In recent weeks, we have witnessed an unprecedented spate of government bailouts of private firms. Estimates of the total cost of government intervention - bailouts, guarantees, stimulus bills, deficit spending etc. - over the next two years approach $2 trillion.
This from a government already in deficit, and with a debt exceeding $10 trillion.
Who is paying for all of this? Well, you are, if you are one of the 124 million people who work in the private sector. Your share of $2 trillion is $16,000. You can add that to your share of the national debt, something north of $85,000.
It is a reasonable question to ask why an autoworker in Tennessee making $20.00 per hour should be forced to pay $16,000 to "save" the jobs of autoworkers in Michigan making $45, or investment bankers making millions, or hedge fund managers making billions.
Why should the 58-year-old welder in Wisconsin pay $16,000 for pensions of California government workers who retired at 50? The list of snouts heading for the trough is endless, but the number of people paying for all this is not. In fact, it is shrinking - this month by 250,000.
Government is funded by taxes on the private sector, and non-profits are either directly funded by contributions from the private sector or indirectly by tax dollars from government.
Ultimately, the cost of everything must be borne by those who work in the private sector, and only by those who currently work.
Every dollar spent by government is a dollar taken from individuals who would otherwise spend it, save it, invest it, or gift it, as they see fit. We allocate resources to obtain things we want; companies who supply them at the lowest costs will grow and prosper, and those who don't will wither and fail. That's how the market works.
If the government was to give each working person $16,000, how many of us would choose to go out an buy a GM, Ford, or Chrysler product with it? I think you know.
The question isn't whether or not to spend $2 trillion, that is going to happen one way or another. The question is who decides how it is spent - the government, or those of us who pay for the government?
November 30, 2008
November 26, 2008
Stick It, Grandpa!
What is the one topic we can't discuss honestly with our children? No, not that one....I mean Social Security.
And for good reason - once they figure out how bad we have stuck it to them, our kids will probably kill us in our sleep the next time they bring the grandkids up for a visit.
As I talk with young people about Libertarian principles and their practical application, I realize that very few of them really understand how Social Security works and how it impacts them. So for all of you 20-somethings who need a simple explanation of the system, here goes:
In ten years. I can retire and draw Social Security benefits. Since I earn a nice living and have been paying into the system since high school, I will draw $24,000 per year to start with. Where does this money come from? You. The government will take money from your paycheck to give to me. Seriously, that's how the system works.
Ten years from now, there will be 2 people paying in for each person drawing Social Security benefits, so two of you get to pay me $12,000 each for the rest of my life. That's if we cut out the middle man, and you just send me a check directly. With the government overhead to run the system, lets round it up to an even $15,000.
And don't forget Medicare. Figure another $5,000 each to pay for health care for the lovely Mrs. Nerenz and me. That's a cool $20,000 per year, every year, year after year, until we do the patriotic thing and keel over so you can at least take your kids to Wisconsin Dells once before they grow up.
Don't believe me? Take a look at your pay stub, find your deductions for Social Security and Medicare and double them. That's right, double them - the clever guys who set this up call half of your payment an "employer contribution" so you don't see it on your check. You still paid it.
There was supposed to be a Social Security Trust Fund that built up a surplus over the past 20 years to cover the retirement of us baby-boomers. The piggy bank is empty; the government spent the Trust Fund money on other stuff, and left IOUs that you have to pay back. Either way, you pay me. That's Social Security.
Every election, the Democrats and Republicans fall all over each other promising more benefits to old geezers that you young folks will pay for. Why? Because the old geezers vote, and you don't - that's why. We even have our own lobbyist, the AARP, to keep the Republocrats in line and keep the system rigged in our favor. It is the most feared special interest group in the country.
Sorry to break it to you, but your parents have mortgaged your future to buy the votes of your grandparents - and that's why nobody will talk about it. It's shameful.
Next election, when the blueheads show up to vote themselves more of your money, you need to stand up for yourself and say "Stick It, Grandpa!". You do that by voting for a candidate that will fight to change Social Security to a system of personal retirement accounts that you own yourself, not a system where the government takes your money and gives it to me.
Politicians call Social Security and Medicare "entitlements" to make it seem unjust to question the system. We certainly should question it. Why should I be entitled to your earnings simply because I'm old? What is the noble principle that compels you to pay me not to work?
There is none, so Stick It, Grandpa!
And for good reason - once they figure out how bad we have stuck it to them, our kids will probably kill us in our sleep the next time they bring the grandkids up for a visit.
As I talk with young people about Libertarian principles and their practical application, I realize that very few of them really understand how Social Security works and how it impacts them. So for all of you 20-somethings who need a simple explanation of the system, here goes:
In ten years. I can retire and draw Social Security benefits. Since I earn a nice living and have been paying into the system since high school, I will draw $24,000 per year to start with. Where does this money come from? You. The government will take money from your paycheck to give to me. Seriously, that's how the system works.
Ten years from now, there will be 2 people paying in for each person drawing Social Security benefits, so two of you get to pay me $12,000 each for the rest of my life. That's if we cut out the middle man, and you just send me a check directly. With the government overhead to run the system, lets round it up to an even $15,000.
And don't forget Medicare. Figure another $5,000 each to pay for health care for the lovely Mrs. Nerenz and me. That's a cool $20,000 per year, every year, year after year, until we do the patriotic thing and keel over so you can at least take your kids to Wisconsin Dells once before they grow up.
Don't believe me? Take a look at your pay stub, find your deductions for Social Security and Medicare and double them. That's right, double them - the clever guys who set this up call half of your payment an "employer contribution" so you don't see it on your check. You still paid it.
There was supposed to be a Social Security Trust Fund that built up a surplus over the past 20 years to cover the retirement of us baby-boomers. The piggy bank is empty; the government spent the Trust Fund money on other stuff, and left IOUs that you have to pay back. Either way, you pay me. That's Social Security.
Every election, the Democrats and Republicans fall all over each other promising more benefits to old geezers that you young folks will pay for. Why? Because the old geezers vote, and you don't - that's why. We even have our own lobbyist, the AARP, to keep the Republocrats in line and keep the system rigged in our favor. It is the most feared special interest group in the country.
Sorry to break it to you, but your parents have mortgaged your future to buy the votes of your grandparents - and that's why nobody will talk about it. It's shameful.
Next election, when the blueheads show up to vote themselves more of your money, you need to stand up for yourself and say "Stick It, Grandpa!". You do that by voting for a candidate that will fight to change Social Security to a system of personal retirement accounts that you own yourself, not a system where the government takes your money and gives it to me.
Politicians call Social Security and Medicare "entitlements" to make it seem unjust to question the system. We certainly should question it. Why should I be entitled to your earnings simply because I'm old? What is the noble principle that compels you to pay me not to work?
There is none, so Stick It, Grandpa!
November 25, 2008
The 100-Yard Dash
When people use the term "equality", it can mean two very different things: equality of opportunity, or equality of outcome.
Think of a 100-yard dash. Equality of opportunity means we all get to start at the same place and time; equality of outcome means we all get to finish at the same place and time.
In a fair race - i.e. everyone starts at the same time and runs the same distance, no two people would ever finish exactly together. Each of us is born with different talents, and each of us develops (or squanders) our talents differently.
In the real world, there can never be equality of outcome unless it is imposed by force.
I'm quite sure I would finish last in a 100-yard dash these days, and no amount of laws or regulations could make me run any faster than I can run. Therefore only way to achieve equality of outcome - i.e. we all finish the same - is to force the faster runners to slow down.
It is competition under equal opportunity that brings out the best in each of us. Dissatisfied with finishing last, the slowest runners train and work hard to run faster. This new threat makes the fast runners also train harder to run faster. The outcome is still uneven, but we all run faster.
Equality of outcome has the exact opposite effect as competition and equality of opportunity. There is no incentive for the slow runners to work to run faster, and the fast runners no longer benefit from their training and hard work, so they get fat and slow down, too. We finish together, but we all run slower.
This is true in economics as well as on the track. As a society, we have turned away from the ideal of equality of opportunity, and have embraced opportunity of outcome. We teach our children that competition is bad, we practice class warfare in our politics, and we despair over income equality and "excessive" profits. Excepting, of course, the profits gained from politicians writing books about themselves, but I digress.......
Predictably, we are becoming a nation of slow runners; our tax system punishes the fast runners and rewards the slow. We tax work, saving, investment, and profit; we reward non-work, debt, and failure. Is there any surprise we have too little of the former and too much of the latter?
In the Special Olympics, everyone who runs the 100-yard dash gets a medal and a hug. In the real Olympics, one person wins gold, and everyone else goes home disappointed.
But they all run very, very fast.
Think of a 100-yard dash. Equality of opportunity means we all get to start at the same place and time; equality of outcome means we all get to finish at the same place and time.
In a fair race - i.e. everyone starts at the same time and runs the same distance, no two people would ever finish exactly together. Each of us is born with different talents, and each of us develops (or squanders) our talents differently.
In the real world, there can never be equality of outcome unless it is imposed by force.
I'm quite sure I would finish last in a 100-yard dash these days, and no amount of laws or regulations could make me run any faster than I can run. Therefore only way to achieve equality of outcome - i.e. we all finish the same - is to force the faster runners to slow down.
It is competition under equal opportunity that brings out the best in each of us. Dissatisfied with finishing last, the slowest runners train and work hard to run faster. This new threat makes the fast runners also train harder to run faster. The outcome is still uneven, but we all run faster.
Equality of outcome has the exact opposite effect as competition and equality of opportunity. There is no incentive for the slow runners to work to run faster, and the fast runners no longer benefit from their training and hard work, so they get fat and slow down, too. We finish together, but we all run slower.
This is true in economics as well as on the track. As a society, we have turned away from the ideal of equality of opportunity, and have embraced opportunity of outcome. We teach our children that competition is bad, we practice class warfare in our politics, and we despair over income equality and "excessive" profits. Excepting, of course, the profits gained from politicians writing books about themselves, but I digress.......
Predictably, we are becoming a nation of slow runners; our tax system punishes the fast runners and rewards the slow. We tax work, saving, investment, and profit; we reward non-work, debt, and failure. Is there any surprise we have too little of the former and too much of the latter?
In the Special Olympics, everyone who runs the 100-yard dash gets a medal and a hug. In the real Olympics, one person wins gold, and everyone else goes home disappointed.
But they all run very, very fast.
$280,000 Per Job
President-elect Obama announced a plan to save/create 2.5 million jobs through his proposed economic recovery package. The cost of the plan is rumored to exceed $700 billion.
That is $280,000 per job.
Perhaps this was the plan all along - stick a big tax increase to everybody making over $250,000 per year and then go manufacture 2.5 million more of them. I'm sure there are many in Washington to whom this actually makes sense.
The median private sector job pays $57,000 in wages and benefits, so the government could achieve the same 2.5 million job growth by simply reducing the tax burden on corporations by $150 billion. An alternative would be to cut corporate taxes by the same $700 billion and create 12 million jobs.
The real problem with the plan is that Mr. Obama and has advisors mistakenly believe that they can create jobs. The private sector creates wealth and jobs, and government can do the most good by getting out of the way, not taxing and regulating and choosing which industries and companies to subsidize and which to punish.
A month ago, the idea was to tax the rich - many of whom are small businesspeople who will respond to the higher cost of taxes by lowering wages and benefits, increasing prices, and cutting jobs.
Jobs that now need to be replaced at $280,000 each.
That is $280,000 per job.
Perhaps this was the plan all along - stick a big tax increase to everybody making over $250,000 per year and then go manufacture 2.5 million more of them. I'm sure there are many in Washington to whom this actually makes sense.
The median private sector job pays $57,000 in wages and benefits, so the government could achieve the same 2.5 million job growth by simply reducing the tax burden on corporations by $150 billion. An alternative would be to cut corporate taxes by the same $700 billion and create 12 million jobs.
The real problem with the plan is that Mr. Obama and has advisors mistakenly believe that they can create jobs. The private sector creates wealth and jobs, and government can do the most good by getting out of the way, not taxing and regulating and choosing which industries and companies to subsidize and which to punish.
A month ago, the idea was to tax the rich - many of whom are small businesspeople who will respond to the higher cost of taxes by lowering wages and benefits, increasing prices, and cutting jobs.
Jobs that now need to be replaced at $280,000 each.
November 24, 2008
Republocrats
We have just finished an exhaustive 2-plus year campaign, and at the end of all of that fuss and fury, who won? The Republocrats - surprise, surprise.
Over the past four decades, the Republocrats have taken turns expanding the size of government, trampling on the Constitution, increasing their take of our earnings, and sticking their noses into every nook and cranny of our lives. One party is tax and spend, the other borrow and spend - and what has all this Republocrat spending brought us?
They have ruined our schools; they have destroyed our manufacturing base; they have spoiled our health care system; they have turned a drug problem into a drug/crime/gang/prison problem; they have destroyed our inner cities; they have wrecked our reputation abroad; and they have racked up a debt that will soon exceed $100 ,000 for each private sector job.
Our government decides what we can eat, what medicines we can take, how much we can earn, what products we can buy, and what vehicles we can drive. It decides what schools our kids can go to, and what they will be taught; what we can build on our own property; what charities we can support; what voices we can hear over the airwaves.
We are slaves to the state; and soon we will have have a master that holds the whip in the left hand instead of the right. Will that matter? Not so much. The oil companies will get a few less goodies and the trial lawyers a few more. Your taxes will go up, and there will be some new restrictions on the choices you can make in life.
The answer to the problems created by big government is not more government - it is more liberty. Economic liberty and personal liberty go hand in hand - if we are deprived one, we are deprived of both.
Vote Libertarian. We want you to have more money and more fun.
Over the past four decades, the Republocrats have taken turns expanding the size of government, trampling on the Constitution, increasing their take of our earnings, and sticking their noses into every nook and cranny of our lives. One party is tax and spend, the other borrow and spend - and what has all this Republocrat spending brought us?
They have ruined our schools; they have destroyed our manufacturing base; they have spoiled our health care system; they have turned a drug problem into a drug/crime/gang/prison problem; they have destroyed our inner cities; they have wrecked our reputation abroad; and they have racked up a debt that will soon exceed $100 ,000 for each private sector job.
Our government decides what we can eat, what medicines we can take, how much we can earn, what products we can buy, and what vehicles we can drive. It decides what schools our kids can go to, and what they will be taught; what we can build on our own property; what charities we can support; what voices we can hear over the airwaves.
We are slaves to the state; and soon we will have have a master that holds the whip in the left hand instead of the right. Will that matter? Not so much. The oil companies will get a few less goodies and the trial lawyers a few more. Your taxes will go up, and there will be some new restrictions on the choices you can make in life.
The answer to the problems created by big government is not more government - it is more liberty. Economic liberty and personal liberty go hand in hand - if we are deprived one, we are deprived of both.
Vote Libertarian. We want you to have more money and more fun.
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