To be fair, there are alternatives other than entitlement reform or big tax increases.
For instance, politicians could endlessly issue more debt. That might work, at least until the fiscal house of cards collapses.
Another possibility, at least with regards to Social Security, is to do nothing.
How is this an alternative? Well, David McIntosh, President of the Club for Growth, explained last month in the Wall Street Journal that the Biden-Trump position on Social Security could be a recipe for automatic benefit cuts.
Joe Biden and Donald Trump agree on one thing. “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” Mr. Biden said in March. Mr. Trump has said: “I will do everything within my power not to touch Social Security, to leave it the way it is.” …The Biden-Trump position may sound like a pledge to protect Social Security, but it isn’t.…the Old Age and Survivors Insurance Trust Fund…will be able to issue payments to retirees only until 2034. …once the trust fund reserve is depleted, beneficiary payouts will be limited to whatever funds come in from Social Security payroll taxes. …Thus consequences of leaving Social Security “without any changes,” as promised by Biden-Trump, are dire. Ten years from now, benefit cuts of 23% will be triggered if there is no change to Social Security…the Biden-Trump strategy has been to play “beat the clock,” leaving their successors to deal with the crisis. Candidates with a record of entitlement reform like Messrs. Pence and DeSantis would do well to point out that doing nothing is the worst Social Security cut.
Technically, McIntosh is 100 percent correct. Under current law, there will be automatic benefit cuts once there no longer are any IOUs in the Social Security Trust Fund.
In reality, future politicians almost surely will change the law to continue full payments. Which is why I feel confident in stating that our real choice is between genuine entitlement reform and massive tax increases.
P.S. My collection of “honest leftists” includes many who openly admit that giant tax increases will be needed if there is no entitlement reform.
Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.
A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes refers to payroll taxes as contributions. But despite Social Security’s fetish for language that echoes private pensions, no one ever vests in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. When voters decide fiscal responsibility is more important, then Social Security benefits- “earned” or not-will be up for review.
__________________________________________
Professor Williams explains what’s ahead for Social Security
Over the next four years (and beyond), it’s quite likely that the biggest threat to global trade will be the European Union.
More specifically, politicians and bureaucrats in Brussels want to toss a hand grenade into cross-border commerce by imposing trade taxes on nations that don’t impose carbon taxes.
The Wall Street Journal has a must-read editorial about this threat to world commerce.
Western politicians have failed to persuade their own voters to commit economic suicide by banning fossil fuels, and forget about China, Russia or India. The climate lobby’s fallback, which is starting to emerge, is to punish the foreigners and their own consumers with climate tariffs. Bureaucrats at the European Commission are due to unveil the proposed Carbon Border Adjustment Mechanism (CBAM) later this month…Brussels wants to impose tariffs to bring the cost of carbon-dioxide emissions tied to an imported good into line with what a European producer would pay to produce the same good. …a carbon tariff would impose an enormous burden on companies seeking to sell to the EU—even the low-emitting firms—and as a result probably will trigger a trade war. …Under the leaked plan, foreign firms would have to undertake detailed carbon audits to report emissions to EU regulators, and then would have to work out what proportion of the emissions attributable to goods shipped to the EU already were covered by carbon taxes elsewhere. …The choice between costly compliance or a punitive default tariff risks deterring smaller foreign companies from trying to navigate this system.
Needless to say, the so-called carbon audits will create big openings for cronyism and favoritism.
Lobbyists will be fat and happy while businesses and consumers will get hit with higher costs.
The editorial’s conclusion wisely warns that it would be a big mistake for Europeans to trigger a trade war.
Western elites haven’t convinced their voters to pay the price of their climate obsessions. Like Donald Trump, they now want to blame foreigners. In the process they’ll force their consumers to pay more for imports and domestic goods, and they’ll harm their own exporters if countries retaliate. The last thing the world economy needs as it recovers from a pandemic is a climate-change trade war.
Writing for Forbes, Tilak Doshi speculates whether the United States will copy the Europeans.
…the European Parliament overwhelmingly endorsed the creation of a “carbon border adjustment mechanism” (CBAM) that would shield EU companies against cheaper imports from countries with “weaker” climate policies. …Now that the Biden administration has elevated climate change to its highest priority across the whole of government,it would seem that the EU and the US working together with like-minded governments in Canada and the UK would be in a position to set up a “trans-Atlantic climate club” and thereby impose a global cost on carbon emissions. …Australian Trade Minister Dan Tehan labelled carbon tariffs “a new form of protectionism.” …For most developing countries, “worries of an increasing carbon footprint generated by economic growth are second to worries that growth many not happen at all.” …What sets off this new protectionism from its predecessors is the sheer scope of its application.
I’m actually hopeful on this issue.
Biden and his team doubtlessly are sympathetic to the E.U.’s initiative, but I don’t think Congress will approve a carbon tax on the American people.
And if the U.S. doesn’t have a carbon tax, there wouldn’t be any reason to impose discriminatory taxes on other nations that also don’t have that levy.
That being said, the Biden Administration would have some leeway to cause problems. For instance, would they push for the World Trade Organization to accept the E.U.’s attack on free trade?
When dealing with politicians, I always hope for the best, but assume the worst.
One of America’s leading public intellectuals, Walter Williams, has passed away.
In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.
I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club” with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.
I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.
Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.
This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.
Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.
Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”
And here’s some of what he wrote about his assignment to South Korea.
We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.
Here’s a passage from his time as a Ph.D. student at UCLA.
My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”
I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.
He appreciated that his professors didn’t relax their standards because of his race.
Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.
Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.
Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.
Here’s a final excerpt showing how he enjoyed shocking people.
At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.
Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.
The bottom line is that Walter was a man, not a victim. He fought and achieved.
Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.
P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.
Author Biography
Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.
A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes refers to payroll taxes as contributions. But despite Social Security’s fetish for language that echoes private pensions, no one ever vests in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. When voters decide fiscal responsibility is more important, then Social Security benefits- “earned” or not-will be up for review.
__________________________________________
Professor Williams explains what’s ahead for Social Security
Under the Impoundment Control Act, the president can propose that Congress rescind, or cancel, specific unspent budget authority from programs he has determined are unneeded. Pictured: President Donald Trump presents the Presidential Medal of Freedom to Dan Gable in the Oval Office on Dec. 7, 2020. (Photo: Doug Mill/ Pool/Getty Images)
President Donald Trump is right: There’s a lot of ridiculous gimmicks and wasteful projects in the new massive spending bill.
And the good news is there’s something that Trump can do about it, even though he recently signed the huge COVID-19 stimulus and omnibus spending bill into law.
While signing the bill, the president released a statement announcing that he would use his authority to request that Congress rescind wasteful spending from the bill.
Stand for your principles in 2021—even in the face of Congress, the media, and the radical Left ganging up on conservatives and our values. Learn more now >>
Under the Impoundment Control Act, the president can propose that Congress rescind, or cancel, specific unspent budget authority from programs he has determined are unneeded.
The rescission package would be considered by the House and Senate under expedited procedures, without being subject to a filibuster in the Senate, and with protections for a minority of members to prevent the bill from getting bottled up in committee proceedings.
This makes sense. The 5,593-page behemoth spending package was loaded with overspending, gimmicks, and dozens of unrelated other legislative provisions. It was written behind closed doors and voted on within hours of it being made public, preventing any member of Congress or the American people from understanding what was actually in it.
Here are nine wasteful programs funded by the omnibus, which has $1.4 trillion in spending, that should be rescinded:
1. Washington Metro: $150 Million
The omnibus provides $150 million for grants to the Washington Metropolitan Area Transit Authority, the D.C. Metro.
This is yet another example of the capital city getting special benefits at the expense of the taxpayers from around the country. No other local transit system gets its own line-item appropriation. The Heritage Foundation has previously recommended this funding be eliminated.
2. DC Tuition Assistance Grants: $40 Million
The omnibus provides $40 million for federal payment for resident tuition support, which funds the D.C. Tuition Assistance Grant program to subsidize the out-of-state tuition for D.C. residents attending college in other states.
Simply put, it is wrong for taxpayers across the county to provide a special subsidy for residents of Washington, D.C., who are also eligible for all the other federal college benefit programs. This program has not even been authorized by Congress since 2012. The president’s budgetrecommended the program be eliminated.
3. Kennedy Center: $40.4 Million
The omnibus provides a total of $40.4 million for operations and maintenance and capital repair and restoration for the John F. Kennedy Center for the Performing Arts.
Using taxpayer funds to subsidize D.C.’s swanky opera house is one of the least defensible items in the entire federal budget. The Kennedy Center already received an additional $25 million as a part of the CARES Act. The Heritage Foundation has previously recommended eliminating this funding.
4. National Endowments for the Arts and Humanities: $335 Million
The omnibus provides $167.5 million each to the National Endowment for the Arts and the National Endowment for the Humanities.
These two programs use federal tax dollars to make grants supporting arts and humanities projects, something that is much better done by private contributions. The two programs also received an additional $75 million from the CARES Act. Both the president’s budget and The Heritage Foundation have recommended these programs be eliminated.
5. Wilson Center: $14 Million
The omnibus provides $14 million for the Wilson Center, a federally subsidized think tank. Federal subsidies make up about half of the center’s budget, and the dedicated appropriation is not needed nor is it appropriate. The president’s budget and The Heritage Foundation have recommended federal funding for this center be ended.
6. Migrant and Seasonal Farmworker Training: $93.9 Million
The omnibus provides $93.9 million for the Migrant and Seasonal Farmworker Training program, a $2 million increase from the fiscal year 2020 level.
This program is supposed to provide job training for migrant and seasonal farmworkers. Even if this was appropriate for American taxpayers to subsidize, it is duplicative of other job training programs. The president’s budget and The Heritage Foundation have recommended this program be eliminated.
7. Senior Community Service Employment Program: $405 Million
The omnibus provides $405 million for Community Service Employment for Older Americans, which funds the Senior Community Service Employment Program.
This program provides grants meant to subsidize part-time community service activities by the elderly. The program is duplicative of other existing programs, is not cost effective, and nearly half of participants do not complete the program. The president’s budget and The HeritageFoundation have recommended eliminating the program.
8. McGovern-Dole Food for Education: $230 Million
The omnibus provides $230 million for the McGovern-Dole Food for Education and Child Nutrition Program, which uses taxpayer dollars to send American food to schools in foreign countries. The president’s budget has recommended this program be ended.
9. Corporation for Public Broadcasting: $495 Million
The omnibus provides $495 million for the Corporation for Public Broadcasting, most of which is an advance appropriation for fiscal year 2023.
Funding for the Corporation for Public Broadcasting has already been provided for the upcoming fiscal year in prior appropriations bills. The organization also received an additional $75 million as a part of the CARES Act.
The federal government should not use taxpayer funds to subsidize television and radio service, a task which is not needed nor appropriate. The president’s budget and The Heritage Foundation have recommended eliminating this funding.
These are just a small handful of examples of wasteful spending in the $1.4 trillion spending package. Even if all of the wasteful or unnecessary spending from the omnibus is rescinded, much more needs to be done in order to have a responsible budget.
Trump proposing a robust rescission package and Congress passing it would be an important first step toward making controlling spending a priority.
One of America’s leading public intellectuals, Walter Williams, has passed away.
In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.
I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club” with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.
I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.
Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.
This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.
Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.
Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”
And here’s some of what he wrote about his assignment to South Korea.
We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.
Here’s a passage from his time as a Ph.D. student at UCLA.
My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”
I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.
He appreciated that his professors didn’t relax their standards because of his race.
Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.
Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.
Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.
Here’s a final excerpt showing how he enjoyed shocking people.
At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.
Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.
The bottom line is that Walter was a man, not a victim. He fought and achieved.
Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.
P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.
Author Biography
Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.
A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes refers to payroll taxes as contributions. But despite Social Security’s fetish for language that echoes private pensions, no one ever vests in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. When voters decide fiscal responsibility is more important, then Social Security benefits- “earned” or not-will be up for review.
__________________________________________
Professor Williams explains what’s ahead for Social Security
One of America’s leading public intellectuals, Walter Williams, has passed away.
In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.
I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club” with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.
I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.
Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.
This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.
Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.
Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”
And here’s some of what he wrote about his assignment to South Korea.
We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.
Here’s a passage from his time as a Ph.D. student at UCLA.
My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”
I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.
He appreciated that his professors didn’t relax their standards because of his race.
Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.
Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.
Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.
Here’s a final excerpt showing how he enjoyed shocking people.
At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.
Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.
The bottom line is that Walter was a man, not a victim. He fought and achieved.
Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.
P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.
Author Biography
Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.
A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes refers to payroll taxes as contributions. But despite Social Security’s fetish for language that echoes private pensions, no one ever vests in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. When voters decide fiscal responsibility is more important, then Social Security benefits- “earned” or not-will be up for review.
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Professor Williams explains what’s ahead for Social Security
Dear Senator Pryor, here are some spending cut suggestions (“Thirsty Thursday”, Open letter to Senator Pryor)
Senator Pryor pictured below:
Why do I keep writing and email Senator Pryor suggestions on how to cut our budget? I gave him hundreds of ideas about how to cut spending and as far as I can tell he has taken none of my suggestions. You can find some of my suggestions here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, and here, and they all were emailed to him. In fact, I have written 13 posts pointing out reasons why I believe Senator Pryor’s re-election attempt will be unsuccessful. HERE I GO AGAIN WITH ANOTHER EMAIL I JUST SENT TO SENATOR PRYOR!!!
Dear Senator Pryor,
Why not pass the Balanced Budget amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion).
On my blog www.thedailyhatch.org . I took you at your word and sent you over 100 emails with specific spending cut ideas. (Actually there were over 160 emails with specific spending cut suggestions.) However, I did not see any of them in the recent debt deal that Congress adopted although you did respond to me several times. Now I am trying another approach. Every week from now on I will send you an email explaining different reasons why we need the Balanced Budget Amendment. It will appear on my blog on “Thirsty Thursday” because the government is always thirsty for more money to spend. Today I actually have included a great article below from the Heritage Foundation concerning an area of our federal budget that needs to be cut down to size. The funny thing about the Sequester and the 2.4% of cuts in future increases is that President Obama set these up and then he acted like the sky was falling in as the cartoons indicate in the newspapers.
IF YOU TRULY WANT TO CUT THE BUDGET AND BALANCE THE BUDGET THEN SUBMIT THESE POTENTIAL BUDGET CUTS PRESENTED BELOW!!
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The European Fiscal Crisis and Lessons for America
Uploaded on Nov 16, 2011
Many European welfare states have been caught in a downward spiral of taxes, spending, and debt. This mini-documentary from the Center for Freedom and Prosperity Foundation identifies key lessons for policymakers seeking to avoid the inevitable fiscal crisis caused by the welfare state.
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We got to let the young people entering the work force have private retirement accounts instead of Social Security!!! If we change nothing our budget will explode because of Sociai Security!!!!
A new section on the Social Security Administration (SSA) has been added to Cato’s Downsizing Government website. The SSA operates three large programs that provide benefits to millions of Americans: Old-Age and Survivors Insurance, Disability Insurance, and Supplemental Security Income. Total SSA spending will be $873 billion in 2013, which works out to an average of about $7,300 for every household in the nation.
Essays:
Social Security Retirement: Social Security faces a huge financing gap because of its pay-as-you-go structure and the aging of the U.S. population. It should be transitioned to a system of personal savings accounts, which would increase individual financial security and help to avert future tax increases.
Social Security Disability Insurance: Growing numbers of Americans are receiving disability benefits, and the system is subject to major abuses. Policymakers should tighten eligibility for the program and explore ways to move it to the private sector.
Supplemental Security Income: This program for low-income and disabled individuals suffers from similar abuses and overspending problems as Social Security Disability Insurance. The financing and administration of Supplemental Security Income should be devolved to the states.
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The Balanced Budget Amendment is the only thing I can think of that would force Washington to cut spending. We have only a handful of balanced budgets in the last 60 years, so obviously what we are doing is not working. We are passing along this debt to the next generation. YOUR APPROACH HAS BEEN TO REJECT THE BALANCED BUDGET “BECAUSE WE SHOULD CUT THE BUDGET OURSELF,” WELL THEN HERE IS YOUR CHANCE!!!! SUBMIT THESE CUTS!!!!
Thank you for this opportunity to share my ideas with you.
Sometimes it is tragic that you got to laugh about it. Dear Conan, Reckless Government Spending Is Worse Than You Think Brandon Stewart August 10, 2011 at 7:31 pm Late-night comedian Conan O’Brien’s blog has a new post parodying Washington’s excessive spending. “Team Coco has found out why our government is so broke,” the blog explains, “They’ve […]
We want to be protected but is the government going too far? Crime Fighting or Corporate Welfare? July 18, 2013 by Dan Mitchell I want government to successfully and rationally fight crime and stop terrorism. That’s a perfectly appropriate libertarian sentiment since protecting life, liberty, and property are among the few legitimate roles for government. But […]
John Stossel notes how good intentions lead to bad results when the government is involved. Why do we keep on giving the government more money when they waste so much? We should be putting more time in staying out of the small businessperson’s way!!!! The Reverse Midas Touch of Government January 6, 2013 by Dan Mitchell […]
______________________________________ Milton Friedman On Charlie Rose (Part One) The late Milton Friedman discusses economics and otherwise with Charlie Rose. _________________________________________ Milton Friedman: Life and ideas – Part 01 Milton Friedman: Life and ideas A brief biography of Milton Friedman _____________________________________ Stossel – “Free to Choose” (Milton Friedman) 1/6 6-10-10. pt.1 of 6. Stossel discusses Milton […]
I wish President Obama would try to cut spending instead of increasing spending and our debt. Two Very Good GSA Waste Cartoons April 21, 2012 by Dan Mitchell One of my first blog posts back in 2009 featured a column about the Social Security Administration squandering $750,000 on a “conference” at a fancy golf resort in […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
What Are the Dangers of Too Much Debt? Published on Mar 20, 2012 Interest payments on U.S. government debt are three times spending in the Iraq and Afghanistan wars already, and that is with the lowest interest rate we have seen since the 1960s. A rise in interest rates would increase interest payments dramatically. What […]
Funding Government by the Minute Published on Mar 28, 2012 At the rate the federal government spends, it runs out of money on July 31. What programs should be cut to balance the budget and fund the government for the remaining five months of the year? Cutting NASA might buy two days; cutting the Navy […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
What Are the Dangers of Too Much Debt? Published on Mar 20, 2012 Interest payments on U.S. government debt are three times spending in the Iraq and Afghanistan wars already, and that is with the lowest interest rate we have seen since the 1960s. A rise in interest rates would increase interest payments dramatically. What […]
What Can We Cut to Balance the Budget Published on Oct 16, 2012 Will Rogers has a great quote that I love. He noted, “Lord, the money we do spend on Government and it’s not one bit better than the government we got for one-third the money twenty years ago”(Paula McSpadden Love, The Will Rogers Book, (1972) […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
What Are the Dangers of Too Much Debt? Published on Mar 20, 2012 Interest payments on U.S. government debt are three times spending in the Iraq and Afghanistan wars already, and that is with the lowest interest rate we have seen since the 1960s. A rise in interest rates would increase interest payments dramatically. What […]
I wish the federal government would go back to spending less than 5% of GDP like they did the first 150 years of our country’s history. We could cut down on a lot of wasteful spending if we did that. Morning Bell: The Governing Class and Us Mike Brownfield April 19, 2012 at 8:57 am […]
As part of my “Question of the Week” series, I said thatAustralia probably would be the best optionif the United States suffered some sort of Greek-style fiscal meltdown that led to a societal collapse.*
One reason I’m so bullish on Australia is that the nation has a privatized Social Security system called “Superannuation,” with workers setting aside 9 percent of their income in personal retirement accounts (rising to 12 percent by 2020).
Established almost 30 years ago, and made virtually universal about 20 years ago, this system is far superior to the actuarially bankrupt Social Security system in the United States.
Probably themost sobering comparisonis to look at a chart of how much private wealth has been created in Superannuation accounts and then look at a chart of the debt that we face for Social Security.
To be blunt, the Aussies are kicking our butts.Their system gets stronger every day and our system generates more red ink every day.
And their system is earning praise from unexpected places. The Center for Retirement Research at Boston College,led by a former Clinton Administration official, is not a right-wing bastion. So it’s noteworthy when itpublishes a studypraising Superannuation.
Australia’s retirement income system is regarded by some as among the best in the world. It has achieved high individual saving rates and broad coverage at reasonably low cost to the government.
Since I wrote my dissertation on Australia’s system, I can say with confidence that the author is not exaggerating. It’s a very good role model, forreasons I’ve previously discussed.
Here’s more from the Boston College study.
The program requires employers to contribute 9 percent of earnings, rising to 12 percent by 2020, to a tax-advantaged retirement plan for each employee age 18 to 70 who earns more than a specified minimum amount. …Over 90 percent of employed Australians have savings in a Superannuation account, and the total assets in these accounts now exceed Australia’s Gross Domestic Product. …Australia has been extremely effective in achieving key goals of any retirement income system. …Its Superannuation Guarantee program has generated high and rising levels of saving by essentially the entire active workforce.
The study does include some criticisms, some of which are warranted. The system can be gamed by those who want to take advantage of the safety net retirement system maintained by the government.
Australia’s means-tested Age Pension creates incentives to reduce one’s “means” in order to collect a higher means-tested benefit. This can be done by spending down one’s savings and/or investing these savings in assets excluded from the Age Pension means test. What makes this situation especially problematic is that workers can currently access their Superannuation savings at age 55, ten years before becoming eligible for Age Pension benefits at 65. This ability creates an incentive to retire early, live on these savings until eligible for an Age Pension, and collect a higher benefit, sometimes referred to as “double dipping.”
Though I admit dealing with this issue may require a bit of paternalism. Should individuals be forced to turn their retirement accounts into an income stream (called annuitization) once they reach retirement age?
I’m torn on this issue. Paternalists sometimes do have good ideas, but shouldn’t people have the freedom to make their own decisions, even if they make mistakes? But does the answer to that question change when mistakes mean that those people will be taking money from taxpayers?
Fortunately, I don’t need to be wishy-washy on the other criticism in the study.
Australia’s system does have shortcomings. It is heavily dependent on defined contribution plans and is vulnerable to weaknesses in such programs.
I strongly disagree. A “defined contribution” account is something to applaud, not a shortcoming.
The author presumably is worried that a “DC” account leaves a worker vulnerable to the ups and downs of the market, whereas a “defined benefit” account promises a specific payment and removes that uncertainty. Sounds great, but the problem with “DB” accounts is that they almost inevitably seem to promise more than they can deliver. And that seems to be the case whether they’re supposedly based on real savings (like company retirement plans orpension funds for state and local bureaucrats) or based on pay-as-you-go taxation (like Social Security).
P.S. I’m also a huge fan ofChile’s system of private accounts. At the risk of oversimplifying, Chile’s system is sort of like universal IRAs and Australia’s system is sort of like universal 401(k)s.
P.P.S. There’s much to admire about Australia, but its government isplenty capable of boneheaded policy. Heck, the government even providesworkers’ compensation payments to peoplewho get injured while having sex after work hours, simply because they were on a business-related trip. Talk about double dipping!
P.P.P.S. Here’smy videoexplaining why we should implement personal retirement accounts in the United States.
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Saving Social Security with Personal Retirement Accounts
Uploaded on Jan 10, 2011
There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely thanks to demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform. http://www.freedomandprosperity.org
This first one is a pretty good assessment of what’s going to happen in a few years if we don’t seereform. Think about what’s happening in Europe, if you don’t have a good imagination.
This cartoon covers the same topic, but looks at how an aging population is going to create unsustainable fiscal demands.
There aresolutions, of course, but don’t hold your breath waiting for them to be implemented.
Incidentally, you may recognize the artistic style in the second cartoon. It’s by Ramirez. Here are links to some of his other cartoons that I found especially worthwhile:Here,here, here, here, here, here, here, here, and here.
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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism, Greece, welfare state or on gun control. Two Social Security Cartoons April 27, 2012 by Dan Mitchell Since we recently learned Social Security is even […]
We got to reform Social Security now!!! Yes, We Should “Reform” Payroll Taxes, but only if that Means Personal Retirement Accounts January 2, 2013 by Dan Mitchell Washington is filled with debate and discussion about the economic burden of the federal income tax, which collected $1.13 trillion in FY2012 ($1.37 trillion if you include the corporate […]
I have been writing President Obama letters and have not received a personal response yet. (He reads 10 letters a day personally and responds to each of them.) However, I did receive a form letter in the form of an email on July 30, 2012. I don’t know which letter of mine generated this response so I have […]
Is Social Security a good retirement plan? Economics professor Antony Davies shows that Americans stand to earn significantly less and assume more risk with Social Security than other investment options. According to Davies, taxpayers would be better off both in terms of financial security and return on investment by investing their money privately. Social security is extremely expensive, soon to be insolvent, and doesn’t even offer taxpayers the most bang for their buck. For those reasons, Prof. Davies argues that it is time for the government to phase out Social Security. Davies’ solution: the government should honor its obligations to current retirees while giving Americans the freedom to invest their money as they see fit.
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The current Social Security system is a ponzi scheme.
For nearly three decades Social Security produced big surpluses, collecting more in taxes from workers than it paid in benefits to retirees, disabled workers, spouses and children. The surpluses also helped mask the size of the budget deficit being generated by the rest of the federal government. Those days are over. Since 2010, Social Security has been paying out more in benefits than it collects in taxes… The projected shortfall in 2033 is $623 billion, according to the trustees’ latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security’s number crunchers because it covers the retirement years of just about everyone working today. Add up 75 years’ worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars, or eight times the size of this year’s entire federal budget.
My only complaint is that the story does include some analysis of the Social Security Trust Fund, even though that supposed Fund is nothing but a pile of IOUs – money that one part of the government promises to give to another part of the government.
But let’s set that aside. Another interesting tidbit from the story is this quote from one of the kleptocrats at the American Association of Retired Persons. Note that he implicitly rules out any changes other than those that enable the government to “pay the benefits we promised.” But that shouldn’t be a surprise. AARP is part of the left-wing coalition.
“I’m not suggesting we need to wait 20 years but we do have time to make changes to Social Security so that we can pay the benefits we promised,” said David Certner, AARP’s legislative policy director. “Let’s face it. Relative to a lot of other things right now, Social Security is in pretty good shape.”
But I will say that Mr. Certner is sort of correct about Social Security being in better shape than Medicare and Medicaid. But that’s like saying the guy with lung cancer who is 75 lbs overweight is in better shape than the two guys with brain tumors who are both 150 lbs overweight.
If you have to engage in fiscal triage, it would be smart to first address Medicare and Medicaid, but Social Security also needs reform. And not the kind of statist reform the folks at AARP would like to see.
By the way, you probably won’t be surprised to learn that President Obama’s approach is similar to the left-wingers at AARP. Here’s a video I narrated about his preferred policy.
It seems that the question doesn’t matter with this administration. The answer is always to impose more class-warfare tax policy.
Max Brantley is wrong about Tom Cotton’s accusation concerning the rise of welfare spending under President Obama. Actually welfare spending has been increasing for the last 12 years and Obama did nothing during his first four years to slow down the rate of increase of welfare spending. Rachel Sheffield of the Heritage Foundation has noted: […]
I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism, Greece, welfare state or on gun control. I think Max Brantley of the Arkansas Times Blog was right to point out on 2-6-13 that Hillary […]
I thought it was great when the Republican Congress and Bill Clinton put in welfare reform but now that has been done away with and no one has to work anymore it seems. In fact, over 40% of the USA is now on the government dole. What is going to happen when that figure gets over […]
Again we have another shooting and the gun control bloggers are out again calling for more laws. I have written about this subject below and on May 23, 2012, I even got a letter back from President Obama on the subject. Now some very interesting statistics below and a cartoon follows. (Since this just hit the […]
watch?v=llQUrko0Gqw] The federal government spends about 10% on roads and public goods but with the other money in the budget a lot of harm is done including excessive regulations on business. That makes Obama’s comment the other day look very silly. A Funny Look at Obama’s You-Didn’t-Build-That Comment July 28, 2012 by Dan Mitchell I made […]
I have written a lot about this in the past and sometimes you just have to sit back and laugh. Laughing at Obama’s Bumbling Class Warfare Agenda July 13, 2012 by Dan Mitchell We know that President Obama’s class-warfare agenda is bad economic policy. We know high tax rates undermine competitiveness. And we know tax increases […]
Dan Mitchell Discussing Dishonest Budget Numbers with John Stossel Uploaded by danmitchellcato on Feb 11, 2012 No description available. ______________ Dan Mitchell of the Cato Institute has shown before how excessive spending at the federal level has increased in recent years. A Humorous Look at Obama’s Screwy Budget Math May 31, 2012 by Dan Mitchell I’ve […]
Sometimes it is so crazy that you just have to laugh a little. The European Mess, Captured by a Cartoon June 22, 2012 by Dan Mitchell The self-inflicted economic crisis in Europe has generated some good humor, as you can see from these cartoons by Michael Ramirez and Chuck Asay. But for pure laughter, I don’t […]
Another great cartoon on President Obama’s efforts to create jobs!!! A Simple Lesson about Job Creation for Barack Obama December 7, 2011 by Dan Mitchell Even though leftist economists such as Paul Krugman and Larry Summers have admitted that unemployment insurance benefits are a recipe for more joblessness, the White House is arguing that Congress should […]
Dan Mitchell hits the nail on the head and sometimes it gets so sad that you just have to laugh at it like Conan does. In order to correct this mess we got to get people off of government support and get them in the private market place!!!! Chuck Asay’s New Cartoon Nicely Captures Mentality […]
Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism: Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State July 15, 2011 by Dan Mitchell In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that […]
John Stossel report “Myth: Gun Control Reduces Crime Sheriff Tommy Robinson tried what he called “Robinson roulette” from 1980 to 1984 in Central Arkansas where he would put some of his men in some stores in the back room with guns and the number of robberies in stores sank. I got this from Dan Mitchell’s […]
I have put up lots of cartons and posters from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism, Greece, welfare state or on gun control. Amusing Gun Control Picture – Circa 1999 April 3, 2010 by Dan Mitchell Dug this gem out […]
We got to cut spending and stop raising the debt ceiling!!! When Governments Cut Spending Uploaded on Sep 28, 2011 Do governments ever cut spending? According to Dr. Stephen Davies, there are historical examples of government spending cuts in Canada, New Zealand, Sweden, and America. In these cases, despite popular belief, the government spending […]
I have put up lots of cartons and posters from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism, Greece, welfare state or on gun control. On 2-6-13 the Arkansas Times Blogger “Sound Policy” suggested, “All churches that wish to allow concealed […]
Gun Free Zones???? Stalin and gun control On 1-31-13 ”Arkie” on the Arkansas Times Blog the following: “Remember that the biggest gun control advocate was Hitler and every other tyrant that every lived.” Except that under Hitler, Germany liberalized its gun control laws. __________ After reading the link from Wikipedia that Arkie provided then I responded: […]
On 1-31-13 I posted on the Arkansas Times Blog the following: I like the poster of the lady holding the rifle and next to her are these words: I am compensating for being smaller and weaker than more violent criminals. __________ Then I gave a link to this poster below: On 1-31-13 also I posted […]
We got to reform Social Security now!!! Don’t you think the young people entering the workforce now are discouraged that Social Security will not be there for them when they retire. They are putting 15.3% in the system every year and there is now why they will get that kind of return.
But there’s rarely, if ever, a discussion of wholesale reform.
That’s actually a good thing. Compared to the income tax, the payroll tax does far less damage. And it’s not just because it collects less money. On a per-dollar-raised basis, the payroll tax is considerably less destructive than the income tax.
It has only one tax rate. There’s a 12.4 percent tax for Social Security and a 2.9 percent tax for Medicare, which means a flat tax of 15.3 percent.
There’s almost no double taxation. The payroll tax applies to wage and salary income, as well as personal earnings from business activities (sometimes known as “Schedule C” income). But dividends, interest, and capital gains are generally spared – other than the 3.8 percent Obamacare surtax.
There are no loopholes or deductions for politically connected interest groups.
And because of these three features, the tax is remarkably simple and doesn’t even require a tax form unless taxpayers have Schedule C income.
None of this, by the way, means the payroll tax is a good or desirable levy.
It takes for too much money from the American people and is far and away the biggest tax paid by the majority of American workers.
The 15.3 percent tax undermines work incentives by driving a wedge between pre-tax income and post-tax consumption.
And the tax is very non-transparent, particularly since many taxpayers don’t even realize that the “F.I.C.A.” tax on their pay stub only reflects 50 percent of their payroll tax burden. In a hidden form of pre-withholding, employers pay an equal amount to the government on behalf of their workers – funds that otherwise would be part of worker compensation.
In other words, the payroll tax is a bad imposition. That being said, it still does considerably less damage, on a per-dollar-collected basis, than the income tax.
With that in mind, I’m puzzled that some folks want to keep the income tax and get rid of the payroll tax.
My friends at the Heritage Foundation, for instance, have a tax reform proposal that would fold the payroll tax into the income tax. Since they’re also proposing to turn the income tax into a form of flat tax, with one rate and no double taxation, the overall proposal clearly is a big improvement over today’s tax system. But all of the improvement is because of reforms to the income tax.
The payroll tax — 12.4 percent, split between workers and their employers to help finance Social Security – is one of the worst taxes on the books for several reasons. A basic economic principle is that when the government taxes something, the nation gets less of it. Because the payroll tax makes it more expensive and administratively burdensome for businesses to hire workers, it’s a drag on employment. Also, even the employer’s share of the tax is effectively passed on to workers in the form of lower salaries and benefits.
There’s nothing overtly wrong with the above passage. The tax does all those bad things. But the income tax does all those things as well, but in an even more destructive fashion.
The editorial addresses a couple of potential objections, starting with the notion that the payroll tax is a revenue dedicated to social Security.
There are two main objections to scrapping the payroll tax. The first is the theoretical idea that payroll taxes are a dedicated revenue stream for Social Security. In practice, it just isn’t true. All government expenditures ultimately come from the same place. Payroll taxes help subsidize other government functions, and the government will use other tax revenue and borrowing to pay for Social Security when revenues are short.
They’re right that all taxes basically get dumped into the same pile of money and that the relationship between payroll taxes and Social Security benefits is imprecise.
But since my argument has nothing to do with this issue, I don’t think it matters.
Here’s the part of the editorial that doesn’t make sense.
The other objection is the massive revenue hit to the federal government. In 2010 (the last year before the recent payroll tax holiday), social insurance taxes raised $865 billion in revenue, according to the Congressional Budget Office. But there are a number of ways to recoup that revenue. As stated above, eliminating the payroll tax would make it easier to get rid of a lot of credits, loopholes and deductions. Also, if lower-income Americans aren’t paying payroll taxes, they can pay a bit more in income taxes. This would also deal with a conservative complaint that the income tax system needs to be reformed so everybody has at least some skin in the game.
This passage has a policy mistake and a political mistake.
The policy mistake is that the proposed swap almost surely would make the overall tax code more hostile to growth. The Examiner is proposing to get rid of an $865 billion tax that does a modest amount of damage per dollar collected, and somehow make up for that foregone revenue by collecting an additional $865 billion from the income tax system – which we know does a very large amount of damage per dollar collected.
To be sure, it’s possible to collect that extra money by eliminating distortions such as the state and local tax deduction or the healthcare exclusion. Compared to raising marginal tax rates, those are much-preferred ways of generating more revenue. But even in a best-case scenario – with politicians miraculously trying to collect an extra $865 billion without making the income tax system even worse, it’s hard to envision a better fiscal regime if we swap the payroll tax for a bigger income tax.
The political mistake is the assumption that more people will have “skin in the game” if the income tax is expanded. That’s almost surely not true. The poor don’t pay income tax, but the payroll tax grabs 15.3 percent of every penny earned by low-income households. And since very few taxpayers pay attention to which tax is shrinking their paychecks, it doesn’t really matter whether the “skin” is a payroll tax or an income tax.
Since the Examiner isn’t proposing a specific plan, there’s no way of making a definitive statement, but it’s 99 percent likely that eliminating the Social Security payroll tax would result in low-income households paying even less money to Washington. I think everybody should send less to Washington, but I don’t think shifting a greater share of the tax burden onto the middle class and the rich is the right way of achieving that goal.
I have one final objection, and this applies to both the Heritage Foundation plan and the Examiner proposal.
Notwithstanding everything I just wrote, I actually agree with them that we should eliminate the Social Security payroll tax. But we should get rid of the tax as part of a transition to a system of personal retirement accounts.
This is a reform that has been successfully implemented in about 30 nations and it also should happen in the United States. But an integral feature of this reform is that workers would be allowed to shift their payroll taxes into personal accounts. Needless to say, that’s not possible if the payroll tax has disappeared.
And let’s not forget that the Medicare portion of the payroll tax could and should be part of a broader agenda of entitlement reform. But that’s also less likely if the payroll tax is folded into the income tax.
__________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
(Emailed to White House on 12-21-12.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on […]
(Emailed to White House on 12-21-12.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is […]
(Emailed to White House on 12-21-12) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is […]
The federal government has a spending problem and Milton Friedman came up with the negative income tax to help poor people get out of the welfare trap. It seems that the government screws up about everything. Then why is President Obama wanting more taxes? _______________ Milton Friedman – The Negative Income Tax Published on […]
I was sad to read that the Speaker John Boehner has been involved in punishing tea party republicans. Actually I have written letters to several of these same tea party heroes telling them that I have emailed Boehner encouraging him to listen to them. Rep. David Schweikert (R-AZ),Justin Amash (R-MI), and Tim Huelskamp (R-KS). have been contacted […]
Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 to 2012, it rose faster than inflation and population growth combined. […]
Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 to 2012, it rose faster than inflation and population growth combined. […]
Some of the heroes are Mo Brooks, Martha Roby, Jeff Flake, Trent Franks, Duncan Hunter, Tom Mcclintock, Devin Nunes, Scott Tipton, Bill Posey, Steve Southerland and those others below in the following posts. THEY VOTED AGAINST THE DEBT CEILING INCREASE IN 2011 AND WE NEED THAT TYPE OF LEADERSHIP NOW SINCE PRESIDENT OBAMA HAS BEEN […]
I hated to see that Allen West may be on the way out. ABC News reported: Nov 7, 2012 7:20am What Happened to the Tea Party (and the Blue Dogs?) Some of the Republican Party‘s most controversial House members are clinging to narrow leads in races where only a few votes are left to count. […]
Rep Himes and Rep Schweikert Discuss the Debt and Budget Deal Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 […]
Collapse of Social Security & Education w/Heritage Foundation President Edwin Feulner 08/30/2012
Published onAug 30, 2012
Heritage Foundation President Dr. Edwin Feulner discusses the sad state of our education and Social Security systems. He also explains why The United States of America would continue to be the best country in the world.
With more than 700,000 paid supporters, The Heritage Foundation is the most prominent conservative think-tank in the world.
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We got to cut the fraud out of the Social Security Disability system!!!!!
In 2011, the Wall Street Journal’s Daniel Paletta reported on the rapid growth in individuals applying for and receiving Social Security disability benefits. Paletta found that Puerto Rico had become a particularly easy place to obtain benefits. Officials with the Social Security Administration (SSA) absurdly claimed that nothing was amiss.
It looks like the SSA is about to get some egg on its face.
Yesterday, Paletta reported that federal investigators, including the FBI, raided doctors’ offices in Puerto Rico as part of a widening probe into disability fraud on the island. A doctor’s opinion that an individual is suffering from a disability is naturally quite helpful in convincing examiners and judges that benefits are warranted. Investigators are apparently looking into whether Puerto Rican doctors are being paid to document that applicants are disabled. From the article:
In 2006, just 36% of initial applicants in Puerto Rico were awarded benefits. In December 2010, the award rate had jumped to 69%. By 2010, nine of the top 10 U.S. ZIP Codes for workers receiving disability benefits were on the island.
At the time, SSA officials said the high number of recipients and the high award rate was due to the island’s weak economy and a lack of adequate health care for workers.
The program is overseen by the Social Security Administration in Baltimore, but each state and territory is responsible for performing an initial screening to determine eligibility. Social Security officials said in 2011 that Puerto Rico had rigorous standards and a virtually nonexistent error rate.
The characteristics of Puerto Rico’s beneficiaries differed from other areas. In addition to the large clusters in certain zip codes, federal data showed that 33.3% of Puerto Rican beneficiaries qualified because of “mood disorders,” a rate that is at least 10 percentage points higher than any U.S. state.
Disability examiners and federal judges say mental disorders are harder to measure and often rely on medical opinions issued by doctors to make a determination.
SSDI was designed as a way to provide benefits for people who can’t work because of mental or physical health problems, and Americans can qualify for benefits because of ailments ranging from severe back pain to terminal cancer.
A lifetime of benefits, including access to Medicare, can cost the government about $300,000 a person.
As I noted in my recent paper on the growing cost of Social Security Disability Insurance, the SSA’s inspector general says that “fraud is an inherent risk in SSA’s disability programs.” But as my paper explains, the problems with the program go way beyond outright fraud:
Given the subjective and convoluted nature of determining SSDI eligibility, it’s likely that erroneous and unjustified payments are far larger in volume than just outright fraud. The huge, complex, and difficult-to-audit system is a perfect breeding ground for awarding and continuing benefits to people who shouldn’t be on the disability rolls.
We got to cut corporate welfare out of the budget too!!! JULY 23, 2013 5:40PM Feds and the States Tag-Teaming on Corporate Welfare By TAD DEHAVEN In a recent op-ed for the Indianapolis Star I discussed the symbiotic relationship between federal and state government when it comes to doling out corporate welfare subsidies. The focus was primarily on Indiana, but […]
The Moocher Index is a measure of which state has the highest level of welfare dependency!!! Which State Has the Most Self-Reliant People? July 24, 2013 by Dan Mitchell Back in 2010, I put together a “Moocher Index” as a rough measure of which states had the highest levels of welfare dependency after adjusting for poverty […]
President Obama has really cranked up the welfare state (Bush really never slowed it down either) and I think this cartoon below is really appropriate. A Real-Life Example of How Government Handouts Create Life-Sapping Dependency February 7, 2013 by Dan Mitchell Remember Julia, the mythical moocher created by the Obama campaign to show the joys of […]
_____________________________________ Milton Friedman On Charlie Rose (Part One) The late Milton Friedman discusses economics and otherwise with Charlie Rose. _________________________________________ Milton Friedman: Life and ideas – Part 01 Milton Friedman: Life and ideas A brief biography of Milton Friedman _____________________________________ Stossel – “Free to Choose” (Milton Friedman) 1/6 6-10-10. pt.1 of 6. Stossel discusses Milton […]
I have written about the tremendous increase in the food stamp program the last 9 years before and that means that both President Obama and Bush were guilty of not trying to slow down it’s growth. Furthermore, Republicans have been some of the biggest supporters of the food stamp program. Milton Friedman had a […]
Welfare state may drag England down the tubes!!!! Very Funny but Very Un-PC British Video on Welfare and Immigration May 19, 2013 by Dan Mitchell I’ve shared this bit of political incorrect terrorism humor from England, as well asthis somewhat un-PC bit of tax humor. But perhaps motivated by the scandal of giving welfare to terrorists, this new video is […]
Milton Friedman did not favor free immigration with existing welfare state in USA Milton Friedman – Illegal Immigration – PT 2 Uploaded on Dec 18, 2009 (2 of 2) Professor Friedman fields a question on the dynamics of illegal immigration ________________ Heritage Responds to Senator Rubio on Immigration Study Amy Payne May 8, 2013 at […]
We got to stop encouraging people to stay on welfare. How the Welfare State Erodes Social Capital, as Illustrated by a Chuck Asay Cartoon April 26, 2013 by Dan Mitchell I’m a big fan of Chuck Asay’s political cartoons. My favorite is his nothing-left-to-steal masterpiece. And his tractor cartoon and his regime-uncertainty cartoon are brilliant indictments […]
I have posted stories on welfare before and here is another one. Another Horrifying and Depressing Look at the Human Cost of the Welfare State March 22, 2013 by Dan Mitchell When we think of Julia, the mythical moocher created by the Obama campaign, our first instinct is probably to grab our wallets and purses. After […]
Why are we spending more and more on welfare every year? What would the Founding Fathers have to say about this if they were still here today? We will look at that in a little bit. We need to cut Food Stamp program and not extend it. However, it seems that people tell the taxpayers back […]