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The Social Dilemma - A Rant

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March 02, 2011 – Comments (0)

Board: Macro Economic Trends and Risks

Author: washcomp

OK, the following turned into a rant, but was well meaning and hopefully apolitical. Sorry for the length.

The following is not intended to support any specific position, but rather to define the economic problem that we are wrestling with on a national level:

Let's assume that we have a "jobless" recovery (we'll call it one where the creation of new jobs doesn't keep up with the growth of potential workforce, rather than on an absolute basis).

Let's further assume (for now) that inflation remains tame.

We have, as a nation established a patchwork quilt of social safety nets. They are not the same in every state or municipality.

As unemployment (in absolute terms) grows, we are obligated to pay for assistance, whether as unemployment insurance, food stamps, Medicaid, or other social welfare programs.

As employment stagnates, the source of revenue to pay for these programs remains constant. (And of course, if employment falters, it drops).

Let's further stipulate (over simplistic) that tax increases on corporations are compensated for in the higher cost of goods to consumers.

We have accumulated on both a federal and a local level previous unfunded obligations of significant magnitude and are continuing to accumulate more.

Before we address how to raise funds, it is important to decide what is the level of the minimum standard of living that we wish to provide for those who need assistance. Should this be at barely subsistence level, or somewhat higher? Should it allow the trappings of a middle class lifestyle? Should it include medical, education, food, housing, "pension" or "luxuries" (auto, TV, PC and internet connection, cell phone, whatever) and if so at what level?

Depending on what we, as a nation, feel is a rational living standard for those unemployed, be it bread and circuses or bare sustenance will dictate the expense.

We then have to overlay the entitlement benefits to be provided to those who continue to be employed, whether during their working years or afterward, with the understanding that they may wish "at least as good" a coverage as those who they are additionally supporting.

Clearly based on the above assumptions, current tax revenues are not sufficient to cover our obligations. This brings a few ways to address the problem to the fore:

1) Increase taxes across the board for all who are working (or through increased corporate taxes, which amounts to a parallel effect as they would be passed along to all consumers - including those not working). Inflation would also allow "automatic" revenue increases in terms of absolute dollars collected. In order to promote fairness, all tax deductions (of any sort, excluding charities) would be eliminated.

2) Default on, or restructure, borrowing obligations giving lenders to our public entities a "haircut". This could also be somewhat accomplished by allowing inflation to destroy the value of the currency paid back.

3) Default on or restructure our entitlement and obligation programs to reduce services as well as save costs. Some of these programs have, until now, been taken for granted (such as Social Security and Medicare), and some have been elective (such as the level of social welfare provided).

4) Cut waste from the system. While this is more prevalent than some suspect, there are strong special interests as, in waste, someone is making money which would otherwise be saved.

5) Cut the very hallmarks of "American Power". While those employed by the military and other service arms of the government do, indeed have employment, it is again at taxpayer expense. Since we, as Americans have very little idea about the "mission statement" of our armed forces in the context of their current usage, this would be important for our "employees" in the government to clarify. If we are using contractors, at a premium cost, to what we would pay our military for the same services, we should consider taking the savings.

There are some places where we could spend money in a more worthwhile fashion than we currently do.

6) School superintendents seem responsible for managing "legacy" systems. We spend more on education (on a per student basis) than any other country, yet our performance is sub-par. Rather than concentrating on managing bureaucracies, our educational system supervisors should be open to whatever provides demonstrably better results. Whether private schools with vouchers, charter schools, or public schools, shouldn't matter as long as the product is improved at the same (or lower) price. Many nations provide free higher education as well. At least in subjects likely to be "useful" from a technical standpoint, competition (based on aptitude/results) driven subsidies should be considered. Forcing students, due to social pressure, to "require" a higher education is as counterproductive as burdening students with debt in order to pay for the tools necessary for our nation to succeed.

7) While the healthcare provided by our some of hospitals is among the best in the world, our health "system" is a laughingstock of even third world nations. Without reopening a debate on what constitutes a rational heath system, clearly our recent attempt has been successfully derailed by numerous special interest groups to the point of being worse than useless. Most civilized nations seem to adopt an equivalent of a nationwide Medicare program (with supplemental insurance if desired) paid for out of everyone's wages. Pharmaceutical prices are negotiated on a national level and constraints are put in place which we would call tort reform in the US. It is mandatory for every citizen, regardless of age or physical condition to be a participant in this government run program.

8) All federal subsidies to businesses would cease. This includes farm subsidies, ethanol content in gas, etc. This would be replaced with strategic government programs (NASA as an example, but extending into the medical and engineering fields) who could subcontract specific tasks to university laboratories. All patents generated under this program would "belong to the people" and be licensed to commercial entities.

9) Gasoline taxes would increase by a significant amount, with more taxes on "regular" than on "high-test" encouraging the ability to use smaller engines at a higher horsepower for better gas mileage (similar to what is done in Europe). This would encourage the use of smaller, more fuel efficient cars as well as raise more tax revenue. A similar "sin tax" on cigarettes (raising the price to about $13 a pack) has been successful in NYC in reducing smoking and the deficit at the same time.

Does the above smack of socialism? Sure, but that's not necessarily a dirty word and it describes a procedure by which a nation works together to accomplish common goals. Does it mean the end of capitalism? Of course not, the two can coexist peacefully (as they do in most countries). "Profitability" both on a corporate level and a personal one (from the standpoint of average standard of living) do not necessarily grow as fast as they do in the "wild west" format that we have become accustomed to, but given that our format is in distress and is unsustainable, a dialog about what we, as a nation desire is important.

We live at a time when a number of nations around the world have decided to challenge the status quo as not representing the desires of the population. I am not advocating making our voices heard in the same fashion, but is important that we communicate what is important to us to our elected representatives. If they ignore our requests, then despite the fact that we may think they are great guys/gals, they should be replaced at the next election.

One of the takeaways of my traveling is the understanding that we, as a nation, are not always in the right. We don't necessarily do things in the most beneficial fashion and there is much we can improve upon compared to others. Until we stop being led by the nose and begin to think for ourselves we will continue to live in a fashion dictated by others for the benefit of others. We have to decide what our lifestyle should be, subject to the constrains imposed by our means and the cost of our selected way of living. That decision requires thinking and until we, as a nation learn to think for ourselves, we will be relegated to the thinking of others.

If we, as taxpayers are paying for the benefits, as well as the excesses of our nation, it's about time we decided what trade-offs are desirable to be made (and which we can afford).

Jeff

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