I won't argue from any fundamental grounds that WITT is intrinsically superior to YOYO. But I would like to nibble around the edges of this distinction with a few thoughts.
My first thought really doesn't take us very far: why are conservatives so selfish? Their biggest, most important gripe is that the government is taking away too much of their hard-earned money. Well, OK, I can understand the basic desire to keep the fruits of one's labor. Yet at the same time, I can't help but wonder how people can be so selfish as to deny basic care to another human being in need.
Let's move on with an observation that, in effect, shatters the underlying principle on which conservatives base their position. Let's ask the conservative, would you refuse to share some of your wealth to feed a starving child? Of course, nobody is monster enough to insist that property rights are more important than the life of an innocent child. And that admission pulls the rug out from underneath the conservative's claim that property rights are sacred. This example establishes that property rights must be subordinated to some sense of basic human decency.
So the issue here is not any sacred principle, but drawing a line between two principles. Where should we draw that line? How much money should a wealthy person surrender to provide food, clothing, shelter, and education to a poor person? We have already established that the answer is not "zero". And since the idea of taking money from the rich and giving it to the poor constitutes socialism, we come to the conclusion that all non-monstrous conservatives have already accepted the principle of socialism. "Garsh, I thought I was just writin' stuff, but now it turns out that I've been writing prose all my life!" Yes, even Rush Limbaugh, I would guess, is a socialist.
So having dispensed with the black and white nonsense, let's zero in on the numeric decision: how much wealth should be transferred from the rich to the poor? I don't think that any of us can provide a clear answer to that question. We end up duking it out in the political arena, and if a conservative wants to argue for less, and a liberal for more, I don't think any of us can find a fundamental principle to gainsay either. Ultimately, it boils down to a simple question:
How selfish are you?
71 comments:
"Let's ask the conservative, would you refuse to share some of your wealth to feed a starving child? Of course, nobody is monster enough to insist that property rights are more important than the life of an innocent child. And that admission pulls the rug out from underneath the conservative's claim that property rights are sacred. This example establishes that property rights must be subordinated to some sense of basic human decency."
Chris,
You're making a big mistake by conflating sharing of one's own wealth (which is voluntary, and entirely consistent with property rights) with political redistribution of other people's wealth (which is done by force, regardless of the owners' desires).
Here's a relevant quote from Frederick Bastiat's The Law (1860):
"Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all.
"We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain."
OK, Dither, let's run with that. You don't want your wealth taken from you by force. Now the question becomes, how do you propose to provide for all the starving children in society? I'm guessing that your solution is to rely on charity to provide the food. But that is not a solution, that is a hope. Charity might have the resources to save the children, or it might not. You don't really know, and so you can't guarantee that children won't starve. So apparently you are happy to let some children starve. Am I correct?
Chris,
One thing we have to take into consideration is how we can best grow the pie. We can begin by saying that socialism is not a very economically productive form of government; it requires too much central planning when it comes to redistributing resources. We can also say that it is very harmful to society to completely neglect those in need; the country could do without the massive amounts of inner-city ghettos that have arisen.
I'm not sure what the right quantity is, but it's not just a matter of "selfishness." Freedom of property rights means that people can invest and grow the economy. We also don't want to deny chances to anyone who doesn't have sufficient money--their talents could outweigh those of more fortunate but not nearly as intelligent landed people.
So when it comes down to using taxes to pay for these kinds of WITT programs, is this any different than the services the government gives us, whether it be power, water, garbage-collection, or defense? Redistributing wealth, if we believe it to be an economically beneficial plan, is a tax-payed service like anything else.
In the end, optimizing economic growth is also important because if we make the pie big enough, it becomes less important how it's split. It might be fundamentally unfair, but it nonetheless would make me sleep more soundly at night if we could bring the minimum standard of living above abject discomfort.
My guess would be that to a libertanian the property rights indeed are sacret. All moral choices, such as feeding starving children, must be made by individuals - others can't force them to make them. The choice between YOYO and WITT are made by individuals, not collectives.
So a libertanian who cares a lot about starving children would spend a lot of money on charity on starving children. Even they might not want to donate for, say, public schooling if they don't believe in the idea of public education. It's your money so you get to choose how to spend it.
Am I way off, Dither?
Personally, I don't believe in this view, mainly because it gives the edge to those who choose to be amoral. In a market economy, every penny you give away is a penny away from your competitive advantage. If companies weren't taxed, they wouldn't start donating money to charity instead - because their competitors wouldn't! Those few who did, would risk going bankrupt.
So it's better, in the end, to impose some amount of charity on everyone. Unless we can find some way to level the playground between those who choose to do charity and those who don't.
As a side note, another interesting discussion is how to distribute the wealth being distributed. I'm a proponent of Basic Income (www.basicincome.org). The way it combines equal security and incentives to work is simple yet brilliant.
Re "a new meme bouncing around the blogosphere," it derives (I'm pretty sure) from the Jared Bernstein book, All Together Now: Common Sense for a Fair Economy. Bernstein used to work at the Fiscal Policy Institute in D.C., and you see him quite often as a "talking head" on the business channels. Right now, he's a top-level assistant to Vice President Biden. You don't have to be there to know what Bernstein is whispering in Joe's ear.
As to the big question, i.e., "how much wealth should be transferred from the rich to the poor?," we make that decision with the tax policies we adopt. The United States once had a significantly progressive tax policy, but it's been largely eroded over the years. Right now, as a percentage of their income, the wealthiest people in America pay little more than the middle class. (Of course, in dollar terms, they pay much more; that's not the point, despite the right's insistence that it is.)
As one example, the tax rate on long-term capital gains is at a 70-year low of 15%. This single fact, by itself, has driven income inequality in America to an all-time high. There's no reason whatever to tax capital gains at a lower rate than wages, but we do. Income is income, and should be taxed at the same rate no matter where it comes from.
Chris,
1. Define "society." Is the U.S. government to provide for all the world's children, or only American children? If the latter, then are you happy to let North Korean children starve?
2. Given that there is no record of starvation being a regular occurrence in the United States prior to the inception of the welfare state, why do you believe it would be a problem today? More precisely, why do you believe it would be a problem beyond the capacity of private society to solve?
After all, the economy is larger today than it was before, and the people are more wealthy. Most of America's "poor" citizens enjoy such luxuries as color televisions, automobiles, computers and internet access. Nutritionally, their problem is obesity, not malnourishment.
2. Can you give one example of a welfare state that only provides for the basic necessities of survival (i.e. food to those at risk of starvation)? To my knowledge, there isn't one. In government -- especially since the coming of mass democracy -- the incentives are to expand welfare benefits to the largest possible group, in order to buy the most votes. Expanding the welfare state also benefits the bureaucracy and everyone it employs (only a small percentage of the money collected actually goes to the poor). This leads to an unsustainability problem, which I will explain below.
It is a basic economic truth that you will get more of what you subsidize. If you subsidize "poverty," as defined arbitrarily by the government, then you will get more of it. In practice, this means you will encourage the behaviors and habits that bring about poverty, while discouraging the behaviors and habits that ameliorate poverty. You will get more out-of-wedlock births, more broken families, more unemployment, and more dependency on government. You will get less work, less savings, and a loosening of the bonds between family and community.
Additionally, because you must expropriate the fruits of production in order to pay for these ever-expanding welfare benefits, you are also discouraging production. When fewer goods are produced, the whole society is poorer, and this is especially harmful to the poorest members of society. An extreme example that illustrates this point would be the collectivist agricultural policies of Stalin and Mao, which, by discouraging production, resulted in famines that killed millions of people.
Government welfare also crowds out private solutions to poverty. Private solutions include not only charitable organizations, but also profit-driven insurance companies, fraternal orders and the like. Fraternal societies once provided insurance, health care, old-age homes and other benefits to many working people. And, because the members tended to know each other, they did so without fostering an "entitlement" mentality and the other corrosive effects of government welfare.
Private solutions are more dynamic, creative, varied and efficient than government's expensive, one-size-fits-all, top-down, bureaucratic model. The economic stagnation faced by every welfare state (especially the big European ones like France) testifies to the unsustainability of government welfare.
In conclusion, if there was no welfare state, there would be far less real poverty and more wealth with which to care for the poor, in a variety of ways. People are not inert matter waiting for government solutions; given the liberty to do so, they will act to solve problems.
"Private solutions are more dynamic, creative, varied and efficient than government's expensive, one-size-fits-all, top-down, bureaucratic model."
1. We are now reaping the benefits of the "private solutions" you so earnestly espouse.
2. It's mouthing right-wing tommyrot to talk about "the government's expensive, one-size-fits-all, top-down bureaucratic model." It just isn't true (and I half-suspect that you know it isn't).
But it sounds so good.
Well, there's lots to respond to here. I like Alex's idea of treating welfare as a government service fundamentally no different than road-building. Yes, it is a service because it provides the wealthy with some additional protection from starving people committing crimes of violence to feed their children.
Dither, your response has a lot of problems with logic in it. Let's go through your items one by one.
1. Starving children. Actually, no, I am not happy to let children in North Korea starve. I support the various worldwide efforts to provide food relief to North Korea and other nations. I take it from your answer that you are tacitly acknowledging that you are happy to see American children starve. I will not state the obvious judgement of such an attitude.
2. Next, you deny that starvation is a problem in our modern welfare state. I agree. Yet you then claim that, if the government stopped feeding poor people, nobody would starve because charities would take up the slack. Have you any data to support that position?
Next, you complain that welfare in modern states always expands beyond the "basic necessities of life". I disagree. I would argue that the basic necessities of life include a good education. There's plenty of data showing that the education provided to the poor in American is substandard. Perhaps this isn't so much a matter of money as it is cultural factors. In any case, the definition of "basic necessities of life" is a matter for the body politic to decide. The citizens of this country have established what they consider to be the basic necessities. You think this definition to be too generous. OK, fine. But you have no fundamental grounds on which to base your objection -- you have no basis for claiming that you are right and the majority of citizens in this country are wrong. It's subjective, not objective.
It is a basic economic truth that you will get more of what you subsidize. If you subsidize "poverty," as defined arbitrarily by the government, then you will get more of it.
You're inverting the logic. I see the glass as half full, and you see it as half empty, and therefore you conclude that adding water to it will make it even more empty. That's backwards. I see welfare as an investment in the future. By bringing up the standard of poor people, we add to the pool of able and educated workers for our economy. In terms of economic productivity, the difference between an educated or trained worker and an unskilled worker is enormous. We're all richer when we produce skilled workers.
I also reject your argument that giving welfare to people demotivates them. Yes, it demotivates some people. But there remain lots of people who would love to support themselves, but cannot. Surely you would not deny state support for a cripple?
You argue that taking money away from productive efforts reduces production. Yes, it does. Robbery, theft, and murder also reduce production. If you have millions of starving people, then you will have millions of robberies, murders, and thefts. Why should a person bother producing if wealth just makes him a target for criminals?
You are conflating welfare the centralized economic planning. The two have nothing to do with each other. The USA could have a huge welfare system without an iota of centralized control; it could also have a totally centralized economy without a penny of welfare. Let's keep the apples separated from the oranges, OK?
You extol private solutions to poverty. I agree that private solutions tend to be more efficient, but they suffer from incompleteness. If you happen to live in a place where there's no charity organization, you starve. Charities are hit-and-miss. Thus, while they ameliorate the problem, they do not solve it.
Private solutions are more dynamic, creative, varied and efficient than government's expensive, one-size-fits-all, top-down, bureaucratic model.
That's true, but there's a reason for it: private efforts are accountable to nobody but the owner. They are necessarily spotty in their solutions, and always unequal in their effects. If we had only private charities, there would always be people starving to death. There would always be people dying from minor infections. There would always be high infant mortality. Private solutions work better for SOME people, but not for ALL people.
The economic stagnation faced by every welfare state (especially the big European ones like France) testifies to the unsustainability of government welfare.
Well, if economic growth is the measure of the success of government welfare, why don't we look at the biggest socialist government of them all: China? Their average annual growth rate from 1993 to 2003 was 8.9%, while the same figure for the USA was a mere 3.3%. The reasons for economic growth are many; the simple correlation you propose, when applied broadly, doesn't work.
if there was no welfare state, there would be far less real poverty and more wealth with which to care for the poor, in a variety of ways.
This is speculation unsupported by evidence. I suspect that it is a conclusion drawn from dogma, not data.
Yes, it [wealth redistribution] is a service because it provides the wealthy with some additional protection from starving people committing crimes of violence to feed their children.
Just to clarify, I think you missed my larger point. Protection from crime is an valuable thing, but it's not the most important benefit of wealth redistribution. Wealth distribution may contribute to economic growth by (1) strengthening meritocracy and (2) expanding the middle class, which could potentially mean more commerce.
It follows as a corollary that too much redistribution could easily stifle the growth of commerce. It helps to have people with obscene amounts of capital, as they can take the risks that create big leaps.
Maybe it would help to stop theorizing and talk about real people: my parents, my wife's parents, and my wife and I.
The grandparents on both sides lived their last years in the 1970s and 1980s. I was one of four brothers. In the last years, each of us kicked in a modest amount to make sure our parents didn't go without. At the same time, had the entire burden been ours, there's no way we could have done it. None of us made big bucks, we were bringing up our own kids, etc. Suffice it to say, Social Security and Medicare were the only things that stood between our parents and penury.
It was the same, essentially, for my wife's parents; even tougher, because she was an only child and there weren't any siblings to share the burden. Social Security and Medicare, those government progams you so despise, did what they were supposed to do.
On to my wife and I, both of whom are in far better shape than our parents. We're among the small percentage of Americans who have *defined-benefit* pensions; we both draw Social Security. Barring catastrophe, our sons will not have to kick in for our final years; in fact, there's a good chance we'll leave them a decent amount.
As for the faceless bureaucracy, the one-size-fits all top-down systems, both my wife and I have had considerable contact with SS and Medicare. We have yet to have a problem. The biggest difficulty we ever had was with the private bank that held a CD of my mother-in-law's for years on end. When it came to transfer it to my wife, the bank gave her all kinds of grief.
In the real world, Dither, your anarchy doesn't begin to meassure up to the New Deal programs that rescued seniors in 1935 and again in 1965: Social Security and Medicare.
I also reject your argument that giving welfare to people demotivates them. Yes, it demotivates some people. But there remain lots of people who would love to support themselves, but cannot. Surely you would not deny state support for a cripple?
How much welfare demotivates people also depends on implementation. I don't know how it works in the US, but here in Finland it's like this: If you don't earn any money, you can get 400 euro worth of welfare money a month. If you earn 50 euro a month, your welfare money is simply reduced to 350. Same with many other forms of state money. In some cases you may even get less money if you work than if you don't. I believe this indeed serves as demotivator for a relevant number of people.
In the basic income system, your pay is always added on top of the basic income. That would be a little more costly, but it would encourage people to take also those jobs that don't pay that well.
So, my point is, even though I support welfare, one should always make sure that being proactive in ones life brings greater benefit than living on the money of others.
I agree, EuroHippie, the Finnish system doesn't seem too smart to me, especially with the high unemployment rate in Finland. I would think that it would be best handled by providing everybody with a basic income and then using a simple graduated tax system. So people at the bottom pay no taxes, and everything they earn, they keep, but as you climb up in income, you start having to pay higher taxes.
The objection to all this is that the checks could be misused by parents or relatives. That's why we also use such things as food stamps, subsidized housing, and so forth.
Yes, that's pretty much what my party (the Greens) proposes. However, we have long traditions of socialdemocratic bureocracy, and irrational objections to "giving things for free".
Good point about misuse.
"I take it from your answer that you are tacitly acknowledging that you are happy to see American children starve. I will not state the obvious judgement of such an attitude."
No, Chris. I thought you were above resorting to this sort of debating tactic: "Anyone who disagrees with me must have evil motivations."
I think you ignored most of what I actually wrote. At this point, it isn't worth continuing the discussion.
"We are now reaping the benefits of the "private solutions" you so earnestly espouse."
Gerald, I'm not sure how you came to this conclusion. Perhaps the misunderstanding is happening because Republicans talk about "free markets" and "small government," and you therefore associate the disastrous outcome of Republican governance with these ideas. But Republicans do not actually believe in these ideas, nor do they practice them.
Dither, I don't think you're being fair here. I asked you a direct question ("apparently you are happy to let some children starve. Am I correct?"). You didn't answer that question and instead countered with "are you happy to let North Korean children starve?" I gave a straight answer ("I am not happy to let children in North Korea starve.") At that point I pushed you hard by insinuating that, since you had dodged by direct question, it was apparent that you were not willing to provide the answer that you were happy to let children starve. You took umbrage to that insinuation and declared the discussion over.
I'd like to examine this process more closely. Here's what was really going on: I'm trying to demonstrate that the basic principle of welfare is accepted by all reasonable people. My position is that the redistribution of income associated with this cannot be gainsaid by any fundamental principle -- that it is in fact a trade-off between competing desiderata. But you don't want to admit that your fundamental principle of the sanctity of property rights admits any compromise. Unfortunately, that uncompromising approach runs into trouble when we talk about starving children. So you dodge the issue.
So let me again put it to you: do you aver that the sanctity of personal property cannot be compromised by the desire to prevent the death of innocents? And I will ask you to provide a straight answer here. I realize that the matter is complicated, but we're talking about a basic principle here.
Chris,
I have not dodged the question. I addressed it at length. I do not believe people would starve to death without the welfare state. Instead, I believe they would be better off. I provided some of the reasons why I believe this.
Your question presupposes that I accept your premise, namely, that starvation will result from repeal of the welfare state. I don't.
You suggested that "property rights must be subordinated to some sense of basic human decency." This implies that property rights and human decency are somehow at odds.
But the opposite is true. The violation of property rights is indecent, uncivilized, violent and destructive. It is the reason for actual starvation occurring in many parts of the world, long after the elucidation of capitalistic principles made such starvation completely avoidable.
We know how to conquer poverty and make starvation a thing of the past. It is not by having government seize more and more of the fruits of productive labor. The welfare state is not the reason why Americans eat, while North Koreans starve. On the contrary, the reason Americans are so much better off is because they have a much smaller welfare state than the North Koreans; its destructive effects are thus mitigated.
You will notice I don't suggest you actually want to bring about greater poverty, or that you take pleasure in the needless death and suffering that will result from it. Instead, I presuppose you actually want to improve the lot of humanity, but we disagree on how best to accomplish this end. I have tried to argue for my point of view, in the (faint) hope of changing your mind.
In any case, I'm starting to think it's probably best to let things be. Your side of this debate has had its way for a long time now and we are reaping what has been sown. All the ideas in the world won't make any difference when Social Security and Medicare obligations can't be met except by devaluing the dollar. Sadly, printing more money won't bring into existence goods that haven't been produced. Then there will be much wailing and gnashing of teeth, and lots of blame going around, but I'm not hopeful that anything will be learned.
Dither, because I value our differences, I'm going to sleep on this and refrain from responding until tomorrow. I'd rather sort this out than butt heads.
Dither: Which of these do you believe?
1) If we stopped redistributing wealth now, poor people wouldn't be worse off next year. In fact, they'd probably be better off.
2) If we stopped redistributing wealth now, poor people would be worse off next year. However, this would increase economic growth so that in time, even the poor would be better off than they are now.
I've given this some thought and I have decided that our basic problem here is that we are coming from such completely different universes that we don't communicate well. Dither, almost everything you write strikes me as preposterous on its face. I suppose that the only means of tackling this is to take our logical processes more slowly, and check each other's assumptions more frequently. I agree with your estimate that we are unlikely to convince each other, but I don't think that should be our purpose here. I think that the value of intellectual collisions of this magnitude lies in how each of us learns about our *own* assumptions.
That said, I'd like to make one point that expands on EuroHippie's question (which I very much hope you'll answer):
You aver that welfare itself is the cause of much starvation:
The violation of property rights is indecent, uncivilized, violent and destructive. It is the reason for actual starvation occurring in many parts of the world, long after the elucidation of capitalistic principles made such starvation completely avoidable.
This is an example of what I perceive as a preposterous statement, because in my reality, history is a major guiding light, and what you say is completely contradicted by history. History provides us with a plethora of examples of societies that had strong protections for property rights -- and those societies all accepted mass starvation as the normal course of life. Indeed, this lesson is so absolute that I cannot think of a single counterexample, although I'm sure that there must be some. And when we look at the other side of the coin, considering those few societies that were in some manner socialistic, we see no starvation. A good example of this is the Inca state, which was a totalitarian welfare state. As far as I can recall, the Inca state was the only totalitarian welfare state in history, and it was also the only state that had no starvation.
Thus, the historical evidence is plainly the reverse of your claim: welfare reduces starvation. This is why I react to your comments with such incredulity.
Chris,
Is it not also true that the communist states of the Cold War (U.S.S.R., Red China, Cuba...) were welfare states that abolished property rights? Fat load of good they did.
Woops! Yes, of course! How stupid of me to think of "history" in terms that don't include the 20th century! So yes, the 20th century totalitarian socialist states provide excellent examples of a correlation between socialism and starvation.
However, I have already pointed out the distinction between socialism (control of the means of production by the state) and welfare (redistribution of wealth to provide for the needy). The examples provided by the Communist states show that socialism (a superset of welfare) correlates with starvation. The examples do not provide a correlation between welfare and starvation. For example, the Inca state did not control the means of production -- all it did was redistribute agricultural output to insure that nobody starved.
However, I have already pointed out the distinction between socialism (control of the means of production by the state) and welfare (redistribution of wealth to provide for the needy).
The examples provided by the Communist states show that socialism (a superset of welfare) correlates with starvation.
For example, the Inca state did not control the means of production -- all it did was redistribute agricultural output to insure that nobody starved.
Chris, I'm having a serious problem with your logic. You claim that socialism is a superset of welfare. Therefore, all welfare states must be socialist states, which would mean that all welfare states, notably the Inca state *shouldn't* work, but you just said that the Inca state did work.
I don't like to speak for other people, but I have a feeling you meant to say that welfare was a superset of socialism. Though personally, I think we should throw out this idea of subsets and supersets, because we have no basis to say that either welfare necessitates socialism or vice versa.
Alex, yes, I got the terms "superset" and "subset" backwards. To avoid the confusion, let me put it this way:
All socialist states are necessarily welfare states.
Welfare states are not necessarily socialist states.
History provides us with a plethora of examples of societies that had strong protections for property rights -- and those societies all accepted mass starvation as the normal course of life.
Can you give examples of these societies? Because, I'm finding it hard to come up with them, in fact.
Sure, EuroHippie, I'll provide a short list of such societies:
Classical Greece
Alexandian Greece
Roman Greece
Medieval Greece
Renaissance Greece
Enlightenment Greece
Republican Rome
Imperial Rome
Medieval Rome
Renaissance Rome
Enlightenment Rome
Roman Gaul
Medieval Frankish states
Medieval France
Renaissance France
Enlightenment France
that's just for starters. Would you like some more?
Didn't many (all?) of these societies tax their people, often arbitrarily and harshly? I guess Dither would not call that respect of property. It's only that the wealth was redistributed to the lords and kings and not to the poor.
Few of these societies had the wherewithal to impose taxes on individuals. Most of the wealth was controlled by the landowners, who were also the aristocracy, who also ran the government (mostly). And they were very serious about protecting their property rights. There was a steady erosion of this process as trade replaced land as the primary source of wealth, so I'm on weaker ground with the Enlightenment societies.
Dither,
"2. Given that there is no record of starvation being a regular occurrence in the United States prior to the inception of the welfare state, why do you believe it would be a problem today? More precisely, why do you believe it would be a problem beyond the capacity of private society to solve?"
Where have you looked for such evidence? Starvation and malnutrition were common problems before and after the inception of the welfare system, especially in rural areas. According to a nation-wide study performed in the 1960s, over 10 million people suffered from insufficient nutrition (Citizens’ Board of Inquiry, Hunger USA, Boston Beacon Press 1968, p. 16). I can't find statistics on starvation very quickly, but even if I could, it would likely underestimate how many people died from insufficient access to food as malnutrition makes people more susceptible to disease.
Hmm. Unless medieval France significantly differed from all the depictions of medieval European society I've read, this is a matter of interpretation.
It's true that the aristocracy were considered the rightful owners of the land. So technically they owned the crops grown on those lands. Call it ownership or rent of the land used by the peasants or taxation, they took more than their fair share of the harvests. Mostly this was enforced on the people, who also were the ones to starve. So it's not really the free society we're talking about here.
I realize that we'll have a devil of a time sorting our the historical record because of the widely varying schemes used to transfer wealth. So I'm going to write up a new essay on government expenditure throughout history. I have several excellent references on the subject.
Eurohippie wrote:
Dither: Which of these do you believe?
1) If we stopped redistributing wealth now, poor people wouldn't be worse off next year. In fact, they'd probably be better off.
2) If we stopped redistributing wealth now, poor people would be worse off next year. However, this would increase economic growth so that in time, even the poor would be better off than they are now.
My view is closer to number 2. If you shut down the welfare system all at once, there would be serious problems because some people are now totally dependent on it, and the society would need time to adjust before it could absorb the burden of caring for those people.
It would be better to phase it out over time -- for instance, by allowing people to opt out of paying into these programs, while drastically cutting spending elsehwere (the military budget and needless wars would be a good place for the U.S. to start) to make up the shortfall in the interim.
The most important change that would result from phasing out welfare is a change in expectations on the part of the public, which will affect a change in behavior.
There is a "moral hazard" that results from subsidizing behaviors that lead to poverty. This is not only an issue with government, of course. Think about a person who is bailed out by his parents every time he loses his shirt at a casino. Any inducement to stop gambling recklessly is mitigated by the promise of such a bailout.
To the extent that government reduces the pain associated with poor choices -- choices like living beyond one's means, taking excessive risks, and failing to plan for a proverbial rainy day -- it results in more of such choices being made, to the detriment of the society onto which the costs are passed.
End the promise of endless government support, and responsible and cautious behavior will be given a boost. Fewer people will end up in poverty.
Of course, misfortune can befall even the most prudent person. But, without the ever-increasing drain of the welfare system, there would be abundant production to care for the truly needy.
Another point to consider is that an economic crisis might force a drastic and sudden downsizing of the welfare system, which would result in some serious pain for a lot of people. If reckless spending, debt and regulation bring production to its knees, no amount of government promises or paper money will feed the hungry.
Chris:
I've given this some thought and I have decided that our basic problem here is that we are coming from such completely different universes that we don't communicate well.
Agreed.
Re: Property rights and starvation. I am referring to the capitalistic age, and the rapid increase in the productivity of labor, and in living standards, made possible by capitalism. When we hear of people today starving in Africa or North Korea, it is not because of the lack of a government safety net. It is because the governments of these nations have rejected capitalism in favor of socialism, or because capitalism is made impossible by the disregard for property rights.
I know that socialism and welfare are not interchangeable terms. But they are related, in that both try to separate production from "distribution." This is the fatal mistake, because production is in fact driven by the desire of the producer to profit by the fruits of his labor. If you tell him, after he has produced something, that you are going to take it away to dispose of it as you see fit, then he has less incentive to produce in the future. The welfare state is simply a partial or piecemeal implementation of this destructive practice, whereas in a socialist state the implementation is total.
The historical examples are interesting, but they are not examples of capitalistic societies. Of course, in the pre-capitalistic ages, natural occurrences like drought, flood or pestilence often resulted in people starving to death. Also, price controls have always caused shortages, which sometimes led to famine. See, for example, Rome, when Diocletian fixed the price of food some 1,700 years ago.
Dither, you seem to be taking a moralistic view of poverty: people on welfare must be lazy. I agree that there are such people -- I knew one personally -- but you have no idea of how large a factor laziness is. You're proceeding from dogma rather than from facts. After all, welfare is not handed out willy-nilly; recipients must go through interviews and demonstrate an objective basis for their inability to support themselves. So your fundamental assumption runs counter to the evidence.
Moreover, you are willing to let the truly needy suffer:
End the promise of endless government support, and responsible and cautious behavior will be given a boost. Fewer people will end up in poverty.
And what will become of those "fewer people" who end up in poverty? Without welfare, they'll starve. You seem quite willing to look the other way while they starve.
I am referring to the capitalistic age, and the rapid increase in the productivity of labor, and in living standards, made possible by capitalism.
What "capitalistic age"? The basic free enterprise system has been with us since the dawn of history. The system of accumulating capital for larger projects that enjoy economy of scale was first conventionalized in the Renaissance. So please be more specific about what you mean by "the capitalistic age" and why that situation is distinct from other economic arrangements.
"Dither, you seem to be taking a moralistic view of poverty: people on welfare must be lazy."
I suggest you take another look at what I wrote. I actually said nothing about laziness. A person can be the opposite of lazy and still make choices which are imprudent or reckless.
I only deduced that a person will do less of something when the cost, to himself, of its doing increases. This is essentially a reiteration of the law of demand, one of the most fundamental principles of economic reasoning. If you find this to be controversial, then please explain why.
"And what will become of those "fewer people" who end up in poverty? Without welfare, they'll starve. You seem quite willing to look the other way while they starve."
Here we go again. I've already answered this question, repeatedly. To recap: I don't believe people would starve — at least, not if the welfare system was phased out gradually. Obviously, you assess the situation differently, but that's no reason to misrepresent my position.
What "capitalistic age"? The basic free enterprise system has been with us since the dawn of history.
Yes, capital itself is nothing new. However, I would describe the "capitalistic order" as one of mass production geared towards satisfying the wants of the masses; and marked by respect for property rights, economic and personal liberty, as accomplished by limiting the power of government through such contrivances as constitutions and bills of rights. Historically, we could say a distinctly "capitalistic age" arrived with the Industrial Revolution in England, although capitalism certainly existed before then. The agrarian, pre-industrial United States was also strongly capitalistic.
I know these definitions are not perfect, but hopefully they provide sufficient clarification.
You're right, you wrote nothing about laziness; instead you wrote about:
poor choices -- choices like living beyond one's means, taking excessive risks, and failing to plan for a proverbial rainy day
So your objection to welfare is that it rewards risky behavior. I misconstrued your writing because it's so far out in the weeds. It seems to me that the primary reason people are poor is because they can't get a job. You seem to think that people are poor because they invested in Enron, bought a Winnebago, or didn't buy enough health insurance. OK, I'll accept those conditions, but what about all those people who can't get a job? What about them?
You argue that, if we get rid of welfare, then the economy will improve in such a way as to eliminate poverty. Yet there is not a shred of evidence to support your argument. Indeed, all available evidence supports the opposite argument: that, without welfare, people suffer from the sharpest poverty.
You offer as an example the Industrial Revolution in England. I'll take this to mean the period from about 1820 to 1910 in England. You include the pre-industrial United States, which I'll take to mean the USA from 1789 to, what, 1900? Let's just average these together and talk about the nineteenth century in England and America. By your reasoning, there should have been no poverty in either country. I think that the most elementary knowledge of history blows your thesis completely out of the water. There were huge numbers of people suffering from intense relative poverty in both societies. Do you claim otherwise?
I just ran across an interesting collection of data taken from the US Labor Dept. Somebody collated net job creation during the terms of all post World War II presidents. The result is shocking in its clarity. Every Democratic president created a great many jobs; every Republican president saw only a small amount of job creation. Here are the number of millions of jobs created per year, on average, during the terms of the presidents:
Truman: 1.0
Eisenhower: 0.3
Kennedy: 1.0
Johnson: 2.0
Nixon 1.1
Ford: 0.5
Carter: 2.3
Reagan: 1.4
Bush I: 0.4
Clinton: 2.7
Bush II: 0.2
Now, if we assume that Republican Administrations take a more libertarian attitude towards the economy, and Democratic Administrations take a less libertarian attitude, then we can clearly see the effects of libertarian philosophy in economic policy: more libertarianism means fewer jobs.
Yet another piece of evidence that runs counter to your hypothesis, Dither.
Dither, the welfare state doesn't exist for the recipients, but for their families. We could let poor people live on the streets, as the lowest castes famously do in India. We could put them in camps, as we do for refugees. Welfare gives them the chance to live a mainstream life. Perhaps some liberals do this for it's own sake but the benefit is that the children -- future taxpayers -- grow up expecting to live as Middle Class. It's a good investment because many will work insanely hard to provide a Middle Class environment to their own children.
Like Chris I worry about jobs. Many of the terrible jobs have been mechanized away. It's not like the whole family can take to rolling cigars in their tenement all night long to earn bread money.
I worry about food. We make enough food here to export. The rich get much better food, but even the richest cannot easily eat 100x what the poor eat. Ethanol changes things. Now the rich can use food to power their machinery in addition to eating it. If the poor start competing with machines for food it's gonna be bleak.
Chris, there are many problems with such a superficial analysis of historical data.
First of all, despite their rhetoric, Republicans are not libertarians and are often bigger spenders than Democrats. Secondly, the data you quoted does not tell us the makeup of the congress, or what policies were implemented during each president's term. How much of the job growth was in the government sector? Third, the data says nothing about Fed policy.
This last point is very important because the economy can be "juiced" in the short term by artificially low interest rates, but, in the long run, this leads to a recession. Instant gratification, for nations as well as individuals, is usually not the healthiest policy.
Now, as to your objections, I think they are largely the result of a misunderstanding (which, I'm certain, is partly my own fault). I'm going to present my analysis as clearly as possible this time, in a step-by-step fashion. I'm even going to try using headlines to make it more readable.
The source of poverty
Poverty is the natural condition of humanity, and was the starting point of the human race.
The reason we are less poor than our ancestors is because they worked, produced and saved, then invested their savings into improving the methods of production. Over time, more could be produced with less effort, which meant that man's energies could be freed up to satisfy additional wants (which are never lacking).
Production, not jobs
It is therefore production, not jobs, that alleviate poverty. What's the difference? Jobs are a means to the end of production, but not an end in themselves.
We all know that the Chinese working in a sweatshop today is much poorer than us, but not because he lacks a job.
We also know that jobs can be created through make-work schemes. The government could order the erection of pyramids. Labor-saving technology could be prohibited. Many jobs would be created if motorized transportation were eliminated, and all freight had to be carried on the backs of mules — or, better still, by men traveling on foot.
Of course, none of this would make us wealthier. Instead, by using more resources to produce fewer goods, the society is deprived of the abundance made possible by the employment of more efficient methods of production.
Why unemployment?
Human wants are unlimited. No sooner is one desire satisfied than another is discovered. When the problem of hunger is solved, and protection from the elements secured, man has time to enjoy the luxury of music. And so on. There is thus always work to be done.
When economic freedom prevails, short-term, transitional unemployment is normal — the sign of a healthy economy wherein labor, like other resources, finds its most productive employment. Men had to stop building horse-drawn carriages, and find other work, when the automobile came along.
But long-term, involuntary unemployment is generally the result of governmental policies. Anyone whose labor is valued below a government-mandated minimum wage will not be able to find work. Likewise, if the government makes firing workers very difficult, or otherwise raises the costs associated with hiring, fewer people will be employed than would otherwise have been so. Government licensing requirements and regulations that raise the costs associated with starting a business also result in fewer people working.
(Not surprisingly, many of these policies are lobbied for by labor unions and established businesses precisely because they offer protection from competitors.)
Abundance makes possible voluntary unemployment
In order for some people to live without producing, others must produce enough to sustain both themselves and those who produce nothing.
Child labor exists not because parents need additional income to pay for luxuries, but because families would risk starvation without the productive efforts of their children. When abundance is achieved by improvements in the methods of production, it is no longer necessary for children to work. They can stay home and be raised by their mothers or grandparents, who likewise are able to leave the workforce.
Conclusion
Only the process of production, saving and capital accumulation cures poverty. No welfare state would even be possible if the people were not already wealthy enough to care for those who produce nothing.
Any welfare state discourages production. Still, this might be tolerable if the benefits outweighed the costs. The problem with the welfare state is that, in practice, it perpetuates itself and grows to the point where it becomes seriously detrimental to production. It is literally bankrupting the United States, and has caused economic stagnation throughout Europe. Is it sustainable? I don't think so.
If the per-capita capital stock — which comes out of production — does not increase more rapidly than population, the standard of living declines. Literally, more people have to make do with fewer and fewer goods. We all become poorer. At some point, if the trend continues in this direction, the welfare state itself goes kaput because the producers are just barely subsisting and there is nothing extra to hand out.
I don't think we'll get there, but I do believe we are in for a world of pain, perhaps sooner than later, and those who are dependent on government will be hurt the most.
Dither, I have to admit that the data I presented on job creation do not provide a solid demonstration of an inverse correlation between a conservative President and job creation. It suggests as much, but nothing more.
So, let me take up your points headline by headline.
The source of poverty: I agree
Production, not jobs: I agree
Why unemployment?: I suppose I would agree with your statement that, in a truly free economic system, there will be no unemployment; however, this would be because anybody not able to work will starve to death and thereby remove themselves from the statistics. I consider this to be an unacceptable downside of totally free economic systems.
I agree that the minimum wage reduces jobs, but you yourself noted that the Chinese sweatshop worker is poor. If there were no minimum wage, how low would wages in this country go? Would the people earning such wages be able to feed, clothe, and house their families? I doubt it.
I'll also point out that some -- SOME -- government employment regulations serve to strengthen the economy by preventing non-economic considerations from influencing the hiring and firing of employees. For example, government regulations requiring fair consideration for women unleashed a flood of new talent into the American economy, much to its betterment. Sure, in a perfectly rational economy, that would have been unnecessary, but since when has sexism been rational?
Other government regulations do indeed serve the economy well. For example, consider the role of food safety regulations in the economy. In a completely free market, manufacturers are free to include long-term carcinogens in their products, sell them to an unknowing public. Twenty years later, when people start dying of cancer, the manufacturer has closed shop and the victims have no legal recourse. This kind of thing could be rampant. Knowing it, consumers would be extremely suspicious of any supplier who does not have a solid track record, resulting in the prevention of any new competitors entering the market, which in turn enables the existing companies to charge higher prices for the same production. That makes people poorer, not richer.
So while I concede that some government policies do diminish overall social production, I think you have to concede that some government regulations increase overall production.
Abundance makes possible voluntary unemployment: I agree.
Conclusion: here's where I disagree, because your conclusion is not a conclusion drawn from the preceding points. It's a completely new set of statements without any evidentiary support.
Your first paragraph would be true if you are implicitly including those government actions that improve overall productivity, such as roadbuilding, establishing weights & measures, keeping the marketplace honest, and so forth. I agree that government can hamper, but I categorically reject any suggestion that ALL government activity is harmful to overall productivity. You seem to acknowledge this with a later reference to benefits outweighing costs.
The core of your case is this statement:
The problem with the welfare state is that, in practice, it perpetuates itself and grows to the point where it becomes seriously detrimental to production.
Note that nothing you wrote prior to this statement provides evidence in its support. This is a bolt from the blue. I'm happy to consider it as a hypothesis. There is no question that the size of entitlements has grown in proportion to GDP; however, I would expect as much as an intrinsic result of economic growth. The richer we are, the more we can afford to give to the poor. For example, this society is fast approaching the point where a majority believes that some degree of health care is an entitlement. A hundred years ago that would have been considered preposterous. But it is accepted now because we have enough wealth to pay for it. (Well, MAYBE enough wealth...)
I am certainly with you on several important points, so let me state my likely points of agreement with you.
There should be a limit to the degree to which the government intrudes into the economy to transfer wealth. You believe that this limit should be zero, but I put the peg higher because I believe that the government is the only organization capable of providing universal basic care for the citizens. I further note (and I doubt you'll disagree) that the government also intrudes into the economy in such a manner as to transfer wealth from the general population to special interest groups other than the poor. I would certainly like all such transfers eliminated.
Private enterprise usually solves problems more efficiently than the government. (However, there are certain tasks that the government can do better than private enterprise.)
"Private enterprise usually solves problems more efficiently than the government."
Baloney. Case in point: of all the health care systems operating in America today, not one even compares to Medicare for efficiency.
Dither, you claim a welfare state discourages production. I read a book by Jeffrey Sachs in which he explains that landlocked countries and sub-Saharan Africa are in a "poverty trap" [ http://en.wikipedia.org/wiki/Poverty_trap ]. Sachs feels if we can get anti-malarial bed nets and a few other things to Africa they will be able to start accumulating capital themselves. Diverting unemployed Americans to bed-net production would discourage daytime TV watching, not useful production.
Someone recently pointed out that one reason burglaries are down is that there is nothing to steal. In the 1970s there were still people without TVs, microwaves, or computers who wanted those things very badly. Now 2-year-old models are thrown away. You say human wants are unlimited but maybe we have reached the point where people would rather spend time with their families in front of a 42" TV than work extra hard for a 70" set?
This is great.
Most of America's "poor" citizens enjoy such luxuries as color televisions, automobiles, computers and internet access. Nutritionally, their problem is obesity, not malnourishment.
Being in this bracket statistically, I'll take this chance to comment on this conundrum.
First I live in HUD housing, my wife and our five children, and to be truthful, my wife and I were pretty delighted that we got the place we did. Yeah our kids have to go past drug pushers and prostitutes to get to school, but out of the several places we looked at this one was the highest quality. And it got us out of a 1 room, hotel room. So I pay 1/3 of my monthly income to live in a place that has a mold problem, it ruined a brand new mattress, in a crappy area. My beef . . . they claim the place is worth $1600 a month. So basically the taxpayers are paying the difference, while I could be in a house in an ok area for less then that. Now... you might say that's the problem with putting govt in charge, but that's not really the issue. It's the same problem of corruption, where someone is making a lot of money off of other people's misery, that we see a lot of in capitalism.
Now I own a few computers, a car, have a nice tv, does this mean I'm living high on the hog, while I get some food stamps and HUD? In your opinion, it would seem I am. What you don't understand, as so many people don't is the prices of basics have skyrocketed over the years while the luxuries are cheap.
You might see me picking up some Tri-tip at the supermarket w/ food stamps occasionally and sneer, not realizing it's on sale for $2.89 a pound, better priced then ground round. And there are also the other meals of top ramen day after day, or peanut butter and jelly for the kids for the 50th time in the month, because fruits and other snacks are too expensive. School lunches are there own atrocity. I'm guessing lowest bidder, where sometimes the kids get frozen milk or bad milk. My kids are half starved, and they still, often refuse to eat the garbage served, or worse eat the fried crap that at least tastes ok.
Yeah we have a car, I've owned since 1999. I drive only to work and the grocery store to conserve gas and save on maintenance, so it still has only ~80k on it. I worry every day that something major will happen (a breakdown) and I'll be SOL.
My fat, lazy kids do stay inside too much, since there is no decent place for them to play. They have health issues from living in another place w/ mold issues. So they do spend a few hours playing video games on my PS3(gift) on my 47" HDTV(gift) or some of the older systems we have around.
I would honestly say one of the things understood the least is how we have money for some of the things we do afford. A DVD here and there, or something really special. If we do have a little extra money it's generally going towards diet.
So if we have you over for a nice meal don't forget about the times in between where things don't look as rosy.
A little glimpse into our life.
My wife's Dad and step mom(conservative) come over for Christmas dinner the year before last, and were so horrified they offered to help find (as in buy) a place for us to live. I'm not sure what happened with the offer, but we're still living here.
Anyway, so many poor people have health issues, like my family and I do. You can't dismiss these factors, but your party does time after time.
http://www.cnn.com/2006/HEALTH/08/29/poverty.health/index.html
Now I'm not saying every person getting some assistance is like me. Many are generational, but do you think they should be grateful for your measly pittance that encourages them to try and work the system or make money on the side(drugs, etc.) Throwing people in jail for being poor is not going to get you more tax dollars, getting people working in the system will.
I hope I have the time to cover #2
Evil Jon
Evil Jon, I really appreciate your comment, because we seldom get to see things from other points of view. Your post raises an interesting question in my mind: to what degree is this person representative of the American worker? You have a job, you're earning an income, but it's not enough to provide what most people consider to be the basics. So my question for you, without invading your privacy, is this: would you say that you are a fairly normal person in a fairly normal job, or would you say that you have some special handicap, weakness, or other factor preventing you from earning what any other person might earn? What I'm wondering here is whether it's possible for people to survive on "regular jobs" (as opposed to, say, bankers who add so much more to our economy {rolling eyes} ).
"What I'm wondering here is whether it's possible for people to survive on 'regular jobs'".
What a touching question from someone who believes (along with Dither) that "the minimum wage reduces jobs" (another huge slice of baloney, contradicted by all kinds of evidence).
Gerald, I'd love to see the evidence that the minimum wage has no effect on job creation. When in doubt, I plunk my money down on the basics, and the basics in this case consist of simply supply-demand-price relationships -- about as basic as you can get. Ergo, I think that the working assumption we should make is that, if you raise the price of employment, then you lower the demand for it. But if you have confuting data, let's see it.
Chris, The idea that raising the minimum wage costs jobs has been a staple of right-wing rhetoric for years. If you believe it, then you must have been solidly with the GOP as they voted, year after year, against any increase in the minimum wage.
There's plenty of evidence on the other side. For just a tiny bit, take a look at this address: http://thinkprogress.org/2006/07/24/ohio-wage/
P.S.: I picked up Systems of Survival at the library today.
Chris, Also see: http://www.letjusticeroll.
org/pdfs/minwageinhardtimes.pdf
In that Nov. 2008 piece, there's a section with the subhead: "Raising the minimum wage does not increase unemployment in good times or bad," are refers to an endnote that lists, in chronological order, several studies in support of that statement. N.B.: None of what I've said should be taken to mean that there are no studies going in the other direction.
Chris, The idea that raising the minimum wage costs jobs has been a staple of right-wing rhetoric for years. If you believe it, then you must have been solidly with the GOP as they voted, year after year, against any increase in the minimum wage.
Believing that raising the minimum wage causes unemployment doesn't mean you necessarity object to raising it. If you believe in this statement of fact, you may still support raising the minimum wage for how it improves the lives of many workers. You must be able to separate your evaluation of fact from your value judgements and political association.
Chris, here are my replies to your comments regarding my last post:
"I suppose I would agree with your statement that, in a truly free economic system, there will be no unemployment; however, this would be because anybody not able to work will starve to death and thereby remove themselves from the statistics."
When I said there would be no "long-term, involuntary unemployment" in a free market, I should have qualified this by adding, "among people who are capable of working." That is what I meant. Of course, people who are seriously ill, injured or disabled will not be working.
I disagree with you about these people starving to death, for reasons put forth earlier.
"I agree that the minimum wage reduces jobs, but you yourself noted that the Chinese sweatshop worker is poor."
Wages are raised by increasing the capital stock, per head. The Chinese worker earns less than us because he has less capital (machines and tools) at his disposal, which in turn means his labor is less productive. Individually, he contributes less to production than does a worker using better tools.
For this, we can thank decades of communism in China, which depleted that nation's capital stock and starved millions. China fell behind, and is now playing catch-up.
"If there were no minimum wage, how low would wages in this country go? Would the people earning such wages be able to feed, clothe, and house their families? I doubt it."
But how would those people be better off unemployed? It's not as if the minimum wage actually raises wages. It doesn't make labor more productive. It simply mandates a minimum price that can be paid for labor. Anyone whose labor is valued below that price won't be hired. Instead, a more productive worker will be chosen.
In practice, this means mostly young, unskilled workers will be priced out of the market, and thus prevented from acquiring job skills that lead to higher paying work.
"I'll also point out that some -- SOME -- government employment regulations serve to strengthen the economy by preventing non-economic considerations from influencing the hiring and firing of employees."
I'm opposed to "anti-discrimination" laws for a number of reasons, but I'll confine my answer here to an economic argument.
Let's say that women are being underpaid in a particular job because of gender discrimination. They can do the same work as men, just as well as men if not better.
If this is true, then any company that hires these women will be getting a terrific bargain! It will be paying less for the same work to be done, and will benefit from a cost advantage over its competitors. Therefore, companies that do not discriminate on such arbitrary grounds will flourish, while those that do will lose market share.
The apartheid system in South Africa was enforced by government precisely because, given the freedom to choose, many whites would have hired black workers. Many did anyway, in violation of the law, rather than hire artificially expensive white labor. Money trumps discrimination, it seems.
Economist Thomas Sowell did some important research into income disparities between men and women, and concluded that they were most likely the result of women temporarily leaving the workforce to raise children, and thus losing time on the job. Among women who stayed in the workforce, wages were comparable to, and often greater than, those of men doing the same work.
"For example, consider the role of food safety regulations in the economy..."
The problem of consumer suspicion which you cited could be solved by private accreditation agencies. New entrants into the market could submit to inspection by these agencies to gain a trusted "stamp of approval."
How is this different from government inspection? Well, for one, when the government screws up, or its findings are tainted by corruption, it stays in business just the same.
Secondly, any minimum standard for health and safety established by the government is necessarily arbitrary. The government might be okay with small amounts of carcinogens in your food, especially if the industry producing the food has a powerful lobby. You thus have a false sense of security because of the government's guarantee.
The dairy industry affords an example of what I'm talking about. Years ago, the big dairy producers started injecting their cows with hormones to increase milk production. This caused infections in the cows, which had to be treated with antibiotics. Many people were concerned about safety of this practice for the consumers of milk.
The free market's response was for natural diary farmers — those NOT using hormones or antibiotics — to label their milk as such. But then the FDA stepped in and actually prohibited them from disclosing this information to the consumer! Only after much public outcry did this policy change. Even now, natural dairy producers have to include fine print on their packaging, stating that the hormones and antibiotics injected into their competitors' cows don't really make any difference concerning the safety of the milk.
In this way, government regulation ostensibly designed to protect us can often have the opposite effect.
"Note that nothing you wrote prior to this statement provides evidence in its support. This is a bolt from the blue."
You're right. Part of my conclusion followed from arguments (regarding why the welfare state inevitably grows) that were put forth in a previous post, and I didn't re-state those arguments here.
"The richer we are, the more we can afford to give to the poor. For example, this society is fast approaching the point where a majority believes that some degree of health care is an entitlement. A hundred years ago that would have been considered preposterous. But it is accepted now because we have enough wealth to pay for it. (Well, MAYBE enough wealth...)"
There's the rub. If we consider the government's indebtedness, not to mention the personal indebtedness of the American people, then it becomes clear that we can't afford it. Social Security is a giant ponzi scheme waiting to collapse. Medicare is in even worse shape. In 1999, the government's total outlays were smaller than this year's deficit. Most Americans apparently believe in the Tooth Fairy, but I prefer reality. And reality is that the bills are going to come due.
Gerald, if you believe that the minimum wage does not increase unemployment, then it logically follows that you must also believe:
1) People will buy the same number of apples regardless of the price. Apples could be $10 each, and nobody would switch over to pears or oranges.
2) The government could make us all rich simply by raising the minimum wage, say, to $1,000/hour. But why stop there? We could all become millionaires for an hour of burger flipping, if only the government wouldn't be so stingy with its minimum wage increases!
Do you see how absurd this is? Claiming that the minimum wage has no effect on employment is anti-intellectualism, pure and simple, in the service of a political ideology divorced from reality. This is not healthy.
To Evil Jon,
I'm not a Republican (which you seem to think is the case), and I don't sneer at people on welfare.
In my view, the government is the Dragon presenting itself as St. George. It makes people poorer, and then offers to rescue them from the poverty to which it is the single greatest contributor.
Government intervention into health care has made health care prohibitively expensive for many people. I addressed this in a reply to one of Chris' previous posts, if you're interested.
Taxation reduces the worker's take-home income, and thus reduces the amount he can save for a rainy day, or invest in starting his own business. Government spending in the U.S. currently equals over 40% of the national income.
Inflation of the money supply by the Federal Reserve debases the currency, which further erodes savings. It also results in economic cycles by promoting an unsustainable "boom" of malinvestment that must be flushed out in a "bust," which can cause a lot of distress to the poorest members of society (as is happening today).
I could go on, but these are some important points to ponder. We always have to consider the unseen, the way things would be if all this harm was not done.
Best of luck to you and your family.
Dither, It's next to laughable to see you talk about anti-intellectualism and logic; it's you who is a 100% ideologue.
As to your No. 1: There are huge variations in price elasticity for various products, some products in fact are price *inelastic*, and your example proves nothing.
As to your No. 2: Absurd on its face, again proving nothing.
Gerald, I think that it's especially important that we retain the highest standards of civility with Dither, because he's the "loyal opposition" around here. He has been remarkably civil here, even though I have pushed the line a bit. Moreover, I disagree with your claim that he is anti-intellectual; anybody who can plough through von Mises has got to have some real intellectual grit.
Next, I think you are dismissing his point too quickly. Let's face it, the claim that minimum wage does not deleteriously impact employment does run counter to basic economics; it's certainly an interesting problem but I don't that the case is strong enough to justify such quick dismissal of opposing arguments. I have only begun to explore the links you provide, and the most impressive of these, the book by Card & Krueger, acknowledges that "many liberal economists also find fault with minimum wage." So let's examine the evidence before we start lynching ideas.
And I think that Dither's reductio ad absurdem argument has substance. The only proper refutation I can think of is an appeal to nonlinearity. There may well be some ideal value of the minimum wage, rather like there seems to be some ideal mixture of inflation, growth, and unemployment. If this be the case, then if minimum wage falls below this hypothetical "ideal value", then an increase in minimum wage would not diminish employment. But we need to find that evidence first.
BTW, I admit that there are times when Dither's claims strike me as preposterous, such as when he talks about the government printing vast amounts of money, but there are also enough times when he makes cogent points that I feel it necessary to double-check with him on all points before dismissing them. FIRST we have the trial, THEN we string him up. OK? ;-)
Chris,
Sorry it took a while to get back to you. I work in security. I had the opportunity to move to a better position, I was going to have to take a physical fitness exam, that I knew I couldn't pass. I have problems breathing and use an inhaler, I also have problems moving even though I'm under 40. I'm ex-Navy (4 years, 1st Gulf war) and I used to be in excellent physical condition(better then your avg sailor), but other then gaining weight, I'm not sure what's exactly wrong w/ me. Doctors haven't helped much to be frank.
As far as typical, there's enough variation where I see a lot of people fall into this catagory. I work at a call center, and most of the people make near the same amount as I do, or maybe a buck or two more an hour.
Dither,
It's the statement, the quote. I keep hearing that and it makes it seem as if poor people are living high on the hog, using easy,tax payer money. When in reality it's constant threats by or warnings that you're losing health care, because someone says you did something you didn't, or you didn't do something you should have.
Anyway, you mentioned it's government that's the problem, but it's not, it's business that influenced Nixon's administration and made healthcare worse. Correct me if I'm wrong, guys. I've listened to that Nixon tape where they talk about HMO's and it's scandalous. Basically it's corruption that's the issue, corruption can ruin any gov't it seems.
Evil Jon
Chris,
I obviously lean left on most of my political beliefs, but I was wondering how the readers, and yourself view this huge deficit monstrosity that Obama has planned.
Without viewing it too harshly I was very happy with the way the budget moved into the black under Clinton in '98. I believe in a sustainable plan not something that will sink us while we're most struggling.
Evil Jon
I certainly don't like deficit spending, and I strongly believe in a balanced budget in normal times. Indeed, in normal times I believe that the government should run a small surplus to set aside some money for the future. I believe that the Federal Government spends too much money and should rein back its spending considerably. I would like to see government spending cut from 40% of GDP to 30% of GDP.
However, the current economic situation, I believe, calls for deficit spending. When the economy gets into a parlous state, it is prudent to borrow from our own future to stabilize things today. Of course, we have to realize that the costs of paying back that spending will have to come out of other expenditures in the future. But so long as we are honest about it, this is an appropriate time to go into deficit spending.
Perhaps a national minimum wage is a bad idea. I recently visited Detroit and met a man whose off-the-books "job" is to live in an abandoned church and try to put out arson fires. He's not getting minimum wage for this dangerous job but since he's homeless he'd be sleeping in a building at risk for arson anyway.
A national minimum wage is a bad idea! In Detroit the median house sells for $7000. Here in NYC the median for an apartment is over a million. Why have the same minimum wage?
Last time we raised the national wage there was a big outcry from Guam. They have a lot of $3.25 cannery jobs (they were exempted from the last national minimum wage). I read something about needing to compete with workers in other islands who get even less.
"Perhaps a national minimum wage is a bad idea....A national minimum wage is a bad idea!"
Ed: The federal national minimum wage does not preclude higher minimum wage laws enacted by states, cities and localities, and there are plenty of these on the books.
Here's the first paragraph of "A Livable Minimum Wage," by David Swanson, posted on Alternet on February 21, 2005:
"Grassroots organizations have responded to the static minimum wage by focusing on the state level. After winning living wage laws in 123 cities and counties (laws that mandate higher minimums for certain categories of workers) and city-wide minimum wage hikes covering all workers in four cities (D.C., Santa Fe, San Francisco and Madison), the campaign for decent wage standards has shifted the battleground to the state level."
Chris: It didn't seem to me that I was "dismissing" Dither's argument about the minimum wage leading to less employment. I disagree strongly with that point of view, but I have no argument whatever with its legitimacy. Until I spoke up, nobody so much as suggested that there might be *another* point of view (along with evidence to support it).
Uncivil to Dither? Perish the thought. But in this paragraph from Dither to me, there are strong overtones of high incivility:
"Do you see how absurd this is? Claiming that the minimum wage has no effect on employment is anti-intellectualism, pure and simple, in the service of a political ideology divorced from reality. This is not healthy."
1) I'm absurd, 2) I'm an anti-intellectual, 3) I'm a political ideologue, out of touch with reality, 4) I'm sick besides.
*That's* civil?
Gerald, if setting the minimum wage doesn't effect employment then what should it be set to? The letjusticeroll.org link you supplied says $10 by 2010. Why not $10.50 or $12 then? I suspect there are places in the USA, such as Detroit and Guam, where $7 is too high.
Funny how it is legal for me to work for free as a volunteer. It's legal for me to work for start-up stock options worth $0. It's illegal to sweep parking lots for $5.
Ed: You know and I know that all kinds of people work for less than the minimum wage, in all kinds of jobs, in all kinds of places. We also know that tons of people work off the books, etc., ad infinitum.
I personally believe that it helps labor, with whom I identify, to *have* a federal minimum wage. I personally do not believe that having a federal minimum wage leads to fewer jobs. It seems to me almost axiomatic that an employer will employ *the number of people it takes to get the job done*, no more, no less. Employers aren't out there offering jobs because they want to be nice. Job openings mean there's work to be done. To me it runs counter to common sense to suggest that a federal minimum wage, ipso facto, will reduce that amount.
You disagree? Fine; I have no problem with that.
Gerald, I've done a little poking around with the references you provided and I have come to the following still-tentative conclusions:
1. The study showing that changes in minimum wage standards did not affect unemployment is a good study, and it has the benefit that it directly addresses the actual policy question: "If we raise the minimum wage, will people lose their jobs?" However, I don't think it constitutes definitive proof. The short-term nature of the study reduces its value. Moreover, several of the cases studied involved increases in the minimum wage at the beginning of a period of economic growth. It's impossible to disentangle the increase in jobs due to economic growth from any decrease in jobs due to the higher minimum wage.
Moreover, I think that the extreme hypothetical cases cited by Dither and Ed Snible have logical weight: if an increase in minimum wage doesn't affect unemployment, then why not raise the minimum wage arbitrarily high? At best, the evidence might support the claim that, within a small range, raising the minimum wage will not affect unemployment significantly.
Lastly, I can certainly confute your argument that employers don't much care about the cost of their employees. In most businesses, labor costs are the biggest single budget item, and any increase in such labor costs forces the employer to recalculate their budget. I know that I myself have been down that road. It's no fun, but you can't pay people with money that you don't have.
"I can certainly confute your argument that employers don't much care about the cost of their employees."
When did I make that argument? Of course employers care about "the costs of their employees." My argument was/is this: employers will hire the number of employees they need to do the work that needs doing, and the minimum wage won't much change that number, if at all.
Well, when I and my friend were considering our start-up game project, we figured we'd need a sound designer and graphics designer. Work that needed to be done. However, we didn't have enough money to pay what those kinds of people cost to hire, so we ended up abandoning that project. So that's a definate case where a job that "needed to be done" was not done because the cost to hire employees was too high.
Of course, we're a really poor start-up, and the costs we were considering were market-set costs, not minimum wages. But nevertheless, the logic remains the same.
"But nevertheless, the logic remains the same."
Please. The situations are totally non-analagous, and the similarity in logic *holds no meaning for a minimum-wage situation*.
My argument was/is this: employers will hire the number of employees they need to do the work that needs doing, and the minimum wage won't much change that number, if at all.
I disagree, because if "the work that needs doing" costs more than "the profit generated by doing it", then the business is unprofitable and will be abandoned.
Moreover, the use of the term "needs doing" is misleading. Very few tasks in a business are absolutely, positively necessary -- the business can always scale down or lower its quality or quality to survive with fewer tasks being executed. There is a threshold below which the business simply cannot function, but that threshold doesn't include many employees at all, and usually involves a handful of dedicated people, each performing many tasks. For the great majority of businesses, hiring minimum wage employees is an option, not a necessity.
Let me be specific: let's consider the classic minimum wage arena: the fast food restaurant. Most of the employees are minimum wage workers, with a single skilled manager and possibly a semi-skilled assistant working at something higher than minimum wage. Those two workers are the core of the operation, and all by themselves they can operate the restaurant. In fact, there's a daily cycle. When the place first opens in the morning, business is very slow and only the two key employees are necessary. As lunchtime approaches, the minimum wage workers show up to handle the extra load. When things slow down in the afternoon, the minimum wage workers disappear. Then they come back for the dinner rush, disappearing once it ends.
Now, if we repeat this process in a restaurant with the minimum wage increased, the manager will bring in fewer minimum wage workers to handle the peaks. The manager knows that this will cause slowdowns during the peaks, and that will cause him to lose some business, but the incremental cost of the minimum wage employees is greater than the incremental loss in profits. The higher the minimum wage goes, the few minimum wage employees he hires. In the worst case, he hires no minimum wage employees and instead accepts only the most profitable business -- that is, the business that he and his assistant can handle.
There's also more than one way to skin a cat. In some situations, the business owner might have a choice between 1) hiring more workers, and 2) investing in technology that allows fewer workers to produce more. If labor becomes costly relative to capital, jobs will be lost.
And not all workers are the same. Some are much faster and more productive than others; thus, their labor is more valuable to their employer. If the minimum wage is set above the value of a particular worker's labor, the business owner may fire that worker and hire someone more productive to get his money's worth at the higher wage.
Chris, Dither: We disagree. I say it's good (in the spirit of WITT, where this column began long ago) that we have a federal minimum wage, you say it isn't. I'm not going to convince you, you're not going to convince me.
That's it for me on this topic.
Fair enough. Time for me to come up with another divisive topic for us to wrangle over.
How about stem cell research. That seems to be popular.
Post a Comment