Thursday, February 24, 2011

Unholy Debt

With the Federal government debt exceeding the total output of the entire US economy (the GDP), serious minded people are seriously concerned about the economic health of the country. Depending on inflation and interest rates, the interest payments on the debt could, by the end of the decade, exceed the total Federal budget of only a few years ago. The effect of such excessive government spending is to remove money from the private economy, keeping unemployment at unhealthy levels, nearly 10% now, and double that if you include the underemployed.

The same problem exists in the States where typical yearly deficits are in the billions of dollars, in excess of $20B in California. States are trying all kinds of tricks to balance their budgets, usually including borrowing tons of money if they can get it. Unfunded future liabilities for government retiree’s pensions and health care costs are impossible hurdles in many States. (In California it exceeds $500 Billion.)


Now church leaders are beginning to speak out about the immorality of massive debt. "America's growing debt is a not just a financial issue, it's a spiritual one," said Jerry Newcombe, of the Coral Ridge Ministries. "The Bible is very clear about the moral dangers of debt." The evangelical ministry has been sounding the alarm about the "monstrous debt burden" to its estimated 500,000 devotees through radio programs, print publications and its website.


Likewise, the Family Research Council has delivered "action alerts" about the debt to its network of 40,000 pastors. The Christian Coalition, Concerned Women for America, and the Faith and Freedom Coalition are also warning members that the deficit is reaching immoral proportions. ("National debt is new hot issue for evangelicals," by Daniel Burke, Religion News Service)


Generally, people are concerned about the effect on unemployment and the threat to long-term prosperity of historically high levels of spending and debt. Another, perhaps even greater, issue is the harmful effects on the targets of government largess. The sad state of New York welfare is a prime example.


New York’s Medicaid program covers nearly 5 million people, a quarter of the total population at a cost of $53 billion (combined federal and state money), more than any other state, even California, with twice as many enrollees. Think about that. One quarter of New York residents receive Medicaid, at a cost of over $10,000 per person.


Now Medicaid is supposed to be a last-resort safety net for those who do not receive medical care through their own or employee insurance or Medicare. Yet New York Medicaid covers parents who earn up to 150 percent of the federal poverty level and childless adults up to the poverty level. New York also provides optional benefits including prescription drugs, dental and vision care and even long-term care. (New York Times editorial, 2/19/11.) Quite the nice safety net! In addition to the Medicaid giveaway, this quarter of New York residents likely receive food, rent and energy subsidies, and pay no Federal or State income taxes. These 5 million people are effectively wards of the State.


So what about these millions of (mostly) able-bodied folks who receive welfare, food stamps, rent and energy subsidies, Medicaid, etc, and pay nothing at all for it? Do they feel good about it? Are they motivated to improve their lot? Daniel Patrick Moynihan, working for Lyndon Johnson in 1965, warned America about the self-destructive consequences of the Welfare State. Star Parker’s Uncle Sam’s Plantation exposed the personal tragedy of a young woman “chewed up and spit out by our country’s ruthless welfare system.” If you look at the many longitudinal studies of welfare recipients from the 1960s until today you find a dismal record of social improvement.


As Aristotle said 2500 years ago, “If you want to encourage something, reward it.” President Johnson’s war on Poverty has had the unintended consequences of “family breakdown and illegitimacy; cycles of dependency that transfer from one generation to the next; anger, despair and hopelessness. Judged by its results, the war on Poverty was more a War on the Poor.” (Jay Richards, Money, Greed and God)


This is the unholy Welfare State. It must be stopped.

Tuesday, February 15, 2011

Oh the Inanity!

I sometimes wonder if I can continue reading the New York Times. OK, I only read it at Equinox where it is free, and I use it to get my heart pumping. But the editorial and op-ed writers (excepting David Brooks) are so ideologically tilted as to overshadow the Leaning Tower of Pisa. One could make a career out of debunking the economic “wisdom” of Paul Krugman (whose answer to every question is more government spending) and the socio-political confusion of Bob Herbert.

On Feb 11, while the throngs celebrated in Cairo, Herbert wrote a piece called “When Democracy Weakens.” In it he mused: “I couldn’t help wondering about what is happening to democracy here in the United States. I think it’s on the ropes. We’re in serious danger of becoming a democracy in name only.”

I wondered what was going on in Bob’s head? Why is he so worried about America?


Herbert again: “So what we get in this democracy of ours are astounding and increasingly obscene tax breaks and other windfall benefits for the wealthiest, while the bought-and-paid-for politicians hack away at essential public services and the social safety net, saying we can’t afford them. Public employees across the country are walking the plank by the tens of thousands.”


There it is. Bob frets that the top tax rate is still “only” 36% and politicians, faced with a $14 trillion federal debt and a $1.6 trillion deficit this year, are looking to cut the budget. “We’re in serious danger of becoming a democracy in name only.”


Well, what about that? The dictionary definition of democracy is a “form of government in which all the people hold the ruling power either directly or through elected representatives.” It is generally agreed that democracies must guarantee “equality of rights, opportunity and treatment” through the rule of law and that includes the right to hold public office. By that definition there were exactly zero democracies in the world in 1900. Women did not get the vote until somewhat later. Today, however, there are 89 democracies in the world comprising 46% of the world population. That is remarkable progress!


Like all leftists, Herbert thinks of democracy primarily in economic terms. So what about the poor that he thinks are, somehow, disenfranchised? Overall, the typical American defined as poor by the government has a car, air conditioning, two color televisions, cable or satellite TV reception, a DVD player, and a stereo. In fact, 46% of all poor households actually own their own homes. As a group, America's poor are far from being chronically undernourished. The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle class children and, in most cases, is well above recommended norms.


Not one poor American is denied the right to vote or hold public office or equality under the law. And not one pays a single dollar in Federal income tax. Bob needs to stop the inanity and worry about what is really wrong with American culture.
There are two main reasons why American children are poor: Their parents don't work much, and fathers are absent from the home.


The typical poor family with children is supported by only 800 hours of work during a year. (16 hours of work per week) If total work in each family were raised to 2,000 hours per year, the equivalent of one adult working 40 hours per week, nearly 75% of poor children would be lifted out of official poverty.

Father absence is another major cause of child poverty. Nearly two thirds of poor children reside in single parent homes; each year, an additional 1.3 million children are born out of wedlock. If poor mothers married the fathers of their children, almost three quarters would immediately be lifted out of poverty.

Look to your community, Bob.