Re: Reject the Welfare/Warfare State

On Wed, Nov 10, 2010 at 4:24 PM, Karl <[email protected]> wrote:
> ***and then what?  Again, creating an artificial bubble of prosperity does more
> damage than benefit.

You seem to be hung up on temporary vs long term changes while I see
it as completely tangential to my point about marginal benefit.

How about this scenario (which is more concrete, and thus more likely
to have some devilish details): cut $1B from food stamps and medicare
vs add $1B in taxes on wealthy.  Both scenarios are ongoing, and both
would help reduce the deficit (which I think we both agree is
important).  I'm arguing that the marginal cost of the social services
reduction might possibly be more than the marginal cost of the taxes.
Ultimately, to eliminate the deficit we'll need *both*.

Even if I was talking about $1B in temporary stimulus, you'd want that
$1B to *circulate* as much as possible.  The more the money
circulates, the more jobs it creates, the more likely those jobs will
persist, and the more likely the economy will function without any
extraneous funding.  If the intent is to get the money to circulate as
much as possible, the marginal cost and benefit of
taxation/subsidizing is higher for the poor than for the wealthy.

> **But again, once the money is gone, they are no better off,

They are better off.  They bought $10,000 worth of stuff they wouldn't
have otherwise bought, they are probably nearly $10,000 better off.
Maybe they invested it, maybe not.  Maybe it allowed them
opportunities they wouldn't have otherwise had, maybe not.  But they
are generally better off.

> and in fact may be in a worse situation.

Giving them money won't make them better off and might make them worse
off?  Huh? what?

The reverse of that is that taking money from them won't make them
worse off, and might make them better off.  So what we should *really*
be doing is increasing the tax burden on the poor.  It's for their own
good.

> **a little longer is accurate, that's my point.  There is no lasting benefit.

In as much as jobs are created and people are working at creating
value for society, there absolutely would be lasting benefit.

>> The demand for goods and the new jobs are not
>> sustainable unless you continue to give them the 10k regularly.
>
> Is this a relevant difference between the poor and the wealthy scenarios?
>
> **a huge one.  You just enabled an entitlement mentality.

Entitlement mentality is already here, and it spans every single
demographic, albeit in different forms.  It's not relevant to the
marginal cost/benefit.  Especially since the most practical scenario
right now (reducing the deficit) is about cost on both ends.  If the
money was given or taken by pay raises or cuts rather than by
government subsidies or taxation, the conclusion is not altered:
marginal cost/benefit both to individuals and society still tends to
be higher at the lower end of the spectrum.

> > You are more cynical than I, perhaps because a few of my best
> > co-workers and bosses have themselves risen out of poverty to work in
> > tech start ups (and deservedly make considerably more than I do).
>
> ***sure they did.  But did someone just hand them 10k to do it?  Or did them
> leverage their own skills and drive?  Give people the money and they lose the
> need to fight to succeed.

More than 10K; minority and demographically targeted university
scholarships create some marvelous results (regardless of funding
source, although I think that most are private.)

Actually, I don't know if the particular co-workers I have in mind had
said scholarships, but many of the best students at my university did.
 And yes, they did need to leverage their own skills even after that
gift.  But, given my experience with them and their overwhelming drive
to succeed, I strongly disagree with a blanket statement of "give
people money and they lose the need to fight".  People are more
complex than that.

> But, even with that cynical 1%: aren't you more likely to cross a
> threshold than with wealthy, and if not, why not?
>
> **what threshold?

The threshold between just making ends meet, and having enough to buy
equipment and vehicles for a lawn care business or lease payments for
a store (which generates jobs for you and possibly employees), or just
buying your kids new clothes and better food (which generates jobs for
retail clerks and clothing/food suppliers).

I'm hardly rich, but if I wanted to start a new business, I could
tighten my belt, rent out my house and move to a cheap apartment in a
scary part of town, change my diet to ramen noodles and multivitamins,
cancel my cell phones and internet, sell my car and use the bus, etc,
and somehow scrounge up 15-40K over the course of the next year to do
it.  These are options I have (however far-fetched) that someone
making one quarter of what I make simply will not have.  As any
investor will tell you, options are valuable.

> ***ok, I see what you are saying, but the methodology is still flawed.  A
> business owner in the 1/4 mill bracket might see that excess cash as an
> opportunity to expand a department.  Dealing with personal wealth as opposed to
> a business's available capital is not comparable.

If a wealthy business owner wants to invest his money into short term
expansion of his own business, good on him.  All I'm saying is that
for every $1 distributed to the wealthy versus the poor, more will
circulate faster and for longer when given to those who have the most
need.  And more damage will be done by withdrawing that same $1 of
support, regardless of where that $1 came from.  I'm not saying that
"trickle down" doesn't exist.  I'm claiming that "trickle up" is often
stronger.

-- 
Nick

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