More Maker/Taker Musings
The NYT has an interesting piece on the ongoing limted v. big governemnt debate.
The NYT has an interesting piece that underscores a key theme within our politics: Even Critics of Safety Net Increasingly Depend on It. The basic thesis (and it is not a new revelation): a lot of people who decry the size of government and call for more “limited” government are, themselves, recipients of government programs. There exists some serious political cognitive dissonance in the populace which underscores part of what I was talking about last week: it is a lot harder to delineate between makers and takers than many ideologues would have us think (or, if ones prefers different language: to identify a clear universe of Peters being robbed to pay the Pauls or what precisely makes up a “moocher” in our system).*
An illustration from the piece:
Ki Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government.
[…]
He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party campaign of a neighbor, Chip Cravaack, who ousted this region’s long-serving Democratic congressman.
Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice.
Now, on the one hand, the programs (EITC, free meals at school, etc.) exist and one can argue that one has the right to take what one can get regardless of philosophical objections. One the other hand, however, there is a something deeply problematic about what appears to be (both in this specific case, as well as within the general politics of this topic) a serious contradiction in position v. alleged political preferences (or, perhaps even more likely, a profound misunderstanding of these policies in the first place).
Back to the specifics of this example: Gulbranson is a small businessman, the very definition of entrepreneurial America and hence a “maker” and yet he also is taking free meals for his kids at school, amongst other things, which makes him a proverbial “taker,” yes? (So much for easy dichotomies in the real world).
In fairness, Gulbranson did say the following in the interview:
Their difficulties, Mr. Gulbranson said, have made it hard to imagine asking anyone to pay higher taxes.
“I don’t think most people could bear to pay more,” he said.
Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.
“I don’t demand that the government does this for me,” he said. “I don’t feel like I need the government.”
How about Social Security? And Medicare? Can he imagine retiring without government help?
“I don’t think so,” he said. “No. I don’t know. Not the way we expect to live as Americans.”
But, of course, even if we eliminate school meals and the EITC, the major social spending by the federal government is Social Security and Medicare. Any discussion about the size of government has to address this fact. Further, these are programs that only work with some substantial amount of redistribution. To wit:
A woman who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer.
Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for.
So, again: if the Tea Party is serious about less government and even lower taxes, then this issues has to be addressed far more head on than has been the case. And such an addressing has to deal with the fact that either we have to pay more in taxes, severely cut benefits, or some mix. Simplistic calls for limited government are just that, simplistic.
One response to the column was by Tom Maguire (and who was quote favorably by the aforementioned Reynolds), who asked:
Wait – Medicare is now a “safety net” program? I thought that,like Social Security, it was an earned benefit – we all paid our taxes, and we are all eligible. Medicaid is means-tested; Medicare is not.
Now, the distinction he appears to be making is that only non-universal programs are “safety net” programs. However, this is not the case.
First, I would counter his assertion by stating just because a program is universal does not mean that it does not constitute part of the safety net. A key rationale for both Social Security and Medicare was to prevent the occurrence of poverty amongst the elderly. Indeed, as I noted not that long ago, there is a correlation between Social Security and the diminution of poverty amongst the elderly. As such, these programs are very clearly part of the safety net, even if not all partakers of the policies use them to avoid poverty. Indeed, one suspects that the vast majority of recipients would be risking poverty without these programs (and certainly a substantial number would not have anywhere near to adequate medical coverage—a situation leading either to an earlier death and/or bankruptcy).
Second, the article is about the fact that many persons who are not poor rely on various social programs despite the fact that they are political inclined to inveigh against government spending. The issue is, therefore, about contradictory politics regardless of whether the programs are universal or targeted in some way.
Third, even if the policies in question are universal, this does not mean that each recipient received back simply what was paid in. Quite the contrary: even people well ensconced in the middle class will receive more in benefits than they paid in.
Maguire also asserts “the Democrats have long wanted to deliver middle-class entitlements paid for by “the rich”, because that is where the votes are” ( a point he hopes to return to). This is, of course, a central theme of many who criticize these program and who call for limited government in general (it also asserts a political conspiracy of a sort that makes the situation sound like some sort of master plan to ensnare the public). However, I would note, that the examples in the NYT undercut that assertion. And yes, anecdotes are not data. However, we know from survey research that there are a large number of people who both support these programs yet vote for politicians who seek to either cut and/or underfund said programs. In other words, if voting was really about material benefits, we would see very different voting patterns than we do.
Indeed, the NYT piece addresses this issue to a degree:
One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.
This is correct: the ancient Greeks criticized democracy (as they defined it**) as nothing more than rule by the poor who would eventually tear done society. However, reality ends up being a lot more complicated. As noted, voting preferences end up being more complex than this notion suggests. One simple fact illustrates this: citizens do not vote solely on class lines.
Further, ss the article notes:
Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.
Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.
Now, granted, the red state/blue state dichotomy is problematic from an analytical point of view because it makes it sound as if states contain only one type of person, which is not the case. Still, there is a disconnect here that is rather profound. For example: deep red southern states often contain a lot of people decrying the federal government and federal spending but seem to ignore the degree to which their own state economies rely upon and benefit from federal spending.
To be clear: I think that there is a legitimate debate to be had over these policies. However, I don’t think that an honest, legitimate debate can be had until there is a real understanding of what government actually does. This has been an ongoing theme for me, and probably is, to me, the most significant fundamental issue for the improvement of our political debate. So,we can debate about the appropriate scope of government: what it should do and how it should be paid for, but to do so we have to fundamentally honest about what government does in reality right now as well as the ramifications of specific changes. And yet, it does not seem that, in the main, we are anywhere near this kind of conversation. Instead we get silly maker/taker, 53%/47%, etc. dichotomizations or simplistic appeals to “rugged individualism” that utterly eschew reality.
A side note: this also gets mixed up in a simplistic dependency/liberty dichotomy (as exemplified by Heritage’s Index of Dependence and that is the hallmark of Ron Paul speeches). Much could be said on this, but I would suggest that sometimes “dependence” (if defined solely as receiving a government benefit of some kind) can lead to the ability to have more personal liberty. If I am a retiree who receives Social Security and Medicare to a sufficient level that I can afford to live on my own rather than having to turn to the charity of family, do I not have more liberty than I otherwise would have had? If I am a parent of school age children, do I not, ultimately have more personal liberty if I have public schools where I can send my children to be educated? Indeed, as an individual, is not a substantial amount of my personal liberty shaped heavily by the education I received, which is often the result of depending on government in multiple ways? That is: public K-12 (free to me) and then public university (subsidized) and perhaps paid for in some way via federal programs, e.g., Pell Grants, the GI Bill, student loans, etc.). Without those things to depend upon, how much control over my life (i.e., liberty) would I have had?
I am not saying that this programs are perfect, that they must maintain their current funding levels, or that there is no room for alternatives. I am saying, however, that we have a choice to make before we can have efficacious discourse. That choice is between ideology/propaganda and reality. And the reality has to reflective not just the downside of government, but the upside as well (and, indeed, it is an upside that we all enjoy more than we seem willing to admit).
*For anyone unclear on why I am using this specific language, please see the linked post and the Glenn Reynolds column I was discussing.
**Which isn’t really how we define in the modern era, but that’s a whole other conversation.
This ties in nicely with the argument that some conservatives make that if people like Warren Buffett want to pay more in taxes, they can personally send more of their money to the IRS rather than wanting the wealthy as a whole to pay more taxes…if so-called “makers” are tired of the “takers” feeding at the government trough, maybe these “makers” themselves could stop feeding at that same trough…
Meanwhile, it can’t be stressed enough that no matter how much the New Deal offends people like Glenn Reynolds and Doug Mataconis, the important parts of its legacy that have survived aren’t going anywhere anytime soon, no matter how much they howl and complain…
Well said. Wish that all discourse could be that intelligent.
The government that will figure out how to do something about the high gas prices and ever increasing food prices gets my endorsement.
Cereal: was $2.68. Now: $3.18 (smaller box, same cereal)
We’re gonna have another Insta-lanche, aren’t we?
The hell with people like Ki Gulbrandson. EITC is not a tax break, or a lower rate. It is welfare. Sure he doesn’t “demand” it, but he takes it. Ain’t that how it always is —
“hey, I didn’t ask for this.” Great, you didn’t ask, but your children (five!) would go hungry if you didn’t get it. He’s a welfare recipient who wishes there were welfare because all the other welfare recipients are unworthy. Screw him, and everyone like him.
I’m not rich, but I pay a lot of taxes due to my being single. I’m willing to pay more, to support a strong safety net. It’s the compassionate thing to do, and it makes economic sense. Let the Bush tax cuts expire already. More taxes to me is the choice between a Kia or a Ford, for Ki Gulbrandson it’s putting food on his table.
But assholes like Ki Gulbrandson should STFU.
Thanks for the link.
As to this stat:
I recall, perhaps incorrectly, that defense spending drives that result, especially with a 1980 starting point. Lots of military bases in the south and west, and I don’t think the locals view them in the same light as safety net transfer payments.
Re a reasonable definition of a safety net: Social Security and Medicare are nearly universal among the elderly and not means-tested; I doubt there has been a time in the past forty years when most (e.g., 51%) of the SS and Medicare spending went to the bottom income quintile. Giving more money to everyone and then claiming that since the poor also benefit it is part of the safety net strains the concept of “safety net” and muddies the analysis of safety net spending. Well, in my opinion.
For purposes of this Times article, if most of the money is going to the non-poor, and the total spending is going up, does it really follow that the safety net is consuming more resources? An argument about whether entitlement spending is out of control would be quite different from an argument about whether “safety net” spending is out of control.
Re:
What’s the matter with Kansas, indeed? My point, evidently poorly expressed, is that Democratic strategists expect/hope people will vote their pocketbooks and back these middle-class entitlements. And certainly the Democrats revel in the Mediscare debate, positioning themselves as defenders of the elderly. (Sarah Palin had the same fun with her “death panels”.)
As to whether voters actually get behind these programs as a matter of their own immediate financial interest, clearly not.
Excellent post, Dr Joyner, and good for you for directing readers to the NYTimes article which also is very much worth reading.
Thank you for making the point that constraints on our ‘liberty’ almost never emerge from our government. I was having a conversation with one of my TeaParty inclined relatives not too long ago who was advocating that the ‘free market’ would solve all our economic problems if only it was released from gov’t ‘interference’ and regulation. I contended that there actually in no such thing as a ‘free market’ absent regulation because it would instantly become ‘cornered’ by it’s biggest participant to the detriment of everyone who depended on it.
Related reading: What’s the Matter with Kansas?
Gosh! Mr Maquire also drew the analogy with Mr Frank’s fine book and beat me posting by a few seconds. Well done, sir.
@Carson: So you’re essentially looking for a government with a weather machine and the secret to abiotic oil?
@Carson: If you can’t afford cereal just eat cake.
@Scott O.: Well, I am sort of partial to cupcakes. But I have to have milk with them and milk is now racing with gas as far as price is concerned. I guess it has something to do with the farm subsidies.
I love the idea that Medicare is a pocketbook issue, as if pure greed and self-interest are driving a person’s desire to die under medical supervision without being hundreds of thousands in dollars in debt.
Let’s face it: if President McCain had scaled-up RomneyCare, none of the outrage, sans coming from a few nuts, would exist. But since there is outrage, the same dumb formula comes into play, with its users so witless that they can’t even describe anything that is a human emotion.
There’s nothing new about this nor suprising. During the great Dubya SS privatisation debate it was revealed that SS was over 50% of income for 80% of seniors and 100% of income for 50% of seniors. Now given that the GOP draws a large part of it’s support from older white Americans it had to be obvious that a lot of them are in favor of an economic Kevorkian fix for themselves and their children who themselves can’t be too far off senior status. At the end of the day it comes down to Mencken’s great dictum “No one ever went broke underestimating the stupidity of the American people.” Without the operation of this great law where would the Republican party be?
@ SLT…
Well done. Thank you.
It is time to cut off all funding for the parasites in the freeloading red states in the south and the west.
@meg: Here in Arizona, we can start with cutting subsidies for water.
@meg: You mean where all the retirees are going?
During my high school years in a small town in Wisconsin I worked Saturdays in my dad’s clothing store. The local farmers would come in, buy their underwear or whatever, and then start talking among themselves about how awful it was that the government was giving all that welfare money to the African-Americans (actually, not the word they used). When they finished, they’d start complaining about the low level of dairy price supports. Truly, we Americans are a mysterious people.
@Tom Maguire:
Seeing as Social Security is the only or majority source of income for over 50% of the elderly, you’re trying to measure the wrong thing in order to make your point.
Per this Kaiser report, 28% of children live below the poverty line, as do 19% of adults 19-64 and 14% of adults over 64.
And from this report, roughly 88% of the elderly receive Social Security. Which means it is going to a lot of non-poor elderly.
To which one might respond, well, they would be poor if we eliminated their Social Security. Of course, that would be a bit harsh since we collected their taxes all these years. To say that elderly people who spent their lives planning to collect on Social Security would be poor if they didn’t get it is not saying much about how effective an anti-poverty program it is – surely some of these people have saved differently over their careers if they (a) didn’t face the payroll tax and (b) didn’t expect to collect Social Security.
More intriguingly, I have no doubt that the poverty line varies with age and family size, so it may be that even though there are proportionately fewer poor elderly, they could still be a larger proportion of the lower income quintiles (since they don’t need a high income to avoid poverty).
I have no serious argument with your points here. I think this is a great discussion.
I would add that the argument against Medicare from a free market standpoint (which is NOT the argument the TP’s offer), is that Medicare + Big Insurance are driving costs up. So while no one can seriously argue for independence from Medicare w/o bankrupting themselves, there is an argument that if it were phased out, our costs would be lower, and this argument is different than saying “I hate the Gov” while simultanesouly taking hand-outs.
@Carson:
“Highly processed corn-based food products, with lots of chemical additives, are well known to be a major driver of weight gain, but, from a conventional growth-accounting perspective, they are great stuff. Big agriculture gets paid for growing the corn (often subsidised by the government), and the food processors get paid for adding tonnes of chemicals to create a habit-forming – and thus irresistible – product. Along the way, scientists get paid for finding just the right mix of salt, sugar and chemicals to make the latest instant food maximally addictive; advertisers get paid for peddling it; and, in the end, the healthcare industry makes a fortune treating the disease that inevitably results.”
This article is a little over the top, but only a little, and the reality of the government-food complex is not … a “healthy” one.
So anyway, no. I wouldn’t look for cheaper cereal as the answer. At least not the big-selling and highly processed brands.
@Tom Maguire:
No doubt. But see this article by Dave Schuler, Why Social Security is Necessary.
Do you think it’s feasible for someone making $50,000/year( the median income for a family of four today) to save 25% of the his or her income yearly over the course of his or her working life?
And Dave argues:
The article’s worth you time, Tom/
@meg:
http://www.thedailybeast.com/articles/2011/02/15/paul-begala-its-time-to-defund-kentucky.html
Great article by Paul Begala about your point. It’s time to defund Kentucky.
Echoing Gus Hall
@Tom Maguire: First, thanks for stopping by and engaging, I really appreciate it and my apologies for not having had the time to fully respond back.
However, let me address one key point:
That’s not my point at all. That is: I am not saying that taking away Social Security now would lead to poverty. I am saying that when we look back to the pre-SS era we find substantially higher rates of poverty amongst the elderly. I am saying that a key purpose of a SS is to prevent poverty for the elderly and that, as such, it is quite clearly part of the safety net.
I would recommend this NBER paper: click. Here’s part of the abstract:
There is a chart at the link that shows a clear correlation between increased SS spending and the decline of poverty rates for the elderly. This is what I mean about it being part of the safety net. Likewise it seems pretty clear that Medicare helps prevent poverty for the elderly as well, and hence is also part of the basic safety net.
I do not see how the Boomer generation can possibly receive full Social Security benefits. Both political parties have been spending the Social Security funds as part of the general tax revenue since the Clinton/Gingrich era. The only way to pay back the IOU’s/Treasury bonds is to raise taxes and cut other spending. I would feel worse about this situation except that the Boomer concern over the spending of Social Security funds seems to coincide with the Boomer retirements.
@EMRVentures:
Never confuse Compassion with Kindness. In this case, I don’t have even the slightest faith that the US Government is approaching this problem with wisdom, and wisdom is a prerequisite for Compassion.
@Steven L. Taylor: I, too, thought this was a great article. There were two things that struck me reading this that hasn’t been mentioned so far:
1) The “red” areas being talked about have a very, very strong “self-reliance” culture. That’s why they (I included) will look at SS & Medicare differently — no matter how screwed up it may be, it’s presented as an “earned benefit”.
2) EITC was presented, in this article, as a means to compensate for the nature of SS & Medicare taxes — that is, because SS & Medicare are not progressive taxes, they must be compensated for. That strikes me as a bit simplistic — EITC doesn’t just give back a portion of your “other taxes”, or a portion resembling it (last time I checked anyway). If it’s a means to encourage work, we’ll need to consider Unemployment Insurance (another “you earned it” benefit, at least in PA, that is part of the “safety net”).
Oh my, so now the New Deal is the same thing as communism? Really? And to think that on another thread you accused someone else of being on drugs…if you really believe in the comparison you are making, you might want to check your own bloodstream for noxious substances…
@john personna: I just might go to Pop Tarts or just make some cinnamon toast.
@Carson:
Toast with crunchy peanut butter is my quick-start. With strong coffee of course.
@Jay:
This is completely senseless point with absolutely no founding in actual research. Inelasticity of demand for heathcare products drives costs up. Insurers increases prices because they can. People pay higher prices because they have to if they want their healthcare services.
@James:
There are quite a few books on how Medicare increases healthcare costs. They tend to break it down as follows:
1. Longer lived patients consume more healthcare.
2. Healthcare Services increased to consume the new moneys made available for healthcare services via Medicare.
3. Consumer of healthcare is not directly paying for services.
4. Reimbursement rules encourage increased costs.
Example: 3 days in a hospital qualify a Medicare recipient for physical therapy treatment paid for by Medicare. 2 days does not. Most hospitals encourage a 3 day stay so Medicare recipients can get the necessary physical therapy (#4). Physical Therapy treatment has become much prevalent due to Medicare funds to pay for it (#2). Since the Medicare recipient is not paying for the extra day in the hospital and the extra treatment, they use the service (#3).
Because Medicare allows for Seniors to live longer and healthier lives, Medicare’s vary existence increases the cost of healthcare. It is a victim of its own successes.
@James: Then I’d recommend you read some different books on the issue. Start with Paul Starr.
Medicare doesn’t increase healthcare costs. Healthcare cost inflation causes increases in Medicare costs. Individual demand for healthcare products and services is very price inelastic. Healthcare consumers can’t place a downward pressure on the price of bypass surgery like they can the price for cell phones or hamburgers.
@James:
You meant the Paul Starr who said:
“Most people see Medicare as a program serving the elderly; what they miss is that Medicare has also been a program serving the health-care industry, financing its expansion.”
and
“…during the course of a year, the most costly 5 percent of people typically account for more than 50 percent of health-care costs, and the top 10 percent of people account for 70 percent of costs. These high-cost cases are little affected by cost-sharing; once a patient is in the system, physicians make most of the decisions affecting costs. Rather than expecting patients to economize, much less to bargain over prices when they’re ill, we should focus incentives on physicians and providers—to try to influence the “supply” rather than the “demand” side of the market, because in health care, unlike other markets, the suppliers drive so much of the demand.”
Link for the above quotes.
@James: Great quote and a nice link. A few points:
It’s really too bad you needed three days to dig around to find something that, on its face, mildly implies a contradiction to my assertion. But, if you look at the tail end of that blockquote you put up there:
You’ll realized Mr. Starr just substantiated exactly what I’m saying; the consumer demand for healthcare goods and services is price inelastic, and that in many ways healthcare providers have a marginal product curve similar to monopolists than competitive frims. This is the fact that underlies the entire cost inflation issue for non-elective healthcare products and procedures.
Now I’m not stating that Medicare is servicing our goals of controlling healthcare cost inflation. But to accuse Medicare of causing healthcare cost inflation just evidences and misunderstanding between correlation and causation.
@James: Great quote and a nice link. A few points:
It’s really too bad you needed three days to dig around to find something that, on its face, mildly implies a contradiction to my assertion. But, if you look at the tail end of that blockquote you put up there:
You’ll realized Mr. Starr just substantiated exactly what I’m saying; the consumer demand for healthcare goods and services is price inelastic, and that in many ways healthcare providers have a marginal product curve similar to monopolists than competitive firms. This is the fact that underlies the entire cost inflation issue for non-elective healthcare products and procedures.
Now I’m not stating that Medicare is servicing our goals of controlling healthcare cost inflation. But to accuse Medicare of causing healthcare cost inflation just evidences and misunderstanding between correlation and causation.