% of a country's economy correlates with a reduction in the TFR of between 0.7 and 1.6 children, after controlling for other variables. Why? A plausible explanation is that, in earlier times, couples "invested" in children to help care for them in old age. The advent of expensive social-insurance arrangements reduced the after-tax resources a family had to raise children, while also lessening the economic need for them.

Raising payroll-tax rates to close a Social Security financing gap is therefore the last thing our country should do. The only long-term *solution to an aging population is higher birth rates — and to the extent that government can play a role in encouraging these, it is by helping younger families with the costs of raising children, not raising taxes on their earnings. The Social Security crisis is a function of a larger demographic challenge now faced by every developed nation. A reformed old-age entitlement will need to take account of this reality and, where possible, try to address it.

THE HEALTH-CARE COST PUZZLE

Medicare — the health-care entitlement program whose enrollees largely overlap with those receiving Social Security benefits — is naturally burdened by the same demographic shifts that are pushing the old-age pension program toward insolvency. But Medicare also suffers from another vexing problem: rapid growth in health-care costs. While Social Security provides a cash benefit, Medicare pays for a service — and the price of that service has been skyrocketing for decades.

CBO has estimated that, between 1975 and 2005, annual Medicare per capita costs rose, on average, 2.4 percentage points more rapidly than per capita GDP growth. Medicaid's costs, meanwhile, have grown 2.2% faster than GDP, and privately funded health-care costs have grown 2.1% faster than GDP.

Combining escalating health-care cost inflation with the retirement of the Baby Boom generation makes for a budgetary nightmare. Between 2010 and 2040, CBO expects the combined costs of Medicare and Medicaid to increase from 4.9% of GDP to 10.6%.

President Obama and his aides have increasingly argued that the only way to "bend the cost curve" of Medicare is to enact comprehensive health-care reform with cost-cutting measures that can be applied across the system. That argument has some appeal; after all, Medicare buys services for its enrollees from more or less the same hospitals and physicians who take care of everyone else. And with roughly 15% of the population lacking stable health coverage, cost-cutting in the absence of a universal insurance arrangement would risk being unfairly imposed on those with the most tenuous access to care.

But upon closer scrutiny, this approach actually seems to have things backward. Yes, there is an aspect of cost escalation that is traceable to variables outside the government's control. Rising wealth and medical discovery are fueling the demand for more and better treatments (and that should not be resisted in any event). But there is widespread *agreement that costs are also high and rising in significant part because of gross inefficiencies in how we pay for health care.

Here, the chief culprit is the federal government itself. The vast majority of Americans get their insurance through one of three sources: Medicare for retirees, Medicaid for the poor, and job-based insurance for workers and their families. In each instance, federal policy is driving up costs unnecessarily.

In the case of Medicare, most beneficiaries are enrolled in the program's traditional "fee-for-service" insurance arrangement. Medicare FFS allows enrollees to see any licensed service provider, with no questions asked. Medicare does require substantial cost-sharing — including a 20% co-pay to see a physician, and a deductible of more than $1,000 per hospital admission. But this is ineffective, because about 90% of the enrollees also have some form of supplemental coverage, which pays for what Medicare does not. Thus, in most instances, more care does not cost Medicare beneficiaries any more money.

It's not surprising, then, that the Achilles' heel of Medicare is volume. According to CBO, the real price Medicare paid for physician fees dropped between 1997 and 2005 by nearly 5%, but total spending rose 35% because of rising use and more intensive treatment.

Employers have been trying for years to move away from Medicare-style FFS in favor of steering patients to higher-quality, lower-cost *networks of service suppliers. The private sector is also well ahead of the federal government when it comes to disease management and wellness efforts. But employers can only do so much when Medicare, the dominant payer in most health-care markets, pushes in exactly the opposite direction. Because Medicare will finance unlimited use, many individual practitioners and institutions see no reason to give up their autonomy and join an organized delivery model. All manner of ancillary service providers — labs, home health agencies, hospices, and others — also survive as stand-alone operations because of Medicare's open network and provider-centric payment systems.

The cost of this escalating use of services in Medicare is felt mainly by current taxpayers, not the program's enrollees. Current retirees qualified for the hospital coverage the program provides long ago. They do not have to pay any additional premium for that coverage in retirement, even though actual costs are well above what was projected when they were working. Current beneficiaries do pay a premium for physician and outpatient coverage, but it covers only 25% of the total cost. The other 75% is automatically drawn from the U.S. Treasury.

The Medicaid program, meanwhile, fuels growth in health-care costs because it is financed with a flawed system of federal-state matching payments, with no limit on the amount that can be drawn from the Treasury each year. For every dollar of Medicaid cost, the federal government pays, on average, 57 cents; the states pick up the rest. But it's the states, not the federal government, that call the shots in the program's management: They determine who is eligible for what, and how much to pay hospitals and doctors for services. Under this arrangement, if governors or state agencies want to reduce Medicaid's cost to their budgets, they have to cut the program by $2.30 to save $1.00 — because the other $1.30 belongs to the federal government. Paying the full political price for benefit cuts while getting less than half the economic benefit obviously does not appeal to most state politicians. So instead, they spend most of their energy devising ways to maximize what they can get from the federal government while minimizing the state contribution.

The private insurance market, in which most Americans get their health coverage through an employer, is also far from immune to price distortions caused by government policy. The federal tax treatment of private employer-sponsored coverage fuels serious cost escalation *system-wide. Today, employer-paid health-insurance premiums do not count as taxable income for workers. No matter how expensive the *health-insurance premium, if the employer is paying, it is tax-free to the worker. Employees thus have a strong incentive to take more and more of their compensation in the form of health coverage instead of cash wages. For every dollar spent by his employer on health insurance, a worker gets a full dollar of health coverage; but when the same worker gets paid in cash, a large portion is sent to the government in taxes.

The favorable tax treatment of job-based insurance was instrumental in spreading private coverage to working-age Americans in the post-war period. It has been a crucial part of the middle-class contract. But because the tax subsidy has no limit, it has also encouraged overly expansive insurance, with lower deductibles and looser networks than would otherwise have developed. Economizing in health care is hard enough under the best of circumstances; if a company and its workers are only going to keep 50 to 60% of what they save, they are going to be much less vigorous in their search for savings.

When you put it all together — Medicare's fee-for-service program and insulation of beneficiaries from rising costs, unlimited federal funding for state-run Medicaid plans, and an open-ended tax subsidy for employer-paid insurance premiums — it is not surprising that health-care costs are rising rapidly in the United States. The vast majority of Americans are in health-insurance arrangements that are heavily subsidized by the federal government. When premiums rise, much of the added cost is shifted to the Treasury. And when someone else is paying even part of the tab, demand for services always rises.

The combination of the demographic variables buffeting Social Security and the distortion of health-care costs caused largely by Medicare, Medicaid, and the tax treatment of employer-based health insurance makes for a very grim prognosis. The case for mitigating the risks middle-class families face has not grown weaker, but the system we have built for doing so must be transformed.

PENALIZING WORK

One obvious component of an entitlement-reform strategy is an emphasis on later retirement and longer working careers. Americans are living much longer than they did when Social Security and Medicare were enacted, and longevity is expected to increase for the foreseeable future. Current projections therefore assume that Americans will spend an ever greater portion of their lives out of the work force and in retirement, placing ever-growing pressure on public finances.

Ironically, some of the largest impediments to continued work by those in their sixties and seventies are embedded directly in the rules governing our entitlement programs. They are implicit in the middle-class contract.

For example, Social Security benefits are based largely on the first 35 years of work, and any earnings beyond the 35-year mark get counted only if they are higher than an amount credited in a previous year. But most people hit 35 years of earnings in their fifties, and if they are winding down their careers, their wages during their last years of work may fall well below what they earned in younger days.

What's more, older workers pay the full Social Security and Medicare payroll taxes — a combined 15.3% on wages, split evenly by employer and employee — even after they have signed up for benefits. In most instances, they get nothing in return for paying these added taxes. This is especially true in the case of Medicare, as the entitlement is unrelated to payroll-tax contributions and is conferred after just ten years of work.

Medicare also discourages continued work by older Americans with its "secondary payer" rules. A 1982 law requires employer-sponsored insurance to cover medical bills first, before Medicare pays for any costs incurred by someone enrolled in both the employer's plan and Medicare. This provision greatly increases health-care costs for employers with seniors on their payroll, and they have responded quite predictably by cutting the wages they are willing to pay such workers. This requirement of primary coverage by job-based insurance imposes an implicit tax on wages ranging from 15% (for men at age 65) to 60% (for women at age 80).

Given these strong disincentives to work, it is hardly surprising that most seniors choose not to. Today, just under 30% of men aged 65 to 69 remain employed, down from 46% in 1960, when men died at much younger ages.

The point of changing these features of our entitlement programs is not to create a situation in which seniors have to work, but to end the powerful disincentive to do so. Making it easier for older Americans to work longer if they wish would significantly improve the financial prospects of our entitlement system.

WORK, FAMILY, AND CONSUMER CHOICE

Creating a genuinely sustainable middle-class contract, however, will require more significant reforms that get to the core logic of our entitlement system, and reward greater self-reliance through work, family formation, and cost-conscious consumption of health care.

In this regard, a good place to start is President George W. Bush's 2005 effort to introduce voluntary personal accounts into Social Security. Fully funded personal accounts would avert fiscal disaster because they would explicitly limit what gets paid out to the amount that gets paid in. Instead of an opaque benefits formula determined by government, personal accounts pay pension annuities based on the actual accrued balances in workers' accounts at retirement. Such accounts would also improve work incentives, as every dollar contributed would add to an annuity in retirement.

Clearly, moving from a mature pay-as-you-go system to funded accounts raises difficult transition problems. Directing payroll-tax *contributions to non-governmental, individually owned accounts would mean reduced receipts for the Social Security trust funds, and, very likely, more federal borrowing. It is entirely plausible that such a reform would actually raise overall national savings, as the amounts in the personal accounts would offset federal borrowing. But the great uncertainty of requiring trillions of dollars in new federal borrowing at a time of existing fiscal stress proved to be an insurmountable obstacle to the Bush effort. In any case, the prospects for personal accounts during a period of Democratic dominance in Washington are dim. And justifiably or not, recent market turmoil has also reduced the public's appetite for such a move.

There is, however, another way to introduce greater personalization, budgetary control, and incentives for continued work into Social Security without transition costs. Several other countries — most of which have faced more severe imbalances than those currently projected for our Social Security system — have adopted a form of personal accounts within a pay-as-you-go structure. The idea, called "notional defined contribution" accounts, is to track worker "contributions," assign "investment earnings," and report "account balances" — but without actual money attached to the accounts. Pensions for current retirees are still financed on a pay-as-you-go basis, with payroll taxes collected today used to cover benefits today. But payments are calculated based on the worker's own individually assigned account, which is converted into a monthly benefit much as the balance in a 401(k) can be used to purchase an annuity. The retirement benefit is set at the amount that would, when drawn monthly, deplete the worker's "account" over his expected remaining lifespan.

Even without full funding, personalization of this kind would still vastly improve work incentives. The only way workers could boost their future pension entitlements is with higher wages and more "contributions" to their notional accounts. For older workers, automatic reductions in monthly benefits for an early work-force exit would encourage more people to stay active and delay retirement.

Notional personal accounts also lend themselves to permanent solvency and budgetary control. The key variable is the notional rate of return, which is used to inflate the "investments" in the personal accounts. Because it remains a pay-as-you-go system, that return must be limited to what population growth and productivity allow. In fact, the Swedish version of this approach explicitly ties the rate of return credited to notional accounts to observed trends in demographics and real economic growth. If, for instance, the size of the work force were to fall below expectations, the annuity calculation would be adjusted automatically to cut monthly payouts — thus ensuring that notional account balances are not overdrawn.

Yet even if a notional account system were imported into our Social Security program, the problem of relatively low fertility and a rising ratio of retirees to workers would not go away. There is not much that entitlement reform alone can do to address this larger social trend, of course. But some modest steps could at least send the right message, and perhaps also influence behavior. Under our current entitlement system, for instance, two families with identical earnings records — one with children and the other without — would get the same Social Security benefit; it doesn't matter that one carried the burden of raising members of the next generation of workers, while the other did not. Pay-as-you-go pension systems cannot long survive without a steady stream of new entrants, so it only makes sense for such schemes to explicitly and transparently reward parents for doing what is essential for the viability of the system (and, for that matter, of society in general). In the context of a reform that introduces notional personal accounts as the basis for calculating benefit payments, this could be done by providing rebates against contributions, or additions to account balances, commensurate with the costs of raising children.

The primary argument against this kind of vision for Social Security reform is that it would necessarily limit the redistributive aspect of the current program. Low-wage workers today get a higher rate of return on their contributions than their higher-wage counterparts. This advantage would be lost if benefits were tied completely to personal accounts funded entirely by worker contributions. But a switch to notional personal accounts could be supplemented with any number of additional explicit subsidies for low-wage workers to replicate the outcomes associated with today's defined-benefit formula. For instance, workers with lifetime earnings below a certain average could get supplemental contributions to their accounts financed out of general revenue. This would have the advantage of transparency and budgetary control, and, structured properly, less of a distorting effect on retirement decisions than today's opaque benefit formula.

Medicare, too, would benefit from adjustments that take account of demographic realities, like a modest increase in the age of eligibility from 65 to 67. But even more important is a concerted effort to slow the pace of rising costs per enrollee, and of health-care costs more generally. In that regard, there really are only two choices: artificial cost constraints imposed by the government (like those employed in many other industrialized nations today), or cost-conscious consumer choice in a decentralized marketplace.

President Obama and the congressional leadership have clearly signaled their preference. They have pledged repeatedly to constrain the growth of government health-care spending. But, to date, they have not admitted that what they ultimately have in mind are limits on spending enforced with price-setting or fixed budgets, which would result in painful and arbitrary rationing of care. Instead, they argue that the government can slow the pace of rising costs system-wide with smarter interventions: more federally financed health information technology, additional research funded by the government into what treatments work best, and some changes in the way Medicare pays for services.

There are two glaring problems with the idea that the government has the capacity to engineer a more efficient health system this way. First, independent analysts, including those at CBO, have already said that these kinds of reforms are unlikely to produce deep and lasting savings absent more fundamental changes in the financial incentives that drive patient and provider behavior. Second, the government has been running Medicare and Medicaid for nearly half a century, and that experience demonstrates that government micro-management of health insurance is highly inefficient. Instead of building a network of high-quality preferred providers, political control of Medicare has resulted in an open network that pays all licensed providers exactly the same fee, regardless of the quality of the care provided. And the only cost-cutting remedy Congress can ever seem to pass is a fee reduction. If applied more systematically across all of health care, such price-setting would, in time, lead to a reduction in willing suppliers of services, to waiting lists, and to government-driven rationing of care.

The alternative is a functioning marketplace in which consumers choose their insurance and the services they use, and so become far more conscious of the costs of their choices. An essential feature of such a marketplace would be fixed, rather than open-ended, subsidization of insurance by the government. That would mean the conversion of today's Medicare entitlement — as well as of the tax break for employer-sponsored insurance, and even of Medicaid — into limited defined contributions toward the purchase of insurance. With fixed contributions, a consumer who wanted to buy more expensive coverage would have to pay more. Conversely, anyone willing to economize and choose a plan with more controls and a tighter network would keep the money he saved. (Such a switch in Medicare could be phased in with new retirees to prevent disruption for those already in the program.)

Opponents argue that this kind of reform would be dangerous for the middle class, and especially for Medicare recipients, because health-care costs would rise faster than the premium subsidies. But with a functioning marketplace, there would be much greater pressure on doctors and hospitals to reorganize themselves into more convenient, *cost-effective, and patient-focused systems of care. It is far more likely that the inefficiency in health care the president so often mentions would be reduced through the power of consumer choice than through bureaucratic regulation.

Reforms of this sort could help bring our entitlement system into line with economic and demographic realities, so that these programs — and the larger economy so heavily influenced by them — could continue to function. America does not face a choice between our march toward fiscal disaster and leaving the elderly and the poor to fend for themselves. Rather, we face the challenge of revitalizing our entitlement system to make it what Americans once hoped it might be: an affordable safety net for those times when the people who have engaged in the work of American prosperity can no longer meet their current needs with their current income.

A NEW MIDDLE-CLASS CONTRACT

The politics of middle-class entitlements has made it extremely difficult to change America's fiscal course, even as it has become increasingly clear that this course leads to ruin. No politician wants to be the first to suggest serious reforms, and be left vulnerable to caricature as an enemy of the middle class. Those who have gotten over their fears and given it a try have failed to solve the problem, and almost without exception have been badly burned in the attempt. Their failures have only reinforced the notion that pushing serious reforms requiring *genuine change or sacrifice is political suicide. Washington is littered with the lengthy reports and analyses of previous reform efforts, all of which were launched with great fanfare but came to nothing: the *Kerrey-Danforth Commission of 1994, the Breaux-Thomas Commission in 1999, President Bush's Social Security Commission (and the ensuing reform push in 2005), just to name a few.

All have run into the same wall of resistance, consisting of the lobbies built up around our entitlement system and the disinclination of the political class to make changes in popular programs. Above all, reform has been stymied by the lack of interest among middle-class voters in altering a system they have come to rely upon — and only a change on this front could make a meaningful difference. The groups that represent the beneficiaries of the current system are not about to step aside, and our politicians are not about to turn courageous. They will act only if their voters want them to.

This might make the case seem hopeless. After all, why would voters willingly sacrifice benefits they have come to expect, and believe they have earned? Nothing in our recent political history suggests that any such willingness is likely to emerge. But we are living in strange times, and proponents of entitlement reform should not miss the opportunity created by the unprecedented economic challenges and political responses of the past few months. In the crisis that began in late 2008, the American public got a taste of economic calamity like nothing we have witnessed since the Great Depression — when the first inklings of today's middle-class contract appeared. Policies that would have seemed unthinkable just a few months earlier — from massive government expenditures to save our banking system, to federal ownership of large corporations — were implemented in swift succession.

Some liberal politicians, including the president, have sought to use this moment of instability — when all past certainties seem suddenly in question — to advance their longstanding agenda and expand the role of the state in health care, energy, education, and other sectors, taking on new spending commitments and in effect exacerbating the dangers of the old middle-class contract. As Obama's chief of staff, Rahm Emanuel, said in November 2008: "You never want a serious crisis to go to waste."

But the shock of the economic crisis may also make Americans more open to serious entitlement reforms that Emanuel, President Obama, and many other Democrats have long resisted. The logic of the case for reform is much like that of the case for the recent emergency interventions: the need for a bold response to an enormous problem, aimed at regaining some equilibrium and allowing again for sustainable economic growth and prosperity. This is the time to explain to the public just how grave the prospects for our entitlement system — and therefore for our larger economy — really are, and to argue for a serious and sensible change of course.

The impulse to insulate the middle class from the cost consequences of their choices — an impulse that has defined our longstanding *middle-class contract — has done great harm and stands to do far more. The remedy must be to redesign our entitlements so that the choices the middle class makes in terms of work, family, and health care will promote more productivity, efficiency, and wealth, rather than the shrinking of the labor force and the growth of government.

Done right, a new arrangement would both strengthen our fiscal outlook and improve the economic standing of American families. The path to such a new arrangement will not be without its costs, but it will surely yield great benefits. The new middle-class contract would still work to mitigate risks and would still care for the old and the needy, but it would do so in ways that encourage personal responsibility, respect individual choice, and foster the work ethic that has made America's middle class the backbone of an unrivaled age of prosperity and strength.

James C. Capretta is a fellow at the Ethics and Public Policy Center.

http://nationalaffairs.com/publicati...class-contract
 
Old October 14th, 2009 #22
Alex Linder
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Join Date: Nov 2003
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Blog Entries: 34
Alex Linder
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History is Repeating
October 13, 2009

Why do I write these? I guess because I think I have something important to say, and I am not a well known writer, even though tens of thousands read each column. To sell gold and silver? Only indirectly. If thousands are intelligent enough to read my stuff, and realize that it is not your typical CNBC trash, then they'll probably buy their gold from us. We do have an "A" rating from the Better Business Bureau however. Maybe it is to get it off my chest, like the following:

It's May 1945, the war was still being fought, and in Britain, Winston Churchill was running for Prime Minister against Clement Atlee, who was the Labor (left) candidate. Atlee had been the Deputy P.M. for several years, and had a long record as an MP (member of parliament) as a staunch leftist. Everyone thought Churchill would win, because he was sort of the hero of the war. (Not to me, because Churchill and FDR actually gave the free world away to the Soviets at Yalta). Everyone loved 'Winnie' and his cigars and speeches. He lost to Atlee. Atlee not only won, but got a Labor Parliament, and they immediately got to work. Atlee had been a leader in the Labor Party for many years, and was in favor of joining the League of Nations, socializing everything in sight, and weakening the British military. Under Atlee, the Brits actually lost their empire. Under Atlee, India, Pakistan, Burma, Jordan, Siri Lanka, and Palestine left the British fold, and have been at war with each other ever since. When it was said that "The sun never sets on the British Empire," it was absolutely true. The Brits civilized major parts of the world, which have been decaying ever since they left. Atlee was a devout student and believer in the Keyenes type of economic planning.

Under Atlee, the entire health system was nationalized, and in the subsequent two or so years, the British government, under Labor, (what we call Democrats), took over, seized, and nationalized the entire British economy. This included NATIONALIZING the Bank of England, civil aviation, coal mining, railways, highway transport, canals, cable. radio, electricity, and gas. In other words, the entire private economy of Britain was seized. (Yesterday, Mexico's electric power industry was seized and nationalized by its government). The have never given much back either. (What they did give back was under Margaret Thatcher). Today, the Brits have become so accustomed to government running everything, that after 65 years, few even remember when England was free, capitalistic, and an economic giant in the world. Today, the Brits pay through the nose for everything...to the government. They have forgotten about the free market, competition, individual action, thought, and the most basic of freedoms we have, but are losing. The Brits are truly wonderful people, don't get me wrong, but they have long ago forgotten about individual responsibility, and not depending on government for virtually everything..

Today, Obama, (who was nominated for the Nobel Peace Price a mere two weeks after taking office), and his leftists, are trying to complete the total socialization of medicine, which was begun with Medicare and Medicaid over 40 years ago. We Americans are so imbued with semi-socialistic health care, that we have forgotten what it was like, when you bought health a policy if you wanted one, or most probably didn't want one, because one wasn't needed. A $3 office visit to the doctor took care of what most people needed. There were thousands of charity clinics for those who needed them. We have forgotten what the medical profession was like before lawyers got into it with fraudulent mal-practice suits. (Yes, we do need tort reform). We have forgotten what it was like before Medicare and Medicaid. Look at food stamps, which came on in 1972. When someone told me that government was going to pay for food, I thought they were hallucinating. We have been slaves to it for 37 years now, and people are forgetting what America was like without government paying for medical care and food. Before 1937, public housing was unknown, and if you had told someone about it, they would have thought you were nuts. In other words, we have been enslaved, weakened, and brainwashed. We have had a population increase with worthless people, who wouldn't be here without the various welfare schemes which Democrats have voted for, and Democrat Presidents have signed into law. Before public housing, food stamps, Medicare and Medicaid, people planned, saved, and cared for themselves, and America was naturally, a much stronger, intelligent place. I haven't even mentioned public schools, which are a disaster.

The Brits so long ago lost their freedoms, that they have forgotten what they were like. We are on the verge completing the course. The Brits of course, have had all their guns seized, and their 'bobbies' (cops) don't even carry guns any more. Crime has skyrocketed in the UK, and no one seems to know why. When you deprive a nation of its freedom to innovate, think, defend itself, and be true capitalists, its brains become numb and submissive. Thomas Jefferson once said, "When once a republic is corrupted, there is no possibility of remedying any of the growing evils but by removing the corruption and restoring its lost principles; every other correction is either useless or a new evil." He also said, "The only way to save the system is to destroy it or have it destroy itself."

What would happen if food stamps were removed, and public housing torn down, as of course they should be? Just imagine the riots, especially in the big cities! The plunder and destruction would probably level them, because the underclass uses them to eat, live, commit heinous crimes, and survive. Should they survive? Are they any benefit to America, when they destroy practically everything they touch, wreck neighborhoods, burn things, rob, murder, rape and destroy? Look at South Central LA or West Philly, and tell me they should be fed and housed. No one would admit that the underclass should exist. Why do they? Because they can vote, and sick, left leaning and voting humanitarians also, can and do vote. "We have to take care of the poor," is the empty, universal phrase. I ask, "WHY?" George Moore said way back in 1888, "I don't care how the poor live; my only regret is that they live at all." Is this cruel? NO, just logical. Let the poor work, survive, sweat, or whatever it takes, but not get a handout from government.

Without Medicare and Medicaid, the million tons of paperwork and tens of thousands of bureaucrats who administer it and write checks for it, would also disappear. Each doctor would require one less employee, and one less office and office equipment. Those who wanted to see a doctor would pay for their visit, which would be a lot less expensive. Doctors would rise and fall on their reputations and expertise, and even rates they charge, like every other business or business person. This is the way it used to be, and of course should be again, but never will. Our brains have become so used to various handouts, that we have forgotten what it was like before them, and now believe we are entitled to them, ignoring their cost and inefficiency. Same with the underclass. We can't go back. We can only get more enslaved by the left, humanitarians, war voting Republicans, "help the poor" fools, and of course those ever lovin' senators and representatives, who never even read the bills on which they vote. Today, as I write this, the Senate is voting on a thousand page, trillion dollar health bill, and none of them have read it, nor probably given a minute's thought to the ultimate result of it.

Whenever any government, at any level, does anything, it costs more, and is less efficient. The larger the government, the less efficient and more costly is the 'service,' and the less able anyone is to complain or change it. In a small town, like the one I live in, I know the sheriff, police chief, city council members and county commissioners, personally. If something's wrong here, I can call them and scream or complain. Try to do that with your DC elected goof off. Imagine what would happen to America if Medicare and Medicaid were cut off. Thousands of nursing homes would go bankrupt immediately. (Before Medicare and Medicaid, there were virtually no nursing homes). Tens of thousands of employees of doctors and the bureaucracy would be out of jobs immediately. Millions of idiotic geezers would have conniption fits. It is impossible for it to happen, in other words. It will only eventually be universal health care like the Brits have, and that is almost inevitable, since we have already gotten half way there. Since Emergency Rooms cannot decline to treat, whether they get paid or not, and since the geezers have Medicare and Medicaid, we are already half way there, and as history shows, we will only get more, not less government.

All we can do is protect ourselves, try to get out of the big cities, and hang on!

P.S. as I finished editing this, I had a customer call who I hadn't heard a word from in over eight years. They, in 2001, had spent $16,655.90 with me, including commission. They just sold it all for $62,130, and their only expense is to ship it. That is a 373% profit in eight years. Eight years from now, will you make 373% profit on gold or silver you buy today? I'd be willing to bet on it.

http://www.coloradogold.com/archive/...ating-897.html
 
Old October 14th, 2009 #23
Alex Linder
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History is Repeating
October 13, 2009

Why do I write these? I guess because I think I have something important to say, and I am not a well known writer, even though tens of thousands read each column. To sell gold and silver? Only indirectly. If thousands are intelligent enough to read my stuff, and realize that it is not your typical CNBC trash, then they'll probably buy their gold from us. We do have an "A" rating from the Better Business Bureau however. Maybe it is to get it off my chest, like the following:

It's May 1945, the war was still being fought, and in Britain, Winston Churchill was running for Prime Minister against Clement Atlee, who was the Labor (left) candidate. Atlee had been the Deputy P.M. for several years, and had a long record as an MP (member of parliament) as a staunch leftist. Everyone thought Churchill would win, because he was sort of the hero of the war. (Not to me, because Churchill and FDR actually gave the free world away to the Soviets at Yalta). Everyone loved 'Winnie' and his cigars and speeches. He lost to Atlee. Atlee not only won, but got a Labor Parliament, and they immediately got to work. Atlee had been a leader in the Labor Party for many years, and was in favor of joining the League of Nations, socializing everything in sight, and weakening the British military. Under Atlee, the Brits actually lost their empire. Under Atlee, India, Pakistan, Burma, Jordan, Siri Lanka, and Palestine left the British fold, and have been at war with each other ever since. When it was said that "The sun never sets on the British Empire," it was absolutely true. The Brits civilized major parts of the world, which have been decaying ever since they left. Atlee was a devout student and believer in the Keyenes type of economic planning.

Under Atlee, the entire health system was nationalized, and in the subsequent two or so years, the British government, under Labor, (what we call Democrats), took over, seized, and nationalized the entire British economy. This included NATIONALIZING the Bank of England, civil aviation, coal mining, railways, highway transport, canals, cable. radio, electricity, and gas. In other words, the entire private economy of Britain was seized. (Yesterday, Mexico's electric power industry was seized and nationalized by its government). The have never given much back either. (What they did give back was under Margaret Thatcher). Today, the Brits have become so accustomed to government running everything, that after 65 years, few even remember when England was free, capitalistic, and an economic giant in the world. Today, the Brits pay through the nose for everything...to the government. They have forgotten about the free market, competition, individual action, thought, and the most basic of freedoms we have, but are losing. The Brits are truly wonderful people, don't get me wrong, but they have long ago forgotten about individual responsibility, and not depending on government for virtually everything..

Today, Obama, (who was nominated for the Nobel Peace Price a mere two weeks after taking office), and his leftists, are trying to complete the total socialization of medicine, which was begun with Medicare and Medicaid over 40 years ago. We Americans are so imbued with semi-socialistic health care, that we have forgotten what it was like, when you bought health a policy if you wanted one, or most probably didn't want one, because one wasn't needed. A $3 office visit to the doctor took care of what most people needed. There were thousands of charity clinics for those who needed them. We have forgotten what the medical profession was like before lawyers got into it with fraudulent mal-practice suits. (Yes, we do need tort reform). We have forgotten what it was like before Medicare and Medicaid. Look at food stamps, which came on in 1972. When someone told me that government was going to pay for food, I thought they were hallucinating. We have been slaves to it for 37 years now, and people are forgetting what America was like without government paying for medical care and food. Before 1937, public housing was unknown, and if you had told someone about it, they would have thought you were nuts. In other words, we have been enslaved, weakened, and brainwashed. We have had a population increase with worthless people, who wouldn't be here without the various welfare schemes which Democrats have voted for, and Democrat Presidents have signed into law. Before public housing, food stamps, Medicare and Medicaid, people planned, saved, and cared for themselves, and America was naturally, a much stronger, intelligent place. I haven't even mentioned public schools, which are a disaster.

The Brits so long ago lost their freedoms, that they have forgotten what they were like. We are on the verge completing the course. The Brits of course, have had all their guns seized, and their 'bobbies' (cops) don't even carry guns any more. Crime has skyrocketed in the UK, and no one seems to know why. When you deprive a nation of its freedom to innovate, think, defend itself, and be true capitalists, its brains become numb and submissive. Thomas Jefferson once said, "When once a republic is corrupted, there is no possibility of remedying any of the growing evils but by removing the corruption and restoring its lost principles; every other correction is either useless or a new evil." He also said, "The only way to save the system is to destroy it or have it destroy itself."

What would happen if food stamps were removed, and public housing torn down, as of course they should be? Just imagine the riots, especially in the big cities! The plunder and destruction would probably level them, because the underclass uses them to eat, live, commit heinous crimes, and survive. Should they survive? Are they any benefit to America, when they destroy practically everything they touch, wreck neighborhoods, burn things, rob, murder, rape and destroy? Look at South Central LA or West Philly, and tell me they should be fed and housed. No one would admit that the underclass should exist. Why do they? Because they can vote, and sick, left leaning and voting humanitarians also, can and do vote. "We have to take care of the poor," is the empty, universal phrase. I ask, "WHY?" George Moore said way back in 1888, "I don't care how the poor live; my only regret is that they live at all." Is this cruel? NO, just logical. Let the poor work, survive, sweat, or whatever it takes, but not get a handout from government.

Without Medicare and Medicaid, the million tons of paperwork and tens of thousands of bureaucrats who administer it and write checks for it, would also disappear. Each doctor would require one less employee, and one less office and office equipment. Those who wanted to see a doctor would pay for their visit, which would be a lot less expensive. Doctors would rise and fall on their reputations and expertise, and even rates they charge, like every other business or business person. This is the way it used to be, and of course should be again, but never will. Our brains have become so used to various handouts, that we have forgotten what it was like before them, and now believe we are entitled to them, ignoring their cost and inefficiency. Same with the underclass. We can't go back. We can only get more enslaved by the left, humanitarians, war voting Republicans, "help the poor" fools, and of course those ever lovin' senators and representatives, who never even read the bills on which they vote. Today, as I write this, the Senate is voting on a thousand page, trillion dollar health bill, and none of them have read it, nor probably given a minute's thought to the ultimate result of it.

Whenever any government, at any level, does anything, it costs more, and is less efficient. The larger the government, the less efficient and more costly is the 'service,' and the less able anyone is to complain or change it. In a small town, like the one I live in, I know the sheriff, police chief, city council members and county commissioners, personally. If something's wrong here, I can call them and scream or complain. Try to do that with your DC elected goof off. Imagine what would happen to America if Medicare and Medicaid were cut off. Thousands of nursing homes would go bankrupt immediately. (Before Medicare and Medicaid, there were virtually no nursing homes). Tens of thousands of employees of doctors and the bureaucracy would be out of jobs immediately. Millions of idiotic geezers would have conniption fits. It is impossible for it to happen, in other words. It will only eventually be universal health care like the Brits have, and that is almost inevitable, since we have already gotten half way there. Since Emergency Rooms cannot decline to treat, whether they get paid or not, and since the geezers have Medicare and Medicaid, we are already half way there, and as history shows, we will only get more, not less government.

All we can do is protect ourselves, try to get out of the big cities, and hang on!

P.S. as I finished editing this, I had a customer call who I hadn't heard a word from in over eight years. They, in 2001, had spent $16,655.90 with me, including commission. They just sold it all for $62,130, and their only expense is to ship it. That is a 373% profit in eight years. Eight years from now, will you make 373% profit on gold or silver you buy today? I'd be willing to bet on it.

http://www.coloradogold.com/archive/...ating-897.html
 
Old October 30th, 2009 #24
Leshrac
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Quote:
Originally Posted by Alex Linder View Post
"The social workers told us that the reason they took our children was because they 'have no contact with other children, that school education is guaranteed and that you are a risk of escape.' But this is nonsense, as anyone who knows our family can tell," the parents said in a statement.
I can see that kind of 'social worker' nightmare from a mile away. Probably 25 to 35 years old uptight bitches suffering from various degrees of paranoia thinking "they know better" because they have the gov't seal tattooed on their asses...

There's a good way to blow up their confidence by the way : just candidly ask them :

"Remember when you were a kid ? Wanting to discover, explore, be nice, etc ? What in the world could have happened for you to turn into what you are now ?"

Then, suddenly, all their little world falls apart as they realize they've become evil scum.
 
Old March 31st, 2016 #25
Robbie Key
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[old article from 1994 but still valid, it's probably even worse now in terms of costs]

Nineteen Neglected Consequences of Income Redistribution

By Robert Higgs | Posted: Mon. December 5, 1994
Also published in The Freeman

Virtually every government action changes the personal distribution of income, but some government programs, which give money, goods, or services to individuals who give nothing in exchange, represent income redistribution in its starkest form.

Until the twentieth century, American governments steered pretty clear of such “transfer payments.” The national government gave pensions and land grants to veterans, and local governments provided food and shelter to the destitute. But the transfers to veterans can be viewed as deferred payments for military services, and local relief never amounted to much.

Since the creation of the Social Security system in 1935, especially during the past 30 years, the amount of income overtly transferred by governments has risen dramatically. In 1960 government transfer payments to persons amounted to $29 billion, or 7 percent of personal income. In 1993 the total came to $912 billion, or nearly 17 percent of personal income.1 In other words, one dollar out of every six received as personal income now takes the form of old-age, survivors, disability, and health insurance benefits ($438 billion), unemployment insurance benefits ($34 billion), veterans’ benefits ($20 billion), government employees’ retirement benefits ($115 billion), aid to families with dependent children ($24 billion), and miscellaneous other government transfer payments ($280 billion) such as federal subsidies to farmers and state and local public assistance to poor people.

Myth versus Reality

It is tempting to think about government transfers in a simple way: one person, taxpayer T, loses a certain amount of money; another person, recipient R, gains the same amount; and everything else remains the same. When people look at income redistribution in this way, they tend to make a judgment about the desirability of the transfer simply by considering whether T or R is the more deserving. Commonly, especially when the issue is discussed in the news media or by left-liberal politicians, R is portrayed as a representative of the poor and downtrodden and T as a wealthy person or a big corporation. Opponents of the transfers then appear callous and lacking in compassion for the less fortunate.

In fact, the overwhelming portion—more than 85 percent—of all government transfer payments is not “means-tested,” that is, not reserved for low-income recipients.2 The biggest share goes to the elderly as pensions and Medicare benefits, and anyone over 65 years old, rich and poor alike, can receive these benefits. Today people over 65 have the highest income per person and the highest wealth per person of any age group in the United States. Federal transfer payments to farmers present an even more extreme case of giving to those who are already relatively well off. In 1989, for example, the federal government paid about $15 billion to farmers in direct crop subsidies, and 67 percent of the money went to the owners of the largest 17 percent of the farms—in many cases payments to farmers are literally welfare for millionaires.3 It is simply a hoax that, as a rule, government is taking from the rich for the benefit of the poor. Even people who believe in the rectitude of redistribution à la Robin Hood ought to be troubled by the true character of the redistribution being effected by governments in America today.

But apart from the troubling moral questions raised by redistribution, the issue is far more complicated than ordinarily considered. Beyond the naked fact that T pays taxes to the government and the government gives goods, services, or money to R, at least 19 other consequences occur when the government redistributes income.

Neglected Consequences

1. Taxes for the purpose of income redistribution discourage the taxpayers from earning taxable income or raising the value of taxable property through investment. People who stand to lose part of their earnings respond to the altered personal payoff. As a result, they produce fewer goods and services and accumulate less wealth than they otherwise would. Hence the society is poorer, both now and later.

2. Transfer payments discourage the recipients from earning income now and from investing in their potential to earn future income. People respond to a reduced cost of idleness by choosing to be idle more often. When they can get current income without earning it, they exert less effort to earn income. When they expect to get future income without earning it, they invest less in education, training, job experience, personal health, migration, and other forms of human capital that enhance their potential to earn income in the future. Hence the society is even poorer, both now and later, than it would have been merely because taxes discourage current production and investment by the taxpayers who fund the transfers.

3. Recipients of transfers tend to become less self-reliant and more dependent on government payments. When people can get support without exercising their own abilities to discover and respond to opportunities for earning income, those abilities atrophy. People forget—or never learn in the first place—how to help themselves, and eventually some of them simply accept their helplessness. It is no accident that both material privation and lassitude distinguish individuals accustomed to living on payments such as Aid to Families with Dependent Children (AFDC).

4. Recipients of transfers set a bad example for others, including their children, other relatives, and friends, who see that one can receive goods, services, or money from the government without earning them. The onlookers easily adopt an attitude that they, too, are entitled to such transfers. They have fewer examples of hardworking, self-reliant people in their families or neighborhoods. Hence a culture of dependency on government transfers can become pervasive when many people in a neighborhood rely on such transfers for life’s essentials or—where the recipients are better off—its comforts.

5. Because some transfers are more generous than others, some classes of recipients come to resent the “injustice” of the distribution of the largess. Hence arise political conflicts. Representatives of discontented groups politicize the determination of the amounts to be transferred and engage in continual jockeying to increase certain kinds of transfers, at the expense of others if necessary. Note, for example, the ceaseless activities of the American Association of Retired Persons, perhaps the most powerful lobby in Washington, striving to increase old-age pensions and Medicare benefits, or the National Association for the Advancement of Colored People, seeking to increase transfers that benefit blacks in particular. Such political maneuvering creates or exacerbates conflicts among groups defined by their eligibility to receive particular kinds of transfers: old against young, black against white, rural against urban, female against male, Northern against Southern, homeowner against renter, and so forth without visible limit. Society becomes more contentious.

6. Just as recipients engage in internecine warfare, so do taxpayers, who resent disproportionate burdens in funding the transfers. For instance, young people now learn that their Social Security taxes are going straight into the pockets of retired people who as a group are better off. Young taxpayers also learn that they probably will never recoup their own contributions, unlike the present-day elderly, who have realized an extraordinarily high effective rate of return on their contributions. (Currently the average married couple gets back everything ever paid in, with interest, in just over four years. )4 Black Social Security taxpayers learn that, because of their lower life expectancy, they cannot expect to receive as much retirement income as the average white person can expect. Taxpayers who consider themselves disproportionately burdened grow to resent their exploitation by the tax-and-transfer system. Therefore they give more support to politicians who promise to defend their pocketbooks against legislative marauders, and they strive harder to avoid or evade taxes.

7. As a result of the preceding two consequences, the entire society grows more divided and pugnacious. Less and less does the society constitute a genuine community. Rather, it becomes balkanized into bellicose subgroups regarding one another as oppressors and oppressed. People lose their sense of belonging to a common political community with collective interests and joint responsibilities. Instead, fellow citizens regard each other as either patsies or moochers and feel personal hostility toward those who appear to be net gainers from the system. Some actually come to hate the perceived moochers. Witness the palpable hostility when shoppers paying cash wait in the check-out line at the grocery store while someone uses food stamps to make purchases.

8. Among the recipients of transfers, self-help institutions languish. In olden days the burden of caring for the less fortunate outside the family was borne mainly by friends and neighbors acting jointly through churches, lodges, unions, clubs, and other voluntary associations. When individuals can receive assistance directly from the government, competing private associations tend to wither and eventually die—at least their functions as helping institutions disappear. When they are gone, people who need help have nowhere to turn except to the government, which is unfortunate in many ways, because what the government does is not really the same. Nor is it as effective, especially in the long run, when private associations have much greater success in making sure that people who recover their capacities then resume taking care of themselves.

An observer noted that in the aftermath of the big Los Angeles earthquake, “Thousands of forlorn, atomized individuals did nothing but wait for a centralized savior, the federal government. America has been diminished by a system of compulsory compassion that simply wants true communities out of the way so that altruism can be left to the experts.”5

9. Just as self-help institutions wither among the needy, so do charitable institutions among those who are better off. When government agencies stand ready to attend to every conceivable problem in society, people whose sensibilities incline them toward helping the less fortunate have less incentive to organize themselves for doing so. It is easy to say, “I pay my taxes, and plenty of them. Let the government take care of the problem.” If one contributes charitably, it is as if one were paying twice to accomplish the same objective. Hence, government transfers crowd out private transfers. Coercion, in the form of the tax system, displaces the voluntary provision of assistance, and private charitable institutions wane.

10. As citizens drop out of their involvement in charitable and helping institutions, letting the government take over, they become less self-directing and more accepting of all kinds of government activity. So when someone proposes that the government undertake a function previously carried out exclusively within the private sphere, people are not shocked; they are not even very suspicious of the government’s ability to carry out the task. After all, governments now do all sorts of things, from socializing preschoolers to feeding the poor to insuring the medical expenses of the elderly. So what if the government takes on still another responsibility? What was once a prevailing suspicion of the enlargement of government becomes a resignation to or an acceptance of its continuing expansion into new areas.

In the nineteenth century, opponents of proposed new government programs would commonly protest: “The government has no business doing that.” Nowadays we rarely hear anyone oppose a government initiative on these grounds. That there is a private sphere into which government ought never to intrude has become a nearly extinct species of thought as governments have spread their programs and activities, not to mention their regulations of “private” life, into almost every cranny of society.

11. Hence people do not mobilize political opposition so readily when new government programs are proposed. Facing less opposition, those who support the new programs are more likely to triumph politically. New government programs proliferate quicker, restrained somewhat by budgetary limitations but not much by fundamental ideological objections. According to a recent Wall Street Journal/NBC poll, “when Americans were asked whether ‘entitlements’ should be cut to reduce the deficit, 61% said yes. But when they were asked whether ‘programs such as Social Security, Medicare, Medicaid and farm subsidies’ should be cut, 66% said no.”6 Evidently most people resent paying for the programs, but they have no objection to the programs themselves.

12. Redistribution involves more than T who pays and R who receives. In between stands B, the bureaucracy that determines eligibility, writes the checks, keeps the records, and often does much more, sometimes intruding into the personal lives of the clients. The mediating bureaucracies consume vast resources of labor and capital, accounting for much of the gross expense of the transfer system. For the government to transfer a dollar to R, it is never sufficient to take just a dollar from T. In addition a hefty “commission” must be paid to support B. From a societal perspective, one must recognize that labor and capital employed by the bureaucracies cannot be used to produce goods and services valued by consumers. Again, society is poorer.

13. Once a bureau is created, its personnel become a tenacious political interest group, well placed to defend its budget and make a case for expanding its activities. After all, who knows more about the urgent necessity of increasing a bureau’s budget and staff than those who carry out its activities? The bureaucrats have a close hold on the relevant data and the ostensible expertise with respect to whatever problem they treat. Therefore they have potent advantages in the political process when they seek to augment the resources placed at their command. Agency experts will testify that outsiders “just don’t know how serious the problem is.”

A bureau often constitutes one side of a political “iron triangle,“ joined with the organized client groups that form the second side and the congressional committees with legislative jurisdiction or oversight responsibility that form the third side. When the bureau becomes politically embedded in this way, as most do, its impoverishment of society can continue indefinitely without serious political challenge.

14
. Taxpayers do not simply cough up money to fund the transfers without resistance. Many of them devote time, effort, and money to minimizing their legal tax liability or evading taxes. They buy books and computer software. They employ financial advisers, lawyers, and accountants. From time to time they organize political movements to campaign for tax relief à la California’s Proposition 13. All the labor and capital employed in connection with tax resistance are unavailable to produce goods and services valued by consumers. Society is poorer, and will remain poorer as long as people continue to devote resources to tax resistance. (However, to the extent that tax resistance succeeds in making tax rates lower than they otherwise would have been, it promotes greater wealth creation in the longer run.)

15. In the end many citizens will pay taxes to finance the transfers. Even if no one tries to resist the taxes or alters his behavior in supplying labor and capital, the cost to taxpayers will be more than one dollar for each dollar taken by the government, because it is costly just to comply with the tax laws. Taxpayers must keep records, research the tax rules, fill out forms, and all the rest. These activities require time and effort withdrawn from valuable alternative uses. Many people, even though they intend nothing more than full compliance with the law, hire the expert assistance of accountants and tax preparers—the tax rules are so complicated that mere mortals cannot cope. Use of resources to comply with tax laws makes the society poorer.

According to a study by James L. Payne, just the private compliance expense of taxpayers plus the budgetary and enforcement expense of the IRS add $270,000,000 to the tab for each billion dollars of spending by the federal government.7

16. Just as taxpayers do not passively submit to being taxed, recipients and potential recipients of transfers do not just sit quietly waiting for their ship to come in. They also act politically. They form organizations, attend meetings, employ publicists and lobbyists, and campaign for political candidates who support their objectives. All the labor and capital employed in transfer-seeking activities are unavailable to produce goods and services valued by consumers. Society is poorer and will remain poorer as long as people continue to devote resources to seeking transfers.

17. Just as taxpayers must employ resources to comply with the tax laws, so recipients of transfers must employ resources to establish and maintain their eligibility to receive the transfers. For example, recipients of unemployment insurance benefits must visit the department of employment security and wait in long lines to certify that they are indeed unemployed. Sometimes they must go from place to place applying for jobs, which they may have no intention of accepting, in order to demonstrate that they are “seeking employment.” Recipients of disability insurance benefits must visit doctors and other health professionals to acquire certification that they are indeed disabled. In each case, more resources are squandered, and society is that much poorer.

18. By adopting programs to redistribute substantial amounts of income, a nation guarantees that its government will become more powerful and invasive in other ways. Because government itself is the most menacing interest group in society, nothing good can come of this development, and much evil may come of it. As James Madison remarked more than two centuries ago, “one legislative interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding.”8 When the government created Medicare and Medicaid in 1965, for example, it set in motion a train of events that led inexorably to the subsequent “crisis” of escalating health-care costs and thence to the bigger government now being wrought by congressional efforts to deal with this artificial crisis.

19. Creating a more powerful and invasive government means that the liberties of citizens will be diminished. Rights previously enjoyed will be set aside. For a long time American citizens enjoyed extensive rights in the negative sense—rights to be left alone by governments or other people as they went about their lives. All individuals could enjoy such rights simultaneously. With the growth of the transfer society, American citizens have gravitated away from negative rights and toward positive rights, also known as welfare rights, which are in effect claims on the resources of other people. One person’s welfare right entails a corresponding duty of other people to provide the resources necessary to satisfy the claim. As such entitlements have grown, therefore, liberties in the sense of negative rights have necessarily diminished.

Culmination

Ironically, in the full-fledged transfer society, where governments busy themselves redistributing income by means of hundreds of distinct programs, hardly anyone is better off as a result. Those who get something of value from the system frequently give up even more in taxes. Further, because many of the consequences of government income redistribution share the common aspect of impoverishing the society, even those who get a bigger slice than they surrender are cutting into a smaller pie. Only the ruling class—those who constitute the government—can confidently expect to gain, as each new program enlarges the number of official jobs and the bureaucracy’s budget.

In the transfer society the general public is not only poorer but less contented, less autonomous, more rancorous, and more politicized. Individuals take part less often in voluntary community activities and more often in belligerent political contests. Genuine communities cannot breathe in the poisonous atmosphere of redistributional politics. Most importantly, the society that allows its government to redistribute income on a wide scale necessarily sacrifices much of its liberty.

Finally, one must recognize that, notwithstanding what some regard as the institutionalization of compassion, the transfer society quashes genuine virtue. Redistribution of income by government coercion is a form of theft. Its supporters attempt to disguise its essential character by claiming that democratic procedures give it legitimacy, but this justification is specious. Theft is theft whether it be carried out by one thief or by 100 million thieves acting in concert. And it is impossible to found a good society on the institutionalization of theft.

Notes:

1. U.S. Council of Economic Advisers, Annual Report 1994, p. 299.

2. James D. Gwartncy and Richard L. Stroup, Microeconomics: Private and Public Choice, 6th ed. (Fort Worth: Dryden Press, 1992), pp. 409–410.

3. Ibid., pp. 488–489.

4. Paulette Thomas, “BiPartisan Panel Outlines Evils of Entitlements, But Hint of Benefit Cuts Spurs Stiff Opposition,” Wall Street Journal, August 8, 1994.

5. Arianna Huffington as quoted by John H. Fund, “A Spiritual Manifesto for a New Political Age,“ Wall Street Journal, July 13, 1994.

6. Thomas, “Bipartisan Panel.”

7. James L. Payne, “Inside the Federal Hurting Machine,“ The Freeman, March 1994, p. 127.

8. “The Federalist No. 44,“ in The Federalist (New York: Modem Library, n.d.), p. 291.

Robert Higgs is a Senior Fellow in Political Economy at the Independent Institute and Editor at Large of the Institute’s quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, the University of Economics, Prague, and George Mason University.

http://www.independent.org/newsroom/article.asp?id=1155
 
Old March 31st, 2016 #26
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I wonder how many of you conservatives that think government can't do anything right have ever seen the disastrous, wasteful inner machinations of a business?

In liberal capitalist societies, most business owners would rather burn their factory down over pay their workers a living wage. The argument that progressive taxation is "theft" is just an inversion of the Marxist argument that the capitalist class pocketing surplus value created by labor is stealing. Both are right to an extent, but their proposed solutions only inevitably contribute to class antagonism, stagnation and socio-economic instability.

The first is a necessary reconciliation with the latter. If you think you will get away with dog eat dog malthusian capitalism in the age of mass politics, you're living in a fantasy world.
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Old March 31st, 2016 #27
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I wonder how many of you conservatives that think government can't do anything right have ever seen the disastrous, wasteful inner machinations of a business?

In liberal capitalist societies, most business owners would rather burn their factory down over pay their workers a living wage. The argument that progressive taxation is "theft" is just an inversion of the Marxist argument that the capitalist class pocketing surplus value created by labor is stealing. Both are right to an extent, but their proposed solutions only inevitably contribute to class antagonism, stagnation and socio-economic instability.

The first is a necessary reconciliation with the latter. If you think you will get away with dog eat dog malthusian capitalism in the age of mass politics, you're living in a fantasy world.
What I don't understand about people like you is the apparent contradiction between your very negative and bleak view of the average White man's behavior and morals yet you think the best solution is to centralize authority so they can boss everyone around else. You want to institutionalize the same people and their power you denounce as opposed to let them compete on a free market. You have some kind of secret Nazi cabal where you will breed new generations of ultimate Avatars or something?

I just don't understand that line of reasoning.

I am not a libertarian or anything but there is a lot of valid criticism against how governments generally look today. I'd suggest you look into Tom Woods and what he's doing. His podcast is very, very informative on these issues.

Last edited by Robbie Key; March 31st, 2016 at 11:06 AM.
 
Old March 31st, 2016 #28
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What I don't understand about people like you is the apparent contradiction between your very negative and bleak view of the average White man's behavior and morals yet you think the best solution is to centralize authority so they can boss everyone around else. You want to institutionalize the same people and their power you denounce as opposed to let them compete on a free market. You have some kind of secret Nazi cabal where you will breed new generations of ultimate Avatars or something?

I just don't understand that line of reasoning.

I am not a libertarian or anything but there is a lot of valid criticism against how governments generally look today. I'd suggest you look into Tom Woods and what he's doing. His podcast is very, very informative on these issues.
Power will be centralized under any and all systems, including and especially capitalism, whose end result is always dictatorship of the billionaires that will use both private and public means to trample all over you "rugged individualists". The question here isn't whether natural organization of hierarchy is pyramid shape, but whether the people who will be at the top of the pyramid will be sleazy merchants (capitalism) or Plato's Guardians (National Socialism).

The main problem with "socialist" states like Sweden isn't any inherent problem with the system. It's that the massive influx of unproductive , low IQ muds is a burden on society and community. In low trust multi-racial societies, people understandably prefer less collectivism, but this is an unsustainable path towards hell on earth in the long run.

If you're a racialist, you're a socialist. If you feel a "centralized dictatorship" needs to protect the race, you indirectly admit that government is necessary and can do something very important better than the private sphere. Why do you do that Robbie, don't you have faith that the average white man's morals will be able to protect the race without supervision?

Tom Woods' ideal society and economy is what the Jew Von Mises advised as economic policy maker in Engelbert Dolfuss' Austria. If you want to compare and contrast , this case is the perfect example of which system is better. Go look at a before and after of unemployment rates, wages, productivity, harvests, etc in Jew Mises' Austria vs Nationalsocialist Austria a few years later and come to your own conclusion. Economic planning is superior to market economies in every case except in the small and racially irrelevant world of light industry and consumer goods (which I agree free enterprise is superior). The only nations that can afford a full market economy are ones with lots of resources to waste, like Britain when it had its world empire to exploit, or the massive USA, but even in these cases planning would've been far superior.

Merchants and peddlers might be a necessary evil in some cases, but these low lives need to be curtailed and contained, and for sure, someone like Cecil Rhodes who helped Jews fill South Africa up with niggers to work in his De Beers diamond mines should be kept far away from government.
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Old March 31st, 2016 #29
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If the people have a healthy, strong nationalist ethos, it doesn't matter too much what form of government or how planned the economy is, people will correct the wrongs and won't seek to screw over their fellow kinsman.

If people don't have respect and trust for one another, it doesn't matter what form of government or economy you have, the nation will be fragile and weak (and will ultimately fail to healthier, stronger nations).

So the key question is how to best instill a strong and healthy blood-nationalistic spirit in the people to forge and maintain a strong and healthy nation.
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Old March 31st, 2016 #30
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So does a system that puts profit over country and people add to a healthy nationalist ethos, George?

Does a system that makes you cheat, cut down your kinsmen and cut corners just to make ends meet contribute to a high trust, community oriented , racially united country?

Letting your economy--the vehicle that provides food, shelter and stability to a race--be reduced to a formless casino is not healthy for a nation.

Healthy, honorable and meaningful intra-racial competition is vital for its virility. This can take the form of sports, academics, culture, etc; more ARYAN than deciding rank based on who is best at haggling over a fucking tomato. Capitalism belongs at home: in the bazaars of the Middle East, not the continent of Greece and Rome.
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Old March 31st, 2016 #31
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Power will be centralized under any and all systems, including and especially capitalism, whose end result is always dictatorship of the billionaires that will use both private and public means to trample all over you "rugged individualists".
I'm not a rugged individualist. This also something that bothers me. Socialists always claim that the free market create atomized individuals who don't care about each other. Is that necessarily true?

If you look around you today, do get the sense of something other than exactly that? I don't and while that is a part of the racial mixture of our societies, I also think the fact that you can ultimately rely on the government to give your money and provide what you need creates an environment where you don't really need to give a shit about other people is highly conducive to this too.

On the free market, and in the local tight-knit community where you can't rely on a government to save the day, you need to establish close relationships with other people both as a worker and an entrepreneur to ensure your daily life and future. If you act dishonorably, the word will go around and you'll be in a bad position. I think this would work well with normal White people who generally are reliable, honest and well-intentioned.

Quote:
The question here isn't whether natural organization of hierarchy is pyramid shape, but whether the people who will be at the top of the pyramid will be sleazy merchants (capitalism) or Plato's Guardians (National Socialism).
Who are these Plato guardians and why, if they were of such high quality, wouldn't they gain substantial power in a market? How is that ensured the Plato Guardians run the government? What happens when the first generation after the revolution is dead? Why can't the scumbags take the power instead, as we've seen all over the White world since WW2?

These sleazy merchants (who do exist) aren't they mostly a British/WASP/Jewish phenomenon?

Quote:
The main problem with "socialist" states like Sweden isn't any inherent problem with the system. It's that the massive influx of unproductive , low IQ muds is a burden on society and community.
It's the government importing these people, through the influence of Jewish-owned media and Jewish activism in general. They're not just suddenly appearing on a half-island far up in the north of Europe.

Quote:
In low trust multi-racial societies, people understandably prefer less collectivism, but this is an unsustainable path towards hell on earth in the long run.
I agree. As a collective, we need to get together and get rid of the Jews and the muds. That's a given and everyone agrees on that. But the question is what kind of society we want to live in after that.

Quote:
If you're a racialist, you're a socialist. If you feel a "centralized dictatorship" needs to protect the race, you indirectly admit that government is necessary and can do something very important better than the private sphere. Why do you do that Robbie, don't you have faith that the average white man's morals will be able to protect the race without supervision?
I haven't ever talked about a racial dictatorship, I think that's Linder's idea, no?

I'm not sure that will be needed, as the coming apocalypse and struggle between the races will be of such epic proportions that everyone will understand these issues anyway.

Quote:
Tom Woods' ideal society and economy is what the Jew Von Mises advised as economic policy maker in Engelbert Dolfuss' Austria. If you want to compare and contrast , this case is the perfect example of which system is better. Go look at a before and after of unemployment rates, wages, productivity, harvests, etc in Jew Mises' Austria vs Nationalsocialist Austria a few years later and come to your own conclusion.
I don't know much about this so can't comment. Do you have something I could read on this?

My impression is that Hitler pretty much from the get-go started up a command economy focused on military production. Back then and in that age, it's hard to fault him for that. It was necessary. It makes sense that that would make for better statistics in the short run, which was needed, but is it sustainable?

As I said, we are talking about a White world after we've regained our indepence.

Quote:
Economic planning is superior to market economies in every case except in the small and racially irrelevant world of light industry and consumer goods (which I agree free enterprise is superior). The only nations that can afford a full market economy are ones with lots of resources to waste, like Britain when it had its world empire to exploit, or the massive USA, but even in these cases planning would've been far superior.
Perhaps.

Quote:
Merchants and peddlers might be a necessary evil in some cases, but these low lives need to be curtailed and contained, and for sure, someone like Cecil Rhodes who helped Jews fill South Africa up with niggers to work in his De Beers diamond mines should be kept far away from government.
I'm just playing a little bit of devil's advocate here, we don't need to resort to slandering or personal attacks. I've always been socialist by default, as pretty much everyone is in Sweden but I am also a curious individual so I like to take in other perspectives on different issues.

Last edited by Robbie Key; March 31st, 2016 at 12:42 PM.
 
Old March 31st, 2016 #32
George Witzgall
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So does a system that puts profit over country and people add to a healthy nationalist ethos, George?

Does a system that makes you cheat, cut down your kinsmen and cut corners just to make ends meet contribute to a high trust, community oriented , racially united country?

Letting your economy--the vehicle that provides food, shelter and stability to a race--be reduced to a formless casino is not healthy for a nation.

Healthy, honorable and meaningful intra-racial competition is vital for its virility. This can take the form of sports, academics, culture, etc; more ARYAN than deciding rank based on who is best at haggling over a fucking tomato. Capitalism belongs at home: in the bazaars of the Middle East, not the continent of Greece and Rome.
Let the womenfolk haggle over tomatoes.

Yes, the government can help ensure unscrupulous capitalists aren't cutting corners or cheating people, but only to a certain degree before it becomes cumbersome and intrusive. What's Aryan is for people to take responsibility for their own lives and first try to correct matters themselves, rather than relying on a cumbersome bureaucracy to look out for them. If you have a strong, competent populous, they are the best at meting out justice and taking care of business.

There has to be a balance. Good laws, good oversight and bureaucracy, but what matters most is good people. Germans hum with productivity under most conditions.
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