THE BOOK--Playing The Percentages In Baseball

A few weeks ago, I had to dump my ten-year old Accord because the tranny was slipping.  The Kelley Blue Book price was about 4K, but with the tranny issue, I sold it for 2.5K.

The Accord did not qualify for the cash-for-clunkers program because one of the conditions is that the MPG is 18 or less.  The Accord is 22, but of course with a slipping transmission, should have qualified as a “clunker”.  Really, the program was “cash for gas guzzlers” (basically a takeoff of cash for guns).

My biggest problem, when you see it that way (cash for gas guzzlers) is that the people who bought the guzzlers got a benefit the rest of us didn’t.  Basically, you are rewarded for getting the guzzlers (as long as you buy a new car with MPG of 24, or whatever, higher).

Why not give a reward to anyone who bumps up their new car purchases by +6MPG?  Why did you have to go from 18 and under to 24 and over?

Suppose for example that I decided to replace my 22 Accord with a 30MPG Civic.  Shouldn’t I qualify?  Indeed, had that been on the table, I might have gone for it, instead of going from one Accord to another.

I think your comment above was similar to what the CEO was saying. Goverment policies shouldn’t favor any special class, whether that class is defined by income, miles per gallon, race, or whatever. His point is that there are unintended consequences to all forms societal engineering by government. There is no president, no committee, no council, no czar wise and smart enough to anticipate the consequences. The CEO isn’t saying enact policies that favor himself. He’s saying let’s stop enacting policies that favor anyone.

The best thing to do is ensure a fair and free *process*--rule of law, free market, individual rights, etc. As in the cash for clunkers program, the government is deforming the natural market to engineer a desired outcome. Whatever you think of the program’s goal, it is doing all kinds of harm to all kinds of people, and it is a net loss to the economy. Sure, it’s “popular"--handing out other people’s money will always be popular to those who are receiving it.

Brian, the CEO is not going to complain about the hundreds of years of policy making in the US that benefit rich white males. There is a consequence to holding others down for a long period of time and that consequence involves a judicious reallocation of resources.
Only the rich can say that gov’t shouldn’t discriminate based on income (or whatever) because rich people have nothing to lose when the gov’t doesn’t discriminate. The rich have a debt to society and as much as I dislike the gov’t, I dislike unappreciative rich people even more.

Brian, we have no idea what the CEO was saying.  MGL only said that he was complaining about “democratic policies”.  You interpreted this to mean that he was complaining about how democrats favor certain classes, which of course is only your (quite cynical) interpretation of democratic politics.

Of course no one can anticipate all of the consequences of a new policy.  But every law, whether it specifically identifies or calls out a name/race/class/income or not, is going to benefit some more than others.  I use roads more than low-income urban families… but I don’t think that should stop us from building roads.

Can you be more specific about how Cash for Clunkers is “doing all kinds of harm to all kinds of people”?  I mean… Tango has a great point about a problem with the program… but is it really “doing all kinds of harm” to him?

@2 - We’d have a hard time enacting policies that favor no one.  Let’s say we wanted every child born in America to have the same chance to do something qualitative - say the same opportunity to hit the SAT score indicated by his academic true talent (TM).  This strikes me as a pretty fair policy - completely meritocratic, does not discriminate against a baby born in circumstances she could not control.

We don’t know anyone’s true talent, but let’s just say that we then required any group of 1000 students to have the same mean SAT score.  It doesn’t matter if they’re in Camden, NJ or Palo Alto - same score. 

What would have to happen to give everyone of a given true talent that opportunity? 

It’s not the course of action that you or the CEO would suggest.  It would require equalizing 1) the pre-natal care in every community; 2) the family medical coverage in each community; 3) having pre-K (like Head Start) in every disadvantaged community; 4) vastly improving public schools in most of the country; 5) subsidizing SAT prep for those who couldn’t afford it.  And even after all that, rich, white, suburban kids with professional parents would still have been favored and would still have a better opportunity to approach their true talent.

So when the CEO attacks Obama’s policies, it’s not because he wants us to favor no one.  It’s because he’s pretty happy with the status quo of favoring rich white people!

Ironically, athletics is one place where there’s the least inequality of opportunity in this country.  Raw athletic talent is quite obvious to observers, and doesn’t take 13 years of gym class to bring out.  A 9th grader who’s never played football but has great speed and hands will make the football team.  A 9th grader who went to terrible schools but has a brilliant math mind will not make the math team.

i dont think there has been much policy specifically written to benefit people who are white and male.  its definitely written to benefit the rich, as yes, they are often the ones writing and implementing it, but making laws to disproportionately benefit a white or a male would be a pretty illegal, no?

but yeah, special interests groups are self centered and a pain in the butt.  but its suffer them or subject them to the tyranny of the masses, right?

"but making laws to disproportionately benefit a white or a male would be a pretty illegal, no?”

If all of Congress were to be replaced by non-white females, you don’t think that this country would look alot different, and that alot of rich white guys will harken back to the days of when they had it so good?

Just start with parental leave, on the birth of a child, and compare the difference between what benefit America gives a woman to what Canada gives.  Woman are systematically oppressed.  Blacks are oppressed.  Poor people are oppressed.  When these people are oppressed, guess who gets to step in to claim the vaccum?

It’s easy for the rich white guy to not see all that oppression as he flies free as a bird.

I think that this used car dealer’s comments are worth listening to and considering even though they aren’t convincing in isolation.  The reason is that we have a natural bias to focus on the intended purpose of a program rather than its side effects.  The goal is what we’re hearing about directly, while understanding side effects before they happen require us to make inferences, and at least some of those inferences are too complex to get right reliably (some of the side effects are complex enough to evaluate that people debate them long after they have already happened).  His quote makes one of the more obvious side effects easily visible.  While any good economist could have predicted that a program to subsidize new car purchases* would harm used car dealers, I doubt that most people considered that right away when they first heard about the program

------------------------
* The debate about the desirability of redistributing income is likely to be off point for this particular program.  As a program to help poor people, destroying cars worth $2500 in exchange for a $4500 subsidy is massively wasteful since there will be fewer options in the used car market, driving up prices and harming other poor people who can’t afford a new car even with the subsidy.  On the other hand, as a program to help new car manufacturers (and their dealers, employees, and suppliers ...) the harm to the used car market is a feature, not a bug.

Telnar, any program that destroys usable items is wasteful, but I think the primary function of the program is to get rid of poor mileage cars and not to stimulate new car buying.  So I think that destroying those cars is a good idea, at least from the perspective of the goal (to reduce pollution and reliance on fossil fuels).

Plus, to tell you the truth, the average person does not realize how much in gas they spend on those clunkers.  I tried to explain to some of my poorer friends that for the money they spend in gas on their clunkers just driving to and from work, they could get a brand new small engine car with good mileage.  Of course, if they can’t get a loan for that new car, that’s another story.

Tango, your first post is EXACTLY what I was talking about.  Because YOU could not get the rebate, you think that they should have a different system!  Don’t you think that they considered all the alternatives and came up with what they thought was the best solution?  And don’t you think that there is no “perfect” solution?  I’m sure there all a million permutation, including your suggestion, which would have been fine.  But you have to pick one.

And yes, there is no such thing as a program designed to assist one group or society in general that doesn’t adversely affect one group or another.  To think that you can design or implement a “fair” plan for anything is ridiculous.  Can’t be done.  Unless you change your definition of “fair” (and not think that if it “hurts” me it is not “fair” which is a selfish and counterproductive way to look at things). 

The used car dealer could have just as easily said, “Yeah, I know this is going to hurt my business in the short run, but I’ll get by, and if it helps society in general, I’ll bite the bullet, make the sacrifice, and make do.”

How about that for an attitude, as opposed to, “If it hurts my wallet, I’m against it and I’ll vote against it, and I’ll vote against any politician that supports it,” which is the way that 75% of the people in this country think, I am afraid…

Ken @6:

Some examples for the Constitution:

Section 1, Article 9 - allowed slaves to be imported

Section 2, Article 1 - slaves are considered to be 3/5 of a person for the purposes of allocating various resources

Section 2, Article 4 - made it a crime to assist escaping slaves and required their return

Section 2, Article 5 - prohibited any laws from restricting slave importation for the next 20 years

African-Americans didn’t receive the right to vote until 1870 (and weren’t freely allowed to vote until much later.) Poll taxes weren’t eliminated until 1964.  Women didn’t receive the right to vote until 1920.  Senators were appointed until 1913. 

We’re freer than we once were...But there’s no doubt that laws still exist and can be made to privilege rich, white males.

MGL, I’m not sure that was the message I got from his comment #1.  I more got the impression that he was complaining that the purpose of the program was to improve gas mileage of the cars we’re driving… but instead, it only improves the mileage of SOME cars.  From a pollution standpoint, the effect is the same when you go from 24 to 33 mpg as 18 to 24 mpg (or thereabouts… you get the idea).  And the program incents one, and not the other, which flies in the face of it’s purpose.

His position as someone not able to participate in the program was what helped him NOTICE that he wasn’t directly benefitting from it.  But his complaint wasn’t “I am not benefitting from this, therefore it’s wrong.” It was “This program is not doing all it could do, and as a result I am not benefitting from it.” There’s a difference, in my eyes.

I am not in the market for a car, so I don’t have much of a personal stake in this debate.  I generally think targeted programs like this are a bad idea.  If we want to reduce low-mpg cars, why not just increase the gas tax, or just enforce stricter mileage standards for car-makers?  That essentially puts a tax on socially destructive behavior (driving and selling inefficient cars), which is helpful to society.

I don’t see any reason why Tango’s proposal (to simply increase the fuel efficiency of your car by at least X mpg) wouldn’t be just as useful as the existing proposal.  The standards used in this bill (18 mpg and 24 for the new car) seem completely arbitrary and probably not aggressive enough, given how quickly this program has run out of money.  Why not make the minimum 30 mpg?

any program that destroys usable items is wasteful, but I think the primary function of the program is to get rid of poor mileage cars and not to stimulate new car buying.

MGL, fair enough that one of the goals of this program is to reduce CO2 emissions.  There are better ways to do that (e.g. by taxing carbon, which is more likely to lead to the optimal result of having poor people who don’t drive much buy the clunkers for less than they cost today if everyone acts optimally in his self interest), but for various reasons related to politics, the better options don’t seem to be on the table.

As far as attitudes, I agree with you that it would be good if voters had the skill to understand what impact a policy has on society and vote accordingly.  That requires a level of understanding that they aren’t likely to get anytime soon.  I would settle for a slightly lesser utopian dream:  I’ll be happy if voters vote based on the present discounted value of their long term self interest.  That rule would if applied well should lead to picking the redistribution programs which work best over time and a sensible weighing of redistribution against the reduced growth it tends to cause by discouraging work and investment (there will always be more poor than rich, which will lead voters to prefer redistribution, but if that redistribution is likely to be harmful to long term growth, then their own self interest should argue against doing too much of it right now to keep more of it for the future).  It also has the potential completely eliminate special interest subsidies which benefit fewer than 50% of the voters (the general political economy view on why those programs survive today is because those harmed by them tend not to notice, while the much smaller group who are helped gain enough benefits to notice and donate or vote accordingly).

"Don’t you think that they considered all the alternatives and came up with what they thought was the best solution?  “

No.  I think they saw that virtually all 18MPG and cars were made by American companies, and that those consumers were most likely to trade them in for other American cars.  Especially considering that the “fuel efficient” new cars that is required by the program is only 24MPG cars and higher.

Their goal was to have +6MPG (or +33%) increase in cars.  They decided that as a benefit, they could disproportionately affect American car companies by setting a minimum threshhold.

whoa, hold on.  im not saying rich white males dont have it better than most any other demographic group you can name (i mean duh), im just saying all this, for lack of a better term, ‘institutionalized favoritism’ is geared toward the rich getting richer, not the advancement of males or whites specifically. 

in other words, lots of rich women and minorities benefit from the system, just as lots of poor white males get shafted by it.

if there are some examples of policy written recently whose purpose is to advance the cause of white males, regardless of their income bracket, at the expense of females and minorities, id be interested in hearing about it. but im not interested in historical injustices.  i know they existed and i know those disadvantages are passed on through generations so that the affects are relevant today.  and it may be semantics but i dont see the difference in maternity leave between the US and Canada as evidence of oppression of women. lack of progressiveness maybe, but not out right oppression.

Ken,

Many people have argued that focusing the stimulus program on road-building and energy-efficiency is a subsidy to white males of all incomes since they are over-represented in the building trades and unionized construction jobs.

Tom #14:

The law as written requires the turned-in car to be destroyed.  Would it make sense, if the purpose of the law was to improve the mileage of the U.S. “fleet” of autos, to destroy a turned-in car that has a higher-than-average mileage?  Never mind the +6mpg thing for a minute: would it make sense to destroy a car that gets better than average mileage?  No.

Now, you might have an argument for making the program a bit more nuanced: all turn-ins get the allowance if they improve by at least +6 mpg, and any turn-ins that are below the fleet average MPG get destroyed, while any turn-ins better than the fleet average can be resold by the dealer.  How’s that?

"but not out right oppression. “

It’s pretty close.  In one case, you have six weeks, and the other, you have six months.  And many (Canadian) companies top that off to ONE YEAR of maternity leave, with guarantee of a job.

If rich white guys could get pregnant, you can pretty much bet that the law would be changed.

@ Tango #1, Mike #11

There is actually a significant diminishing return on gas saved/ emissions reduced from raising MPG. (Click my name for more info) Getting the most inefficient cars off the road saves a lot more gas than getting people to upgrade their Carollas to Priuses. That being said, the amount of emissions produced in the manufacture and shipping of a new car eliminates the first several years of carbon savings gained from increased efficiency. Though the program will end up reducing emissions somewhat, helping people buy brand new cars is hardly the best way to spend money for the environment. In the end, the program does much more for the executives at the motor companies (rich white men) than it does for the environment. Though I’m sure many poorer people will gain some benefit from it, there are better ways to help them out just as their are better ways to help the environment out.

Ken,
How about the war on drugs? This is a government initiative that has decimated the african american community to “protect” the, mostly white, overpriviledged classes of the US.

Greg/17: agreed. 

The only part of the car that is “destroyed” (rendered inoperational) is the engine. 

You could make it that any engine 18MPG and below must be rendered inoperational if car is submitted via the CARS program.

Agreed on the war on drugs.

Cash for Clunkers has, if anything, a net negative environmental impact. Making a new car - and the acquisition of the requisit natural resources and all that entails - is not an “environmentally-friendly” act.

Taking cars in working order off the road (and the way the law was written, mostly the cars in the best working order are eligable) and replacing them with new cars offsets most of the environmental savings of using less gas. (Note that there are many cars that can’t pass emissions but aren’t eligable because once upon a time they were rated at 19 or 20 MPG, back when the drivetrain was in decent shape.)

The program is designed as an economic stimulus, to try and relieve the massive backstock of cars in this country so that we can keep more auto workers employed. (We can argue over whether or not there’s any real economic stimulus being provided, of course.) The envioronmentally-friendly aspects of the law simply mitigate the environmentally-unfriendly main purpose of the law, which is to consume more resources and build more material goods.

An unappreciated aspect of how the U.S. society favors the well-off: everyone who lives above the poverty line in this country should be grateful and appreciative of the fact that in the USA, the rule of law prevails.  Someone stronger than you, or more powerful, or more connected than you, cannot just kick your front door down and take all your stuff if they decide they want it. 

You can lock the front door, turn on the alarm system and head for the coast, and while you’re gone, your comfortable 4-bedroom, 2,500 square foot house remains empty and your well-stocked pantry remains untouched, while a couple miles away people are homeless and hungry.  Never mind why these things came to be, that’s another discussion; focus on what happens (or doesn’t happen) during your vacation.

Who benefits more from this state of affairs, a rich person or a poor person?  A rich person ought to pay more taxes than a poor person, regardless of what services they actually partake of.  And by more I mean not only absolutely more, but proportionally more as well. 

Rich people derive exponentially more benefit from society than do poor people; whether that enormous difference in benefits is commensurate to the difference in contributions to society, could be debated in great depth and detail…

eh - look, i dont want to be the defender of rich white males the world over but but to me its all about the money, not the whiteness or the maleness.  and bringing up a rich white male bogeyman whenever there is social injustice in the country is counterproductive in my opinion.

sorry - just read greg’s post and the drug war posts, and i agree with you all, very much so.  but to me its all issues stemming from socio-economic issues, not racial or gender issues.  and maybe im nit picking or being naive but to me its that these policies greatly benefit the rich, who happen to be predominantly white and male, and not vice versa. so i dont see the point in belaboring the white maleness of those in power, especially considering were now in a post racial political society (ok that time i was just kidding).

I’m not sure Professor Gates would agree with you, kendynamo.  I can’t remember where I read it, but there was a first-person account on some blog about two white women opening the second story window of a house in the same town as Professor Gates when a Cambridge cop came by.  And immediately helped them get the window open without so much as asking for a driver’s license.

What the CEO doesn’t get is that there is a breaking point for every society. It’s actually in the interest of the elite to make sure the masses have a decent standard of living. If the middle class were to vanish (which is certainly possible, considering the economic policies of the last 30 years or so), does the top 10% think the bottom 90% wouldn’t insist on much more radical change than, you know, making sure everyone can afford to go to the doctor?

Ken,
I agree with you that this is an issue about class; but when class is as influenced by race and gender like it is in our society, class based policies are in fact race based policies as well. Context matters.

Why do we keep mentioning the rich and poor here? The rich don’t need a $4,500 subsidy to buy a new car and the poor can’t afford a new car even with one (and because used cars are being decomissioned, fewer of them will be able to afford a used car). This is purely a subsidy for the middle class.

From mgl’s intro, “Just once I’d like to see people judge things from the perspective of what is good for society as a whole and not just what is good for them.”

The problem with that is, who decides what’s better for society? And ‘society’ is just a collection of individual people anyway. All you can, or should, really do is give everyone an equal voice, and not demand or expect them to vote against their self-interest. The only times people do things against their self interest is when a) they can afford to do so, and b) there is a hidden benefit (maybe feeling good about yourself).

Yes, it would be great if people did as mgl said. But people simply aren’t wired that way. Better to do the best job we can within the nature of man, not outside of it.

"All you can, or should, really do is give everyone an equal voice”

Right, exactly.

And if you can’t, you need someone to advocate for those who can’t speak.

A question for everyone here who does not have a government job.  Who employs you?  Who is the person who innovated your company or your field and took the risk to run the business which you work for?  Probably a very rich person.  Yes, please bite the hand that feeds you.  Our country and our system may not be perfect, but it’s better than most of the other systems out there.  I for one am glad that we don’t run things like Canada, Europe, China, Iran, Cuba or Mexico to name a few.

In our country anyone can make it, whites, blacks, browns, yellows, rich and poor alike.  Yes, being born into wealth has it’s advantages, as does being born into a culture that puts an extremely high importance on education and family.

Rich whites can’t be blamed for that!

vr, Xei

breadbaker/27: well that just sounds like a small step for the advancement of women in society to me.  see, were making progress.

“All you can, or should, really do is give everyone an equal voice”

Right, exactly.

Are you kidding me? If not for people who, for whatever reasons (you may call altruism “selfish” but it doesn’t matter what you call it), actually look out for others with no tangible benefit to themselves, other than “feeling good” or being patted on the back, NO minorities would ever have any rights, simply because they are minorities by definition!

If you simply give everyone one equal voice and you think it is OK for people to make decisions and vote for whatever feeds their self-interests, how about we start a petition to enact a Constitutional Amendment in your state that says that really tall people (or red-heads or whatever minority you want) pay all the taxes and everyone else pay nothing?  According to your plan, that passes easily.

Seriously, are you kidding me?  I don’t think either one of you mean what you wrote, but you did say essentially that it is OK for people to vote their self interest as long as everyone has an equal voice.  Under that plan, how in the world would minorities EVER have anything that benefits them?  I suppose you can argue that it IS in other people’s best interests to give benefits and rights to minorities, but I am afraid that that argument won’t fly in a million years. The ONLY reason we don’t have slaves and widespread injustices against minorities like we did 50 or 100 years ago, is because a FEW people stepped up to the plate, and NOT because the masses (the majority) decided that it was in their best interest for these injustices and prejudices and discrimination to end.  Are you kidding me?

In Canada, mothers get more maternity leave than fathers get paternity leave.  I see this as oppression against middle-class men.

I don’t know who said it but I’ve always really liked this quote:
Democracy is two wolves and a lamb voting on what to have for lunch.

FWIW, the USA is not a “true” democracy or “mob rule” governance.  We are a “republic” with democratic “tendancies”, or pick your semantic of choice.

“I pledge allegiance to the Republic… one nation under God...”

Also, Article IV, Section 4.

One could agrue though, that state governments through their “state ballot initiatives” are less of a Republic than the federal government.

Any vote passed to unfairly tax red heads would be struck down by the Court System under the “check and balances” system our founding white fathers had the foresite to design.

vr, Xei

"Any vote passed to unfairly tax red heads would be struck down by the Court System under the “check and balances” system our founding white fathers had the foresite to design.”

That wasn’t my point.  However, your point is a good one in that one of the reasons why our system of government is one of the best in the world is that we have a Constitution, among other things, that was written to some extent to protect the minorities from being oppressed and from the potential tyranny of majoritarian rule.  Of course it took a bunch of Amendments for that to develop beyond that of the Bill of Rights.  And again, it also took a number of brilliant and altruistic people who stepped up to the plate and risked everything in some cases, in order to make that happen.  It is interesting and ironic (and sad in my opinion) that when we put things up to “a majority vote” we get things like Prop 8 in California (outlawing gay marriage), but when it comes to revolutionary laws or legislation that protect minorities or right past wrongs, it usually takes a brave individual or small groups of minority individuals to make these things happen.

Cash for clunkers as a stimulus package is a joke.  The baseball equivalent of trading a grade A prospect for 2 months of a soon to be free agent who upgrades you by half a win.  We’re getting people who might have been thinking about a new car 1-2 years from now to jump in and buy now.  Great in the short run for the car-makers.  But these same people will not be buying any more cars in the next few years.

As Colin said, it’s purely a middle class program.  The poor don’t buy new cars, they buy used.  The rich don’t keep cars that are still running but worth less than $4500.  They’ll trade in the 4 year old Lexus still worth 20K when they buy a new beamer.

@33: “A question for everyone here who does not have a government job.  Who employs you?  Who is the person who innovated your company or your field and took the risk to run the business which you work for?  Probably a very rich person.”

Well, I work for a startup.  Like most startups, we are almost entirely funded by teachers’ pension plans and the like.  That’s the great thing about venture-backed startups: the founders tend to have none of their own capital at risk.  Our risk is borne by a million middle-class teachers.

With regards to the moral of MGL’s story: I completely and totally understand the “What about me?” philosophy. In fact, I think the majority of us have our political ideals shaped by this. It’s human nature. And you know, I can’t really blame a person for voting one particular way based on how they personally benefit. I’m actually ok with that.

That said, what bothers me is when people lie about their motives. It bothers me when rich white guys make up stories about birth certificates and religious affiliations and terrorist ties. It bothers me when talking heads blatantly tell untruths about the FACTS of certain policies and plans of the other side all to hide the fact that they might not be getting the benefit they want (and, usually, the benefit they want is actually not what will make their life best - but that speaks to my belief that the vast, VAST majority of Americans have absolutely no ability to know what’s best for them).

In short, if a rich white guy doesn’t like being taxed because all he really cares about is himself and his family and his money. Hey, I’m fine with that. I don’t agree with it, but I’m fine with it. But, as MGL said, when the rich white guy doesn’t like those things and then says it’s bad for everybody, that pisses me off.

Tango is correct that ‘clunkers’ is a misnomer, that it’s actually gas guzzlers.

I do believe it was intended
1. as an economic incentive to get better gas mileage

Ten Top Trade-Ins Under Cash for Clunkers
1.  Ford Explorer
2.  Ford F150 Pickup 2WD
3.  Jeep Grand Cherokee 4 WD
4.  Jeep Cherokee 4 WD
5.  Dodge Caravan/Grand Caravan
6.  Chevrolet Blazer 4 WD
7.  Ford Explorer 2 WD
8.  Ford F150 Pickup 4 WD
9.  Chevrolet C1500 Pickup 2 WD
10. Ford Windstar FWD Van

and 2. stimulate new car sales.

But, inventories of cars from US owned companies is low so the unintended consequence is

Top Ten New Car Purchases: Cash for Clunkers
1.  Toyota Corolla
2.  Ford Focus FWD
3.  Honda Civic
4.  Toyota Prius
5.  Toyota Camry
6.  Ford Escape FWD
7.  Hyndai Elantra
8.  Dodge Caliber
9.  Honda Fit
10. Chevrolet Cobalt

Several years ago, during the last recession when state tax coffers were low and road projects were put on hold, Virginia put to a popular vote a tax plan that would establish regional tax districts to pay for roads in that district. I recall there were some arguments about it’s constitutionality, and I objected to it on some matters of principle. It’s passage would have meant more business for our company, and thus more money in my pocket. Pro-tax flyers were placed on our company bulletin board. I posted a list of points against the tax, and it was removed. A friend told me he did not want to hear me complain when we didn’t have any overtime. The proposal did fail, and our company likely did suffer loss of business, but I voted what I thought was best for the community as a whole, not what would benefit me personally.

Hawerchuck #10
Article 1 Section 9 on migration and importation of people, appears to treat slavery as a fact, and that the intent was to give a 20 year grace period after which the federal government would take over immigration control from the states.

Article 1 Section 2 the three fifths compromise - slave states did not want to grant any human rights to slaves, treating them as property, but at the same time wanted them to count as population for the awarding of congressional seats. It was argued that they shouldn’t be able to have it both ways, either slaves were people or they weren’t - they settled on 3/5 to get it passed.

Article 4 Section 2 Full Faith and Credit - the intent was that if the states were to come together in a union, it was necessary for them to recognize and respect the contracts and property from another state. Not meant to be pro-slavery, but treating it as a fact of life at the time.

MGL, it looks like your #35 is a response to my #31. So, if we don’t give everyone an equal voice, it means the women, the blacks, etc etc should be able to rule over the “rich white guys”? I don’t get that at all. If your apparent underlying sentiment about people is correct, then they’ll simply enslave the rich white guys!

No matter what is your underlying theory about the nature of man (inherently selfish, inherently benevolent, etc), it always works both ways.

This is, essentially a debate about liberalism, conservatism, libertarianism, etc. I have little desire to tread deeply into that debate with anyone. I only responded because you took a position in your initial post as though it was almost correct by definition, and I didn’t want to let that slide.

Two comments.

The Cash for Clunkers program is a clunker of a design. Agree completely that the size of the incentive should have been fit to the MPG differential. I got rid of a 20 mpg 13 y.o. Taurus for pennies. Bought a new car getting 38 mpg. Did get hybrid tax credit, which was far smaller than the $4,500 for the clunkers.  Would have made sense to offer $600 for a 6 mpg improvement, and $100 for each additional 1 mpg improvement up to some limit (say up to 40 mpg).

On MGL’s OP:  the core issue of one of “empathy,” something that the right tends to denigrate. To me the concept has to do with the a sense of understanding how other people feel and considering not just their feelings but their actual well-being.  Many people tend to think that whatever they have is theirs, even if earned largely through the labor of others or through inheritance or luck. They feel no sense of social responsibility.  A practical aspect of this is that we’ve totally lost the sense of the purpose of progressive income taxes, or, for that matter, the dangers of inherited wealth.

David, I was responding to this ideal, which I don’t really think that you and Tango meant:

“All we need is for everyone to have an equal voice and even if everyone “voted” selfishly everything would take care of itself.”

My response was that under that system you would have tyranny of and by the majority, by definition.

My “system” and the one we essentially have is laws to protect the minority no matter what the majority thinks (e.g., the 14th Amendment and almost the entire Bill of Rights) and altruistic, enlightened, and forward thinking individuals who are always stepping up to the plate to right injustices and protect the rights of ALL individuals, with no tangible benefit to themselves.  And of course everyone has a voice.  But that is not ALL you need (that everyone have a voice).

Of course you can’t set up a system that creates these (altruistic) people.  All you can do is set up a system that allows them to do their thing.  All societies will have (and do have) such people.  In other countries of course they have limited power to effect change and risk death sometimes.

As far as giving the credit on an MPG percentage basis, as someone said above, the whole idea is to get rid of low mileage cars.  You want to get rid of all cars that have an MPG below average or below some threshold. So while you obviously want to encourage people to drive cares with better mileage, you don’t want to get rid of a car that is already above average in MPG.  Someone is going to drive that car.

Would it makes sense to destroy a car that is getting 30 MPG when someone trades that in for a car that gets 40 MPG?  I don’t think so.  You can certainly give government sponsored credits and rebates to people who buy high MPG cars (we do that already - e.g., gas guzzler tax) or upgrade their mileage.

But that is a separate story.  The “cash for clunkers” program is primarily designed to destroy low mileage cars.  Tailoring the 3500 or 4500 rebate to a “percentage upgrade” makes little sense to that end.

Brian/43 was marked for moderation.

***

As for the “one person one voice”, I meant it that each person has equal say.  At the same time, one person’s liberty ends where the liberties of another starts.

Gay civil unions, for example, has no impact on anyone other than those getting “unioned”.  It’s not up for a vote. 

The benefits that a gay couple has compared to a non-gay couple is again not a voting issue, since the benefits of the gay couple is not to be set by the non-gays.

Discussing the definition of a word (marriage v union) is beyond ridiculous.

***

Obviously, we’re going to have problems on alot of things, like taxes.  The “right” thing to do is that everyone pays taxes relative to their wealth, in proportion.  Or pays taxes relative to how much use they get out of the government (i.e., “we the people").

As it turns out, the wealthy is subsidizing the poor.  The income of people starts at 20K or 30K, and is taxed at an increasing rate above that line.  Certainly not “fair”.  And I presume a rich person does not use government proportionately to their wealth.  Again, not “fair”.

But, the wealthy subsidizes the poor for moral issues, and also to keep the engine going (keep the poor strong enough to keep the whole machine going).

Tom #47:  Don’t forget that the “rich” and “poor” categories are quite fluid.

When I was very young, at one point I got my meals at school at a reduced price, through some sort of program, I don’t recall what it was exactly.  I wouldn’t consider my family poor at that poitn, but if we weren’t, we certainly were at the very low end of middle class.  Later I was able to attend a prestigious pre school, and an excellent private college, with substantial financial aid in each case (some of which I had to pay back, some of which I didn’t).

Now I’m very comfortably employed, and though not rich, certainly near the higher end of middle class.  My kids don’t need or get aid for school lunches, and they almost certainly won’t be getting any financial aid for college outside of loans perhaps (yikes!).  It is a fact that some portion of my current tax dollars go to provide school lunches for some kids, and financial aid for some others.  The circle has come around.

So, does the wealthy subsidize the poor: yes, they do.  Maybe for some that seems unfair, but to me, it seems like a pretty fair arrangement; I’d have to engage in some pretty elite moral jujitsu to justify that to my conscience…

One more thing: I thoroughly disagree with your statement that a rich person does not use government proportionately to their wealth.  Rich people have much, much more to lose from a removal of government than do poor people.

The number one function of government in the USA is law and order, the preservation of the principle of the rule of law.  The rule of law allows the accumulation of wealth that leads to the existence of rich people (other than tyrants).  In that sense, rich people are constantly deriving enormous benefit from government.

Just because a rich person never sees a policeman during the course of his day does not mean that that rich person didn’t draw immense benefit from the existence of law and order, and the police who preserve it. 

Just because a rich person doesn’t patronize a homeless shelter doesn’t mean that rich person doesn’t benefit from its existence. 

Just because a rich person doesn’t see any soldiers, sailors, airmen or Marines on a daily basis doesn’t mean they don’t benefit greatly from the sacrifices of those servicemen/women.

Without government and the fundamental preservation of law and order it provides, there would be no rich people, other than those who somehow acquired the power to take from others by force.  Rich people should be glad we don’t live in a world like that any more.  Poor people should be, too, because it presents the opportunity to use talent and energy to become middle class, or rich…

Greg, I don’t disagree with your post, except the end.

By “government” you mean a US-style government.  There are plenty of governments out there that protect the rich to an even greater extent than America does, and there are plenty of governments that take what they want from the rich.

Whether the US-style government actually gives the rich guy “you get what you pay for” I suppose we can debate (though I don’t really want to) given the indirect benefits you cite.  Canada, for example, taxes the rich even more.  Do the rich get what they pay for there?  Probably not, given how many rich people leave Canada for USA.

Does USA still tax them too much?  Maybe.  But given the overall net effect, this is probably the best country for them to live in.

Tom, we’re on the same page.  And I agree, not worth it to debate whether someone, or anyone, is getting what they pay for.  That’s a bottomless pit of discussion, I don’t have better answers than anyone else, I suspect, and life’s too short…

Brian @ 43:

The question was asked in #6 whether there were laws that favored white men as opposed to rich men.  Clearly there were; it hardly matters what the rationale was.

Granted this is a cynical view, but at its most basic level, the main objective of specifically the legislative branch of government is to move money from one set of peoples to another, whether that be from rich to poor ("progressive" redistribution) or from poor to rich ("exploitation"), from one region of the country to noather ("pork" or appropriations).  But at a base level, the goal of every senator or representative is to get as much of the central money redirected to their state/district.

However, economics is not a zero-sum game, just because some money goes from one group to another, this can actually provide economic benefit to make the whole group better off.  If you believe in socialism, then your belief is that by driving everybody to an equal amount of income/wealth will have the greatest economic impact, while if you are a capitalist, your essential belief is that typically wealth trickles to the people with the talent to do the most with it and leverage it the most.

With that said, I’m willing to have a little bit of “overall economic benefit” to have more equality, but I’ve seen a lot of “progressive” issues which have actually been a drain from the poor to the rich (take Social Security).  Social Security in theory is a great idea, but the evidence shows that typically this is a “tax” that actually drives more money from poor people to rich people, since poor people have a shorter life expectancy and draw less.  Typically, they get much less out of it than they actually put in, where rich people usually get more benefit out of it than they put in.

Majority rule and self-interest voting aren’t necessarily bad.  There are definitely times when we need voting as a rough “preference aggregator” to tell us what people want. 

Everyone, of course, sees issues through their own biases.  There’s sometimes an implication that voting/favoring a policy that benefits you is selfish.  But you may also just think it’s better for the country.  Normatively (and I’m not implying anyone here did this), we criticize the rich when they do this.  But we don’t criticize the poor when they favor pro-redistribution policies. 

As for tax liability distribution, there are really 2 issues.  Who are we trying to benefit (what weight do we put on different people)?  And how do we optimally get to that point?  I think we focus way too much on the first question and ignore the second.  Sometimes arguments about “fairness” in taxes are silly because they focus only on what the tax rate is for different groups...not how we can optimally redistribute, even if that requires a tax system that doesn’t “look” redistributive.  For example, there’s good evidence that high-earners are more responsive to taxes.  Honestly, I have no idea what the optimal tax rate is for the wealthy (responsiveness isn’t the only relevant variable), but we rarely hear about individual-level behavioral responses to taxes in policy debates.  And those are potentially huge. 

(No, this doesn’t directly address anything anyone said.  More of just the “flavor” of some of the discussion.)

Tim, please let me know if you disagree with this, but I would guess that rich people would much rather get rid of SS and poor people want to keep it.  It’s just become more redistributive than its original (economic?) intent (to solve the adverse selection inherent in an annuity market).  SS is great for people worried that they will outlive their savings.  This is less likely for rich people.  The poor benefit much more from this safety net.  I’m pro-redistributive policies in a lot of contexts, but I don’t believe that SS should care about redistribution (with minor exceptions).

Blacks and the poor have a much shorter life expectancy, so the current SS system shortchanges them.  They and everyone else would be better off saving the money they put into SS in a fund that matches the cost of living (no risk) or does slightly better (tiny risk) than the cost of living.

Social Security in it’s structure is a pyramid scheme.  Those who were the first in, paid nothing and were supported by those who were working.  This pyramid scheme (I mean SS), wasn’t meant to last this long, it was a temporary solution for a way to help retired people at the end of the Great Depression.

Yet, the pyramid scheme (SS) continues on today.  In the same way that a pyramid (or ponzi) scheme can come crashing down or profits/payouts come to a halt, the same can and is happening to social security, due to the fact that the pyramid is getting too top heavy.  In the ponzi version, new recruits must be found, or the scheme will end up folding, with the newest members left holding the bag.

In SS, the newest members are the young work force.  The only way to keep the SS pyramid scheme afloat is to either raise taxes (increase ponzi fee on members), raise the retirement age (raise qualifications for ponzi members getting payouts) or lower benefits that are paid out (slash the payout amounts of ponzi members).  Or some combo of the above.

The similarities between the ponzi pyramid scheme and the basics of social security are stunning.

I would love to be able to opt out.

Why is that a pyramid scheme?  A pyramid scheme gives people their money plus a healthy interest rate even though the money is not invested in anything.  The organizers also siphon off money so that there is not much left to pay out.  The key to a pyramid scheme is that some people get more than they put in and that the money is not actually growing through an investment so that many of the “investors” - most of them actually, because the organizers steal most of the money - get very little or nothing.

It is a given that the original participants in SS put in nothing.  So what?  The government can subsidize that very easily with taxes collected in other areas.  We know that.  There is no pretense.  Other than that, everyone gets what they put in, essentially, at least in the aggregate. It is a zero sum game, other than the original benefactors.

Let’s say that I design a SS system, as a government.  I realize that if I want to start it now (as opposed to waiting a generation until there is money to give out), I have to seed the fund. So what?  I spend billions of tax dollars on lots of other entitlement programs.  So the first generation of SS recipients happen to get “free money” just like any other entitlement program.  So I take 1 billion dollars (or whatever the number is) and put it into the fund from my “tax coffers” for the first generation of recipients.  No problem there.

After that, I make it a zero sum game which it should be.  Now, obviously because the number of workers fluctuates and the life expectancy of people fluctuates (goes up usually in time) and the number of retirees fluctuates in any given year, I have to make sure that I balance the money going in and the money going out for the long run.  Sometimes I might even have to either raise the SS tax rate or lower the benefits if I want to retain this zero-sum game.  Imagine that!  (In lies one of the problems.  People are intolerant to having ANY taxes raised or benefits lowered.  Well, that’s too bad.  Sometimes that is necessary.  Imagine that.)

Or I can NOT mess with the SS tax rate or the benefit structure to any large degree.  I can simply subsidize the SS pool with other tax dollars (again, why does SS have to be a zero-sum program?  It doesn’t!  It can be part entitlement and part forced savings with a zero-sum outcome) if there is a shortfall or if there is a windfall, I can take the extra money and use it for something else (or stick it in the “bank” until such time as there is a shortfall).

Why is SS eventually going to go broke?  For three reasons and neither of them is because of an inherent problem with the system and all three of them can easily be repaired.  One, since the first generation of recipients didn’t pay in, obviously extra money needs to come from somewhere, which is simply other tax dollars.  Two, because of higher life expectancies, the SS tax rates might need to be increased (or benefits decreased), but no one wants that and you NEVER get elected if you tell people you are going to raise taxes and you NEVER get re-elected if you raise taxes while in office.  And finally, because of the fluctuations in shortfalls and windfalls on a year to year basis, if you always spend the windfalls, but never subsidize the shortfalls, you will eventually go broke. But, guess what?  You didn’t really go broke.  You just spent the “profits.” In a zero-sum game, there are no profits of course.  Just year to year fluctuations.

Finally, the idea that SS is going “broke” is a false and ridiculous one. Since when is one government program separate from another?  That would be like saying that welfare and medicaire are going broke!  Those are entitlement programs that are funded by our tax dollars.  If excess monies from SS have been spent then it needs to be reimbursed by our tax dollars.  And as I said, and which is obvious, the original recipients’ monies needs to be reimbursed by our tax dollars.  Who ever said that all SS monies have to come from this (fictitious) SS fund that exists somewhere in some bank or in someone’s drawer in an office somewhere in Washington?  There isn’t and it doesn’t.  SS is just part of the thousands of government programs that come, in part, from out tax dollars.

SS is NOT a pyramid scheme!  It is what it is.  It is forced retirement savings.  Nothing more and nothing less.  Which is NOT a bad idea.  ALL governments exists as surrogate parents.  That people complain about that exact thing is ridiculous, in my opinion.  Certainly that can go too far, but the basic idea is EXACTLY what governments do.  If it weren’t for SS, many people would blow all their money and have NOTHING to live on for retirement.  That is human nature.  So a government has two choices:  One, take care of those people in retirement using everyone else’s tax dollars.  Or force people to save their money for retirement (SS). Which one would you prefer?  I think the answer is a no-brainer and it is brilliant.

Now, whether people should be able to opt out is another story altogether.  Or whether the funds should be invested in the private sector (which you heard LOUDLY from Republicans until the stock market collapsed) is another matter.

Just like there are thousands of permutations for the cash for clunkers program, I’m sure there are plenty of permutations for SS.  But the basic idea is brilliant.  A pyramid scheme?  Not even close.  That is just rhetoric.

Social Security is NOT brilliant.  A system that sucks 23% of the US Federal budget and will shortly be returning a negative return on investment is wasteful and fraudulent.  We are not talking about giving people the option to put 100% of their SS taxes in internet stocks, we are talking about low risk to perhaps a small percentage of medium risk fixed income investments.

A few links to ponder.

The National Ponzi Scheme
http://www.capmag.com/article.asp?ID=5409

More on Ponzi vs SS
http://www.socialsecurity.org/daily/05-11-99.html

Briefing papers on why SS is a bum rap for blacks.
http://tinyurl.com/bumrapforblacks

I’ll read those links, which I assume are not unbiased.  When it comes to complicated things, the worst thing you can do is to read a biased assessment of it.  It is easy to make a solid case for one side or another when something is complicated.

Why would SS “suck 23% of the budget” when basically in the long run the money going in equals the money going out, other than the first group of recipients who put nothing in?  And if it is net negative then we need to increase the taxes or decrease the benefits, obviously.  It is forced savings, nothing more and nothing less.  You can’t even get SS unless you put in a certain minimum amount!

If it is meant to be a subsidy for retired people, then that’s fine too, if that is necessary.  And if it is a subsidy (an entitlement - a non zero sum game), then obviously that subsidy should only be given to people who need it and not to people who already have enough savings or an adequate retirement plan.

I hear lots of people saying SS is going to be in the red as the Baby Boomers pass through the system, but no one ever says that the system will rebound once the Boomers are gone.  Will it?  If the Baby Boomers are a demographic bubble passing through that forces the system to take out far more than is paid in, doesn’t that imply that after they’re through, the opposite is the case?

Not trying to make any more of this than an observation… sort of like saying that winter is coming, and my home heating bill will be bigger than it is now, OMG, if I multiply my January bill by 12, that’s way more than I have set aside for heat, what am I going to do?

Greg, I agree 100%.  If the baby boomers are going to take a lot out of the system simply because there are lots of them, then they must have put lots into the system while they were working.  If the “SS fund” spent all that money that the boomers put it, that is not a fault of the system.  It is not a fault at all.  As I said, government tax coffers is one big pile of money with a bunch going in and a bunch going out all the time.  The trick is to monitor the taxes and the expenditures to make sure that they are balanced in the long run.  Obviously we haven’t done a good job of that lately but that doesn’t make SS (or any other program) a bad program.  In fact, quite the opposite.  It is one of the only government programs which is zero sum. If it is not, it is not too tough to make it so.  The idea of the Boomers breaking SS is nonsense for the exact reason that Greg says. And the idea of SS going broke is nonsense also.  SS will be broke when the government folds up.  The government is technically broke now (giant deficit), but that does not stop it from operating.

O.K., I read this one:

The National Ponzi Scheme
http://www.capmag.com/article.asp?ID=5409

It basically says that SS is a “Ponzi scheme” because even though it typically pays less than it takes in, the government spends the excess.

O.K.  We know that.  So what?  As I said, regardless of how it was billed at its inception (in the 1930’s?), it is just another tax.  The government can do whatever it wants with the money.  The important thing is that it is what it is, which is a forced savings for retirement.  Now if the government took our money while we worked, told us that we would get it back when we retired, and then didn’t, that would be another story.  We’d have a right to be pissed.

Seriously, with the deficits we have in government, do you expect them to keep the extra SS money locked in a drawer only to be used when it is needed for SS?  And what would be the difference anyway?  If the government didn’t borrow the SS money, it would have to borrow money somewhere else.  It amounts to the same thing.  It can take the SS excess now and we can borrow money for SS when we need it, or it can leave the SS money in a drawer and borrow the money it needs now.  EXACTLY the same thing.

That article was worthless.  I’ll try the next one.  I am really reading these with an open mind.  I have no pre-conceived notions about SS and I have no ax to grind.  I dislike government as much as anyone else.  I really do.

OK, the second article says this:

Just like Ponzi’s plan, Social Security does not make any real investments—it just takes money from later “investors,” or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi’s scheme.

Again, nothing new there.  It takes in money and then gives it back.  That is what it is supposed to do.  And of course the government invests some money.  What do they think it does with it when it is not in use - hide it under a mattress?  And, as Greg said, sometimes it takes in more than it gives out and sometimes it gives out more than it takes in.  Just like your energy bill in January as compared to April.

Anyone who tells you that, “SS is going to go broke (meaning that people will stop receiving it) because it gives out more than it takes in” must think you are an idiot.

I wouldn’t call SS forced savings.  It’s a transfer with an implicit promise of a tranfer back to you later.  This isn’t just nuance.  Forced savings would add a ridiculous amt of capital/investment into the economy.  A transfer system does not do this.  This is probably why both parties wanted to invest SS in the stock market (Democrats were against private accounts but not against investing directly into the market).  Of course, we started out with a pay-as-you-go system so transitioning is difficult. 

The best (in my opinion) way to think about SS is like this - we all want guaranteed $ when we retire so that we don’t have to worry about outliving our savings.  We could buy an annuity, but you have the same problem then that health care is currently having.  The people who will get the most benefit from insurance are the ones most likely to take it up and, thus, one possible equilibrium is that no one gets it.  In this case, only the people who think they’ll live for a long time would purchases annuities.  So, we need government to solve this adverse selection problem.  Talking about SS in terms of redistribution clouds this issue.  We have to consider the benefits of solving this problem ($ after retirement) and weigh it against the costs (higher taxes).  Redistribution can be handled in different ways.  For SS, just think about it as “I’m being taxed X now for an annuity worth Y later.” What type of balance do you think is worth striking?  (You also should add the distortionary aspect of taxes into the social calculation).

From the web site, here is the summary of the third article:

Perhaps no group has as much at stake in the debate over Social Security reform as do African Americans. Elderly African Americans are much more likely than their white counterparts to be dependent on Social Security benefits for most or all of their retirement income, yet the current system often works to their disadvantage.

Despite a progressive benefit structure, Social Security benefits are inadequate to provide for the retirement needs of the elderly poor, leaving nearly 30 percent of African-American seniors in poverty. Moreover, because African Americans generally have shorter life expectancies than do whites, they receive less total Social Security payments over the course of their lifetimes.

Social Security also contributes to the growing wealth gap between blacks and whites. Because Social Security taxes squeeze out other forms of saving and investment, especially for low-income workers, many African Americans are unable to accumulate real wealth. And, since Social Security benefits are not inheritable, that wealth inequity is compounded from generation to generation.

Traditional Social Security reforms such as raising the retirement age, cutting benefits, or increasing taxes would only make the problem worse. On the other hand, African Americans would be among those with the most to gain from the privatization of Social Security�transforming the program into a system of individually owned, privately invested accounts.

Let me say first that like ANYTHING else, I’m sure that SS can be improved.  No entity or program is perfect and there are always unexpected things and unintended consequences that arise after a program is formulated and implemented that allow us to improve the program with time.  SS is no exception.  That is why we have people and organizations that continually study these programs and make recommendations for improvement.

Since SS is not inheritable and you don’t get exactly what you pay in, obviously it will have a disparate impact on any group that does not have a high life expectancy.  I don’t know why it is not inheritable or you cannot accelerate the payments more than you can (you can elect to take it at an earlier age of course).  I’m sure there are reasons but I don’t know what they are.  And I am sure that they considered all of this when they formulated the program.

The idea that SS taxes “squeeze out other opportunities to save” and therefore negatively impacts low income people is ridiculous!  That is the whole idea of it in the first place.  To force people to save.  If there weren’t SS taxes, sure some people would take the same money and put it into an investment that actually earns something, but most people don’t and won’t, especially poor people.  What a ridiculous argument.  Think about it this way:  I am sitting in a room and we all agree that lots of Americans, especially the poor and the middle class don’t earn enough money to save enough for their retirement and/or they would rather take a vacation or buy a car or cola and ciggarettes rather than sock away 10 bucks a week in the stock market or a CD.  All of that is true of course.  And we all agree that the government is going to have to take care of these people who end up with no money for their retirement, one way or another.  So we decide that we’ll implement this program whereby we take money out of people’s paychecks to force them to save some of their income and then we’ll give some or all of that money back to them when they retire in monthly payments.  Seems like a good idea to me.  Then someone says, “Wait, that’s not fair.  These people now won’t have any money to save and invest themselves!”

Huh?  Are you kidding me?  Did you not hear what we just said about why we were starting this program in the first place?

One more thing.  The summary of the above “briefing paper” (whatever that is) says that because SS is not adequate for retirement (which it isn’t) and because that leaves poor people without enough money for retirement and because a disproportionate number of blacks comprise the poor, something is wrong with SS.

Huh?  And without SS poor people and therefore lots of blacks would be even poorer!  Another really “poor” argument…

There’s good economic evidence that SS benefits reduce elderly poverty levels.  There’s also good evidence that SS crowds out private savings. 

It is possible that SS could hurt the poor - it crowds out their savings and SS has a really low rate of return (though probably not for the poor b/c of the redistribution within SS).  Their labor supply decisions are also being distorted by the higher taxes.  I _highly_ doubt SS hurts the poor (in general), but I wouldn’t rule out the possibility that it hurts some poor.  (My broader point is that a primary economic justification of SS is that it prevents people from inefficiently saving “too much.” We don’t want people saving due to fear of outliving their wealth.  This is inefficient because this risk can be spread around.  So, I’m not sure why we’re assuming the point of SS is to help people who save too little.  The point is to spread risk.  And keeping people from saving too much.)

MGL, would you be in favor of a SS system that taxed (and gave benefits) only to the poor?

"MGL, would you be in favor of a SS system that taxed (and gave benefits) only to the poor?”

I am guessing that that was discussed originally as well.

No, that is not workable.  You would have to have a crystal ball to figure out who was GOING TO BE poor after retirement.  There are many middle class and even upper middle class people who don’t save enough for retirement.  If they don’t, they need SS as much as anyone else. 

I suppose you can eliminate the highest income brackets from SS taxes, but again, I’m pretty sure that was discussed and discarded.  It is not really necessary to do that.  First of all, SS is capped, and second of all, so what if I make a lot of money and a relatively small amount goes towards forced savings.

And the big point against limiting who gets it and who pays, is that it is not an entitlement program.  You basically get back what you put in (in aggregate of course), so it doesn’t matter to the government whether someone is in or out, other than the cost of operating the system, I guess (which is a function of the number of participants).  And honestly, I’ve never heard a wealthy person complain that they had to pay SS taxes, knowing that they are going to get them back eventually (albeit without the possible extra interest they could have earned in their own).

The argument that SS taxes keeps people from making better investments on their own is ridiculous.  While that is true, that is the whole point!  It’s like if you set aside some money from your kid’s Bar Mitsvah or Confirmation for his college education and you put it in a savings account which earns like .5% interest.  He says, “Come on Dad, I can invest that money and make a lot more than .5%.  Just let me have it.”

Yeah, he might, and then again, we know that a good percentage of kids will blow that money on video games and such.  Same with SS taxes.  Of course SOME people can and will invest it on their own.  But we KNOW that many, if not most of the people who will need it when they retire, will blow the money.  I know of virtually NO ONE who makes very little money who saves any money at all.  They always think that there is nothing to save.  Yet, somehow is SS were eliminated tomorrow and they had 7.5% more in their paycheck, they would NOT say, “Oh, wow, I have some extra money to save and invest now!” They would say exactly the same thing.  “I have no extra money. I make just enough to pay my bills.”

And for the people who make a lot of money and definitely save some of it no matter what?  It is not as big deal that 7.5% or 15% of their paycheck is squeezed out from their own investments.  Like I said, if we could eliminate these people from the pool of people who pay SS and allow them to invest it on their own, that would be good, but there is NO way for us to know who is going to invest their money and who isn’t.  That is the whole point of SS.  Let’s say that we allow all persons making above 100,000 a year to opt out or we simply don’t allow the program for them.  18% (or whatever) of those people, when they retire, are going to say, “I really tried to save, but X, Y and Z, and I am broke now. Please give me money to live?” That is what we are trying to avoid with SS!  And it works.  It has to by definition.  It is not perfect because NOTHING is.

I think a lot of rich people are more anti-SS than you think.  The “problem” with SS is that the rate of return is really low (and dependent on population growth).  People don’t want SS to save for them because they can do better on their own.  Not with risky investments but even with riskless investments.  For some people, the rate of return of SS is actually negative.  This is a big difference and people do care.

To summarize and partially extend your points...you see the purpose of SS only to help people who don’t save enough (where “enough” means enough to stay out of poverty).  And it sounds like you’d be in favor of funding SS through a lump sum tax (everyone pays $x/yr instead of proportional to income) and giving retirees a fixed payout where the payout is just to make sure no one’s super-poor.  Basically, under your arguments, there’s no point in taxing rich people more $ than poor people or giving them more $ later.  Does that work?

I don’t have a problem with rich people paying more SS and I don’t have a problem with rich people paying SS in the first place.  It may not be ideal, but again, I’m sure there is a reason for it.  For example, where do you draw the line?  What if I am rich now but I’m broke when I retire.  When it comes to gov programs and taxes, I am a BIG fan of making them simple even if it is not “fair” for everyone.

Again, what is the big deal if I make $500,000 a year and the government forces me to set aside $6,000 a year, or whatever the max is, at little or no interest?  It is not.  In my opinion at least.  It is a sacrifice for a system that I think is good.  Heck, I’m thrilled that SS is at least one system designed to assist the poor and middle class that is not an entitlement.  That should be worth something, shouldn’t it?

But under your logic, why does anyone have to pay more than anyone else?  You only seem to care that everyone gets a basic minimum when they retire.  So, would you support a SS system where everyone paid the same amount in and got the same amount out?  That’s a VERY simple system.

That is the same question as whether I would prefer a flat tax system.  I already answered your question.  I said that I don’t mind rich people paying more into SS than poor people.  I don’t mind rich people subsidizing the poor.  That is why we have not only a proportional income tax system, but a progressive one as well.  That being said, if it were just a flat amount (not a percentage of income), I would not be opposed to that either.  Without looking it up, I really don’t know exactly how SS works.  If I pay more SS than a poor person because I make more than he does, do I get more when I retire?  I would not be opposed to that either.  And again, because there is a cap at like $100,000 of income on the tax, rich people do NOT pay much more than middle class folks and rich people do not pay any more than the upper middle class.  So, unlike income taxes, SS is NOT progressive and even though it is proportional, there is a cap.  So, regardless of income, most people pay around the same.

Sometimes there is no “yes or no” answer to a question, which is one of many reasons why I would never go on the Bill O’Reilley show.  I’ve seen him “demand” from a hostile guest that they answer a question with “yes or no”.  For example, “Are we winning the war in Iraq?” Demanding that someone answer a question with “yes or no” when they don’t think that either word is appropriate is baiting someone, plain and simple.  It is like, “Answer the question with a time and data only - when did you stop beating your wife?”

I am not implying that you are baiting me with that question or demanding that I answer it, “Yes or no.” I am just saying that I don’t feel strongly about it one way or another, and I don’t know enough about SS to be able to formulate a credible answer.  Unlike people like Mike Silva and millions of others, I rarely have a strong opinion on something that I know little about.  And if that something is technical and complicated, I’ll NEVER have an opinion on it unless I am an expert.  One good example of that is global warming.  Unless you are a global warming expert, how could you possibly have a credible opinion on whether it “exists” or not.  Yet, millions of lay persons claim that they do (have a credible opinion on it).  Or at the very least inform oneself from the experts, and that is often not enough.