Continuing with the series of debates from my last post, here is a later encounter with Poster 2.
Poster 2: Social security should be a mandatory retirement with a guaranteed minimum return. Everybody should get it. Elsewhere on here I advocated privitization in the Chile model. Yeah – lets cancel the minimum wage and require payment of a much hi…gher living wage. The main issue is not that the taxes on the rich are too low but that the pay of the middle class is too low. The rich own the means of production so if you increase demand they are forced to produce more and that means they pay more taxes (even at 35%). It has been accurately argued that unemployment benefits are an excellent stimulus – with, of course, the downside of federal debt attached. Increased wages, employment benefits, would have the same effect without the deficit – what is not to like about that ?
Response: Wow … umm, ok. So Warren Buffet deserves to have a federally funded retirement package? Why? Especially if the liberals want a 55% estate tax on those with over $1M in assets? You’re going to pump money into a persons account (who doesn’t need it), waste money processing said payments, and then turn right around and tax those payments (receiving back less than 50% of the original amount due to processing expenses)? That’s not going to do anything but take away funds from those who would actually benefit from it.
As far as Social Security being a “mandatory retirement” system, I think FDR would have to take issue with that. His program was designed to be a protection against poverty for retired individuals … essentially an insurance program. Like with any other forms of insurance, you don’t receive funds unless you are in need. People who properly manage their finances and improve their economic condition (such as the Warren Buffet’s of the world as well as many in the “middle class”) have enough funds going into retirement without facing a drop in their standard of living. Since they are not in need, there isn’t a reason to receive insurance payments. But as I noted above, a reform of the program focused around a need-based approach a) saves money by not wasting it on “the rich,” which b) allows for more fund to be provided to those who are in economic need, and c) ensures the program is financially self-sufficient for decades to come without having to increase taxes on people, who can d) save more money for their retirement and well living.
As far as “if you in crease demand they are forced to produce more” is not realistic. For example, demand was high for homes designed by Frank Lloyd Wright, but he wasn’t forced to produce more. When demand is high and supply is limited, the producer can demand higher prices. And while higher prices will result in higher tax revenue, that doesn’t mean there will be more supply for people to purchase a high-demand product.
Another example is corn/ethanol. By requiring more corn to be used for fuel, even with increased production, corn prices have nearly tripled in the past decade, despite the fact that production has escalated. Part of the rise in cost comes from demand (since you now have two markets competing for the product) and another being the increased labor/land expenses in order to compete with demand. If you increase the minimum wage to a “living” wage, that will further increase the cost since farmers have to pay the field hand even more for their labor. You can reach the point where those earning a “living” wage will be worse off economically because they now cannot afford the basic necessities in life such as food.
Lastly, yes, unemployment payments do stimulate the economy (no, it’s not an “excellent stimulus” because it isn’t a lot of money) because some money is better than no money circulating in the market. However, the return on investment on unemployment payments is low and is not sustainable over protracted periods of time. One possible way to improve the ROI is by transferring local and state jobs (such as admin and environmental position) from full-time positions to temporary positions for those who receive unemployment to fill and compete for. After 3-6 months, the position reopens for the next person in the queue, with the hope that the training and experience gained by working for the government will lead to a full-time job elsewhere. It is understood that sub 7% unemployment is considered “full employment,” so you only need to reduce the level by 3%. Now, these individuals are both employed (filling the gaps that appear on resumes that hiring managers don’t like to see) and improving the local economy by removing an additional level of expense for the government (who can then turn around and use those funds to provide assistance to those in need).
The above is a more realistic and practical approach rather than hoping for some idealistic liberal economic utopia.