Friday, September 20, 2019

Week 50: Price tag

In weeks 52 and 51, we examined the philosophical and practical notions of rights and equality. We will, of course, continue to explore the philosophy and principles that serve as the cornerstone of our democracy. This week, we will explore what might seem to be a more practical aspect of our republic, specifically the cost of our republic and the proposals we will hear during this election year.

If I could encourage you, kind reader, to do two things first, read this blog and share with others, second, take seven minutes to watch this video, which is part of a talk by the Nobel Prize awardee Milton Friedman. In it, he describes much more eloquently and succinctly than I the financial shell game that is our national economy.

Friedman’s concept that there is “no free lunch” is, or at least should be, at the heart of the discussion of the myriad programs that are suggested by candidates from both parties. “Free” education, healthcare, food and housing; a guaranteed minimum income; the list goes on and on.

To ground our conversation, the national debt of the United States of America $22.577 trillion. Roll in the unfunded liabilities of Social Security, Medicare Parts A, B and D, along with benefits for Federal employees and veterans, and the cost per citizen (not per taxpayer) is more than $381,000. If the average salary for U.S. workers is $47,060 (Q1 of 2019), it would take each person eight years to pay their share. This assumes that the debt and unfunded liabilities would remain frozen and not increase. It also assumes that each person will forego personal expenses, such as food, water and shelter, for those eight years.

In Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, he writes, “When the publick expence is defrayed by funding, it is defrayed by the annual destruction of some capital which had before existed in the country; by the perversion of some portion of the annual produce which had before been destined for the maintenance of productive labour, towards that of unproductive labour. As in this case, however, the taxes are lighter than they would have been, had a revenue sufficient for defraying the same expence been raised within the year; the private revenue of individuals is necessarily less burdened, and consequently their ability to save and accumulate some part of that revenue into capital is a good deal less impaired. If the method of funding destroys more old capital, it at the same time hinders less the accumulation or acquisition of new capital, than that of defraying the publick expence by a revenue raised within the year. Under the system of funding, the frugality and industry of private people can more easily repair the breaches which the waste and extravagance of government may occasionally make in the general capital of the society.”

In this passage, we see two key concepts. First is that public funding of programs destroys capital and the ability of individuals to provide for their own welfare and to save for their future. Second is that it is the industry of the individual that can repair this destruction, and repair is necessitated upon low taxes.

Regarding the first concept, I would argue that personal initiative is also destroyed. For those whose capital is redistributed, they are deprived of the utility of what they have produced. Furthermore, they are deprived of making the decision about how to use their capital for the good of society – either through charitable gifts and the good feeling it engenders or through the effect of Smith’s “invisible hand,” which results in all the wonderful downstream effects of the use of one’s own capital, such as creating jobs for others through the demand for goods and services.

Smith also writes about the opulence of the state. When its opulence grows, so must the redistribution of private capital and wealth through taxation.

Listen to the proposals of the candidates in this election year. Do any of them talk about the costs of such programs? The answer is either no, or it is yes but relies on grossly false figures. Name a government program that comes in at expected costs or below. I think you’ll find none.

Knowing that each new program or expanded program will require more taxes from you or increase your share of debt and unfunded liabilities, what proposals will you support? In making that decisions, we should all keep in mind that we would be opening our own wallets to Uncle Sam and requiring our fellow citizens (i.e., the half that actually pay taxes) to do the same.

As citizens, we should be asking the candidates (and our fellow citizens) this question: How much productive, private capital are we willing to destroy to pay for things like Medicare for All? Also, how much good capital are we willing to spend after bad? In this, I call your attention to the Affordable Care Act, aka Obamacare. The problems it purported to fix still exist and the lies upon which it was sold to the people (e.g., if you like your doctor you can keep your doctor) still plague many citizens.

Returning to Milton Friedman, he reminds us that no one spends his/her money as well as himself/herself. Furthermore, when we allow someone else to spend our money (i.e., the government), there are multitudes of administrators and functionaries that all get their cut of the funds, ever increasing the cost of government programs.

Also, it’s important that we ask for results. In terms of accountability in government programs, there is little to none. For the more than $381,000 that each of us owes, does any one of us know the return on investment? How many are lifted out of poverty because of government programs? How many become trapped in a cycle of dependency and ignorance. Take public education, for example, the kids who need a good education to lift themselves and their families out of poverty are the same kids who receive from our government the worst conditions for education. The cry from politicians is more money. What is the return on that increasing investment? Education continues to grind on as a great divider between the haves and have nots, despite more and more funding. This seems to be true for each and every program.

As we can clearly see, there’s not only a tremendous financial price tag to government programs, but there’s a more devastating price tag, one that has a depressing return on investment – that of human dignity.

Let us question those seeking to represent us as to the costs of their proposals. Let us force them to explain the tradeoffs. Let us require them to walk through the use of redistributed funds in a way that guarantees the elevation of human dignity. Perhaps it’s not more, but less.

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