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…:dubious:
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.
Do you have a cite for the sequester money assertion?
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.
Welfare ended decades ago.
And Soc Sec is not welfare in any way shape or form.
I’d like to see that also. Because I am not clear on how this works -
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
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.
We still have various forms of assistance for the poor.
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.
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.
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.*
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.)
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.
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.
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.
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.
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?
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”.
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.)
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.
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.