January 03, 2004

What Is the Point of the Republican Party?

David Brooks argues that the Republican Party has no reason to exist--save to channel money to favored businessmen and their lobbyist friends:

Op-Ed Columnist: Running on Reform: ...The G.O.P. used to have a governing philosophy: reducing the size of the state.... But reducing the size of government can no longer be Republicans' animating principle... Republicans have no credibility on this subject.... Now Republicans control everything, and over the past three years the size of government has still increased.... Republicans have learned through hard experiences that most Americans do not actually want their government sharply cut....

With its old governing philosophy obsolete, the Republican Party is adrift domestically.... Meanwhile, corporate lobbyists have jumped into the vacuum. If principles aren't going to guide the Republican Party, the opportunists are happy to take control...

Posted by DeLong at January 3, 2004 08:33 AM | TrackBack

Comments

How can he go on admitting this stuff and stay a Republican? And another thing: notice how often he uses the word "reform" -- tort reform, welfare reform, tax reform . . . . But what does he mean by "reform"? Republican strategists have emptied the word "reform" of all meaning. The only general meaning they could give the word as they use it is "change," but "change" doesn't sound as appealing as "reform." Moreover, saying you want to "change" taxes pretty much requires you to say how you would do it. And Republicans don't want to do that, because an honest answer -- more tax cuts for the rich -- doesn't sell.

Posted by: Charlie Robb on January 3, 2004 08:50 AM

____

For once Brooks writes a column that isn't completely inane. He is right that the Dems are running on anger - anyone with his or her eyes open would necesarily be shrill in sounding the alarm. But he is wrong on the Dems not forwarding policy. A few minutes on most of the candidates' websites would show that there is actually good policy being advanced. The Dems' policies beat Bush's only two agenda items: irresponsible tax cuts, and putting industry lobbyists in senior government positions to have their ways.

Posted by: AJ Colyer on January 3, 2004 09:04 AM

____

Once again; Howard Dean must concentrate on the spending program, and not commit too strongly on the particulars of the means of financing.

Posted by: Bulent Sayin on January 3, 2004 09:15 AM

____

Bulent - I'm not sure I agree with this. Perot, as odd as he was, found an audience in 1992 with his message of fiscal responsibility. The Dems would do well in '04 to run to the right of the Republicans on domestic policy. Ultimately, taxes must be raised. If the Dems ran as the "fiscally responsible" party, they would find success.

I do, though, agree with you that the Dems must stay somewhat ambigious on the budget. They would get hammered as "soft on defense" if they were to posit that some large budget expenditures, like defense, lend themselves to scale advantages - they don't need to increase at the same rate as the economy. Therefore, we could hold defense spending relatively constant and increase spending for other non-discreationary programs.

Posted by: AJ Colyer on January 3, 2004 10:07 AM

____

I don't know about the rest of you, but as for me, I love David Brooks. He is that rare right-wing pundit (along with Bill O'Reilly and Ann Coulter) that I can read and feel better about my liberal beliefs. If any right-wing conspiracy theorists wanted to argue that the liberally-biased TIMES hired Brooks to make the left's ideas look stronger, I'd have a tough time disagreeing with them...

Posted by: Brad Reed on January 3, 2004 10:12 AM

____

Charles Robb asks, "How can he go on admitting this stuff and stay a Republican?"

Since he's clearly a hypocrite for remaining a member of what he admits is a completely corrupt political party, Brooks has proven himself to be a Republican in good standing. Hypocrisy is the second principle of the GOP, right after greed.

Posted by: Charles on January 3, 2004 11:05 AM

____

Brooks is really suggesting lines of attack for an outside-the-spider-hole Democratic Party.

An economic policy that aims to correct the disconnect between economic growth and what average people feel through reduced lower and middle income taxes, healthcare, assistance with college tuition, etc., at same time restoring sanity to our budgets.

Increased national security by rejoining the community of nations, repudiating cowboy foreign policy, and addressing the real threats like nuclear proliferation, those would-be friends like Saudi Arabia and Pakistan who breed hate and militancy.

Posted by: BobNJ on January 3, 2004 11:38 AM

____

AJ Colyer:

"The Dems would do well in '04 to run to the right of the Republicans on domestic policy. "

But would that not completely confuse the electorate and further weaken the two party system? Perot did find an audience in 1992, perhaps, but he did not get elected. And every body on this blog says Americans are simply not ready to hear higher taxes at this time.

I think Howard Dean should tell the people the truth about the need to raise taxes to avoid debt burden on future generations, but first and foremost he should make clear that his priority is to change the spending patterns of the Bush administration and that he is willing to do that on deficit budget.

After all, if Howard Dean is not going to change the spending program in a significant way, then Mr. Bush might as well stay on the job. No?

Changing the spending program is the primary issue in electing the new President, alternative means of financing it is secondary -- as I think.

Posted by: bulent on January 3, 2004 11:50 AM

____

The US political parties do not have political theories--they are geographic coalitions and change their political theories with the times. Need one point out that the claim of Democratic fiscal irresponsibility has been campaigning only for at least 80 years? I guess one does...

Posted by: Randolph Fritz on January 3, 2004 12:23 PM

____

From Howard Dean web site:

http://www.deanforamerica.com/site/PageServer?pagename=policy_statement_economy

"My economic policies for America are based on four fundamentals:

- Repeal the Bush tax cuts, and use those funds to pay for universal health care, homeland security, and investments in job creation that benefit all Americans.

- Set the nation on the path to a balanced budget, recognizing that we cannot have social or economic justice without a sound fiscal foundation.

- Create a fairer and simpler system of taxation.

- Assure that Social Security and Medicare are adequately funded to meet the needs of the next generation of retirees."

--------

I wonder if the Governor has begun talking to people in Silicon Walley and Wall Street?

Posted by: bulent on January 3, 2004 01:53 PM

____

..."Now Republicans control everything, and over the past three years the size of government has still increased"...

Yes, but, we hit the "trifecta"...

Any money the Bush administration spends is to protect freedom. Unlike the Democrats' whole raison d'etre - purchasing votes by giving handouts to society's losers.

Only a treasonous, freedom-hating, terrorist-appeasing, dictator-coddling, Francophile couldn't see the necessity and righteousness of this Administration's spending priorities.

In fact, I wonder if the Homeland security department knows about this little meeting of degenerates here...hmmmmm...

Posted by: gimmeadollar on January 3, 2004 06:03 PM

____

bulent writes [about Dems running "right" on the budget]:
>
> But would that not completely confuse the electorate and
> further weaken the two party system? Perot did find an
> audience in 1992, perhaps, but he did not get elected. And
> every body on this blog says Americans are simply not
> ready to hear higher taxes at this time.

For political reasons if no other, whoever the Democrats nominate *does* have to hammer home that under Clinton we came to have surpluses while under Bush we have deficits as far as the eye can see. I don't think that is very confusing. Perot did not get elected, it is true, but he did play a role in getting Bush de-elected and helped make Clinton's job at getting re-elected in 1996 much, much easier. (In 1992, Perot got his special brand of supporters and other voters who came in equal numbers from supporters of both parties; in 1996, his votes came at the expense of Republicans.) In 2004, only Democrats can really talk about balancing the budget with a straight face, so they should do that whenever it makes sense. As far as taxes to raise goes, the bold move would be to campaign on bringing back the estate tax on estates greater than some high number (let's choose $10 million for the sake of argument). Way too many people used to get confused about who would have to pay estate taxes, but hardly anybody is deluded enough to think they're going to die with $10 million in the bank. Moreover, such an inheritance tax even with a high limit would regain most of the revenue that has been lost with the current repeal. And, for that matter, the campaign ads featuring the exploits of spoiled heir and heiresses practically writes itself.

Posted by: Jonathan King on January 3, 2004 07:23 PM

____

Vive la France!

Posted by: bulent on January 3, 2004 09:39 PM

____

J. King:

"In 2004, only Democrats can really talk about balancing the budget with a straight face, so they should do that whenever it makes sense. "

I concur, with emphasis on "whenever it makes sense".

At the same time, I'd like to repeat something I have said before:

"After all, if Howard Dean is not going to change the spending program in a significant way, then Mr. Bush might as well stay on the job. No?

Changing the spending program is the primary issue in electing the new President, alternative means of financing it is secondary -- as I think."

O-oh, I realized something just now:

The biggest change in spending program would be to cut down on defense and spend more on non-defense. And that would require a change in foreign policy, away from unilateral approach, so that occupation of Iraq can be ended and international support can be secured for reconstruction. Foreign policy area, however, by the the words of Mr. Dean himself, is a hole in his resume that he needs to plug soon by picking ... a running mate (? or secretary of state?).

Well, look, I keep saying that America needs a "New New deal with a global reference". It is now clear that American domestic and foreign policy cannot be separated from each other any longer.

Howard Dean needs to quickly develop a capacity to look at almost every matter from a global perspective and put that spending program of his on the table soon so that people can see what difference he plans to make relative to deeds of Mr. Bush.

On that count, starting with "repeal the Bush tax cuts" is really a non-starter. He should start with "I'll be spending more money here and here and spending less money there and there; I expect such and such benefits from that spending program; this will be the total amount of spending; and these are the options for financing that spending, depending on how the Congress moves."

Only after that he should get into things like "Set the nation on the path to a balanced budget, recognizing that we cannot have social or economic justice without a sound fiscal foundation...."

And he ought to start talking to NASDAQ people.

Posted by: bulent on January 3, 2004 10:12 PM

____

Not to sound snarky, but what is the point of the Democratic Party, other than to funnel government funding to various disparate interest groups? (the various ethnic lobbies, the legal lobby, the various unions).

Posted by: Ray on January 3, 2004 10:42 PM

____

Ray: No offense please, but how much of this is really corroborated by good evidence, and how much of it is hearsay? I'm a little bit skeptical, as I know the media machine here in the US (Fox etc.), and things like Whitewater, the Lewinsky affair, or Gore's alleged "Internet invention" have been blown so much out of proportion that I give certain statements little credence. (This is not to say that Whitewater has been a clean deal, or Gore has not made improper statements -- I'm sparing further comment on what effectively boiled done to one particular blow-job -- but the media spin on those things was far off the mark.)

On the other hand, as pointed out in another thread, one (independently?) perceived problem in the US as well as Europe is that the two major parties (or blocks) become more and more indistinguishable, different only in their set of special interest groups (and even those have a large overlap).

I guess that's a problem related to the campaign finance issue, but if one is cynical, one would probably say that after a campaign finance reform, the corruption will simply take a different form.

Are you saying that Democratic administrations have been screwing working people as much as some recent Republican ones, based on existing evidence?

Posted by: cm on January 3, 2004 11:02 PM

____

First The Second Gilded Age, and now this. What I observe is the left, as Chris Berman would say, "rumblin,' bumblin,' stumblin'" to find an identity that can win an election against somebody whose policies are supposedly transparently contrary to the public interest.

Here's a hint: The Bush Administration is NOT incompetent, and they're not out to destroy anyone. Any reasonable person can take issue with any one of Bush's policies, but to characterize tham as attacks on American society or the American economy is just ludicrous. You can do all the hate-mongering you want to, but that won't cut it on Main Street. Most sensible Americans greet phrases like "tax cuts for the rich" and "throwing seniors out in the cold" as pure political boilerplate, rhetoric in search of substance.

You're also not going to win by adopting platforms like BobNJ's "Increased national security by rejoining the community of nations, repudiating cowboy foreign policy, and addressing the real threats like nuclear proliferation, those would-be friends like Saudi Arabia and Pakistan who breed hate and militancy." By now we know damn well those are code words for "let France dictate our foreign policy."

Even Clinton got tired of Europe's unwillingness to confront evil in its own backyard and, despite not having a UN resolution approving it, went out and bombed the Serbs in Kosovo until they got the message.

I am a registered Democrat, but I'll never vote for any candidate who refuses to defend this nation's interests. I have a lot of company.

Posted by: Michael Brown on January 4, 2004 08:09 AM

____

Charles Robb asks, "How can he go on admitting this stuff and stay a Republican?"

I have an answer different from that given above. After the quoted section In the column Brooks talks about some things he'd like to see done. By the end of the column those things have morphed into the platform of the Republican Party. He then endorses that (imaginary) party.

Really, nothing to it. It's just a minor variation on the old straw man ploy, with the straw man wearing the white hat.

Posted by: Jonathan Goldberg on January 4, 2004 09:47 AM

____

bulent:

Re: "Vive la France" Hoop-dee-doo

Speaking of France, I wonder what their rate of taxation is vs. government/service jobs produced, since I read somewhere they have a high level of government workers relative to the population.

But then in turn they pay taxes and support other workers, etc., so there may be an optimal level of taxation/job creation.

Another interesting statistic would be- what was the rate of unemployment during the U.S. Depression vs. increase in government sector employment in the postwar period. This should include private sector dependent on government contract (defense industry).

Posted by: northernLights on January 4, 2004 12:19 PM

____

Last time I looked, France seemed to me sort of like Turkey in terms of size of public sector-- one of the last communist states on earth!

In general, Western Europe has pretty good coverage under social safety net, especially relative to US. I mean US had at one time 30 percent population segment not covered by any medical insurance and that was the same rate as in Turkey. OK, so health care should be rationalized, but I'd say a country as rich as US should have 100 percent of its population covered under some medical insurance.

Unemployment rate in EU countries appears to be higher than that in US. I think a good part of that relatively high unemployment rate would be attributed to rather rigid labor market regulations -- tough to fire, therefore tough to hire; less contract flexibility like part time employment, etc...

Mais vive la France just le meme! :)

Posted by: Bulent on January 4, 2004 01:24 PM

____

Bulent: European unemployment

There are other factors that affect the rates. First (based on what I know from the German system), the definition of labor force and employment are, while generally similar to the US, slightly different in detail, second, the measurement goes through the government's labor agencies and is not by self-labeling survey like in the US, and third, longer benefit durations tend to keep people in the system longer. Most unemployment-related benefits require regular registration at the employment office, submitting evidence off seeking a job, or doing interviews for jobs they provide.

From here on I can only speculate -- I think more, but not all, people who in the US would fall in the "marginally attached" or "discouraged" categories and are not included in the official U-3 rate, would count as unemployed. I'm not sure about the "self-employed" between jobs (not willing to admit they are unemployed?, or not even aware that they are really unemployed?). There is a significant segment of the German population that does free-lancing. Anecdotal evidence, I recently read an article about actors who fetched dole between roles and the outrage because they were not required like others to acceppt "low" jobs.

Also the relatively generous welfare system may discourage people from seeking certain jobs, and as a side note, Germany does not have minimum-wage laws, so people with even low benefits of welfare checks would take a significant paycut, and perhaps even lose their healthcare coverage (!) accepting certain jobs. My view, although there are others out there, is that the welfare level has been determined based on indexing a mix of living costs in an attempt to provide benefits that allow a very basic while dignified lifestyle, with which I generally agree, and lower-paying jobs are not living jobs, period. (Of course there is a certain level of abuse by people "resting in the social hammock", but I think the reporting on this is out of proportion.) One thing that many of those outraged (by real or alleged abuse) people don't realize is that the welfare system and the fact that those "parasites" can live relatively comfortably is what keeps their wage/salary levels up, their level of anxiety down, and puts a lid on how much crap employers can give them. Also it creates a basic level of domestic demand (housing, food), which would probably otherwise go into the stock market or investment speculation.

Current German unemployment numbers (Nov 2003) are 8+% in the West, 17+% in the East (!), and around 10 total. Who is interested can consult the following map, the text is German, but the numbers are easy to make out, and the numbers in parentheses are the previous year's numbers.
http://www.arbeitsamt.de/hst/services/statistik/gif/b_karte_aloq.html

Posted by: cm on January 4, 2004 02:09 PM

____

Bulent: rigid labor market

You're right, getting rid of workers is much more diffcult in some European countries. One consequence is of course reluctance to hire, and rather squeeze more work out of the existing workforce. And it's also not easy to quit -- first you have to line up a new job, which is also harder as a flip side. So in toto the working conditions for employees may not effectively that much better than in countries with hire-and-fire.

Also those rigid laws are not applicable to all companies -- it is by size, and smaller companies with maybe one or a few dozen employees are exempted from many regulations, so they effectively do have hire-and-fire with all the consequences. (But then their (ex-)employees can rely on a more generous welfare state when things get tough.) The government is now in the process of cutting back on employee protection, so things may get worse or not, it has to be seen. To some extent a new equilibrium will be found. When it is easier to terminate workers, there me be less reluctance to hire. But then there are always lags in attitude, processes, etc. For sure workers' general level of anxiety will go up, employee loyalty will take a hit, more butt-covering, etc.

Posted by: cm on January 4, 2004 02:24 PM

____

Good golly!

Do people actually believe this stuff? Letting individuals decide how to manage and save for their own health care isn't "reform" (early post)? Getting to keep and direct 20-50% of my Social Security instead of staying in the current Ponzi Scheme isn't "reform".

You guys must be college kids? Is there really a person in the world who believes we should follow the French model of taxing the country into "prosperity" by offering every one a Government Job.

100+ years of public "education' is certainly bearing its intended fruit.

Posted by: BB on January 4, 2004 09:56 PM

____

BB: Calling SS a Ponzi scheme is not entirely fair, although it has some Ponzi-like properties at times.

Social security is not only about retirement income, it is also about risk pooling. If your private plan gets screwed up, you are fully hit. In a collective scheme, the hit is ditributed. Also you get disability insurance included, should you become unable to contribute. (I don't know to which extent in the US.)

On the other hand, with SS you own only your "entitlement" via credits, and can be cheated out of the money by redefining what your entitlement actually entitles you to, with a private plan you actually own the funds (and hope that you are not cheated out of the funds' value).

With no offense as always, your kind of argument that I have heard often enough before (about how much better a smart person can manage their retirement funds than the state) smacks a little bit of this "shit cannot happen to me" attitude. I generally wish everybody well, but shit can happen to anybody. Usually if it happens to somebody else, it's "tough luck, buddy", if it happens to you, it's "oh my god, how can they let me get so screwed".

Unfortunately I have to be out of here now, but hope we'll continue tomorrow with fresh energy.

Posted by: cm on January 4, 2004 10:36 PM

____

"Is there really a person in the world who believes we should follow the French model of taxing the country into "prosperity" by offering every one a Government Job."

America is a completely different story than France, obviously. Entreprenurs and capitalists run America.

As to France; the Enarques (bureaucratic elite graduates of schools called ENA Ecole National d'Administration)don't want to give every body a government job; but they do want a large body of public sector employment cause it gives them considerable political power.

France does adapt, however. They manage to somehow change and keep up productivity growth.

And Enarques do get reaction. A few years back there was so much frustration with them in some French circles that at one point there was talk of shutting down the schools they came from, sort of just dry out their source.

Posted by: bulent on January 4, 2004 11:29 PM

____

Before people begin criticising the US Social Security program you might to know what it actually is: (1) it is not just a retirement program it is also a disability insurance program, i.e., you receive disability benefits (supplemented by SSI benefits if your benefit is low enough as is any other income and countable resources (value of your home and one vehicle is not a "countable" resource). (2) If a covered wage earner dies, then his/her children will receive dependent's benefits until age 18. It used to be 21 if the dependent attended college but Rocket Ronnie ended that. (3) until the children reach a certain age, the surviving parent may receive a parents' monthly benefit from the deceased wage earner's record; as may a grandparent who ends up as caretaker for a deceased wage earner's children. In addition, a disabled divorced spouse meeting certain other requirements besides disability may also receive benefits as may a disabled widow/widower. If a wageearner becomes disabled, his/her dependent may receive a monthly dependents' benefits.

If disability continues until age 65, then the benefits continue, and then become retirement benefits. After 24 months of receiving disability benefits the recepient becomes entitled to Medicare benefits with payment of a $60/month (or so). If a person is also SSI eligible he/she may also be entitled to Medicaid or the state equivalent. Of course, now that that horrendous new Medicare bill has been passed that may not happen anymore, thus leaving many low income disabled people a hell of alot worse off then they were before, i.e., unable to afford their meds. Sooo--how many of you have a private or employment related disability policy that's as good as that? I've seen several disability policies offered by various employers such as Nike and most of them are not really as good--besides many policies require people to file for Social security and then repay much of the "private policy" benefits paid out if they do. And of course, if you check out the Social Security benefit report that most people receive every year (or so) now, you can calculate how big a life insurance policy you'd have to buy (and the amount of the premiums) in order to generate the same amount of income your qualified dependents' would receive through Social Security if you died/were killed--and build in the possibility that if the insurance proceeds were invested (or perhaps turned in to annuities if that's possible) what rate of return you'd need and what are the odds of losing it through another stock market collapse or just a corrupt manager or other investment person.

I haven't done the calculations, so I don't know how the final numbers look. And don't forget that, without Social Security, if you had no private disability policy, you'd have no money coming in.

I've listened to a number of people say, oh, if I just had the money I paid into Social Security, I wouldn't be filing for disability benefits. Well, perhaps for percentage of the speakers that's true--but for others, they would've spent it. Or invested it unwisely. They wouldn't have that money when they needed it anyway. Given the credit burden many Americans are reported to carry now, and how few (according to most reports I've seen) have saved much towards retirement, I'd say that without the forced savings of Social Security, many people wouldn't have squat when they retired--given the corporate pension trends for all but the upper management types. This is especially true now when it seems that so many people have refinanced their homes, not just to get a lower rate but to pull money out--which just means that they'll have more years to repay probably. Sure, you can say, oh people should be responsible enough to save for retirement. Well, yes and no. I've worked with people who once had a job, a home, some investments and a (401)k. Then they got injured or ill. Then no job, and no health insurance. Didn't take long before the home, investments and 401(k) were gone--for living expenses but also for medical/hospital/surgical expenses. Because we don't have national health insurnance coverage. These people did the "right" thing: they worked, they saved, etc. It wasn't enough. What they have now are their Social Security disability insurance benefits and it's not a whole lot but it sure beats nothing and living on the streets or waiting 5-8 years for one's name to reach the top of the public housing list.

Posted by: sh on January 4, 2004 11:48 PM

____

Despite my announcement to be out for the night, one last remark I cannot resist. Thanks sh for explaining in more detail.

One point that I only touched on and that sh also did not play out in full is that there is a risk distribution -- if disability hits you late into the game, you _may_ have accumulated enough to have funds (and let's hope the assets that you are invested in are not down that year). If it hits early, that's been it for you.

For believers in privatized retirement plans & disability insurance, are you sure you have made the math and compared what a good and realistic policy costs? Also it would be prudent to look at the guaranteed payouts, not just the "projected" ones. In other words, compare apples to apples.

For what it's worth, in SS essentially the payout will be total contributions divided by number of recipients (with suitable weighting and plus discharge of reserves, provided the "lock box" (ha!) is refilled).

One case that has been made is that despite prejudice, administration of SS is more efficient than private plans/insurances. The overhead is supposed to be in the small percent range (1-2%), but not sure about the US system. There is no profit element, or corporate extravaganzas of the kinds that we heard about in the recent wave of scandals.

And for those who argue that SS in its current form is unsustainable (which it may in fact be if current economic and political trends continue), one should better hope that the actuaries of your insurance have done a good job in their fortune telling. Otherwise your insurance company may go down in a big crash, and you will be empty-handed as well.

Posted by: cm on January 5, 2004 12:40 AM

____

I have the impression that cm is from Europe, Germany, perhaps, and I think it is a good thing that Americans and European are discussing social safety net. The world could only benefit from a convergence between structures of social safety net in US and EU. (Hint for Howard Dean: "New New Deal with a global reference".) Germany, by the way, as I understand it, has a pretty good health care system and it is financially sound as well.

Posted by: bulent on January 5, 2004 01:25 AM

____

Not to ignore all the other posts, but it seems to me the Republican Party, as Brooks describes it, is pretty nearly unstoppable. Isn't this reasonably close to the poli-sci 101 textbook explanation of why special interest, well organized and with a narrow set of goals, carry so much influence? The Republican party has simply turned the standard explanation around, going out to recruit well-organized groups with narrow sets of goals from the outset. Farmers, oil barrons, loggers, polluters, defense contractors, those for whom a change in tax rates can mean very large sums - they were all on the target list.

So Mr. Brooks has a complaint that won't be heeded, because he is complaining not about some form of backsliding, but the core principles of the party occupying the White House. It is a valid complaint, but one which the White House already has a plan for confronting. A tax give-away to the rich is a jobs program. A fiscal give-away to drug and hospital firms is a Medicare drug benefit. New source review is for green field construction only.

Now, pack the courts with judges as freindly as the majority on the Supreme Court, redistrict where and whenever there is a chance of expanding a legislative majority by non-democratic means, and the future is bright.

Posted by: K Harris on January 5, 2004 09:19 AM

____

Bulent: your impression is correct. Don't hold _too_ much hope for the healthcare system. The underlying financing issues are the same everywhere, and the German .gov is in the process of modifying legislation to shift more of the financing to patient's and premium-payers' pockets. I should perhaps also mention that medical/dental insurance will cost employees about 7% of gross earnings, matched by an equal amount in addition out of the employer's pocket (nominal ~14%). Social security tax is about 19.5%, unemployment 6.5%, and long-term care around 1% (?), all plus/minus as I don't know the most current numbers. That comes down to 40+% (shared 20/20 by employee/employer) of gross earnings, with caps (but most people don't hit the cap).

Regarding the financing of social security and healthcare (but not welfare) is that the contributions are essentially a surcharge _only_ to wage/salary income, i.e. a "tax on work". Welfare comes from general tax revenues.

You can hold against that that only contributors (and their families under healthcare and partially SS) are entitled (plus people who receive unemployment benefits or welfare), but essentially the unemployed and welfare people are sitting only on the neck of working people and not everybody, when it comes to healthcare. That creates quite an amount of ill will of people who are questioning what or who they are paying for.

Posted by: cm on January 5, 2004 09:22 AM

____

Some Responses:

As to the fact that SS is also a "disability program"...and your point is?

It is true that most of the discussion revolves around the retirement issue. It is also true that any reform needs to address the "disability" issue as well. So?

The fact is that the system is unsustainable (primarily due to the demographics of the retirement side). It will require either a) tax icreases (large ones), benefit cuts (means testing or retirement age), or some form of privatization. (or a mix of the above)

If one curbs their ideology (the Government MUST do it!), it becomes clear that there is no real intellectual argument agaisnt morphing SS into private accounts.

Safety nets for the poor can be maintained, safeguards can be kept, the liberal notion of "forced" savings can still be imposed to "protect" people from themselves !AND! it can be privatized.

Not only can reasonable people disagree, but reasonable people CAN craft a compromise.
_________

Investment risk.

The objection - "What if the person invests in instruments/markets that fail; look at 2000-2002?

BB writes:

This is a pretty lame objection for two important reasons. 1. Retirement savings are intended to be a "long term" investment, therefore less susceptible to damage from short term fluctuations. The "what about Enron" canard is even more remote, since the reform will probably limited investments to index/diversified funds (stocks, bonds, interest rate securities).

The 2nd (and better) poinot is to ask where our "government has invested "our" money.

I always pull out a picture of the rotting hulks of now defunct public housing (in Chicago we are slowly tearing down the Robert Taylor homes and Cabrini Green). I've heard the left talk about $600 toilet seats.

THAT! is how your 'so-called' retirement was invested! You didn't have a choice. The ponzi scheme financed our huge investment in Vietnam, Reagan's Build up, Johnson's Great (Big) Society, much of which was spent on building a permanent class of huge bureaucracies.

I'll take the worst performance of any Bond or Stock fund over 70 years over this massive waste of financial capital.

[Note: Even if one could make a case that any of the above government programs was a "good investment", the waste, fraud and abuse endemic in government procurement vitiates any benefit.

It becomes even more sinister when one realizes that almost no one is told that this is what their "retirement" is "invested" in.]

__________________________

Entitlement

BB writes:

What entitlement? You/we aren't entitled to anything. I can't cite that case name, but the Supreme Court has held that there "is no property interest" in your Social Security benefits.

It's smoke and mirrors. This is true for disability as well. The group funding the Ponzi scheme is getting smaller and the group "claiming" the benefits is growing.

When the crisis point is reached, the benefit will be cut, revoked, moved further out, or you and I will be taxed to the tune of about 20% (not including income tax).

That is, unless, a courageous politician touches the so-called "third rail" of politics and promotes the only rational way out of this mess.

And wins.
__________________

I'm a 43 year old "compassionate conservative" entreprenuer with a law degree. I travel in the same "liberal soup" that most college educated folks do these days. Here is what I tell them.

All reasonable people want a healthy, educated, and secure population. What boggles my mind is that so many "intellegent" people will defend an indefensible bureaucracy (health - medicare, Education - Public education trough, SSec - Ponzi scheme) when the same goals can be reached by empowering individuals to decide these things for themseleves.

BB

Posted by: BB on January 5, 2004 09:52 AM

____

Some Responses:

As to the fact that SS is also a "disability program"...and your point is?

It is true that most of the discussion revolves around the retirement issue. It is also true that any reform needs to address the "disability" issue as well. So?

The fact is that the system is unsustainable (primarily due to the demographics of the retirement side). It will require either a) tax icreases (large ones), benefit cuts (means testing or retirement age), or some form of privatization. (or a mix of the above)

If one curbs their ideology (the Government MUST do it!), it becomes clear that there is no real intellectual argument agaisnt morphing SS into private accounts.

Safety nets for the poor can be maintained, safeguards can be kept, the liberal notion of "forced" savings can still be imposed to "protect" people from themselves !AND! it can be privatized.

Not only can reasonable people disagree, but reasonable people CAN craft a compromise.
_________

Investment risk.

The objection - "What if the person invests in instruments/markets that fail; look at 2000-2002?

BB writes:

This is a pretty lame objection for two important reasons. 1. Retirement savings are intended to be a "long term" investment, therefore less susceptible to damage from short term fluctuations. The "what about Enron" canard is even more remote, since the reform will probably limited investments to index/diversified funds (stocks, bonds, interest rate securities).

The 2nd (and better) poinot is to ask where our "government has invested "our" money.

I always pull out a picture of the rotting hulks of now defunct public housing (in Chicago we are slowly tearing down the Robert Taylor homes and Cabrini Green). I've heard the left talk about $600 toilet seats.

THAT! is how your 'so-called' retirement was invested! You didn't have a choice. The ponzi scheme financed our huge investment in Vietnam, Reagan's Build up, Johnson's Great (Big) Society, much of which was spent on building a permanent class of huge bureaucracies.

I'll take the worst performance of any Bond or Stock fund over 70 years over this massive waste of financial capital.

[Note: Even if one could make a case that any of the above government programs was a "good investment", the waste, fraud and abuse endemic in government procurement vitiates any benefit.

It becomes even more sinister when one realizes that almost no one is told that this is what their "retirement" is "invested" in.]

__________________________

Entitlement

BB writes:

What entitlement? You/we aren't entitled to anything. I can't cite that case name, but the Supreme Court has held that there "is no property interest" in your Social Security benefits.

It's smoke and mirrors. This is true for disability as well. The group funding the Ponzi scheme is getting smaller and the group "claiming" the benefits is growing.

When the crisis point is reached, the benefit will be cut, revoked, moved further out, or you and I will be taxed to the tune of about 20% (not including income tax).

That is, unless, a courageous politician touches the so-called "third rail" of politics and promotes the only rational way out of this mess.

And wins.
__________________

I'm a 43 year old "compassionate conservative" entreprenuer with a law degree. I travel in the same "liberal soup" that most college educated folks do these days. Here is what I tell them.

All reasonable people want a healthy, educated, and secure population. What boggles my mind is that so many "intellegent" people will defend an indefensible bureaucracy (health - medicare, Education - Public education trough, SSec - Ponzi scheme) when the same goals can be reached by empowering individuals to decide these things for themseleves.

BB

Posted by: BB on January 5, 2004 09:55 AM

____

BB wrote, "If one curbs their ideology (the Government MUST do it!), it becomes clear that there is no real intellectual argument agaisnt morphing SS into private accounts.

"Safety nets for the poor can be maintained, safeguards can be kept, the liberal notion of 'forced' savings can still be imposed to 'protect' people from themselves !AND! it can be privatized."

You're entirely missing the point.

The question isn't whether what you're describing can be done. The question is, at what cost?

Pro-privatizers always either side-step the issue of where to come up with the money to fund privatization, or issue figures that are either bogus or not consistent with the numbers used to show that SS is going to be in trouble.

For an example of the latter, consider that pro-privatizers often assume that portions of individual accounts invested in US stocks will get the historic rate of return, say 7% real/year. But the Social Security Administration's projections assume that over the next 75 years, the long-run GDP (real) growth rate will be 1.5%. Kinda hard to sqare with the 7% figure.

Posted by: Stephen J Fromm on January 5, 2004 10:54 AM

____

"What entitlement? You/we aren't entitled to anything. I can't cite that case name, but the Supreme Court has held that there "is no property interest" in your Social Security benefits."

While this is true, it is a very fundamental good-will arrangement (for lack of a better term). You may not be legally entitled to anything, but you are morally entitled to the generation that creates the values taking care of retirees who have contributed in previous years. The SS credit system is mediating this entitlement. Still I don't think your _entitlement_ can be revoked. What may happen is that it is not honored to an appropriate extent, e.g. by proclaiming that one credit entitles you to $1, and thus 40 credits entitle you to $40. But cutting benefits to such an extent would essentially dishonor the system, and would amount to moral bankruptcy of the society, and its subsequent disintegration, which is not to say that it cannot happen.

From your latest remark I'm getting that you are not concerned with collective schemes per se, but the (alleged or real) abuse of the system by those to control it? (And of course, you points about financing wars and other adventures with SS money is probably true. In Europe SS money has also been used for non-SS purposes, and current beneficiaries are being cheated a bit.)

Posted by: cm on January 5, 2004 01:23 PM

____

Steve writes:

Pro-privatizers always either side-step the issue of where to come up with the money to fund privatization, or issue figures that are either bogus or not consistent with the numbers used to show that SS is going to be in trouble.

BB writes:

This critique, while often true, proves that we need to discuss various options. It does not prove that privatization is a bad idea.

Left alone, we will "have to come up with the money" to fund the collapse of the current scheme anyway.

Steve writes:

For an example of the latter, consider that pro-privatizers often assume that portions of individual accounts invested in US stocks will get the historic rate of return, say 7% real/year. But the Social Security Administration's projections assume that over the next 75 years, the long-run GDP (real) growth rate will be 1.5%. Kinda hard to sqare with the 7% figure.

BB writes:

Is it my imagination, or are you confusing "historical rates of [stock market] returns" (industry data) with historical GDP growth rates (SS Admin "guess" of growth.)

Regardless, neither rate is going to be predictive of a person's rate of return on their privatized SS account. Frankly, it hardly matters. The rate fo GDP growth will be what ever it is, and the rate of return on accounts will be dead center average (look up "index funds").

This ROR will almost certainly outperform SS, which has an awful rate of return (and it can only get worse).

Sure, the person who retired in the 80s or 90s, after working since 1940, is making out like a bandit, but at whose expense. Me (and my generation). The Gen Xers and younger are getting an even harder screwing.
_________________

Paying for it....

This is an important issue. If the current crop of victims is allowed to fund private accounts, it is still reasonable to assume that some of the savings will be available for borrowing.

[I'll have a choice of various baskets, stock funds, government securities, bond funds, etc.]

Hence, government will still have a pool of money to draw from, only they will owe it to individuals, not to "themselves." (as a slimy politician once stated)

[Imagine what this will do to America's savings rate]

Even though, this doesn't solve the problem of the shortfall created by keeping promises that never should have been made. As I stated in my first post, a mix of tax increases, benefit cuts, and privatization will be necessary.

My personal favorite is to a) determine the size of the gap in terms of both time and money, and b) remove the ceiling on income subject to SSec tax for the period of time necessary.

I find this elegant because it;
a) removes the regressivity of the current system,
b) places the majority of the burden upon the rich,
c) is needed only as long as it takes to get over the demographic hump.

By the time the baby boomers are paid through, the entire system can be privatized (excluding a small tax for the disability portion - which the private sector can probably do better anyway.)

To those who think "it can't work", China (the commies!) and Chile already have this, and it is working pretty well.

BB


Posted by: BB on January 5, 2004 04:28 PM

____

"[...]But cutting benefits to such an extent would essentially dishonor the system, and would amount to moral bankruptcy of the society, and its subsequent disintegration, which is not to say that it cannot happen."

If BB has its says, it will happen. Never trust a "compassive conservative", you'll lose everything.

DSW

Posted by: Antoni Jaume on January 5, 2004 04:41 PM

____

BB: As you are suggesting that a capped tax is "regressive", I would like to point out that the benefit is also capped. (This does not contradict you.) When you propose to remove the ceiling on SS tax, will this not suggest removing the ceiling on benefits as well? I.e. the current system (I believe) operates based on points, where a determined contribution level earns 1 point, and other levels are pro-rated up or down. Increasing contribution by removing the ceiling without building up a matching liability will require capping the points that you can get in any period, regardless of contribution. This sounds hard to sell to me, and introduces another parameter that can be conveniently tinkered with (let's say lowering the cap once it has been installed).

Posted by: cm on January 5, 2004 05:21 PM

____

CM wrote:

Still I don't think your _entitlement_ can be revoked. What may happen is that it is not honored to an appropriate extent, ...... dishonor the system, and would amount to moral bankruptcy of the society,

BB writes:

Interesting. Some would argue that increasing my taxes to 20 to 25% NOW, (they are currently 12.6%) to pay for a benefit that I won't get to "use" until five or ten years later than those currently "using" it is a de facto repeal of "my entitlement."

I'd add that this defines "morally bankrupt" as well. Particularly when there is a better alternative.

CM wrote:

From your latest remark I'm getting that you are not concerned with collective schemes per se, but the (alleged or real) abuse of the system by those to control it?

Bruno writes:

You are half right. Unlike you, (naivette has its allure) I see that "collective systems" are abusive on their face, regardless of any laudable goals they may have.

I may like the goals, but I reject collective implementation, because it almost always fails.

______________

To CM and Steve and K Harris:

Let me let you in on a little secret. We on the "reasonable right" are going to "win" on these big issues. Here's why.

"Collective Schemes" are inherently wasteful. Whether the issue is health care, retirement, or education (the BIG Three), all the money we need to get to improve the system is already being spent.

In fact, once the bureaucracies are deflated, we may well find that too much has been (and is being) spent.

The US spends over $400 bn on "education", (this does not include private school, tutoring, or supplemental curricula that actually works) with a higher per pupil spending than any OECD nation. Yet, our children, (yes Virginia, the Suburban Children, too) are woefully ignorant of virtually everything but their feelings.

We don't need to spend another dime on "education". We need to re-allocate how it is spent, and the consumers (parents/families) are far better at making those decisions than a corrupt bureaucracy.

Re: Health Care, the brand new entitlement (ick!)came with the little known feature called the Health Savings Account, which allows people to allocate their own mix of insurance and first dollar spending. What isn't spent is saved tax free.

The "third/single" payer disconnect between consumer and provider is reconnected.

In a nod to Steve, funding the transition will be problematic, but doable. Where do we get the money? Take it from the carcass of the corrupt and inefficient Medicare system.

I've already covered SSec to some degree, but the model is the same. Individuals are better at making these choices than governments. This message "resonates", and it is going to be heard.

Before TV, mass communication, Telephone, and yes, "good" education, there may have been an excuse to have government take "responsibility" for these "needs".

In an age where people can literally ask Google where to find the answers to these questions, and in a nation where we can take a few courses and start our own businesses supplying our countrymen with any needed information, the government is becoming increasingly obsolete.

Who is it who talked about the "state" withering away......? Maybe he was right, but for the wrong reasons.

BB

Posted by: BB on January 5, 2004 05:23 PM

____

Hey Antoni,

Try making a substantive comment instead of the usual pointless (and immature) attacks.

Or is that too difficult?

Bruno

Posted by: BB on January 5, 2004 05:28 PM

____

CM politely asked:

BB: As you are suggesting that a capped tax is "regressive", I would like to point out that the benefit is also capped. (This does not contradict you.)

Bruno writes:

Actually, you are helping me make my point. In truth, the benefit can be increased, decreased, or revoked at any time. By using terms like "defined benefit" and "defined contribution", you are acting as if the system is a real pension plan. It isn't.

If they increase the tax to pay "benefits", what prevents them from cutting (or increasing) the benefit as well?

Yes, they probably do make "actuarial" calculations, but there is no "fund" or "lockbox".

CM again:

I.e. the current system (I believe) operates based on points, where a determined contribution level earns 1 point, .........This sounds hard to sell to me, and introduces another parameter that can be conveniently tinkered with (let's say lowering the cap once it has been installed).

BB writes:

You apparently are more familiar with the point system and the machinations of our SSec system than I am. I have to get other work done, and I'll have to read up on some details.

That said, there is no contract. They can do whatever they want when the political landscape tells them they can.

If there is a shortfall in any transition to a privatized system, any money that comes from an increase/removal of the ceiling can be set aside, regardless what they call it.

Gone for the day.

BB

Posted by: BB on January 5, 2004 06:07 PM

____

BB: I don't mind helping you make your point, or for that matter, agreeing on any number of points even if not agreeing with everything. It's a discussion, not a winner-takes-all rhetorical exchange.

I know more about the German system than the US one, but based on what I have read about the US one has led me to conclude that they follow essentially the same principles.

I am well aware that SS is not a pension plan, that the T's & C's can be redefined at will, and that it's not a contract. However there is the notion of human society that is founded on certain basic principles, and one of those principles is that more or less universal agreements must be honored lest the society break apart (or lose its character). That is a quite strong force. (Even legal entitlements are only enforceable within said social context. All your contracts and property rights can be voided or dishonored in certain circumstances, as has often enough happened in past revolutions, and I'm sure you are aware of the principle of eminent domain.) That notwithstanding, there have always been contracts and tacit agreements that have been more or less universally honored. Why do you think that is? I have to speculate a bit, but I offer it is because human society has some sort of ethical continuity.

Call me a sucker, but there are certain goodwill things you have to rely on (but you may choose not to). For example, you would _generally_ assume that people don't lie to you on the street when you ask the time or the way, or that if you give a store clerk $20 that they return the change and don't tell you to go to hell. When certain things cannot be assumed, there is no society.

Posted by: cm on January 5, 2004 07:42 PM

____

CM,

I have no problem with "social contracts" nor do I advocate the breaking of them. Reform is not abrogation.

As much as I dislike the current Social Security System, I would not advocate pulling the rug out from under people who relied on it (no matter how silly their reliance might be).

Interestingly, our Constitution has a clause that disallows laws that change (real) contract terms, but that clause was written out of the Constitution in the 30s, just like the recent Sup. Ct. Decision repealed the First Amendment (and look what an uproar that caused)!

These things are far too elastic to be called "laws", "contracts" or even "ein Grundgesetz. (did I spell that right?) They mean what the people in power want them to mean.

The fact is that a well thought out privatization is an opportunity to keep the "promise" of Social Security in a far more honest and economically sound fashion than the current system.

BB

Posted by: BB on January 5, 2004 10:46 PM

____

What cm says about goodwill is indeed a crucial point. Goodwill and high moral standards even have a significant impact on inflation rate, as I believe. My way of formulating is that the better off you and your society would be if you had more people in your society with three attributes: a) honest, (b) competent, (c) well mannered, all equally important. And you don't get that w/o good education.

Posted by: bulent on January 5, 2004 10:56 PM

____

About numbers:

cm said in Germany the payroll tax (my term, correct term?) covering premiums for health insurance, unemployment insurance, and retirement benefits (but not welfare benefits) amount to about 40 percent fo gross wage/salary (20/20 shared by employer/employee, but that is basically a matter of record keeping, in the end, the consumer pays for it).

I wonder what the corresponding US figure is.

Posted by: bulent on January 5, 2004 11:21 PM

____

BB: I think we agree more than on first appearances. (Spelling: yes. "Ein" is an article, also doubling as the numeral one, and means "a".)

However, regarding twisting of the law (or the interpretation of tacit agreements aka social contracts) by people in power, that is why it is so important to have social institutions including the government corrupted as little as possible, and their actions subject to public review. This is basically what democracy is about, which should close the circle nicely. (And this is where the current administration and business elite along with quite a few prior ones is perceived to fall short -- no flamebait!) One important ingredient in that is having a population with a solid education standard, as rightly observed by Bulent.

Many of the discussions in this forum revolve just around these core issues; I venture to say that also most of the economy-related stuff is really about the future of the US democracy and the living standard of the people, even if that is rarely (?) stated explicitly.

Bulent, it's most unfortunate that you join when I have to go sleep (US West Coast). Over the holidays I allowed myself more lenience.

Posted by: cm on January 5, 2004 11:29 PM

____

Bulent: re numbers

To shortly summarize and extend (and unfortunately discussions of similar themes are fractured into multiple threads), as of 2000 it was 19.5% SS, 6.5% unemployment, about 13-14+% medical/dental, and a few other stuff of gross employee earnings, borne 50/50 by employee/employer (with ceilings). In many rhetorical contexts it is called a "tax on work/employment", or "side costs of employment", and supposedly one factor that makes companies reluctant to increase headcount and rather squeeze existing workforce. Which for people with wages well below the cap is bullshit (other than trading people for automation), but higher-paid people like in many engineer positions means a lower hourly rate once you are beyond cap territory (assuming paid overtime).

In the US I guess it depends. They mailed us "total compensation statements" instead of raises some time ago, but I forgot the numbers (it was impressive). Basically the employer pays medical/dental plan insurance and unemployment insurance, and some other insurances (life, accident, worker's comp), part of which is optional, and is subject to varying degrees of worker co-contributions (paycheck deductions). Larger companies are often self-insured for medical, as their large employee base gives them enough risk pooling (and frankly, you can "optimize" your employee pool , but watch out for those discrimination lawsuits). I would think here on the US West Coast medical/dental/vision should be from a few thousand to way over ten thousand bucks annually depending on plan and coverage, out of which it depends on the employer what to charge employees. I don't feel comfortable to estimate the latter part, as there has been quite a bit of outrage that certain companies feel in a position to charge employees up several hundred per month.

Posted by: cm on January 5, 2004 11:55 PM

____

Bulent: re numbers #2

I forgot to include FICA (social security), medicare, and state disability, which combined should be somewhere in the 7+% range, subject to different caps somewhere in the $40-90k range.

Posted by: cm on January 6, 2004 12:05 AM

____

As I said, from the point of the national economy, it doesn't matter much whether employee or employer pays the payroll tax. You say:

"They mailed us "total compensation statements" instead of raises some time ago, but I forgot the numbers (it was impressive)."

That makes me think that the rates of payroll tax in EU and US are comparable then, in the order of 40 percent, or very roughly nearly half the gross salary/wage.

If the US and EU rates of payroll taxes are compatible, then it would be easier to talk about convergence of structures of social safety net in US and EU.

P.S.: I think Ankara time is about +10 hours the blog time. It is now around 10.30 a.m. here. Let's see -- preview shows it? Yep, that's +10 hours.

Posted by: bulent on January 6, 2004 12:34 AM

____

Bulent: re numbers #3

I don't know where my head stands. To put the payroll tax numbers in perspective, I should include that based on the numbers I have seen, so take this with a grain of salt, the German unemployment and pension benefits are relatively higher than the US ones (and in the case of unemployment extend longer), and at least the medical insurance contains a portion that is effectively used for transfer payments to (partially?) finance healthcare coverage for welfare and unemployment benefit recipients. Note: this is probably different from universal healthcare. For example, people who work in a "minor" job that is not subject to medical insurance, are not covered, unless through a spouse or such, or a separate insurance (which at that "minor" wage is effectively unaffordable).

One troubling problem with this setup is that the German social safety net (aside from welfare) is largely financed from payroll taxes, which creates kind of a negative feedback.

Posted by: cm on January 6, 2004 12:37 AM

____

Bulent: EU/US payroll taxes

I'm not sure they are comparable. Certainly the money comes out of workers' productivity, regardless what is the nominal salary. However, there is also psychology involved, in who knows which numbers.

And certainly supporting a welfare system presents a cost (some people call it "drag"), and presumably the marginal cost of doing business is indeed higher (not sure though). There is a benefit in a higher low-end living standard, but in the eyes of people who are looking only at money, profit, and economic indicators, it presents a "geographical disadvantage" and makes the economy "less competitive".

Posted by: cm on January 6, 2004 12:46 AM

____

Negative or not, feedback is feedback, and I have a hunch that such feedback plays an important role in keeping German social safety expenditures at least relatively stable in a responsible mode.

I'm not sure why but I think I tend to side with payroll tax financing of social safety net rather than out of income / corporate tax revenues.

I also seem to think that convergence of social safety net structures would greatly aid and improve globalization.

I think a stable and generous structure of social safety net is the most prominent indicator of civilization, as it would indicate to both prosperity and high moral standards upheld in a society -- high moral standards both in terms of generosity and tendency to refrain from abusing generosity.

Posted by: bulent on January 6, 2004 01:07 AM

____

Bulent: By "negative feedback" I meant that financing the safety net (to a large part) as an "employment tax" creates strong incentives to avoid employment, which tends to push/keep people in the safety net, thereby creating even more pressure via employment tax, or whatever other modes of cross-financing are invented (like the misnamed "ecological" tax surcharge on fuels -- with the notable exceptions of already less-taxed diesel (commercial trucks) and certain heavy-duty energy consumers, so that it effectively becomes a tax on private households and small business, who are mostly not using diesel engines). As a side note, do I have to add that the "market" arbitrages this by diesel versions of cars, all other things equal, being significantly more expensive? And that also heating diesel is artificially colored, and trucks are stopped on the streets for having their tanks inspected to detect diesel-tax evasion by using heating diesel instead of the higher-taxed driving diesel (gasoline is taxed even higher)? But let this be enough. The bottom line is, certain population groups (or rather income kinds) are preferentially squeezed for financing the safety net, and those are mostly (not entirely) those with earned income.

With impending changes in the age structure of the society, there will be an increased load on the pension system -- the reserves are already drained, to a large part by plundering for non-SS purposes, and they will soon start shifting to end-of-month instead start-of-month payments for new retirees, and proclaimed a pension freeze for next year (no inflation indexing). BB's Ponzi argument strongly comes to mind here. As employment will be burdened even more (?), this will create even larger incentives for outsourcing etc. The situation is not at all rosy.

Regarding convergence, the case is often made the relationship is the other way -- globalization greatly aids "convergence" (downwards) of safety nets.

But I agree with your last paragraph. Your word into God's ear, as we say.

Good night/morning.

Posted by: cm on January 6, 2004 02:12 AM

____

Holy cow! You have written "US West Cost", I just noticed, which means your time is blog time. I don't know if it is necessary to say this but here it goes: Please feel free to defer responding to things I post as it comes convenient to you -- as they say, "this is just a blog". (Don't let Brad hear that, though!)

Posted by: bulent on January 6, 2004 02:33 AM

____

Hmmmmm. So Germany has not been as disciplined as I thought!:)

You say:

"There is a benefit in a higher low-end living standard, but in the eyes of people who are looking only at money, profit, and economic indicators, it presents a "geographical disadvantage" and makes the economy "less competitive".

Companies locating in Austria or Switzerland don't look at things that way, obviously. I mean I have the impression that the cost of doing business in those two countries are probably not on any scale that could be called "cheap".

Back to socia safety net financing and structure:

In the final analysis, the consumer pays for cost of social safety net, whether you finance it out of payroll tax or income / corporate tax. Financing social safety net out of fuel tax is obviously not a good idea.

I believe financing social safety net out of payroll taxes helps keep social safety funds and expenditures under scrutiny and relatively better protected from politician interference. Social safety net should be financed out of its own funds from payroll taxes and supplementary funds should be provided from general budget only occasionally and when absolutely necessary. Funding social safety net from other sources like fuel tax or borrowing should be even less frequent and one hundred percent transparent.

I don't know how valid it is but I have this impression of German work culture: In Germany, once you become "meister" (right word?) in a vocation, then that becomes your vocation for life, and you assume sort of a contract with society that there would always be work for you in that vocation or else the society would somehow provide you with comparable income under any circumtances.

While this helps existence of a strong sense of occupational pride which contributes significantly to worker productivity, it also brings about a weakness in terms of labor market flexibility: Technology is changing so quickly now that an occupation does not last a life time, especially not as average life expectancy increases.

One remedy could be to (a) put a limit on duration of benefits while unemployed at a level as associated with last employment, (b) with level of benefits then dropping to an absolute minimum a bit below the income from the lowest paid job in the country, and (c) provide nearly unlimited support for re-training, continous education etc. all the time.

Posted by: bulent on January 6, 2004 03:27 AM

____

I search for forum like this long time.You website is very good!I will come next time !

Posted by: role on January 6, 2004 08:38 AM

____

Bulent: timezones

I would love to, but then we would be subject to a similar problem as with US/Asia offshoring -- one email per day.

Posted by: cm on January 6, 2004 09:45 AM

____

Bulent: timezones

I would love to, but then we would be subject to a similar problem as with US/Asia offshoring -- one email per day.

Posted by: cm on January 6, 2004 09:50 AM

____

E-mail? No no I really don't want to take forum discussion to e-mail any way, unless it is necessary and not related to thread, all I was saying was feel free to respond the next day ... well any way it is not too important I guess... got our signals a little crossed here but it'll work out I'm sure...

Posted by: bulent on January 6, 2004 10:29 AM

____

BB:

There are a few philosophical points to ponder in CM's & Bulent's discussion, but first, some mechanical stuff...

1. The US FICA (Social Security) tax rate is 12-14% for worker bees and 15.6% for the self-employed.

The worker bees are under the illusion that their rate is half of 12-14% because they think that their employer pays half, not realizing that it matters not one bit how it is allocated on the paycheck. The "cost of employing" any person is the sum of their salary, imposed payroll taxes, regulations, mandates, and benefits.

The more you burden employment (self or otherwise) the less you will get. Hence EU's structurally high unemployment vis-a-vis the US.

Bulent wrote:

I also seem to think that convergence of social safety net structures would greatly aid and improve globalization.

I think a stable and generous structure of social safety net is the most prominent indicator of civilization, as it would indicate to both prosperity and high moral standards upheld in a society -- high moral standards both in terms of generosity and tendency to refrain from abusing generosity.

Bruno writes:

I'm glad you are so willing to say so. I'm also happy to see you openly advocating "imposing your values" on all of us in the EU and US (re: convergence and "safety nets").

Perhaps this will make you more tolerant of others "imposing THEIR values", if and when they have the political clout.

In a related philosophical point, what does it say about a region's "morality" if one region has a vibrant and growing "not-for-profit" network (US) that efficiently provides for literally thousands of different "needs" while another region relies almost entirely on government coercion to achieve these goals? (EU- Fra & Ger in particular).

If you are serious about "convergence", then let there be an honest discussion between different worldviews, and the effect these have on not only countries, but civilizations.

Here in the US, any discussion of "convergence" really means "the US needs to become more like the EU." This is based upon the opinion of US elites that "Europe - with its social welfare, safety net, etc. - is more "moral."

I reject that notion.

The day America takes "moral leadership" from the EU is a sad day indeed. Are we to be lectured by the EU on single payer health care or the death penalty when France has police checking parking lots for workers who go over their "alloted time" and Germany throws people in jail for the horrible crime of homeschooling?

I think not. The EU has as much (if not more) to learn from us as we do from them.

The crux of the issue is the individual's role in society. The two of you (CM & Bulent) speak reasonably, but it doesn't take much reading between the lines to see your ideological bias.

It seems difficult for you to conceive of the notion that the state (collective) should be subservient to the individual, not the other way around.

[Note that I freely admit that I stand on the other side of that ideological divide.]

I stand for the proposition that the forward movement of mankind depends on the freedom of individuals to live their lives the way that they choose, as uncoerced by either government, corporations, tribes, or special interest groups as possible.

If the EU and US can "coverge" inside that framework, then I think we have much to learn from each other.

BB

Posted by: BB on January 6, 2004 11:25 AM

____

BB, or, Bruno:

Usually, and especially in this case, what I write means what it reads: Convergence without prejudice; and all I said about social safety net was in the form of two adjectives "generous and stable", I didn't say any thing about other attributes, e.g., state provision versus NGO activity.

So I meant that EU and US should try to have converging their structures of social safety net towards one that would be generous and stable.

Now; I do think US needs higher taxes and a New New Deal and I do think US needs to converge towards EU structures in some aspects of its social safety net. I would like to think that I am entitled to my opinion and that I can maintain an opinion without prejudice, and especially without prejudice when the subject matter is any thing like convergence between structures of comparable scale and weight.

And you are, frankly, pretty off the mark in your assessment that perhaps I favor subservience to state, or corporation, or tribe, or individual -- or even to one's own opinion.

Ideology is important; but the term "ideological divide" does not make a whole lot of sense to me.

Remember the frontier times: There was the God given land, and there was the God given horses (or, slaves, in case of the South) and so you just worked the land and you probably made it, enough to feed yourself and family, at least, and retained your freedom too.

I am now proposing something similiar: There is the man made agro-manuf-service sectors with such high levels of productivity that only about one percent of the population can produce all the food and shelter and infrastructure that every body needs (for God's sake, we have machines and robots for slaves, we are really all aristocrats); and so you really don't need to "work" to feed yourself and therefore you pursue your own dreams and projects for creating addional value added, in complete freedom and autonomy.

That, I guess, is what I really have in the back of my mind when I use the word convergence in the context of the notes I post here.

I am obviously glad that you have posted the note that I'm responding to.

Posted by: bulent on January 6, 2004 01:34 PM

____

"The crux of the issue is the individual's role in society. The two of you (CM & Bulent) speak reasonably, but it doesn't take much reading between the lines to see your ideological bias."

"It seems difficult for you to conceive of the notion that the state (collective) should be subservient to the individual, not the other way around."

I leave it to Bulent to speak for himself, but if you check my posts, you will (hopefully) find that I'm making mostly factual statements. If I carry any "ideology" then it is that a society should be fair (which does not mean that everything and everybody should be equal, but that everybody should have "fair" opportunity to conduct a dignified, if only very modest, life).

Neither do I think that the "state" should be superior to the people. That I'm coming from Europe does not make such blanket suggestions warranted. Suggesting that it is "difficult to conceive of a notion" is just short of saying that I'm boneheaded, but no offense taken.

I've got stuff to do, so unfortunately I cannot devote more time to the discussion right now.

Posted by: cm on January 6, 2004 02:57 PM

____

Eivdence of me speaking for myself appears to me alone or what?

Posted by: bulent on January 6, 2004 10:42 PM

____

Bulent: German working culture

There is no "social contract" of being set for life in a profession (although a certain entitlement thinking exists). Vocational (re-)training simply comes at an expense, and is often not exactly practical. At the same time I suspect that occupations with relatively low requirements, and with relatively modest training effort are sufficiently subscribed; more difficult and laborious ones like engineer or IT sysadmin that require a certain initial level of proficiency and long experience, do not lend themselves well to mid-career training. (I'm not going into the guild-like schemes of barriers to entry or artificial price controls in certain "medieval" professions that control supply and demand.)

And who is going to retrain unemployed people when even people out of school cannot find decent (i.e. with prospect of finding a job and good pay) training positions? How many accountants, secretaries, salespeople, "office assistants" etc. does a society need? And in addition, due to the skills/education/training barriers alluded to above, many less demanding jobs are already oversupplied.

In Germany, there is a long tradition of requiring a sufficiently high level of credentials for most jobs. Nobody is going to hire a 40-year old butcher-retrained engineer (no offense anybody).

Hell, any 40-year old even with good credentials will have a hard time in a more demanding (e.g. engineering) job. It is not uncommon to see job ads where one job requirement is "not above 35". In the US that is called age discrimination (in Germany as well, but apparently it's not an offense, or is not enforced). The reasons for this discrimination are practical as well as cultural:

(a) older people are more prone to health problems -- in all seriousness, 40+ is a serious age, and less "loadable" (a euphemism for doing a lot of overtime that exists in most job ads)
(b) they tend to have family and are less "mobile" (euphemism for job transfers and business trips)
(c) learning or upgrading a foreign language is mostly no-no
(d) they are most likely through a few jobs and have realistic expectations and life/corporate experience, and are harder to "motivate" (don't take every bullshit)
(e) they have opinions (based on their extensive experience), i.e. they may not be "open-minded"
(f) they cost more! (see also (d)); they will of course accept a lower salary as well, but then you can rightfully suspect that they will feel underpaid (i.e. cheated)

But I'm becoming facetious. Nevertheless, all of the above is truly existing prejudice.

Posted by: cm on January 6, 2004 11:35 PM

____

Bulent: "Eivdence of me speaking for myself appears to me alone or what?"

No offense, I was in a hurry and did not read your whole post at the time. BB was addressing both of us.

Anyway, I hope a new thread will open up that fits the topic, this one is becoming long and old.

Posted by: cm on January 6, 2004 11:39 PM

____

Yo, Bruno! See how much convergence Germany on its part needs to do towards America -- I mean see the note cm posted just above about German working culture? OK, so we were talking about social safety net. It just could be, however, that US needs to converge towards EU on social safety net while EU needs to converge towards America on labor market flexibility and work culture ( which Germany did a bit, by the way).

And I said "could be", eh?

Posted by: bulent on January 7, 2004 04:32 AM

____

Bulent & CM,

I note with humor the responses I get when I call some one "ideological". This reminds me of a favorite zen quote from a college book.

"Most people hate egotists because they remind them of themselves; I love egotists because they remind me of me."


The same goes for the label "ideologue." It's a feature, not a bug.

Re: "can't even concieve".....

No insult meant. Some people are perfectly intellegent and educated, but simply "can't see" some things from different points of view.

I try to avoid this in myself, and actually succeed at times.
_______________

"subservience to the state"

Both of you rejected my opinion (for I don't know the facts - so I surmise from your words) that you see the state (or collective) as superior to the individual.

Yet you both argue vociferously for things like bigger "safety nets" and collectivised (over individualized) retirement plans.

For example, CM wrote:

"If I carry any "ideology" then it is that a society should be fair (which does not mean that everything and everybody should be equal, but that everybody should have "fair" opportunity to conduct a dignified, if only very modest, life).

And who decides "fair", "dignified", and "modest"?

The obvious answer is "society". I live in such a society, (the US) and I do what I can to argue that, at the very least, those providing the money for these vary loaded terms are the ones who have the right to define them, not the recipients.

Surely, there is no "Atlantis" (a la "Atlas Shrugged") where some one like me can live with out taxes and regulations. So I do what I can to move my people to the right.

This is simply a reaction to your attempts (succesfully, here in marginally free America) to "impose your values" on me. ;-)
_________

Re: Both on of you Germany...

Yes, I have a sister there. (Both parents are post-War immigrents, and I've been there many times - most recently in Oct.)

Germany/EU has much speaking for it, but it's employment "weltanshaung" isn't one of them.

I have less of a problem with "safety nets" than you might think, but I know that a permanent class of bureaucrats controlling education, retirement, health care, hiring, investment is not needed.

A rich society can provide "nets" with out such waste.

Ideologically yours,

Bruno

I don't have a blog yet, but if you would like to be on my e-mail list, contact me at the address above.

Over and out for this thread.

Posted by: Bruno on January 7, 2004 04:30 PM

____

Post a comment
















__