Inequality: Should the government be concerned about it?

KarateCowboy said:

I'm asking how anyone can suddenly do those things, ethically, just because they wrote a constitution, which is just a piece of paper saying "I get to do these things". Writing the word "Government" on a piece of paper, putting it on your chest, and saying you can now do what was not ethical before --that is not much different than writing on a piece of paper that you can do those things and now all of a sudden they're ethical. So, the question remains: why is it unethical for me to take stuff from you to pay my doctor's bills, but suddenly it becomes ethical if I write down in a 'constitution' that I get to do that?

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OK, that's actually a very good question. It applies to everything the government spends money on.

Why is it ethical for the government to take my money to build a bomber?
Why is it ethical for the government to take my money to build a road?
Why is it ethical for the government to take my money to pay the governor?
Why is it ethical for the government to take my money to help orphans?
Why is it ethical for the government to take my money to study why pigs stink?

And so on. All of these can be summarized into one simple question, "Why is it ethical for the government to take my money?" Because that is really where the issue is, yes? Once an entity has the money, and if there were no strings attached when getting that money, then it is a free country, they can spend their own money on what they want. The issue is not what gave them the audacity to think they have the liberty to spend their own money on charity if they choose, but what gave them the audacity to take my money and call it theirs. That is the issue, yes?

Not only does the question apply to tax, but to anything the government does.

Why is it ethical for the government to force people to serve in the army?
Why is it ethical for the government to force people to follow certain laws?
Why is it ethical for the government to put people in prison?
Why is it ethical for the government to attack another country?
Why is it ethical for the government to build a fence on the border?

In short, we can summarize it by asking, "Why is it ethical for the government to have any authority to do anything at all?"

The answer, as framed by the founding fathers, is that we the people chose it to be that way. Uh, maybe most of the people chose that, but certainly not all! Some disagreed. So what gave the winners the audacity to say that we the people agreed that this entity will be in charge, and we all agree it will be this way? That is a very good question. But that is what happened.

The historical question of how we got here is largely irrelevant. Today we are under a constitutional government, and most of us think it is far better to live under this government then to abandon it. So I, and many others, choose to obey the government, and to exercise our right of input into the government by voting, simply because that is the best for us.

And the framers of the Declaration seem to indicate that their government is valid only up until the point where the people overthrow it. And we haven't overthrown it yet, so therefore it is still valid. That's the simple answer.

So we cut to the chase: why is the United States Government valid? Answer: Because most of us choose to not overthrow it. Therefore it is in charge.

And since it is in charge and it says it has an agreement with us--the constitution--and that document says the government can tax us, therefore it has the right to tax us. And after it has the money, it is the property of the government. And they have the right to spend it on what they choose unless we overrule it. It is their money at that point.

Do you have a better answer? Why is the United States Government authorized to force people to obey laws, to jail them if they don't, to force people to pay taxes, to declare and fight wars as necessary, to say only they can print dollars, or to do any of the other things that government does? Why is the authority of this government valid? I gave you my answer. What is yours?

miniverchivi said:

I've covered this in other threads, but the supposed "surplus" during that era wasn't a true surplus. It was just a surplus in terms of what congress set as the budget.

Example, if you have $10 in revenue and congress says you spend $15, spending $12 is a "$3 surplus" in terms of the budget they laid out, however, in terms of reality, it's a $2 deficit.

In real numbers provided by the US treasury


Fiscal
Year
Ending National Debt Deficit
FY1993 09/30/1993 $4.411488 trillion
FY1994 09/30/1994 $4.692749 trillion $281.26 billion
FY1995 09/29/1995 $4.973982 trillion $281.23 billion
FY1996 09/30/1996 $5.224810 trillion $250.83 billion
FY1997 09/30/1997 $5.413146 trillion $188.34 billion
FY1998 09/30/1998 $5.526193 trillion $113.05 billion
FY1999 09/30/1999 $5.656270 trillion $130.08 billion

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Ok, I had heard that this varied depending on how you calculated it. At least they got to the point where they only lost $113 billion a year! And certainly it would have been possible to truly break even if they had wanted to at this point.

The fact that debt continued to rise is not exactly proof that the programs were failures. It just means we could not afford everything we tried at the tax rates we had.

Does the $17T debt prove the FBI is a failure? Does the $17T prove the M-16 was a failure? Does the $17T debt prove every program ever undertaken by the government was a failure? It does not. So one cannot argue that the debt proves that all government programs to help the needy were failures.

Social Security, for instance, has brought in far more than it spent, so it can hardly be blamed for the deficit (at least not yet!).

miniverchivi said:

I did see the previous post, however, your only solution is to fix the artificially created inequality between business sizes was to adjust taxes.

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My point is that you have not proven that an increase in minimum wage will hurt small businesses more than large businesses.

Say a company with $1 million in annual revenue operates at 10% margin, and suppose that minimum wage payments accounts for 10% of its operating costs. Suppose minimum wage goes up 20% and the sales volume does not change. If nothing else changes, then its operating costs will go up 2%. If it keeps the same margin, it increases its sell price by 2%.

Now run the same analysis for a company with $1 billion in annual revenue. Same thing. If it increases its sell price by 2%, it keeps the same margin.

And this would happen to everybody, so everybody sees this increase (except for those who already pay their workers well).

Both companies above are effected equally on a percentage basis.

You argue that the big company can be more efficient after the wage increase, but that was so before the minimum wage increase also. Nothing changed there. And small companies often have better innovation and individual initiative (both before and after the minimum wage increase) so that counteracts the advantage of scale that the big companies have.

And even if there were a slight windfall for large companies, you could adjust the upper tax bracket up a fraction of a percent and the lower bracket down a fraction of a percent if needed. But I see no need for that at all.

So now you would have a lot of people with 20% more money who are more than willing to spend it in the economy, and prices only went up 2%. And that would help the economy and increase sales substantially.

Miniverchivi,

Getting back to your worthy post on government programs (#173), that response was a lot more than I expected from my question, so thanks.

miniverchivi said:

I don't think totally eliminating all of the following programs is the way to go, but I would vastly change a few of them, I'll address them below.

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My main question was whether you accept that the government should at least do some things to help the needy. Your responses on welfare, schools, emergency rooms, and food stamps indicate that you agree that at least some times the government should help the needy. So we agree that if some people are living with high needs in a rich society, that it can then be reasonable to have the government help with their plight. This stands in clear opposition to others in this thread, who are vehemently opposed to the government ever doing any act of charity whatsoever. If the government were to spend their own money to give a hungry child a sandwich, some people here would hit the roof and scream about the immorality of using government funds to redistribute wealth. I don't understand why people can get so upset about the government giving a sandwich to a hungry child--an act they consider immoral--but say nothing about a war in Iraq that wastes hundreds of billions and accomplishes little. Thankfully, your response is much more reasonable than other responses I have seen here.

However your response to some particular programs would gut them so much as to make them worthless, so let's discuss that.

For instance, you suggest making unemployment insurance and Medicaid optional. Exactly how does that work? Does everyone check off a box on their tax form, and if they check it, then they owe the government some amount which is calculated such that the total government income from the box checkers covers the payments to the box checkers? The only ones checking the unemployment insurance option will be those with a high risk of unemployment. Same with the Medicaid option. But if only those who expect to use it check it, then a very high percentage of people in the program will want payments, and the price of opting in will soar. You defeat the whole purpose of the program, where government gets the money from its general fund and pays it where needed. Why even have the government involved at this point? Since you are a fan of private enterprise, why not just have private firms offer unemployment insurance or Medicaid insurance that people can buy? Why would the government even be needed as you suggest? But neither governments nor private firms offer plans like you suggest, because they would not work.

Similarly in Social Security, currently the higher earners tend to pay more than they get out, and the lower earners tend to pay less than they get out. So if you make it optional, the higher earners will tend to drop out of the program, and everybody left in the program will be expecting to get more out than they put in. Again, what is the advantage of your program over simply eliminating Social Security? Why not just let private insurers sell private long-life insurance policies that people could buy on their own to help them with monthly supplemental income if they live longer than expected?

So I take your comments on Social Security, Medicare, Medicaid, and unemployment insurance to be the functional equivalent of eliminating those programs, and I think that is a big mistake.

Your comments on schooling and college are fairly generous to needy people. I won't nitpick on the details there.

I disagree with your suggestion to abolish labor union rights, which is in essence what is happening today. If labor unions cannot set up systems where everybody joins, then a lot of people will opt to enjoy the benefits of the union without the payments. And soon the unions become very weak, as they are today. When the rich and powerful have strong connections to maintain their income from their contributions (capital and raw materials) and labor has no such connections, then industry becomes set up for the specific purpose of paying off those with capital and raw materials, and exploiting those who provide the labor. That's basically feudalism--if you control the present wealth, then you are entitled to almost all future supplies of wealth, and everybody else has little choice but to sell themselves into your service.

Regarding minimum wage, if an employer now pays minimum wage, that is basically a statement that if they could pay their workers less, they would. Already minimum wage workers are making far less in real dollars than they used to. And if we were to eliminate these laws, their wages would surely plummet. The decline to a state similar to feudalism would accelerate.

You say progressive income tax is a joke, but we have had it for a century, and most people like it. What would the 60's and 70's have been like without it? In those days the top bracket was 70% - 91% (now it is 39%). And because the rich were asked to contribute high income taxes, we had great programs to build roads and provide a safety net for the needy. Without this, where would we have been? Would we then have been having crumbling bridges as we do today, instead of all those great highway projects?

And then we come to health care. Your suggestions about emergency rooms essentially describe how it has worked for years. If you arrive at the emergency room with no means of payment, they are required to treat you. But you don't get it debt-free. You then owe that money back. Since many cannot pay it back, they stay hopelessly in debt, and the government takes the loss. It is a lose-lose situation. The patient is placed hopelessly in debt, and the government is stuck with the tab. When unions and manufacturing were strong in America, and almost anybody could get a job with good insurance, this was a rare event. But when emergency rooms became packed with the uninsured in this lose-lose situation, there was a strong need to change. Hence the ACA (Obamacare).

Your response to the ACA is interesting, apparently accepting most of that Act that conservatives so hate. But you disagree with the mandate to pay a fee/tax that is charged to people who could afford to get insurance. But what about the benefits people get for that payment? They get a) the guarantee that they can wait until they get sick, and then get on an insurance plan that the insurance company will be required to give them, and b) the guarantee that should they get sick before the insurance takes effect, they still have emergency room coverage. That's actually a lot of value. Should we give that to people for free if they could afford insurance to cover themselves? The mandate allows them to choose to go without insurance, but they need to pay money for what they would otherwise get for free. That all seems quite fair to me.

Without the mandate, the ACA runs into the same problems as I mentioned for unemployment insurance above. If it can be bought when you expect to use it, then only those who expect to use it buy it, and the prices go through the roof. But with the mandate, there is incentive for everybody to get insurance, and the cost gets spread out.

So anyway, we agree with the major point of this thread that it is moral for governments to spend some of their money on helping the needy. We disagree on some programs that you essentially eliminate.

miniverchivi said:

Big box stores have a distinct advantage. It's about more than just "Minimum wage workers account for X% of operations costs"

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Sure that is not the only thing, but it is probably the most important thing to consider when we want to understand how a minimum water increase will affect the cost of doing business. In my example I assumed 10% of costs were minimum wage, which seems like a reasonable guess to me. You don't tell us what you use for either the big or little stores, and without it, your numbers lose meaning.

If for instance, you pay $100 for dinner for two at a restaurant, where does that money go? I am guessing it might divide up something like this:

Groceries $35
Minimum wage wrkrs $10
Other wage and salary $10
Other operating costs $20
Taxes and Profit $25

So in this instance if we increase the minimum wage 20%, the restaurant's total minimum wage cost goes from $10 to $12 for that meal, and its total costs before taxes goes from $70 to $72. We have a 20% increase in wage to most of the workers, with little increase in operating costs.

And this analysis is essentially the same, regardless of whether you ate at a Mom and Pop restaurant or a huge chain.

As noted before, the key piece that needs to be evaluated is the ratio of (Number of Employees : Units/Products sold) as well as the store model (Big Box vs. Local Store that specializes in a type of product)...this is what's going to determine how much (if at all) you have increase the price on each unit to cover the difference.

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In your example companies compensate for a minimum wage increase by increasing the price of toothpaste 10%, and increasing the price of the TV 0%. If jacking up the margin on low cost items is such a great business model, then wouldn't big box stores be doing it before the minimum wage increase? Why would they operate with a bad business model, and after a minimum wage increase, switch to a high-margin-on-low-cost-goods model to absorb their costs? If your pricing model is so good, why wait?

And many small companies also sell a range of high and low cost items, and they also could use your magical high-margin-on-low-cost-items model if it was so good.

So no, you have not shown that a minimum wage increase would hurt small businesses more than large.

For the record, it looks like a substantial minimum wage increase might actually increase prices less than the 2% back-of-an-envelope calculation I used here. For instance:


Source: Forbes, search for "Raising The Minimum Wage Would Be Good For Wal-Mart"

Yoder777 said:

I don't think that the government can force full equality, and countries that have tried merely succeeded at making everyone poor. Having said that, I think that our tax dollars would be much better spent on ensuring affordable healthcare, a good education, and a social safety net to help people in hard times to get back on their feet, than on tax cuts for the wealthy, corporate welfare, and failed, unnecessary wars based on false pretenses.

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Right, nobody is asking for all to be equal. The problem here is that some are expressing moral outrage over the fact that the government spends some of its money helping poor kids go to school or giving the elderly Social Security.

It's quite different from when the angry populace was demanding the government take on the robber barrons. Now we have the populace on the streets, demanding the government help the rich!

miniverchivi said:

I would call that failure

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Suppose your neighbor comes to you hopelessly in debt and despondent. Do you tell him that everything he ever did was a failure? I think not. The fact that this person is hopelessly in debt does not prove that everything he ever did was a failure. It might prove that he has budgeting inadequacies, or it might prove that he had unfortunate circumstances--a trip to the emergency room, for instance--but it does not prove that every thing he attempted to do with his money was a failure.

Likewise it has been argued here that since the government is in debt, therefore certain programs are failures. But if we are going to use that argument, we cannot use it only for some programs and not for all. If the debt proves that program A is a failure, then that argument proves that programs B and C were failures, and hence that everything the government ever did was a failure.

I was merely point out that the failure of the government to budget its money effectively does not prove that every program the government ever spent money on was a failure. (And there are fiscal reasons why a government might be better with some debt, but that is another topic altogether.)

And it certainly doesn't apply to things like Social Security which so far has brought in more that it has paid. (And yes, the key words there are "so far" because there are serious issues about the future solvency of Social Security that need to be addressed.)