Net Givers v Net Takers (Sep 2012)

With recent talk of Romney’s flubs and his admittedly inarticulate comment on the “47%” who pay no income taxes, I felt it necessary to try to enunciate what I think he was trying to say, and then expand on it a little bit.  I’ve actually found this to be something that hasn’t been succinctly summed up by the Republican party writ large, and I think this may be one of the factors contributing to the devolution of the overall political discourse into half-truths, gotchas, snippets, and barbs.

As usual, most knowledge stems from an understanding of context and history.  In the 1960s, Lyndon Johnson’s “Great Society” programs were instituted to eliminate poverty and racial injustice.  The Department of Housing and Urban Development (HUD) was a product of this liberal push, as was Medicare and Medicaid, federal funding for education, etc.  An interesting fact is that during this time (60-68) federal aid to the poor increased approximately three-fold, from about $10B to $30B a year; today it is between $400B and $800B a year, depending on what you count as anti-poverty programs and how creative you want to get with your math.

I’ll start by stating I do not question the nobility of the cause of helping the less fortunate, but I must (as you should) question the effectiveness of the policies enacted to do so.  Let’s take a good look at the end result of 50 years of this help.  We now have 15% of the population at or below the poverty line.  I’d note here that we’ve increased the threshold of what constitutes “poverty” over the years to include a larger and larger share of the population under the umbrella.  If I were more cynical, I’d surmise that this is an excellent way for Democrats to expand their loyal voting base (as free stuff garners votes), but let’s remain in the realm of policies, not politics, for this discussion.  The fact is that we have now engendered the dependency of three generations of people by providing handouts and disincentivizing, and thus devaluing, work.

Net “takers”, by which I mean those that draw from the government goods and services while at the same time not working/contributing to the tax base, have steadily increased because of the above policies.  They invariably increase the strain on net “givers”, by which I mean those who contribute to the tax base by holding down jobs and being productive members of society.

To properly frame the problem, let’s look at this from a state level using my beloved New Jersey as an example.  Not sure if you are all aware that the cities of Camden and Newark (combined population of about 400k) have been and continue to be in such dire fiscal straits, that Camden has been a ward of the state for seven years along with Newark’s public school system.  On top of crime and corruption, the unemployment rate is almost double the national average, and they (along with the chronically underemployed) receive a litany of supplemental government benefits and services, including housing assistance, medical care, food stamps, energy assistance, etc.

What this means is that tax revenues now have to be redirected from the rest of the state’s working population in order to support these communities.  Try to think of it as an increase in blood flow to an extremity to prevent that extremity from rotting off; that “blood” must come from somewhere and this diversion inevitably taxes (literally and figuratively) the rest of the body.  Over the years, liberal policies aimed at “helping” compounded the problem by increasingly subsidizing irresponsible behavior.   Free methadone, because we need to help heroin addicts.  Extra money for extra kids, because we certainly can’t let poor children starve.  Food stamps that pay for garbage food, cigarettes, and booze which contribute to diabetes, lung cancer, and cirrhosis which contribute to high future associated treatment costs that will also be borne by the taxpayer.  Did I mention Medicaid covers Viagra too?  What this does overall is divest responsibility from the actions of the individual and burden the group with the ramifications of poor choices.  To me, this is the EPITOME of selfishness.  The irony is that descriptor is often hung around the necks of conservatives.

Anyway, as those in need of that “help” increase, so do subsequent costs, and taxes must therefore rise.  In New Jersey (as in many other states) the tax rise is usually weighted toward property taxes and state income taxes (to be read as people who work and/or own land and tend to be productive members of society).  At a certain point, folks of means tired of seeing their taxes rise and services diminish as a result of this wealth transfer will vote with their feet and move out of New Jersey, probably to Pennsylvania because there is a lower tax burden there.  Over time, there will be fewer “givers” to contribute to the pot, so taxes will have to increase more to cover the gap, thus speeding the outflow of taxpayers and exacerbating the problem.

Fast forward a couple decades.  If left unchecked, New Jersey will have so few “givers” and so many “takers” that it, like Camden and Newark, will become insolvent, unsustainable, and ungovernable.  It too would have to become the ward of a larger entity, namely, the Federal Government.  What that essentially means is that New Jersey itself will be a net “taker” and the burden for taking care of it will shift to “givers”, namely taxpaying citizens of other states.  As a fiscally conservative resident of Pennsylvania or Utah or Vermont or Virginia or Wyoming (states with very small budget shortfalls per capita), would you want to pay for profligacy in New Jersey, New York, California, or Illinois?  To put in an international light, if you are a fiscally responsible German, do you see why now they don’t want to pay for the irresponsible, profligate net “taker” that is Greece?  If you can’t already see what all these entities have in common, I’ll help you out—failed liberal policies.

Further, you can currently leave and go to a state with a lower tax burden.  However, if rampant liberalism and misguided helpers implement their vision of America, you won’t be able to find a lighter tax burden among the other states in the future—–you’ll have to move to Canada.

Bottom line is that these policies, while originally well-intentioned, have changed welfare from an emergency rescue to a way of life.  Conservatives don’t “hate the poor”, but kindness has limits and should never EVER be administered beyond one’s capacity to support one’s self first.  Thomas Malthus, famed scholar, demographer, and economist, emphasized the difference between government-supported welfare and public charity by proposing the eventual abolition of poor laws by gradually reducing the number of persons qualifying for relief.  Relief in dire distress would come from private charity because government administered poverty relief acted against the poor folks’ longer-term interests by raising the price of commodities and undermining the independence and resilience of the citizen.  In simpler terms, poor laws tend to create the poor which they maintain.

Frankly, I can’t think of a better example of a self-licking ice cream cone.  This is why liberalism and the nanny state, if left unchecked, will ruin America.  Click on the “Videos” section to see Milton Friedman’s take on poverty.  Enjoy, and thanks for reading.