Thursday, August 02, 2012

A logical corollary of the Obama gospel


Social Security Nonsense

If you want to see a good example of liberal or progressive thinking on fiscal policy, read this article in the Philadelphia Inquirer entitled “Social Security Is Not Headed for Disaster” by Barbara R. Bergmann, who serves as professor emerita at American University and the University of Maryland.

The thrust of Bergmann’s article is that Social Security is not headed for disaster because the federal government is a big government in a nation of lots of rich people who can be taxed whatever amounts are necessary to fund the Social Security program indefinitely into the future.

That’s also the argument that liberals make with respect to the entire welfare state — that there is so much wealth in the United States that the federal government can use its vast taxing powers to continue imposing and raising taxes to whatever extent it needs to continue funding the ever-increasing expenditures of the welfare state.

Unfortunately, Bergmann didn’t mention the case of Greece. I wonder what she would say about Social Security and the entire welfare state in that country.

You see, in Greece statists took the same position — that government spending on welfare could go on increasing forever. Of course, Greek citizens on the dole, like American citizens on the dole, absolutely refused to consider any reduction in their dole.

Well, it got to a point in Greece where the amount being spent far exceeded the amount being collected in taxes.

So, why not just continue raising taxes? Because the government sector depends on a vibrant private sector in order to survive, much as any parasite needs a vibrant host to survive. If the private sector shrinks to nothing, there are no more taxes that can be collected, which means no more Social Security or any other welfare dole.

The problem for the parasite is this: how to keep the host vibrant and still suck as much blood of him as possible. If too much blood is sucked out of the host, he dies. That means the parasite dies too.

So, the government can tax up to a certain point but if it continues to confiscate increasing amounts of wealth and income from the private sector, it ultimately destroys the source of its loot.

As taxes are raised, businesses that are barely making a profit go out of business, laying off workers. Those workers go on the dole, which means higher taxes to fund them, which means more businesses going out of business. Moreover, wealthy people stop producing wealth and instead look for ways simply to preserve what they already have. Increasingly, the private sector shrinks and ultimately gets to a point where it cannot sustain the enormous taxes that are being imposed on it.

That’s what happened in Greece. And when spending began to exceed tax revenues, instead of reducing spending, which the dole recipients would not permit, the government just went on a huge annual borrowing spree to keep the dole going. For a short time it worked. But as the government’s debts mounted, things finally got to a point where no one would dare lend it any more money.

The Greek government was busted. Sure, it could levy a massive confiscatory tax on everyone, including the rich, which many statists want it to do. It could seize savings accounts, businesses, and homes to continue paying the doles. But then what? What does it do then? The host is dead. And that means the parasite is dead too.

Closer to home, I wish Bergmann had talked about those cities in California that are going bankrupt. Why is that? Why can’t they simply tax everyone 100 percent to fund their obligations and pay their debts? Why not seize their homes and businesses? What’s all that private wealth good for if not to fund the government? It’s because they know that that would work only one time. Then what? Who do they tax next year when there isn’t anyone left to tax?

Undoubtedly Bergmann would say that the U.S. government is different from the Greek government and those California city governments in that it is a bigger government that has more wealthy people to tax. But that implies that no matter how much the federal government spends, there is always going to be enough money in the private sector to fund it. It implies that that private sector can sustain any amount of federal expenditures.

With all due respect, that’s ridiculous. Right now, the federal government is spending more than a trillion dollars a year more than what it is bringing in with taxes. Like the Greek government, it continues to borrow the difference, adding to the mountain of federal debt that hangs over the American taxpayer.

Why doesn’t the government simply raise taxes to cover that difference rather than go further into debt? Because the more it raises taxes on the private sector, the more it threatens to destroy the host. It is an implicit recognition that there is a limit on the amount of taxes that can be imposed on the private sector.

Moreover, as the Greeks have learned and as American cities have learned, debts ultimately have to be paid back. And the only way governments have to repay their debts is through taxation. By borrowing the money, the day of reckoning is simply delayed.

In her article Bergmann mentions the Social Security “trust fund,” which is designed to make Americans falsely believe that their Social Security taxes are placed into a fund for their retirement. To Bergmann’s credit, she pierces right through that sham. There is no trust fund and there never has been one. Social Security is a straight welfare confiscate-and-transfer program, one that taxes the young and productive and gives the loot to people to whom it does not belong.

Bergmann suggests that the government can raise Social Security taxes to whatever extent is necessary to keep the system going. Oh? What if that means imposing a 90 percent tax on the income of young people for the rest of their lives? Would Bergmann say that’s okay?

The fact is that Social Security, like all other aspects of the welfare state (and the warfare state) are in deep crisis. After 80 years of all this socialism, the chickens have come home to roost. Medicare, Medicaid, public schooling, paper money, the Federal Reserve, farm subsidies, foreign aid to dictatorships, and all the rest. They’re all in crisis, which is why they’re always in need of “reform.”

The only question is: Are Americans going to let this alien, socialist system that was imported onto our shores in the 1930s take us down, or are we going to embrace libertarian principles before it’s too late?



Big Lies in Politics

Thomas Sowell

It was either Adolf Hitler or his propaganda minister, Joseph Goebbels, who said that the people will believe any lie, if it is big enough and told often enough, loud enough. Although the Nazis were defeated in World War II, this part of their philosophy survives triumphantly to this day among politicians, and nowhere more so than during election years.

Perhaps the biggest lie of this election year, and the one likely to be repeated the most often, is that the income of "the rich" is going up, while other people's incomes are going down. If you listen to Barack Obama, you are bound to hear this lie repeatedly.

But the government's own Congressional Budget Office has just published a report whose statistics flatly contradict this claim. The CBO report shows that, while the average household income fell 12 percent between 2007 and 2009, the average for the lower four-fifths fell by 5 percent or less, while the average income for households in the top fifth fell 18 percent. For households in the "top one percent" that seems to fascinate so many people, income fell by 36 percent in those same years.

Why are these data so different from other data that are widely cited, showing the top brackets improving their positions more so than anyone else?

The answer is that the data cited by the Congressional Budget Office are based on Internal Revenue Service statistics for specific individuals and specific households over time. The IRS can follow individuals and households because it can identify the same people over time from their Social Security numbers.

Most other data, including census data, are based on compiling statistics in a succession of time periods, without the ability to tell if the actual people in each income bracket are the same from one time period to the next. The turnover of people is substantial in all brackets -- and is huge in the top one percent. Most people in that bracket are there for only one year in a decade.

All sorts of statements are made in politics and in the media as if that "top one percent" is an enduring class of people, rather than an ever-changing collection of individuals who have a spike in their income in a particular year, for one reason or another. Turnover in other income brackets is also substantial.

There is nothing mysterious about this. Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience.

Politicians and media talking heads love to refer to people who are in the bottom 20 percent in income in a given year as "the poor." But, following the same individuals for 10 or 15 years usually shows the great majority of those individuals moving into higher income brackets.

The number who reach all the way to the top 20 percent greatly exceeds the number still stuck in the bottom 20 percent over the years. But such mundane facts cannot compete for attention with the moral melodramas conjured up in politics and the media when they discuss "the rich" and "the poor."

There are people who are genuinely rich and genuinely poor, in the sense of having very high or very low incomes for most, if not all, of their lives. But "the rich" and "the poor" in this sense are unlikely to add up to even ten percent of the population.

Ironically, those who make the most noise about income disparities or poverty contribute greatly to policies that promote both. The welfare state enables millions of people to meet their needs with little or no income-earning work on their part.

Most of the economic resources used by people in the bottom 20 percent come from sources other than their own incomes. There are veritable armies of middle-class people who make their livings transferring resources, in a variety of ways, from those who created those resources to those who live off them.

These transferrers are in both government and private social welfare institutions. They have every incentive to promote dependency, from which they benefit both professionally and psychically, and to imagine that they are creating social benefits.

For different reasons, both politicians and the media have incentives to spread misconceptions with statistics. So long as we keep buying it, they will keep selling it.



Statehouse, not White House, should lead on health reform
Washington Times

Says Gary R. Herbert, the Republican governor of Utah, below

The full title of what most call Obamacare is the Patient Protection and Affordable Care Act (PPACA). The irony is it neither protects patients nor is it affordable. In fact, PPACA is a misguided budget-buster that falls short of real health care reform, undermines state solvency and subverts individual liberty. For those reasons, Utah is in no rush to adopt any Medicaid expansion and will continue to pursue pragmatic, principle-based reforms, regardless of elections or Congress‘ partisan balance.

Of course, we care about better health and an improved system, but it’s breathtaking that in order to comply with the individual mandate for insurance, just covering Utahns presently eligible for Medicaid but not yet enrolled will cost the state $940 million the first decade and $1.88 billion the next decade. Then the Medicaid expansion tacks on an additional $240 million the first decade, and $480 million the next. In other words, even if Utah does nothing, Obamacare will completely unravel our state’s uniquely positive financial outlook.

Utah has defined a clear vision for health care: We will pioneer health care innovation and reform, harnessing the power of collective efforts and market principles as we become the healthiest people in the nation. Our efforts include solutions for low-income, uninsured and vulnerable populations.

But in contrast to federal solutions, the philosophical framework for Utah’s vision is personal responsibility. Reform must align incentives and empower people to make better choices — and reward them when they do. Most importantly, reform must reinforce basic principles of free markets — principles like flexibility and certainty. PPACA stifles both.

Washington appears to have forgotten that Medicaid is supposed to be a bridge, not a hammock. To that end, Utah has proposed thoughtful and potent Medicaid waivers to deliver care to the most vulnerable while protecting the program’s long-term viability. Our goal is to help people in need but prepare and empower them as their situation improves.

Yet it is those most vulnerable — those whom Obamacare professes to protect — who will be most victimized by shrinking access to eligible providers, and hidden taxes and regulation that drive up the costs of life-saving medical devices.

Utah continues to use and explore customized reforms like greater flexibility, accountable care organizations and paying for quality instead of quantity, cost-controlling features, electronic records management systems like Utah’s Clinical Health Information Exchange, a market-oriented health insurance exchange, and our All Payer Claims Database. True reform adds real value.

At this time of economic uncertainty, Obamacare will effectively kill every state’s efforts to maintain balanced budgets — all at the sacrifice of other critical priorities. Right now, Medicaid consumes 21.5 percent of Utah’s budget, nearly double what it was a decade ago. Adopting the expansion could cost Utah $1.3 billion over the next 10 years. Where will that money come from? Take no consolation in false assurances that the federal government will offset costs. It all comes from the same wallet — the American taxpayer’s — and alarming federal deficits should be a major concern for every one of us.

If we truly want to cut costs, the administration should cut strings attached to Medicaid and issue block grants to states. Give me less money and no strings, and I’ll deliver better services.

PPACA has too many rules and too few answers. Unfortunately, the Supreme Court’s ruling has only exacerbated marketplace uncertainty. Restoring market confidence and stability will come when we strike the right balance between costs and benefits, between compassion and dependence, and between freedom and accountability.

Unfortunately, with its top-down, one-size-fits all approach, Obamacare doesn’t really fit anybody. At this juncture, as states assess their options, it comes down to this: The statehouse, not the White House, should be leading the charge on one of the most complex issues of our day. It is time to reset the health reform conversation, and repeal and replace PPACA with state-driven, people-centered and market-oriented innovations. States simply cannot afford the Affordable Care Act, and neither can the American people.



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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