[kenrexford]

Winstonm, on 2013-November-06, 09:43, said:

What I hear a lot of, though, sounds to me like an expression of total self-serving ideology, that the poor deserve to be poor and do not deserve better health care - but this ideology goes unspoken as it is hidden inside a claim (which may be real to them) that government interference is the culprit and private enterprise is the solution, that it is really not about simple self-preoccupation..

While there may be some who have that view, I think you are being a tad unfair in your analysis of those people. If I understand the thinking correctly, the objection is not that poor people deserve to be poor and screw them. Rather, the idea seems to be that some means of alleviating the harms of poverty have an unintended consequence of increasing poverty and dependency.

I mean, consider that one of the good arguments for universal health care is one of avoidance of increased poverty and dependency in a conservative-type thinking. If you create a safety net from the government solely for those who fail to get insurance until it is too late, you take away the risk of not getting insurance until it is too late, thereby increasing the number of people who do not get insurance until it is too late. Thus, the safety net itself creates, in a sense, the poverty and dependency that we sought to alleviate. By forcing people to get insurance before it is too late, which is not really conservative or liberal but rather authoritarian, whether for good or evil, we actually address the problem without encouraging further poverty and dependency.

The contra to that, though, is that health care is yet another benefit in a total package that is driving poverty and dependency. If the poor get subsidized everything, the incentive to work is reduced, and a larger and larger number of people opt for the benefits package rather than work. Hence why the Great Society efforts are often deemed by many as a failure.

I would venture to say that some might actually be OK with single payer if all of the other entitlement programs that seem counterproductive net were dealt with more effectively. I would imagine that even more would be OK with some sort of mandated insurance laws and subsidies if counter-balanced with reduction in other areas to compensate. What angers people is not that the poor are taken care of but rather that the poor have grown in size, including people who really can work and people who continue to make idiot life choices, with the benefits packages making the effective benefit to working substantially lower than stated wages. I mean, if you make $30K a year working, but would get $20K in net benefits if you stopped working, then your net benefit to working is only $10K a year, meaning roughly that you earn $4.80 or so per hour of effective work value. Granted, if your job pays substantially more, the effective hourly wage goes up, but at the lower end, the benefits are small. This is even more problematic if benefit-takers can work under the table, which is very common, to the point where even courts know that this is done and calculate that into expected child support payments! When you calculate all this in, and then add into the mix subsidized health care, your disincentive to work gets stronger and stronger. Plus, those who work anyway get angrier and angrier.

Summarizing this type of concern into "they hate poor people" is unproductive. However, say that long enough and you may convince people that they actually should hate poor people.

[Winstonm]

kenrexford, on 2013-November-06, 10:23, said:

While there may be some who have that view, I think you are being a tad unfair in your analysis of those people. If I understand the thinking correctly, the objection is not that poor people deserve to be poor and screw them. Rather, the idea seems to be that some means of alleviating the harms of poverty have an unintended consequence of increasing poverty and dependency.

I mean, consider that one of the good arguments for universal health care is one of avoidance of increased poverty and dependency in a conservative-type thinking. If you create a safety net from the government solely for those who fail to get insurance until it is too late, you take away the risk of not getting insurance until it is too late, thereby increasing the number of people who do not get insurance until it is too late. Thus, the safety net itself creates, in a sense, the poverty and dependency that we sought to alleviate. By forcing people to get insurance before it is too late, which is not really conservative or liberal but rather authoritarian, whether for good or evil, we actually address the problem without encouraging further poverty and dependency.

The contra to that, though, is that health care is yet another benefit in a total package that is driving poverty and dependency. If the poor get subsidized everything, the incentive to work is reduced, and a larger and larger number of people opt for the benefits package rather than work. Hence why the Great Society efforts are often deemed by many as a failure.

I would venture to say that some might actually be OK with single payer if all of the other entitlement programs that seem counterproductive net were dealt with more effectively. I would imagine that even more would be OK with some sort of mandated insurance laws and subsidies if counter-balanced with reduction in other areas to compensate. What angers people is not that the poor are taken care of but rather that the poor have grown in size, including people who really can work and people who continue to make idiot life choices, with the benefits packages making the effective benefit to working substantially lower than stated wages. I mean, if you make $30K a year working, but would get $20K in net benefits if you stopped working, then your net benefit to working is only $10K a year, meaning roughly that you earn $4.80 or so per hour of effective work value. Granted, if your job pays substantially more, the effective hourly wage goes up, but at the lower end, the benefits are small. This is even more problematic if benefit-takers can work under the table, which is very common, to the point where even courts know that this is done and calculate that into expected child support payments! When you calculate all this in, and then add into the mix subsidized health care, your disincentive to work gets stronger and stronger. Plus, those who work anyway get angrier and angrier.

Summarizing this type of concern into "they hate poor people" is unproductive. However, say that long enough and you may convince people that they actually should hate poor people.

IMO, the disincentive is not the safety net but the poor job markets. The mark of a country's wealth lies in its ability to sustain all its people, not just the top 20%. Better and more equitable educational opportunities would be a good starting spot.

[kenrexford]

Winstonm, on 2013-November-06, 11:45, said:

The disincentive is not the safety net but the poor job markets. The mark of a countries wealth lies in its ability to sustain all its people, not just the top 20%. Better and more equitable educational opportunities os a good starting spot.

That all sounds nice, except that there are problems with your analysis, despite only three sentences. If the problem is a poor job market, then fantastic education will simply mean more educated people who are unemployed. Obviously, if your initial point is correct -- that the job market is the problem -- then curing that seems like the first issue. Then, people who are considering education might have more of a reason to do so, and demand for good education will be higher, and the benefits of money spent on education would be obvious.

Right now, in case you missed it, college graduates (great education) cannot find work. From a purely economic sense, then, we are spending too much on education and too little on job creation. You would ideally have education of any type exactly calibrated to create enough of each field to meet demands. Hence, if we have too many educated people and too few jobs, we are spending too much on education and/or too little on jobs.

So, then what about the question of incentives and the poor job market?

These seem like two sides of the same coin. To pay for entitlements, we tax. Tax reduces profits and thereby reduces jobs. Hence, the more the entitlements, the worse the job market. If Johnny could be paid $30K to make $50K worth of stuff, that would be great. If Freddie also could be paid $30K to make $50K worth of stuff, even better. But, if Freddie can be paid $20K to do nothing and likes that plan, the profit for Johnny's work is taken to pay Freddie to do nothing. The employer ends up with nothing unless he reduces Johnny's pay. Using the same percentages (which is unfair, but stay with me), Johnny now gets only $18K for his work. That makes him lose -$2K for working, because he would make more if he did not work. So, Johnny cannot stand it and quits also. Now, no one makes anything.

The point, then, is that we started with x% of the population unemployed and figured that the economy could handle that percentage of people having benefits. But, then we made the benefits better and better for the unemployed, such that more and more Freddies started opting for the benefits. That reduced the number of Johnnys while also reducing the profits. So, Johnny's pay went down, more Freddies ended up on benefits, and the education ended up meaningless. That is bad.

We decided to fix this my changing the value of the dollar. We threw a bunch of new bills at the employer, figuring that somehow this would trickle down. However, more and more of those bills were grabbed back for Freddies, and less went to fewer and fewer Johnny's. Plus, the employers on paper started gaining more and more wealth, not as a function of true wealth (because the money supply was arbitrary) but as a function of ratios, meaning who had what percentage of the pie.

Sometimes you might have a theory and be seeking proof. Looking out your window is not proof, but it sure makes you think you are on to something. I look out my window and see what appears to be assurances that I am thinking right, because in fact more and more people are on entitlements, fewer and fewer educated people are finding jobs, more and more people are taking pay cuts, and a larger percentage of the pie is in the hands of the asset-holders.

What do you see out your window?

[Winstonm]

kenrexford,

I think some of your assumptions are incorrect - taxation does not cause job loss is #1. Although excessively high taxes have a negative effect on growth, that is far different than a statement that all taxes deter growth. Another assumption I question is the willingness of the less fortunate to work - I know few who willingly choose poverty.

Your arguments sound good in a vacuum - but they do not comport with historical data, and they don't work in the real world.

[kenrexford]

Winstonm, on 2013-November-06, 14:36, said:

kenrexford,

I think some of your assumptions are incorrect - taxation does not cause job loss is #1. Although excessively high taxes have a negative effect on growth, that is far different than a statement that all taxes deter growth. Another assumption I question is the willingness of the less fortunate to work - I know few who willingly choose poverty.

Your arguments sound good in a vacuum - but they do not comport with historical data, and they don't work in the real world.

Few willingly choose poverty. Many choosr subsidized housing, food, school, medical care, telephone, child care, and the whole package available, which is not exactly poverty, over working and having about the exact same thing.

[blackshoe]

Taxation does cause job loss. Money businesses would have had available to hire more employees is not available when the government takes it, so those employees don't get hired. Of course, it's possible that money might have gone elsewhere — say to maintaining the businesses' infrastructure, or even improving it. If the business doesn't maintain its equipment, guess what happens? Equipment breaks down, business doesn't produce as much, people get laid off. Surprise, surprise.

Taxing the rich (or the business owner) is not the way to improve the overall wealth of the country.

[Winstonm]

blackshoe, on 2013-November-06, 16:54, said:

Taxation does cause job loss. Money businesses would have had available to hire more employees is not available when the government takes it, so those employees don't get hired. Of course, it's possible that money might have gone elsewhere — say to maintaining the businesses' infrastructure, or even improving it. If the business doesn't maintain its equipment, guess what happens? Equipment breaks down, business doesn't produce as much, people get laid off. Surprise, surprise.

Taxing the rich (or the business owner) is not the way to improve the overall wealth of the country.

Your belief is blinding you to reality. Think about it. Taxes do not go into a black hole. The money is not set ablaze. The government does not keep profit to pay out to shareholders - money that comes into the government goes right back out. The government is a massive spending machine, not a taking machine. Money going back into the economy equates to increased demand - the fact that this demand comes from a single source instead of 300 million individuals is the basis of your complaint.

[blackshoe]

Winstonm, on 2013-November-06, 18:09, said:

Your belief is blinding you to reality.

Whereas yours is a perfect reflection of reality. Uh, huh. Right. Sure. Whatever you say.

[kenrexford]

I want to be paid a percentage of all profits. I will pay 90% back. I promise. It will be good for everyone to do that.

[Zelandakh]

Winstonm, on 2013-November-06, 14:36, said:

Your arguments sound good in a vacuum

No they really do not - but you are focusing on the wrong part. The basic premise was that if there are too few jobs then education spending should be lower. But this does not take account of the market being cyclic in combination with the period of education being short, while the period of productivity is long. More than that, highly educated workers provide significantly more to the economy when they do get a job and the cost of educating such a worker is repaid many times over.

What this means is that you cannot put off education during a recession in order to stimulate job creation, since the loss of future income once the recession is over cannot be reclaimed by educating at the time of demand. In comparison, the returns on the education investment are more consistent, since the ups and downs of the economy will tend to even out.

And this is why a good education system is fundamental to a good economy in Western countries, even when it is (temporarily) producing more skilled workers than jobs.

Incidentally the truth of the matter is between the two extremes presented by Winston and Ed. Governments do reinvest the income they receive but it is a sad fact that government-run businesses are almost always less efficient than private ones and that public workers are significantly less productive than those in the private sector. That means that private businesses are to be preferred in sectors where efficiency is key and public ones are more suited to sectors where non-profit factors are paramount. Security and safety are obvious examples. I would argue that healthcare should also be on that list; presumably Ed and Ken would have a different opinion.

Just a further point on this subject that may or may not be relevant. In the same way that early education pays for itself, the same can also be said for preventative healthcare. One of the strengths of the NHS is that everyone can visit their doctor for free and thus many illnesses are caught early enough to limit their impact, either by avoiding contagion or lessened treatment costs. This is something that seems to be sadly lacking in the American model and is surely one area where costs could be drastically saved. Indeed, someone I used to know (loosely) actually died because they waited too long before visiting their doctor over something they thought was not serious. Now death is quite a good way of reducing costs too but perhaps not an ideal one.

But the real cost savings to be had are in medication. A long time ago doctors in the UK used to prescribe named varieties of drugs even when there was a generic available. Coincidentally the drugs companies for these products also gave incentives for such prescriptions. Then the government stepped in and produced a list of precribable drugs and promptly took all of the named varieties away whenever there was an equivalent generic. Practically overnight the costs were drastically reduced. From all I have heard/read/seen it appears that this still happens in America and drug company representatives market to doctors very aggressively. That is not an ideal situation if you want an efficient and cost-effective healthcare system (he's a doctor not a mathematician).

Talking of maths, here's an article from back in 2009 on some of the numbers involved in comparing the US and UK healthcare systems. The full quote from the central section runs:

Quote

Of the c.15% of GDP the US spends on healthcare annually (that’s about $2.2 trillion*), around 50% is spent by the government (around $1.1 trillion). By contrast, the UK spends around 8% of its GDP on healthcare, with the Department of Health’s budget for the NHS (England**) in 2008/9 around £94 billion (about $155 billion).

The English NHS cares for 49 million people (100% of the population of England); US public healthcare currently covers about 83 million (around 28% of the US population).

For a direct comparison, that means that in England the government spends around $3,200 per capita on healthcare and covers the entire population whereas in the US the federal government spends around $3,700 per capita and yet covers less than a third of the population.

Some food for thought there about the idea that government spending is always less efficient than the private sector. It also gives some idea as to why the British are so fond of the NHS and why practically noone can understand why (some) Americans are so fond of a system that is at the same time horribly overpriced and shockingly uncomprehensive (to the point where people die from simple ailments (see above)). It is not that anyone thinks the NHS is perfect, just that many consider the American healthcare system a laughing stock better fitting to a developing country than the world's leading economy.

[Winstonm]

kenrexford, on 2013-November-06, 21:02, said:

I want to be paid a percentage of all profits. I will pay 90% back. I promise. It will be good for everyone to do that.

I don't understand your position. Are you talking about taxes? If so, what 10% of taxes disappears from circulation? Supply-side does not have a strong case. Historical data suggests higher average GDP occurs when taxes are higher, and a lowering of taxes does not have the return promised by the supply-side ideology.

[Winstonm]

blackshoe, on 2013-November-06, 16:54, said:

Taxation does cause job loss.

Hey, Blackie,

Not meaning to be repetitive, but this is a strong statement that left me shaking my head in amazement, so here I am back to it. Do you have any facts that support the allegation? To me, this sounds like the type of claim that is ideologically based. We (me included) all have from time-to-time made unfounded claims because they make sense to us within the confines of our worldview or political thinking. But what is the supportive data that helped you create your understanding - do your ideas grow out of the data as an explanation for the data or do you start with the idea? If your claim is accurate, how did we have lower unemployment and higher average GDP when taxes were higher than now?

Myself, I think the ideas should be an outgrowth of data, and those ideas should try to explain what is happening and has happened. This approach allows you to change your mind if the facts change.

[kenrexford]

Winstonm, on 2013-November-07, 07:32, said:

I don't understand your position. Are you talking about taxes? If so, what 10% of taxes disappears from circulation? Supply-side does not have a strong case. Historical data suggests higher average GDP occurs when taxes are higher, and a lowering of taxes does not have the return promised by the supply-side ideology.

Government is the same as stock brokers, in a sense.

The ideal is for money to be in the right place to make the most out of investments. If everyone in the market were brilliant, then money would flow directly to where it needs to be. However, people are not brilliant, and even brilliant people need someone to transmit money. So, there is a cost to money movement, whether simply transmission costs (e.g., Western Union) or strategy costs (advice on where money should go). The people moving the money and providing advice are paid to do that task. The ideal is that their contribution is paid less than their fruits of efficiency gains.

Government also re-allocates. Government workers are paid to do this. If the government work provides a net gain to efficiency that surpasses the cost of the government worker, then taxes to pay for the government worker are a net gain to the economy. So, you are correct in theory.

The problem seems to be, however, that many believe that the net cost of government in many areas is not met by greater gain. In the case of taxes for reallocation to "the poor," simple reallocation seems on the surface to be a net wash (except for the benefit of helping the poor, obviously). The first problem is that the reallocation is not all that efficient, because of the cost of the government workers need to collect, process, and re-allocate. Fraud is not actually a "cost" in one sense, except that it is reallocation that does not have the benefit of helping the poor.

The cost that is not accounted for, however, is whether by reallocating you (1) place money into less productive hands net and (2) incentivize fewer workers working. If these results occur, then reallocation is actually unproductive. In simplest form, you treat human beings in the same way that you treat fields that farmers are paid to not plant.

My point was that your statement was too shallow. For, if reallocation is good because it induces spending, then everyone paying me money would be good because then I would spend more. That sort of simplistic view is as silly in my example as it is on yours unless you develop your thinking better. You might be able to make a valid point with economics proof that is plausible, but simple reallocation for its own sake does not create a market that did not exist, because the money taken to create the stimulus was already in the market. Plowing over corn and then replanting corn does not yield a gain in agriculture.

[Winstonm]

kenrexford, on 2013-November-06, 16:04, said:

Few willingly choose poverty. Many choosr subsidized housing, food, school, medical care, telephone, child care, and the whole package available, which is not exactly poverty, over working and having about the exact same thing.

Taxpayers subsidize the profits of the fast-food industry because the pay scale in that industry is so low - and those who work in the fast food industry do not "choose" to be poor but instead "choose" to attempt to survive.

There may by a tiny fraction of the population that abuses the benefits - there always will be. Business has bad employees, too. But to focus on a tiny fragment of total population instead of how to provide the greatest good seems to me a backwards approach to problem-solving.

[Winstonm]

kenrexford, on 2013-November-07, 07:53, said:

Government is the same as stock brokers, in a sense.

The ideal is for money to be in the right place to make the most out of investments. If everyone in the market were brilliant, then money would flow directly to where it needs to be. However, people are not brilliant, and even brilliant people need someone to transmit money. So, there is a cost to money movement, whether simply transmission costs (e.g., Western Union) or strategy costs (advice on where money should go). The people moving the money and providing advice are paid to do that task. The ideal is that their contribution is paid less than their fruits of efficiency gains.

Government also re-allocates. Government workers are paid to do this. If the government work provides a net gain to efficiency that surpasses the cost of the government worker, then taxes to pay for the government worker are a net gain to the economy. So, you are correct in theory.

The problem seems to be, however, that many believe that the net cost of government in many areas is not met by greater gain. In the case of taxes for reallocation to "the poor," simple reallocation seems on the surface to be a net wash (except for the benefit of helping the poor, obviously). The first problem is that the reallocation is not all that efficient, because of the cost of the government workers need to collect, process, and re-allocate. Fraud is not actually a "cost" in one sense, except that it is reallocation that does not have the benefit of helping the poor.

The cost that is not accounted for, however, is whether by reallocating you (1) place money into less productive hands net and (2) incentivize fewer workers working. If these results occur, then reallocation is actually unproductive. In simplest form, you treat human beings in the same way that you treat fields that farmers are paid to not plant.

My point was that your statement was too shallow. For, if reallocation is good because it induces spending, then everyone paying me money would be good because then I would spend more. That sort of simplistic view is as silly in my example as it is on yours unless you develop your thinking better. You might be able to make a valid point with economics proof that is plausible, but simple reallocation for its own sake does not create a market that did not exist, because the money taken to create the stimulus was already in the market. Plowing over corn and then replanting corn does not yield a gain in agriculture.

Yes, but taking corn that is hoarded in a silo and redistributing that to small farmers who plant it does yield a gain, even if 10% is lost in the transaction.
The big fallacy of supply-side is that savings stimulate. Ask any business person what spurs the decision to expand - it is the belief that there is a market that will return more (demand) than the cost of production (supply).

When the more wealthy are given tax breaks, that money does not go into circulation as capital spending unless there is demand for services. When there is no demand, the money is hoarded as treasury bonds - so the government loses twice - less tax revenue plus accrued interest on the bonds.

[kenrexford]

Winstonm, on 2013-November-07, 08:04, said:

Yes, but taking corn that is hoarded in a silo and redistributing that to small farmers who plant it does yield a gain, even if 10% is lost in the transaction.
The big fallacy of supply-side is that savings stimulate. Ask any business person what spurs the decision to expand - it is the belief that there is a market that will return more (demand) than the cost of production (supply).

When the more wealthy are given tax breaks, that money does not go into circulation as capital spending unless there is demand for services. When there is no demand, the money is hoarded as treasury bonds - so the government loses twice - less tax revenue plus accrued interest on the bonds.

That lsst point has merit. There is a moral question about taking, but it is not an economic question. Of course, this makes qe dubious, which was one of my points.

[Winstonm]

I think many lose sight of this fact:

Quote

...more than half of U.S. wage earners made less than $30,000 last year, according to an analysis released by the Social Security Administration on Tuesday

[ArtK78]

Many years ago, I graduated from Princeton University with a major in Economics. I have never used my economics training directly in my professional career, given that I am a tax lawyer. But I still remember some of the most basic ideas from Econ 101. One of these is that government spending stimulates the economy to a much greater extent than private spending. This is due to the multiplier effect of government spending. I am sure that there are other Forum members who can explain this better than I can, given that it has been 39 years (!) since I took Econ 101. But, if I remember correctly, the effect of government spending was on the order of 5x the effect of private spending.

In any event, even if 10% of the money government takes in in the form of taxes vanishes mysteriously somewhere into the bowels of the machinery of government bureaucracy (and I question that premise), the 90% that comes out in the form of government spending does far more to stimulate the economy than if 100% of the money were retained by individuals and businesses.

If you want to question economic theory, please address your responses to Paul Samuelson and not to me. But that will be difficult, as he died in 2009.

[hrothgar]

ArtK78, on 2013-November-07, 09:27, said:

Many years ago, I graduated from Princeton University with a major in Economics. I have never used my economics training directly in my professional career, given that I am a tax lawyer. But I still remember some of the most basic ideas from Econ 101. One of these is that government spending stimulates the economy to a much greater extent than private spending. This is due to the multiplier effect of government spending. I am sure that there are other Forum members who can explain this better than I can, given that it has been 39 years (!) since I took Econ 101. But, if I remember correctly, the effect of government spending was on the order of 5x the effect of private spending.

In any event, even if 10% of the money government takes in in the form of taxes vanishes mysteriously somewhere into the bowels of the machinery of government bureaucracy (and I question that premise), the 90% that comes out in the form of government spending does far more to stimulate the economy than if 100% of the money were retained by individuals and businesses.

If you want to question economic theory, please address your responses to Paul Samuelson and not to me. But that will be difficult, as he died in 2009.

There's a fair amount of debate regarding naive Keynesian models and a relative size of the various multipliers.

Most of the studies that I have seen regarding multiplier effects focus on guns versus butter decisions.
Infrastructure projects tend to have much higher multipliers than buying new fighter jets.

I don't recall many good studies that comparing the multiplier effect of government spending versus private consumption.
If your increase in government spending ends up crowding out private consumption or investment, the results can be somewhat small.

With this said and done, government spending can have an enormous impact if private investment is being curtailed for some reason.

For example, consider a hypothetical case in which companies were sitting on large amounts of cash and refusing to invest because of "uncertainty".
This is definitely a case where taxing the companies and increasing government spending can significantly boost growth.

Pity we don't have the balls to do so...

[billw55]

ArtK78, on 2013-November-07, 09:27, said:

Many years ago, I graduated from Princeton University with a major in Economics. I have never used my economics training directly in my professional career, given that I am a tax lawyer. But I still remember some of the most basic ideas from Econ 101. One of these is that government spending stimulates the economy to a much greater extent than private spending. This is due to the multiplier effect of government spending. I am sure that there are other Forum members who can explain this better than I can, given that it has been 39 years (!) since I took Econ 101. But, if I remember correctly, the effect of government spending was on the order of 5x the effect of private spending.

I have no training in economics. Can anyone explain in non-technical terms why this should be so?