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Old 11-17-2019, 07:05 AM
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ok how much would the economy shrink if all state and federal assistance stopped


I was in a discussion a while back about one reason things like SSI and things like cash aid aka AFDC still exists is that if programs like that were totally eliminated the economy wouldnt be able to take the hit as people spending such money make up at least 25 (or more) percent of it

any truth to this? and if not how much does state and fed assistance actually make up of the us economy?
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Old 11-17-2019, 07:39 AM
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Well, it wouldn't be pretty. I'll tell you that for free.

Census numbers say that 21.3% of Americans are on some form of assistance (2015 numbers). That's means-tested assistance so I believe Social Security doesn't count. Include SSI and you're looking at a LOT of people.

We're looking at likely 40% of the country on some form of government assistance? Social security, SNAP, medicaid, medicare, disability and so forth. According to the fed total federal transfer payments are about $2.5 Trillion.

It's too damn early to try to look up individual state transfers. Apologies.

But the fact is, in an economy of about $21 Trillion we'd be looking at 15-20% of spending going away. That would be offset by - theoretically - a lack of federal taxation and borrowing so it gets complicated in a hurry. And Americans would find ways to cope such as group living or a return of multi-generational households. Still, the impact would be severe and disastrous.
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Old 11-17-2019, 09:31 AM
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According to this website, the total amount spent per year on government assistance in the U.S. is $1.047 trillion:

https://www.google.com/search?source...4dUDCAg&uact=5

According to this website, the average personal income in the U.S. is $53,820:

https://en.wikipedia.org/wiki/Per_ca..._United_States

According to this website, the number of people working in the U.S. is 155.76 million:

https://www.google.com/search?source...31.mq1wljL5Mjk

155.76 million times $53,820 is about 8.38 trillion. 1.047 trillion is about 12.5% of that. I'm not sure if the personal income includes government assistance. My calculations give something less than Jonathan Chance's. He figures it's 15-20%, while I figure it's about 12.5%. Please, if any of you have different figures, I'd like to know them. I just did this calculation now and don't have any emotional connection to it. I'm always happy to learn something new.
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Old 11-17-2019, 09:46 AM
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Nor do I, Wendell. But note that I included all transfer payments. Most calculations of 'federal assistance' leave out social security, medicare and such. So I'd bet that's where our difference in result comes from.

You're also only including personal income in your calculation which seems an odd choice. There's a lot more to the economy and GDP than just personal income. You're discounting corporate income, for one thing, and I can assure you it exists and should count.

Last edited by Jonathan Chance; 11-17-2019 at 09:47 AM.
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Old 11-17-2019, 09:49 AM
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Fuck, and I didn't even think to include in 'assistance' corporate tax incentives and offsets as well as grants to non-profits and economic development concerns.

Hrm.

It's a LOT, OK?

Last edited by Jonathan Chance; 11-17-2019 at 09:51 AM.
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Old 11-17-2019, 11:10 AM
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The OP doesn't differentiate between short-term and long-term results.

Obviously, there would be a great deal of short-term disruption. But long-term? I don't know if it would make any difference at all to the overall economy. People are not static. Money would find some other way of flowing.
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Old 11-17-2019, 11:15 AM
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The OP doesn't differentiate between short-term and long-term results.

Obviously, there would be a great deal of short-term disruption. But long-term? I don't know if it would make any difference at all to the overall economy. People are not static. Money would find some other way of flowing.
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Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
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and let them starve so that those who are fat can get fatter.
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Old 11-17-2019, 11:28 AM
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I don't know if it would make any difference at all to the overall economy. People are not static. Money would find some other way of flowing.
Would it, though?

This hasn't always been the case. We don't have to look very hard to find cases where this isn't the case. And that's not just the US but other countries with examples from the last 100 years alone.

Generally the historical way of getting money flowing has been some sort of government intervention (even if that intervention is a war rather than a direct change in economic policy), which is the opposite, in spirit, of what is asked in the OP.
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Old 11-17-2019, 02:03 PM
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I'm not sure the premise is that the money wouldn't be spent is correct. If the government stopped taxing me to pay for entitlement programs I'd spend it on a new car or a vacation (creating auto industry and hospitality jobs) rather than burn it or stuff it in my mattress.
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Old 11-17-2019, 07:25 PM
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"Government assistance" doesn't just arrive by magic. We PAID into our support programs for many decades. Killing-off those programs is up-front THEFT. That's the modern corporate program: privatize and confiscate. What would be the immediate result of a 'benefit' cutoff? If I were a pol who'd voted for that, I'd hire a large security squad, because starving masses would want me dead.

The main purpose of government benefits is to prevent uprisings to slaughter the elites.
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Old 11-17-2019, 08:58 PM
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RioRico is not entirely wrong. Or even mostly.

While I doubt most would now admit to it, I believe a factor in offering social security, disability, welfare and other similar benefits is to prevent a general lefty uprising.

We saw this following the late 1800s and the first Gilded Age (it's my belief we're undergoing a second Gilded Age right now). That led to worker insurrection, battles against both public and private police and a general lack of interest in compromise. The end result was increased union participation, the breaking up of the trusts and further steps toward support for the underclass paid for by general taxation.
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Old 11-17-2019, 09:06 PM
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I'm not sure the premise is that the money wouldn't be spent is correct. If the government stopped taxing me to pay for entitlement programs I'd spend it on a new car or a vacation (creating auto industry and hospitality jobs) rather than burn it or stuff it in my mattress.
The problem is that welfare is paid for via income taxes (non-social security and non-medicare welfare that is), and income taxes tend to fall on the wealthy.

So the wealthy would save quite a bit of money, but I don't know if they'd reinvest it. My understanding is the world already has several trillion in idle capital, what is missing are good investments to put the money into. If the well off saw their income taxes cut, they'd probably just put the money into savings or stock buybacks rather than reinvesting it.

For a program like food stamps, every $1 spent results in ~$1.80 in GDP growth.

https://www.theatlantic.com/health/a...stamps/260015/

I don't know what the GDP growth is for supply side tax cuts. I am sure its smaller, but I don't know by how much.
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Old 11-17-2019, 09:22 PM
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I'm not sure the premise is that the money wouldn't be spent is correct. If the government stopped taxing me to pay for entitlement programs I'd spend it on a new car or a vacation (creating auto industry and hospitality jobs) rather than burn it or stuff it in my mattress.
Money transferred to those who are not well-off is spent almost immediately. If it wasn't transferred, and the taxes to fund it were not levied, less of it would be spent. You might immediately increase your consumption to spend the tax saving, but you are not every taxpayer. The richer the taxpayer is, the less likely they are to spend an increase in net income immediately; a proportion - a growing proportion, as we move up income levels - is saved or invested.

So the short-to-medium term effect of cancelling these programs and the taxes used to fund them (apart from an increase in poverty and hardship, of course) would be an overall reduction in consumption and an increase in accumulation and investment. This would tend to have a depressive effect on jobs and income.
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Old 11-17-2019, 09:26 PM
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Originally Posted by Jonathan Chance View Post
RioRico is not entirely wrong. Or even mostly.


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While I doubt most would now admit to it, I believe a factor in offering social security, disability, welfare and other similar benefits is to prevent a general lefty uprising.
I sometimes note that von Bismarck created the first modern social support system, not for love of peasants and proles, but to steal an issue from the socialists, produce a healthier and more productive nation to pay the Kaiser more taxes, and prevent uprisings. Can't let the aristos be slaughtered, now can we?

Another point: taxes and fees sequester money that would otherwise flood the economy, increasing inflation and poverty. I can did up a cite for that if asked.

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For a program like food stamps, every $1 spent results in ~$1.80 in GDP growth.
AFAIK food stamps have always been an agribiz subsidy; any public benefit is secondary.
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Old 11-17-2019, 09:38 PM
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Wow, that's way the heck more than i even thought.....I get food stamps aka EBT Medi-Cal (state of ca) and medicare (fed govt) and SSA(originally SSI ) from my dad's fat retirement ...... mom signed me up for SSI originally and everything else was "well since the rest is available for you weve signed ya up for it ... enjoy! Oh and I pay my aunt for helping me via the IHSS program ...Reagan did something great for me as governor of ca ......(about the only thing)

note this discussion started in a bar because we were watching the news (bartender needed to know how to dress her kid for school the next day)and they were discussing the small raise SSI and SSA gets every year and some blowhard who was working of the 3rd pitcher of the cheap piss of the day was "just get rid of al those programs make the lazy sobs get a job .......
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Old 11-18-2019, 01:00 AM
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Corporate welfare elimination would also gravely impact economy, as would elimination of farm subsidies.
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Old 11-18-2019, 02:01 AM
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Originally Posted by Wendell Wagner View Post
According to this website, the total amount spent per year on government assistance in the U.S. is $1.047 trillion:

https://www.google.com/search?source...4dUDCAg&uact=5

According to this website, the average personal income in the U.S. is $53,820:

https://en.wikipedia.org/wiki/Per_ca..._United_States

According to this website, the number of people working in the U.S. is 155.76 million:

https://www.google.com/search?source...31.mq1wljL5Mjk

155.76 million times $53,820 is about 8.38 trillion. 1.047 trillion is about 12.5% of that. I'm not sure if the personal income includes government assistance. My calculations give something less than Jonathan Chance's. He figures it's 15-20%, while I figure it's about 12.5%. Please, if any of you have different figures, I'd like to know them. I just did this calculation now and don't have any emotional connection to it. I'm always happy to learn something new.
While average income is what you say, median income, which is more important here is (from here) much lower.
Quote:
The 2017 nominal median income per capita was $31,786. The mean income per capita was $48,150. The Census Bureau reports those in the Current Population Survey, Table PINC-01.
Thus besides the good point that the rich would save much of the extra income, not spend it, the impact would be greater on the poor, who also would be getting less of a break.

As for savings versus investing, the article in the Times today about FedEx's 0 taxes notes that business investment now is less than that before the tax cut.
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Old 11-18-2019, 02:05 AM
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I'm not sure the premise is that the money wouldn't be spent is correct. If the government stopped taxing me to pay for entitlement programs I'd spend it on a new car or a vacation (creating auto industry and hospitality jobs) rather than burn it or stuff it in my mattress.
Behavioral economists note that people have different buckets for money. A lump sum payment goes into a different bucket than an increase in income. They've shown that someone like a house painter, when he works in his free time for money, puts the money in a different bucket than the one for his job pay, even if he is doing the same thing.

In 2009 Obama reduced Social Security payments instead of sending checks as a boost to the economy for this very reason. The money showed up in the paycheck and got spent more than the Bush checks which got saved and which didn't boost the economy as much.
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Old 11-18-2019, 02:13 AM
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That's true about the median income, but it's not possible to use it in calculations like mine. The average income (i.e., the mean income) is total amount of income divided by number of people earning an income. That says that total amount of income is the number of people earning an income times the average (i.e., the mean) income. Using the median wouldn't work in that equation. The median may be more important for some things, but it doesn't work in that equation.
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Old 11-18-2019, 10:07 AM
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Stopping assistance doesn’t necessarily mean that money is now no longer collected as taxes. It means either a reduction of the deficit (meaning the economy shrinks by the entire amount), it gets spent elsewhere by the government (depending on where, and so the multipliers involved, it might mean shrinking or expanding the government, probably the former) or in fact taxes get reduced. If it’s a straight reduction in tax rates, people like me end up with much of it, and I won’t spend it all - the economy shrinks. Other changes to the tax code would have possibly different effects.
Not factored in is the effect on the then former recipients. If some of them, out of necessity, enter the workforce or become entrepreneurs, that expands the economy. I don’t believe a whole lot of people don’t work and receive assistance because of choice, so possibly the only work or enterprise open to them is illegal or otherwise undesirable, making this economic expansion sub-optimal.
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Old 11-18-2019, 10:28 AM
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Stopping assistance doesn’t necessarily mean that money is now no longer collected as taxes.
Stopping assistance is highly unlikely, stopping congresscritters from reallocating funds to pet projects is equally highly unlikely, but when you talk about both happening at the same time...
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Old 11-18-2019, 10:58 AM
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The economic effect must also include the impact on all of the people whose jobs are involved in the collection and administration of these funds. This in not a small number of jobs.
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Old 11-18-2019, 01:32 PM
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I sometimes note that von Bismarck created the first modern social support system, not for love of peasants and proles, but to steal an issue from the socialists, produce a healthier and more productive nation to pay the Kaiser more taxes, and prevent uprisings. Can't let the aristos be slaughtered, now can we?

Another point: taxes and fees sequester money that would otherwise flood the economy, increasing inflation and poverty. I can did up a cite for that if asked.


AFAIK food stamps have always been an agribiz subsidy; any public benefit is secondary.
Do you have a cite for the sequester money assertion?
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Old 11-18-2019, 02:05 PM
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RioRico is not entirely wrong. Or even mostly.

While I doubt most would now admit to it, I believe a factor in offering social security, disability, welfare and other similar benefits is to prevent a general lefty uprising.

...
Well, many so called "benefits" are insurance or retirement payouts for which you paid into. People pay into SocSec. Medicare, Unemployment, etc. Getting Soc Sec is no more getting "assistance" that getting a private corp retirement plan would be. And yes, you can often pull more from SocSec than you put in, but then there is imputed interest and also you can also often pull more from a Corp retirement plan than you put in- some members die early and dont pull much.

And the expenses of clearing the starved out bodies off the streets would be fairly high.
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Old 11-18-2019, 02:06 PM
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The problem is that welfare is paid for via income taxes (non-social security and non-medicare welfare that is), and income taxes tend to fall on the wealthy.
Welfare ended decades ago.

And Soc Sec is not welfare in any way shape or form.

Last edited by DrDeth; 11-18-2019 at 02:07 PM.
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Old 11-18-2019, 02:23 PM
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Do you have a cite for the sequester money assertion?
I'd like to see that also. Because I am not clear on how this works -
Quote:
Originally Posted by RioRico
Another point: taxes and fees sequester money that would otherwise flood the economy, increasing inflation and poverty.
How does sequestering work? It sounds like you think the government sits on, or destroys' what it collects. I don't think they do. They spend it, on federal employees' wages and benefits, the military, health care, interest on the debt, or in transfers to the states and various citizens.

Regards,
Shodan
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Old 11-18-2019, 02:24 PM
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I don't think there is a GQ answer to this question.

But if you do it, you'd better find a way to prevent all the poor people from voting.
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Old 11-18-2019, 05:02 PM
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Welfare ended decades ago.

And Soc Sec is not welfare in any way shape or form.
We still have various forms of assistance for the poor.

https://www.thebalance.com/welfare-p...d-list-3305759

And I dislike when elderly conservatives (not saying you're one) who are on medicare and social security say that those programs aren't welfare.

Social security has a progressive reimbursement mechanism using the 90-32-15 system, which means low earners earn more back for the taxes they pay. People who made 10k a year get a far better return from the SS system than people who made 120k a year.

And the average baby boomer collects 3x more from medicare than they paid into it. The average boomer pays about 30k over their career in medicare taxes (their employer pays another 30K) and they collect about 200k in retirement in medicare funds.

The only reason medicare is still solvent is because in 1993 Bill Clinton eliminated the tax cap on medicare. Before that only the first 120k or so in income was taxed for medicare.
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Old 11-18-2019, 05:07 PM
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But the fact is, in an economy of about $21 Trillion we'd be looking at 15-20% of spending going away. That would be offset by - theoretically - a lack of federal taxation and borrowing so it gets complicated in a hurry.
Actually the 'first order' answer is simple as suggested by that. Not 'theoretically' but as a matter of accounting, it would make no difference overall if you didn't collect and didn't spend tax money. That goes for defense etc as much as 'helping people' where the tendency to get emotional about it might be greater with the audience here (for defense it might make other crowds go emotional more readily).

The complicated parts are
a) transient effects if you did that suddenly, but the OP question doesn't specifically say 'stopped instantly', doesn't specify a length of transition period.
b) distribution effects. The people who receive govt assistance, net, would lose out but the people who pay, net, would come out ahead in $'s and cents. Keeping in mind the same person might be a net receiver and a net payer at different times in their life (eg pay FICA tax while working, receive Social Security later, etc). We've decided as a body politic* that the current level of redistribution of income is more desirable than none. That's the reason we do it. Because we want to do it. We don't do it 'to keep the economy going', or anyway it's basically a misconception to the extent people really think that's the reason.
c) economic efficiency effects. That's where people can debate for pages, even if they know what they are talking about (by no means always true of internet debates, obviously). 'Assistance' might include payments which are bona fide investments, ie will increase future output (early education or child nutritional assistance might be examples in case of some programs at least). But naturally it's attractive to then justify all such payments as 'investments', but many aren't really, they are just shifting consumption from one person to another, see b). And failed 'investments' or admitted consumption transfers might reduce economic output at the margin by reducing productive incentives or creating perverse ones. But that's surely not a 'general question' with a fixed answer with no opinion component.

*not the 'we', taking the US at least, all agree on what the appropriate level of redistribution is: obviously people can be bitterly divided about that like lots of other things, but that's where it's come to rest at the moment in our representative republic system.

Last edited by Corry El; 11-18-2019 at 05:10 PM.
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Old 11-18-2019, 05:18 PM
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...

And I dislike when elderly conservatives (not saying you're one) who are on medicare and social security say that those programs aren't welfare.

Social security has a progressive reimbursement mechanism using the 90-32-15 system, which means low earners earn more back for the taxes they pay. People who made 10k a year get a far better return from the SS system than people who made 120k a year.

And the average baby boomer collects 3x more from medicare than they paid into it. The average boomer pays about 30k over their career in medicare taxes (their employer pays another 30K) and they collect about 200k in retirement in medicare funds...

They arent welfare at all. They are a retirement system you pay into. Look, if you worked for Bigbux inc which had a funded and employer matching classic retirement, you could well get more out than you put in. There's the matter of compounding interest, investments and of course- many people dying before they collect. No one calls them welfare. SocSec is entirely funded by SocSec payments, not a penny of taxes go into it. It's not welfare, it's a forced retirement system.

From your own cite:
Myths About Welfare Programs in General
A 2018 Rasmussen Report survey found that 61% of Americans believe that too many people are dependent on government financial aid.19

The residents don't realize that they themselves are benefiting from federal aid given to their state governments.

In 2012, presidential candidate Mitt Romney said that 47% of the population would vote Democrat no matter what.20 He claimed it was because they receive some type of federal assistance. Many people believe this myth. In an interview with Vox, political scientist Suzanne Mettler said her research shows that welfare and food stamp recipients don't vote much.21 They are so low income that they are too busy surviving to go to the polls.

Research by the Tax Foundation and Gallup polls shows that in fact, the states that rely the most on federal benefits vote Republican.22 Many of the voters in these states often aren't aware of how dependent they are on tax credits, such as the deduction for home mortgage interest. They only consider visible federal benefits, such as welfare checks or food stamps. As a result, they don't think the government has done much for them personally.

Another myth is that immigrants come to the United States to collect welfare and other benefits. According to the myth, most undocumented immigrants are on welfare. But the Department of Homeland Security found that less than 1% of this population is on welfare.23 That's about the same as native-born Americans.

Last edited by DrDeth; 11-18-2019 at 05:21 PM.
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Old 11-18-2019, 10:59 PM
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They arent welfare at all. They are a retirement system you pay into. Look, if you worked for Bigbux inc which had a funded and employer matching classic retirement, you could well get more out than you put in. There's the matter of compounding interest, investments and of course- many people dying before they collect. No one calls them welfare. SocSec is entirely funded by SocSec payments, not a penny of taxes go into it. It's not welfare, it's a forced retirement system.
No, Social Security is a generational transfer program. The money collected this year from working adults is paid out, this year, to retirees and others who qualify, such as dependents and the disabled. In some years (including all of the years since 1982), the feds have taken in more than is paid out; in other years, including the late 1970s, they paid out more than was taken in (and that will likely happen again starting this year or next). However, this isn't like a corporate-funded plan where there must be a great pot of money; until the 1980s, the Social Security trust funds were pretty minimal, and they only started growing enormously then because people realized what would happen as the baby-boomers retired.

Moreover, you become vested in a corporate-funded plan at some point, which means you have an ownership interest in your share. You never become "vested" in Social Security because Congress can change the law at any time and strip you of some or all of the payments for which you were previously eligible.

(Also, nitpick: Social Security is entirely funded by taxes. These are payroll taxes, not income or excise or other kinds, but "not a penny of taxes go into it" is manifestly untrue.)
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Old 11-19-2019, 12:23 AM
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The other interesting question is - where do you stop? What spending should not be cut?

Medicare, essentially, is giving money to doctors so that they provide "free" medical care to people, so essentially paying people's medical bills - not much different than giving them money. But then, so is VA benefits. So is subsidising state colleges. Even more, so is paying anyone except career soldiers, we could do what other countries do/ used to do, and pay drafted basic troops something like $100 a month. Anything more is just giving money to people. Does the post office lose money? Shut it down, auction off the real estate. Ditto for the air traffic control system, the NTSB, and aircraft certification process - if the airlines really want their planes to fly properly and land safely, they'll figure it out. Police and courts are a money drain - let the people take care of their own law enforcement. If you can't afford bodyguards -well, sucks to be you. This system worked great in the dark ages, and in Little Italy. Ditto - close the Underwriters Labs, the copyright office, the Library of Congress. Even roads, if they cost more than the taxes from gasoline and licenses, is a subsidy.

Sort of reminds me of the story attributed often to George Bernard Shaw. he's sitting next to some high society lady and asks her "Honestly, if I offered you a million pounds, would you sleep with me?"
She hems and haws and says "well, probably, a million pounds is a lot of money." (It was a huge amount back then)
So he says "How about for five pounds?"
She replies indignantly and offended, "What do you think I am?!"
His reply "We've settled that, were just haggling price."

Basically, anything where the government is spending more than it is taking in and there is not a direct benefit to the government itself, is open to be cut. That's a lot.

Last edited by md2000; 11-19-2019 at 12:25 AM.
  #33  
Old 11-19-2019, 05:29 AM
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That's true about the median income, but it's not possible to use it in calculations like mine. The average income (i.e., the mean income) is total amount of income divided by number of people earning an income. That says that total amount of income is the number of people earning an income times the average (i.e., the mean) income. Using the median wouldn't work in that equation. The median may be more important for some things, but it doesn't work in that equation.
Agreed. However the next step is to look at the impact or reducing benefits on the average or median income, and it is much greater when considering median than average - and more accurate a reflection of the impact.
  #34  
Old 11-19-2019, 05:40 AM
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They arent welfare at all. They are a retirement system you pay into. Look, if you worked for Bigbux inc which had a funded and employer matching classic retirement, you could well get more out than you put in. There's the matter of compounding interest, investments and of course- many people dying before they collect. No one calls them welfare. SocSec is entirely funded by SocSec payments, not a penny of taxes go into it. It's not welfare, it's a forced retirement system.
Say everyone on Social Security conveniently died when their statistical life expectancy said they would, and there is still a transfer from people who maxed out on payments to those who paid in less. It's fine with me. Call it welfare or not, but there is a transfer from the richer to the poorer.
As for it being a tax, if you are self employed the 50% of SS payments employed people have their employers paid is paid by you and called a self employment tax. All things being equal, you get it back, but it's still a tax.
  #35  
Old 11-19-2019, 01:10 PM
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The other interesting question is - where do you stop? What spending should not be cut?

Medicare, essentially, is giving money to doctors so that they provide "free" medical care to people, so essentially paying people's medical bills - not much different than giving them money. But then, so is VA benefits. So is subsidising state colleges. Even more, so is paying anyone except career soldiers, we could do what other countries do/ used to do, and pay drafted basic troops something like $100 a month. Anything more is just giving money to people. Does the post office lose money? Shut it down, auction off the real estate. Ditto for the air traffic control system, the NTSB, and aircraft certification process - if the airlines really want their planes to fly properly and land safely, they'll figure it out. Police and courts are a money drain - let the people take care of their own law enforcement. If you can't afford bodyguards -well, sucks to be you. This system worked great in the dark ages, and in Little Italy. Ditto - close the Underwriters Labs, the copyright office, the Library of Congress. Even roads, if they cost more than the taxes from gasoline and licenses, is a subsidy.
That slope isn't actually quite that slippery if everyone gets on the same page about a few basic distinctions. Of course in practice they don't, US politics at least is partly defined now IMO by refusing to agree with certain 'others' on principal, about pretty much anything.

Anyway it's not 100% impossible to define what programs transfer *consumption* $'s from one group of citizens to another. Cases where the body politic decides its more practical or efficient to conduct certain economic activities (defense, post office, air traffic control) via the public rather than private sector is really not the same thing.

The theory of doing air traffic control via the govt, which as you probably know is not the case in Canada, among other places outside the US where it's privatized, isn't, at least supposedly, because we want to subsidize the airlines or travelling public. It's also not accurate to say the wages of the FAA employees are subsidies. Presumably they are paid something like the labor market value of their skills in equivalent jobs, in an economic activity we've decided to do collectively. For the presumed reason that we think it's more efficient or safe that way. Obviously in reality it's also at least partly a function of demoschlerosis, where democracies often find it hard to change things against vested interests in keeping things 'the way we've always done it'. But anyway not to debate whether it should done publicly or privately, it's done on the idea the public sector can do it better, obviously by comparison to other places you can't say it's impossible to do via (regulated, obviously) private entities.

For something like housing vouchers, it is a subsidy, no other honest way to look at it. Subsidize people who can't afford market rent/purchase because that's judged to be in the best overall interest of society. Calling that 'doing things more efficiently' is not just debatable on the specifics like ATC, it's a fundamentally false claim of the intent. Which isn't necessarily a bad intent, but the intent is to fund more ('minimal decent level of', if you want) consumption by some people with taxes collected from other people.

I don't think presenting all govt spending as one thing with no way to distinguish those different purposes is accurate. Of course there are cases at the margin where it's debatable the purpose. For example I mentioned before early education, it's somewhat reasonable in theory at least to call that an investment in future production, like a road is also (but roads are another thing other generally more 'left' countries than the US demonstrated don't actually have to be govt funded as much as we do it in the US). Calling Social Security OTOH 'investment in our seniors' is basically political bullshit. It's shifting money from current workers to fund consumption of people who (in general, not all cases) paid qualitatively similar taxes (not as much necessarily) when they were workers. Which is a very important political fact, but nothing much to do with economics. Economically it's shifting consumption, not building future capacity for production, not the (alleged) most efficient way to conduct an economic activity (like ATC supposedly is). Those things aren't as hard to distinguish in general as your post implies.
  #36  
Old 11-19-2019, 09:01 PM
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Do you have a cite for the sequester money assertion?
Washington establishment freaks out as Modern Monetary Theory gains currency at Boing-Boing, blogging Economists Worry That MMT Is Winning the Argument in Washington on Bloomberg. I admit mis-remembering the details - sequestration occurs when government bonds aren't redeemed.

I stayed in barracks in my US Army years, not renting off-post, so I spent little of my meagre paycheck. What didn't buy beer or cameras went into US Savings Bonds. I sequestered thousands of bucks! I kept 1970's inflation down! I'm a hero! Then I cashed them in and the economy went to shit. Don't you hate when that happens?
  #37  
Old 11-19-2019, 10:58 PM
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Say everyone on Social Security conveniently died when their statistical life expectancy said they would, and there is still a transfer from people who maxed out on payments to those who paid in less. It's fine with me. Call it welfare or not, but there is a transfer from the richer to the poorer.
As for it being a tax, if you are self employed the 50% of SS payments employed people have their employers paid is paid by you and called a self employment tax. All things being equal, you get it back, but it's still a tax.
Yes, it is a "tax" but it's a special tax that funds SocSec. What I meant was that SocSec takes nothing from the general fund, it is wholly self funding. You could call it a forced contribution if you like. FICA does stand for Federal Insurance Contributions Act. So, by that act it's a "contribution".
  #38  
Old 11-20-2019, 12:28 AM
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If a program draws from general revenue rather than being net neutral or producing revenue, it's a subsidy to someone somewhere. The same arguments about the societal value of air traffic control or Underwriter Labs safety standards testing or CDC research on disease - can also be made about the value of feeding and housing indigents so they don't become a roving mob of desperate starving people. Ditto the value of running police and courts, rather than leaving it up to people to dispense their own brand of justice. ("Quick, round up a posse!") Giving money to Medicare doctors or the FBI agents so random people on the street receive an unpaid benefit - is a subsidy. If it's funded by people who have no choice but to fork over their income to the government and may not see that benefit - so a subsidy. I don't see a benefit to paying the FBI large sums to safeguard New York if I'm in, say, in rural Montana. Certainly a large number of taxpayers would prefer a system where they could avoid paying taxes for services they disapprove of - pacifists and the armed forces comes to mind.)

It's not impossible to define what's a subsidy but - poh-tay-toh, poh-tah-to.

(Hint - if you want to define subsidy more specifically, maybe start with the same concept courts use to define someone's standing in a lawsuit. You cannot sue if you are no worse harmed than the average member of the public. That would at least validate paying out of general revenue for some of the services.)
  #39  
Old 11-20-2019, 01:41 AM
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I'm not sure the premise is that the money wouldn't be spent is correct. If the government stopped taxing me to pay for entitlement programs I'd spend it on a new car or a vacation (creating auto industry and hospitality jobs) rather than burn it or stuff it in my mattress.
Money spent on assistance goes through the economy several times. Removing that stimulating effect would slow the economy down further. Your taxes may or may not decrease, but your earnings would probably do so, as the economy slows.
  #40  
Old 11-20-2019, 02:05 AM
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Yes, it is a "tax" but it's a special tax that funds SocSec. What I meant was that SocSec takes nothing from the general fund, it is wholly self funding. You could call it a forced contribution if you like. FICA does stand for Federal Insurance Contributions Act. So, by that act it's a "contribution".
Here why I have special interest in this question. My father worked for the UN, and the UN. being not located in the US by treaty, for a long time did not pay the half of Social Security other employers paid. He fought them for a long time on this, and finally got them to admit that it was a tax. The UN, by policy, paid taxes for workers and so then agreed to pay this one - and gave a refund to everyone. I'm not sure I have all the details correct, but it was close to this. The money sent me to college.
I'll grant that the FICA part is not a tax, since the benefit goes right back to the payer, but the self employment tax and the similar payment businesses must make does not benefit them directly, and so can be called a tax.
And yes I'm nitpicking.
  #41  
Old 11-20-2019, 01:50 PM
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Washington establishment freaks out as Modern Monetary Theory gains currency at Boing-Boing, blogging Economists Worry That MMT Is Winning the Argument in Washington on Bloomberg. I admit mis-remembering the details - sequestration occurs when government bonds aren't redeemed.

I stayed in barracks in my US Army years, not renting off-post, so I spent little of my meagre paycheck. What didn't buy beer or cameras went into US Savings Bonds. I sequestered thousands of bucks! I kept 1970's inflation down! I'm a hero! Then I cashed them in and the economy went to shit. Don't you hate when that happens?
Your cites do not mention taxes being able to sequester money.The only mention of sequestering was people sequestering money in war bonds in ww2.

MMT is a fringe theory only advocated by crackpots and believed by the ignorant.
  #42  
Old 11-21-2019, 01:26 PM
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If a program draws from general revenue rather than being net neutral or producing revenue, it's a subsidy to someone somewhere. The same arguments about the societal value of air traffic control or Underwriter Labs safety standards testing or CDC research on disease - can also be made about the value of feeding and housing indigents so they don't become a roving mob of desperate starving people. Ditto the value of running police and courts, rather than leaving it up to people to dispense their own brand of justice. ("Quick, round up a posse!") Giving money to Medicare doctors or the FBI agents so random people on the street receive an unpaid benefit - is a subsidy. If it's funded by people who have no choice but to fork over their income to the government and may not see that benefit - so a subsidy. I don't see a benefit to paying the FBI large sums to safeguard New York if I'm in, say, in rural Montana. Certainly a large number of taxpayers would prefer a system where they could avoid paying taxes for services they disapprove of - pacifists and the armed forces comes to mind.)

It's not impossible to define what's a subsidy but - poh-tay-toh, poh-tah-to.

(Hint - if you want to define subsidy more specifically, maybe start with the same concept courts use to define someone's standing in a lawsuit. You cannot sue if you are no worse harmed than the average member of the public. That would at least validate paying out of general revenue for some of the services.)
Again I think that lumps things together where it's actually pretty easy to see the differences. Not that it's *always* easy, not that people who want to make a certain argument can't take refuge in the fuzzy margins, but saying that funding the FBI is a 'subsidy' in the same sense as housing assistance, hard for me personally to see how anyone honestly believes that.

The core role of govts is to make and enforce laws to achieve basic security and order. Nobody is saying democratic govt's can't take on any wider role the voters want them to take on, but functions like the FBI are clearly a core govt role. But a govt which doesn't enforce basic order isn't a govt, by any example in the real world so far.

The purpose of the housing assistance does not in fact rest on the theory that it would be impossible to maintain order without it. There used to be no such subsidies. There was basic order. Practically everywhere, for centuries. The reason for those subsidies is a subjective judgement that it's a better, fairer society with those *subsidies* than without them. It's quite easy to distinguish from the FBI, if we're not being obtuse. Also, arguments about how revenue should be raised to perform core govt functions (taxing one group or region v another based on how much the govt performs that core function for their specific benefit) is not the same as a real debate as to what is or is not a core govt function.

Then once again there are economic activities which might be undertaken privately or publicly (again US ATC is public, Canada's is privatized) as shown by real world examples of each (there's no reason to waste time evaluating theories like privatizing the FBI of which there are no real world examples). Those efforts are not themselves subsidies Often they contain an element of subsidy as actually implemented, but their proponents almost always deny that or claim it's only temporary. Because once you admit subsidy is an integral part of the implementation, it's hard to address arguments that the subsidy part should just be broken off and done separately (eg. people in expensive to deliver rural areas could get $'s to pay the higher prices a private postal organization would charge in those areas to cover their costs)...because basically everyone realizes at some level that conducting an economic activity via govt because govt can do it better is not the same thing as a subsidy.

Last edited by Corry El; 11-21-2019 at 01:27 PM.
  #43  
Old 11-21-2019, 03:15 PM
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Again I think that lumps things together ...

The core role of govts is to make and enforce laws to achieve basic security and order. ...
Ok, I concede you can define a core mission for government of obvious goals and then say for that they can spend without breaking even - peace, order and good government was I believe the goal of British parliamentary governments.

So laws and law enforcement are things a government would do without hope of direct reimbursement. Presumably this includes enforcing the tax laws and the border laws, regulating the airwaves and traffic laws, etc. We can add defence and the minutiae of government - having offices for the administration and legislature, printing laws (or contracting to print them), etc.

until recently, welfare was the problem of Church organizations and charities, not the government.

the privatized ATC is a prime example of "user pays". You want to fly in controlled airspace, you pay for the privilege on a scale based approximately on resources used. Airlines pay bigly, but for small planes there should be an appreciable cost too.

the post office is a grey area. For ATC, for example, they might charge by the number of landings, the miles inside ATC airspace, or some such criteria - because putting a metering process such as "how many minutes did you talk to ATC?" and allocating costs - is not worth the complexity. For some such services, you get to a point where metering costs is more expensive than the actual service. But the post office - countries existed for centuries without one. It is a convenience and an aid to commerce, like roads, canals, subsidized housing and legal aid. It is not necessary for the core function of government, unless we add delivering mail to their mission statement.

The post office falls under the category of natural monopoly. Like land line phone systems, electricity, and public roads, it makes no sense to have two or more parallel systems. Logically, governments should either run these or franchise them out. The "no handouts" rule would suggest such services should break even.

Then you can debate whether mandating a fee structure is in effect a subsidy? If the government forces XYZ Cable to charge more for urban customers so rural customers don't have to pay a fortune - it's still government mandated assistance - just from cable subscribers, not the taxpaying public. Depends on your definition of government assistance. If it's mandated by the government but not from the taxpayer, is it still "government assistance"?

Which means, we can go whole hog libertarian on the economy, or recognize some support is required for a civilized existence. Everyone says "get rid of wasted subsidies" but then declares their pet subsidy is money well spent. tax breaks encourage (some) business. Infrastructure attracts business. Welfare of various sorts means fewer desperate starving people roaming the streets and committing petty crimes.

But how much would the economy shrink? It's all handwaving, but the start on an answer would be to figure out how much is going out as subsidies and where the money would go otherwise. But if by your definition 10% of government spending is subsidies, let's say, then there would be 10% less spending by government. what replaces it? One of the bizarre things about America, to a Canadian, is all these fund-raisers for poor sick kids and such. Nobody need to beg for the cost of a liver transplant in Canada, medical bills are covered. So some hypothetical money saved by the government would be raised in other ways, it still comes out of the pockets of taxpayers - or at least the generous ones.
  #44  
Old 11-21-2019, 03:34 PM
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The post office falls under the category of natural monopoly. Like land line phone systems, electricity, and public roads, it makes no sense to have two or more parallel systems. Logically, governments should either run these or franchise them out. The "no handouts" rule would suggest such services should break even.
The PO already has competition - UPS, FedEx, OnTrack to name but a few. All that's needed is to allow them to carry mail as well as parcels; maybe bid for a district or something. I am not saying that is desirable, just that it's possible.

Last edited by bob++; 11-21-2019 at 03:35 PM.
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