Phil Gramm and John Early write,
if you count all government transfers (minus administrative costs) as income to the recipient household, reduce household income by taxes paid, and correct for two major discontinuities in the time-series data on income inequality that were caused solely by changes in Census Bureau data-collection methods, the claim that income inequality is growing on a secular basis collapses. Not only is income inequality in America not growing, it is lower today than it was 50 years ago.
On a pre-tax basis, income inequality has increased. But if their claim is correct, then the U.S. addresses income inequality the same way that Denmark does–with taxes and transfers.
Seeing inequality as a “problem” that needs to be addressed makes successful people into villains, and feel guilty about their success. In time, this will turn the country into an idiocracy, where people are proud to be, or appear, thick and do the barest minimum needed to be citizens.
The money quote was
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Almost as if we had a basic income program for at least a fifth of the population, and it was almost all the income they had.
J.W. Mason’s position that incentives don’t really matter much (from a few posts ago) doesn’t look so good anymore.
As if it ever looked good.
It never seems to register with libertarian/free-market types, such as our gracious host, that open borders increases this pathology and further politically entrenches it.
Open borders isn’t libertarian. Violates freedom of association. Conclusion: libertarians aren’t libertarian. I unironically buy this conclusion.
It’s easier to see from a plain right/left wing framework. The right wing is responsibility and the left wing is irresponsibility.
If an immigrant wants to move into your neighbourhood and that’s a bad idea, who is held responsible for the negative effects?
When an immigrant commits a crime, who pays for it? The person who imported the immigrant, or whoever happens to be nearby? If an immigrant goes on welfare, who pays for it? The person who imported the immigrant, or society at large? Etc.
Nobody is held responsible => it is not responsible => firmly left wing.
An immigration scheme that is in fact classically liberal would be some sort of explicit sponsorship. Also neighbourhoods would have to have specific owners, so they could accept or reject the immigrant. In this way, you don’t have to worry about what the rest of the country is doing. Costs are internalized rather than externalized. You can mind your own business.
Closed borders most certainly violate freedom of association.
And of course you are certainly not in a “mind your own business” frame of mind, when you are busy looking to stop your neighbors from employing, housing or being foreigners.
What you propose is that each region (locality, neighborhood, country) have a specific owner. It does: that owner is called the “government”.
Classical liberalism is a philosophy by which that government would decide how to run its territory. It advocates minimal intervention as a guideline, without denying that intervention is often necessary.
“Open borders” has become associated with classical liberalism because economists find that it is often in the government’s interest to allow more immigration than the local residents would like (indeed, it is often in the government’s interest to allow more freedom and responsibility than most local residents would like – liberty is not very popular). Local residents are motivated to exclude outsiders for various reasons, from tribalism to a misunderstanding of economics (the “take our jobs” fallacy, for example), to concerns about externalities from admitting outsiders not likely to comply with bourgeois norms.
But, libertarians understand that governments may have reason to limit access; you can be libertarian and accept that full open borders might be a problem. If you genuinely oppose all government regulation you are an anarchist, which is a different thing.
Sad but true.
“misunderstanding of economics”
They understand IQ and the Wealth of Nations and Hive Mind pretty well. You don’t because your an ideologue.
If only governments can own neighbourhoods, can only governments own houses? What about cars? What about wallets? What about people? If there’s a difference, what is it?
If I am not in the business of preventing my neighbours from associating with foreigners, does your argument collapse? I regret having to say this looks like projection. You care whether folk have bad reasons for what they want. I don’t. I think if you want to disinvite someone from your house, it’s fine to do it for any reason or no reason at all, and you clearly disagree.
If they have bad reasons, couldn’t their mind be changed by better information? Shouldn’t you be able to confidently use this information rather than throwing around various mood accusations?
John Cochrane has more to say here:
https://johnhcochrane.blogspot.com/2021/03/defining-inequality-so-it-cant-be-fixed.html
To argue that inequality has grown and no inequality growth is flat and perhaps decreasing, misses the crucial questions of “What is an appropriate level of inequality?” and “How do we get there without damaging work incentives?” Until those questions are addressed explicitly we will have an ongoing unproductive quarrel.
Most transfer payments come in the form of services provided by (usually left voting) college graduates. These services are something that the poor will certainly accept if it costs them nothing, but it’s not clear they value these services at anywhere near the price of their inputs.
Also, there are thing the poor can’t buy because they themselves would trash it if they got it.
Did you mean own when you wrote buy in that last sentence? Or is there some item one can’t purchase because of future behavior? Honestly asking.
Even if you bought some underclass family a house in a nice neighborhood, they would probably trash it. They would have the same net-do-well friends coming around causing trouble. The “good schools” wouldn’t have that much value to them, and as more of their kind moved in they wouldn’t be good anymore.
I’ve seen this up close with Section 8 housing before. You can’t buy bad neighbors the amenity of good neighbors at any price. Only good neighbors can attract good neighboors.
> Most transfer payments come in the form of services provided by (usually left voting) college graduates.
That would describe Medicaid, but overwhelming majority of remaining transfer payments cannot be described this way. TANF, SNAP, EITC, SSI, SSDI, housing assistance: none of these are “services provided by college gradutes”. So, where does your figure come from?
Medicare and Medicaid are the biggest transfer and fastest growing outlays in the budget. In any budget projection were we face a solvency crisis, they are the cause.
They also provide more benefits the poorer you get. The copay on Medicaid or LIS Medicare is basically $0 on everything.
Medical services are provided by educated professionals.
I count education as a transfer payment as well. The poor generally don’t pay enough in property taxes to fund their own schools and rely on others and state/federal backstop.
Education is provided by educated professionals.
So I would say that the biggest and fastest growing budget items are all services provided by educated professionals. We could even through in other things like police, social workers, etc that the poor aren’t funding themselves through taxes.
How useful any of these services are to the poor is in doubt, but when something is free to you the bar is pretty low.
Denmark is far superior to the USA in every objective category. Unlike in the USA, the tax system there is broadly based and not punitive to a relatively small range of industries :
“The corporate tax rate in Denmark is 22%, placing Denmark below the average OECD and EU level.
Uniquely among the Nordic countries, Denmark has no double taxation for Danish companies with branches abroad. As a result, Greater Copenhagen is a highly attractive location for establishing a Nordic headquarters and for Scandinavian expansion.
Denmark offers highly competitive labour costs. Employers in Denmark pay the world’s lowest social contribution rate; less than one percent per employee per year (maximum 1,350 Euro), including pension schemes, healthcare insurance and holiday pay.
Attractive tax schemes for foreign researchers and key employees is also among the tax advantages in Denmark.
Key tax advantages:
* Corporate tax rate of 22%.
* Full tax rebate of R&D expenses.
* Full tax rebate of interest arising from acquisitions.
* Corporate tax is paid after deduction of expenses.
* No double taxation for Danish companies with branches abroad.
* No additional local tax, franchise tax or net wealth tax.
* No capital duty or share transfer duty.
* Unlimited loss carry forward.
* Attractive holding company tax scheme.
* Special expat tax scheme for foreign researchers and key employees.
* Employer-funded employee benefit costs are the lowest in Europe.”
https://www.copcap.com/set-up-a-business/taxation
There is no minimum wage.
And unemployment was only 4.6 percent in February. https://tradingeconomics.com/denmark/unemployment-rate
The USA would be lucky to perform half so well.
Denmark is like a small Beverly Hills country. Rich and comfortable, but lazy and indifferent to their ability to help others. Low growth, small population, and little innovation (i.e. no world changing corporations) means it has few positive spillovers. A US run like the majority of the EU would mean much slower growth and no ability to handle new challenges quickly and well. The US cannot and must not pattern itself after a small country.
However, it does well by limiting immigration to help it stay rich and somewhat productive, which the US could adopt if it were not so foolish and desirous of becoming a slightly wealthier version of Brazil.