Does It Matter?

It seems like we are obsessed, more than ever, with the idea that redistribution to provide a safety net for the less fortunate in society always generates costs greater than benefits.  When was the last time you heard a story or read an article about someone down on their luck who reluctantly applied to the "system" for help, received that help temporarily, got back on their feet, and left the system?  I cannot recall one.  However, I've heard stories from friends, relatives, and students of the "friend-of-a-friend" who is scamming the system, purposefully doing everything they can to remain on government assistance.  As a result, many are absolutely convinced that these government programs are a waste of money and should be eliminated. 

Why does everything seem to come down to this all-or-nothing option?  Are we incapable of reasoned analysis?  Of compromises that generate net benefits for society?  Or does the mere attempt to use reasoned analysis signal, to a seemingly growing number, of an effort by the intellectual elite to take one step closer to the socialistic revolution of our economic system?

In the article, "Moral Hazard: A Tempest-Tossed Idea," by Shaila Dewan in the NYT on 2/26, Dewan explains how the concept of moral hazard is now used to argue against any form of government assistance.  Most "safety net" programs that redistribute create incentives to engage in behaviors that result in added costs to society, moral hazard.  These costs should be minimized with well designed policy, but they can never be eliminated unless you eliminate the safety net.  Eliminating the safety net will cause even larger social and economic costs than providing a program where some individuals take advantage of others (as the article points out, the costs of moral hazard are likely to be overstated). 

So, does it matter? Does it matter if a social safety net (government redistribution) will cause moral hazard?  Or does it matter that we use reasoned analysis to offer help to the less fortunate and thus compromise on policy that generates greater net benefits for all of society?

Your share of the national debt = $135,000!

Tom Smith is running for Senate in PA.  I saw his commercial on TV this morning.  In the commercial, he states that each person's share of the national debt is $135,000 without any mention as to how he came up with that number.  I had never heard that number used before, so I went looking for the explanation.  I think I found it and wrote the following on Tom Smith's Facebook page regarding the statistic.  http://www.facebook.com/TomSmithForSenate

Mr. Smith,
First of all, thank you for your willingness to serve the public. I saw your TV spot today and viewed it again online. I also took a look at your position on the issues and agree with you in regard to term limits. I also agree that our national debt is a concern; however, I disagree with the way you state the problem in your commercial. I understand that the point of your commercial is to grab people’s attention but you don’t want to misrepresent the facts, right? If you misrepresent the facts and are called out to explain, some might wonder if you purposefully exaggerated the facts for political advantage or if you don’t understand these important issues which call into question your credentials for the job.

You state in the commercial that “everyone’s share” of the national debt is $135,000 but you don’t say who you consider everyone. Everyone would make most people think citizens. If your calculation represented citizens, then each citizen’s share of the national debt is around $49,120. The national debt = $15,355,198,335,393.66 (2/13/2012 – treasury.gov) and the estimated population of the US. = 312,602,730 (12/1/2011 – census.gov). Did you know that the average US citizen has a little over $50,000 of personal debt (mortgage+loans+credit cards) so combined, total debt obligations for each citizen are significantly lower than your number.

I’m assuming your number comes from taking the national debt and dividing it by the number of “individual” taxpayers who paid income tax? Therefore, you’re saying that only taxpaying Americans are unfortunate enough to be on the hook for the entire national debt. Really, is that true or does $135,000 sound a lot worse than $49,000?

Don’t you propose to significantly cut spending to reduce the debt? You would have to if you plan to lower taxes too. Maybe cut a little from Medicare, education, national defense, environmental protection, etc… don’t these policy decisions have the potential to negatively affect all citizens? Don’t all citizens share in the cost of the national debt? Kids don’t pay taxes so they’re not on the hook for the national debt? The poor? I guess you’re also planning to eliminate corporate taxes because your number cannot include corporations who pay taxes.

Again, I don’t disagree with you about the national debt being a growing problem and that decisions to reduce the debt will be difficult, $49,000 is still a lot of money. What I disagree with and find unacceptable of politicians, even politicians who claim "not" to be politicians like you, is their inability to explain the facts to the voters and their reliance on “the party’s” spin to exaggerate the issue for political advantage. You claim to be better than that.