Who's Subsidizing Whom? And Should We Oppose All New Anti-Poverty Programs as Crony Giveaways?
Well, the new meme on the Left in favor of higher minimum wages seems to be that since many minimum wage workers also receive government benefits, those benefits "subsidize" the employers paying minimum wage. Example from Kevin Drum here. This is utter madness. A few responses:
- The implication is that the choice is between a job at $8 an hour or a job at $15 an hour. But this assumes the jobs still all exist at $15 an hour. Clearly, many would disappear over time, either as companies automate or as consumers reduce purchases at now higher cost establishments. If the alternative to offering a $8 an hour job is in fact offering no job at all, then minimum wage employers are reducing government benefits payouts.
- The Left has pushed eligibility for many programs (e.g. the changes in Obamacare to Medicaid) into higher income bands of people making more than 100% of the poverty line. How is this creeping up of transfer program eligibility somehow the fault of employers?
- Does this mean that all right-thinking Americans should oppose any future expansions of transfer programs as crony giveaways? And if you say no, that they should not be thought of crony giveaways in advance of their passage, why should they be considered such afterwards?
- The whole point of many of these programs, like the EITC which is listed among the programs in Drum's post, is exactly this -- to provide transition assistance from not working to supporting oneself. The Left's view on this is, as usual, entirely static. What are the folks who are on benefits and working in food service doing 5-10 years from now? Would they look back on that time as a stepping stone to something better?
- If you require that all employers pay a salary such that none of its workers are on assistance of any sort, which is the logical conclusion of this meme, then you divide the world into two classes -- those 100% employed and those 100% on benefits, with most people in the latter having little or no prospect of moving to the former.
- My company pays minimum wage to the vast majority of our 300+ campground workers. But who is subsidizing whom? Most of these folks are over 60 and on Social Security and find that they need or want more money than their Social Security can provide. One reason for this is that Social Security is a horrible retirement savings program, essentially paying a negative interest rate on the money contributed to the system in the retiree's name. If Social Security were a private retirement plan, its proprietors would be in jail by now. Because Social Security is so lame, older people seek work, and come to me, happy to stay active and earn money to supplement their government checks. So am I subsidizing the SSA's inability to provide a fair return?
Back at you: "it doesn't matter even if it's accurate."...it doesn't matter even if it takes ssa.gov out of context. The number of workers per SSA recipient is irrelevant if robots do all the work. That's the effect of the rise in productivity.
Bottom line: reading comprehension or no: as long as the productivity keeps up with SSA recipients' demand (and their number will begin declining shortly) the number of workers is strictly misdirection. IT DOESN'T MATTER.
The ultimate source of *all* (legal) currency is the Fed. If you didn't ultimately get your dollars from the Fed, they're counterfeit. You may, incidentally, get banknotes (claims on demand accounts) from banks, but actual dollars come from the Fed and only the Fed. You can wish it were otherwise, but that's how it is. Sorry to disappoint.
In addition to the link to Keen's paper, if you want more links, I recommend Google.
For example, here's Forbes saying the $16 trillion understates how much money the Fed issued. Here's a summary of the Dallas Fed paper saying the cost of the financial meltdown was $14 trillion.
Keen is a Forbes blog contributor...many articles there. Here's his Crisis in 1000 words article.
Keen is also available in many Youtube video lectures. Youtube has a search box. Type "Steve Keen" and any other topic of interest in that. Watch the videos. (There! A link that does it for you!)
You can also look for the blogs / papers, etc. of Keen's colleagues, Stephanie Kelton, Randall Wray and others. The generic term for these economists is "Modern Money Theorists" or "New Chartalists"...
Believe me, the irony of you not having the energy to Google this stuff (it took me about two minutes to get the links above), yet being critical of those lazy welfare moochers, who you're willing to deprive of most of life's necessities for their laziness, is not lost on me.
This is roughly like asking which countries are now following the laws of gravity. They're all following those laws. Nobody is exempt. Some programs (Argentina's job guarantee, the WPA in the U.S.) have successfully proved the positive effects, some others (austerity in Greece, Spain & Ireland) have proved the negative ones. If economics is science, not superstition (still debatable), it's indifferent to which direction its instrumentalities are used.
Even if what's accurate?
Find better data or STFU. Meantime, they used government sources, and it's up to you to explain why their sources were wrong.
That kind of stupid thinking infects policy regarding home ownership. These fools think owning a home makes you middle class, when in fact owning a home is an effect of being middle class (and having suitable values, which topic we must never ever discuss) and not its cause.
Sources don't matter. The number of workers supporting each SS recipient is much lower now (and in the future). That's do-able because of productivity increases. Mercator has an axe to grind, but even if what they say is accurate it doesn't matter. Productivity makes the "Eek! we're running out of workers to support the SS loafers!" meme just scare tactics, not a realistic concern.
Who supports the government? Why the economy...which requires governance. Without governance, you get the wonderful wealth of Somalia. It's a chicken-and-egg situation.
Government is no more "self-supporting" than you are, or than the King on the chessboard. You don't even knit your own socks, much less treat your own sewage. It's a network.
And as the government cannot exist without private input, the private economy cannot (and obviously cannot) exist without governance. Read that article about the Dark Internet's libertarian experience.
So even when "no governance" is the rule, governance is required. Says the article: "The Silk Road [one site on the Dark Internet] might have started as a libertarian experiment, but it was doomed to end as a fiefdom run by pirate kings." The explicitly libertarian "Dread Pirate Roberts" (the handle for the guy who ran Silk Road) was successful in business because he regulated the transactions on his site--i.e. provided regulations like a government. He was caught because he was trying to hire an assassin--i.e. doing enforcement, again like a government--who turned out to be an FBI agent.
This is not complicated. We don't have to decide how many angels can dance on the head of a pin. We simply have to acknowledge that markets do not exist without government supervision. And they don't.
The job is to make that supervision as intelligent and humane as possible. Otherwise, unregulated markets deteriorate into "Silk Road" chaos where merchants hire assassins to enforce their contracts.
Here is the formula for calculating Social Security retirement benefits:
http://www.foxbusiness.com/personal-finance/2015/04/20/social-security-mystery-solved/?intcmp=ob_article_footer_text&intcmp=obnetwork
Read the section about "bend points". Someone in the bottom bracket gets 90% of his average income as benefits. For the last dollar of my average income, I'll get 15%. What workers and their employers pay in is directly proportional to the income credited to SS. The bottom bracket gets six times the payout per dollar put in as I will get for the last dollar I put in. Overall, I will get about 40%, as compared to 90% in the bottom bracket, so unless I live to far over 100 I will lose money, while someone who fell short of being fully self-supporting for his whole life gets far more than he put in.
Even if you accept the fiction that SS is a paid retirement plan, the gross disproportion in benefits/contributions makes it mostly a welfare plan, thinly disguised by paying well-off retirees much less than they put in. But you can't really call it a transfer from the rich to the poor; the way it really is financed with current tax receipts [1], it also transfers much money from poor working families to wealthy retirees. That shouldn't be a surprise - any time the government is allowed to transfer wealth, the wealthy and powerful will be sure to get their share...
[1] Don't cite the "trust fund". There are no real assets there, just an IOU issued by the government to itself. When and if that IOU is paid back (and there is no legal requirement to ever do so), the money for it will come from current taxes, and will be a wealth transfer from the currently productive to the no-longer productive.
The process of business cycles are already well-known. Demand does not "run" the economy and type of "jubilee" (how's that for a euphemism) he suggests is typically only prescribed, even by its proponents in the short term. It is not a long-term strategy for anything, short of perhaps inflation and/or default.
Most economists understand that long-run growth can only come about through productivity improvements. Simply printing more dollars to chase the same amount of goods can never do that, because, long story short, expectations matter.
I'll admit that the lack of social safety nets increases the
plutocracy's power to create debt peons, but how are any of your
question related to "fraud" or deception.
The difference between fraud and incompetence is merely a matter of intent. Let me know which one you think is at work here. In any event, it doesn't matter because the result is the same.
One reassuring note: The Bush 43 administration experienced the peak in
U.S. life expectancy. Yep, "Thanks W! We're living shorter lives now!"
Nice head-fake. I call bullshit.
It may be unfair that some lazy slug gets to defraud a social safety net
So you admit that it is fraud?
Where's the complaining about the $16 - $29 trillion the Fed pushed out
the door to rescue our banksters? Social safety nets are a rounding
error in that figure.
Way to change the topic. But the true irony here is that your "solution" requires heavier reliance on the institution that aided and abetted those "banksters". Are you sure you want to pursue the Faustian bargain of financing a social "safety net" via the same organization that was only recently empowered to buy large ownership stakes in auto manufacturers, financial and insurance firms, not to mention huge quantities of mortgage-backed securities that it couldn't even value, all with literally no channels of oversight or accountability?
Who said "no channels of oversight or accountability"? You must be arguing with that famous straw man.
And yes, of course there's welfare fraud! Harumph! It's like a rounding error on the Federal budget. The $16 - $29 trillion, on the other hand, is some real money. Again: Straining at a gnat while swallowing a camel.
As for trusting the government to do something well...Well, you're trusting that the firemen will actually put out the fire, and that the CDC issues healthful vaccines, and so on. You're not trying to do your own mosquito abatement again, are you?...;-)
We can all find something to complain about in government (or frankly any human) actions. So what? What's the alternative to government? The libertarian state? Sorry, that's never existed, or has existed in only virtual form, and even then it devolved to a kind of neo-feudalism.
(https://aeon.co/essays/why-the-hidden-internet-can-t-be-a-libertarian-paradise)
See...government can be smart too (financing research that led to the transistor the integrated circuit, 75% of pharmaceutical innovation, etc.) See https://www.ted.com/talks/mariana_mazzucato_government_investor_risk_taker_innovator
I realize it's easier to ignore facts than to change your mind, but I encourage changing your mind as an exercise. Try it! I think it prevents senility... although I may be wrong...;-)