I go away for a week to eat BBQ in North Carolina and look what happens. Tyler, with his very good brain, dives into the political swimming pool that is already more than half empty. Can't we go back to discussions of savings vs. capital and the definition of the gold standard?

Social Security payments go directly to the people who had at least 40 quarters of payroll employment or self-employment tax payments; but it is unfair to call them "transfer payments". The gross payouts are simply the return of the money paid in plus 1% per year. We can debate whether or not this is a munificent reward to geezers in a ZIRP environment; but using the label "entitlement" hardly seems appropriate. People were legally required to pay the taxes into a Trust Fund that Congress dedicated to old age and disability payments; if the Treasury's bondholders are entitled to get their money back, it is not unreasonable for Social Security beneficiaries to expect the same treatment. In a steady state world where the Federal government matched revenues against expenditures and there was no net increase in debt, the returns of and on capital - i.e. Social Security payments, with administrative costs - and interest on the debt (excluding debt held by the government itself) are 25.88% of the 2011 budget.

The actual "transfer payments" - Medicare and Medicaid - are 26.08%. However, to argue, as Tyler does, that these payment represent "net largess" to old people is more than a bit of a stretch. None of the payments go old people except for the doctors who are still practicing. The money goes to hospitals, nursing homes and medical practices and the bureaucracy that regulates them. It is not a lie to say that these payments represent a net benefit to the patients; but the money does not go to them. Just as the defense contractors and bureaucracy and non-combatants swallow 90%+ of the costs of "Defense" even in a time of war, the academic medical service complex are the people who actually get the cash we old folks are supposed to feel guilty about. BTW, the Department of Defense is now in 2nd place in transfer payments in the name of the greater good; it receives 20.13% of the 2011 budget.

The real theater here is in the notion that these extraordinary expenditures have net benefits anywhere near their costs. It is what the public school teacher unions do when they argue that the salaries and bonuses paid to them are an "investment" (sic) in America's future.

Tyler is also wrong about the demographics of American voting. We "old white people" (sic) have shifted our preferences towards the Republicans by a grand total of 4% over the past 2 elections; more than 43% of us are still gullible enough to believe Nancy Pelosi has "saved Medicare". It is only in academia and among black-skinned voters that the "homogeneity" Tyler attributes to "groups" has come true; they vote 90%+ for Democrats.

Sam Marx writes:

As insane as it is, 50% of the potential taxpayers pay no significant income tax.

Stefan Jovanovich replies: 

Nor can they. The lower half of all people who earn money in the United States through wages or self-employed work have family net worths of less than $30,000 and a net savings rate of 0%. They are poor even if they think of themselves as "middle class". The nation's tax revenues, excluding employment taxes, come from the upper half because they are the only people who have the cash. If the Left has a massive hypocrisy about the net benefits from government expenditure, the Right has one about the capacity of the losers in our economy to pay up. Conservatives are right to complain that the Earned Income Tax Credit is largely a scam; but they are as blind as any professor to the reality of where the money goes. It goes to the income tax preparers– whose fees can easily net as much as half of the refunds received - or at least they did in the good old days when I had friends in the retail tax farming biz.





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