Better than raising the min wage

[moda0306]

Decent article by Warren Buffett, claiming that an Earned Income Tax Credit would be better than raising the min wage.  My opinion is that the first step should be elimination of the regressive FICA tax for low wage earners.  I always prefer a tax break for the poor rather than credits, if possible. 

The remedy usually proposed for this mismatch is education. Indeed, a top-notch school system available to all is hugely important. But even with the finest educational system in the world, a significant portion of the population will continue, in a nation of great abundance, to earn no more than a bare subsistence.

To see why that is true, imagine we lived in a sports-based economy. In such a marketplace, I would be a flop. You could supply me with the world’s best instruction, and I could endlessly strive to improve my skills. But, alas, on the gridiron or basketball court I would never command even a minimum wage. The brutal truth is that an advanced economic system, whether it be geared to physical or mental skills, will leave a great many people behind.

http://www.wsj.com/articles/better-than ... 1432249927

I actually disagree with this... though I haven't dove into the economics of either of these with any kind of uber-analysis.

The EITC phases out over income... which is a HUGE part of the problem of our current government help for the lower classes, IMO... Rather than being a given level of broad-based support, it is a carrot that goes away as your income grows.  The "effective marginal tax rate" of poor folks is actually alarmingly high when you take into consideration all the benefit they lose as they earn more income.

A minimum wage hike raises the floor on an hour of work for everyone.  While the economics of this are double-sided in some ways, it at least raises the general floor, and therefore raises the steps above that, as well.  There's far-less of a moral hazard with a minimum wage hike than creating yet another disappearing program for poor folks trying to not be poor, anymore.

This is moda's "quick take."  I've hardly taken any of this to a spreadsheet or have any sources of deep analysis.  I'm just combining what I think I tend to know about 1) minimum wage economics, and 2) the economics of our disappearing-as-you-earn-more safety-net programs.

If he'd advocated for a citizen's dividend, then we'd be talking!

[moda0306]

Desert,

As with anything, a "citizen's dividend" can probably built a hundred different ways, but for most people advocating for it it's an adoptions of a mindset that in-stead (or on top of) all our random government safety-net programs, we simply give EVERYONE in the country a certain amount of money every month simply for being a citizen.  Usually this is a fundamental citizen right, so it doesn't phase-out over income.

So essentially it's far-more simple than administering a bunch of programs that phase out, arguably much more fair or at least doesn't result in all the social animosity of our current welfare state where only "those people" get "welfare."

It also eliminates a lot of the "moral hazard" associated with having benefits phase-out as you earn more.

Now I still think catastrophic risk protections like universal healthcare probably need to be maintained, and perhaps higher dividends for families than for single folks with no kids, but for the most part, this solves a ton of the bullsh!t if you ask me.



With regards to less FICA taxes, that's essentially what the EITC is... I'm quite sure that the EITC is actually designed around "how many FICA taxes are you paying in??  Ok, here's some/all of it back."  Remember, if you include the employer portion, FICA/Medicare make up about 15% of every dollar an employee earns from the first dollar.  I'm not about to lose my mind and call this criminal or anything (they get a substantial benefit at old age for this pay-in), but this makes up a MASSIVE portion of taxes paid-in.

I think that in 2009, one of the simplest ways to stimulate the economy in a "bi-partisan" way would have been a payroll-tax holiday for both employers and employees.  Republicans would have looked like idiots opposing such an awesome tax break, and it wouldn't have required any more tax forms for folks.  It would have had a supply-side element and a demand-side, as opposed to all the depreciation supply-side stuff the gov't does that IMO isn't NEARLY as useful at getting people higher paychecks and lowering the payroll tax overhead % of every employee you bring on.

Personally, today rather than FICA changes that complicate the tax, I'd rather have it lowered generally but apply to ALL income, rather than avoid every plutocratic form of income and only apply to earned wages.  Back in the 1970's, earning wages was actually more tax-efficient than earning income through investment/passive means (tax rates were capped on ordinary income, but up-to 70%-range for investment income).  Today, it's hugely different.  And having various rates for various types of income is one of the largest sources of wasted $$'s and economic output on preparing/planning around taxes in this day and age.


But either way, I think anyone talking about this stuff is good... even if they're wrong on some stuff.

[Stewardship]

or at least doesn't result in all the social animosity of our current welfare state where only "those people" get "welfare."

It also eliminates a lot of the "moral hazard" associated with having benefits phase-out as you earn more.

Until taxpayers realize that they're the ones footing the bill.

[craigr]

Warren Buffett misses the main issue because he profits immensely from missing it: Immigration.

If you want to boost minimum wages:

1) Stop importing millions of cheap labor workers each year illegally and legally that push down wages across the board, but espeically for those working minimum wage jobs.
2) Punish all employers anywhere that hire illegal labor with stiff fines and jail time.
3) Cut off the H1B spigot that is flooding the high tech market as well with cheap labor depressing wages of middle Americans in technology fields.

But doing the above goes against current U.S. business interests and those interested in expanding government, so it won't happen. This in light of the fact that the current earned income tax credit is being abused by illegals already. Plus, giving away free money won't help if you have three illegals waiting in the wings to work your job for cash under the table while you are required to pay taxes and collect only minimum wage. There is no incentive for a company to pay more when they've got three guys willing to do your job and won't report them for abusive employment practices.

Don't believe anything you read in the U.S. press about wages that doesn't mention the word "Immigration" in big fat bold letters during the lead in. Everything about the issue comes down to simple supply and demand. A surplus of workers willing to work for dirt cheap means you are not going to get higher wages. The fact that Buffett doesn't mention this means he's either a flaming idiot, or is making a ton of money off the situation. Which does everyone think it is?

[moda0306]

Craig,

We still have the rest of the world to compete with that's going to drive jobs out of the country if we try to keep wages too high.  I'm not saying immigration isn't a decent part of it, but a huge piece of all this is that we're now competing on a world stage for manufacturing labor.

Less immigrants here offering to work for $6 per hour, and more in Mexico offering to work for $3 per hour are all threats to our wage level in the U.S.  Just in different industries.

[Pointedstick]

The really awkward thing about immigration is that it shows how many foreigners can economically outcompete natural-born Americans. Asian immigrants and their children roundly outperform most everyone except for Jews when it comes to college enrollment and placement in high-status jobs. Hispanics and their children have taken over the construction and labor trades because they're willing to work harder, longer, and for less money than everyone else.

Maybe we should welcome the fact that these newcomers are improving the economic gene pool, on average.

[craigr]

Everyone is welcome to believe what they want about the foreign competition excuses for mass immigration, but the reality is that it's all about cheap labor and always has been for U.S. business interests. The democrats also "benefit" because they get a very large voting bloc that will demand more government services into the future which will consolidate their power. They ain't importing libertarians after all!

There are ways to deal with foreign competition that doesn't involve outsourcing everything that moves, and then importing cheap labor to replace the jobs you couldn't outsource and compete against the native population. This is the current U.S. plan and I predict serious social upheaval eventually from it.

[barrett]

This post is going to veer a bit but why is it that after eight winters here in CT we have only had one kid knock on our door and ask if we wanted to have our driveway shoveled? It happens that I like clearing snow but that is irrelevant to my point. When I was a kid in PA (1960s), we used to look at every snowfall as a money-making opportunity. There were invariably other kids out offering their services and we had to learn quickly about cutting prices, but not so far that doing the work just wasn't a worthwhile exchange for our time and effort.

As a side note to my side note, the businesses of cutting grass and snow clearing are now done by adults with fancy machines. Are young people just more averse (make that totally averse) to doing physical labor? I know that is the standard explanation when I raise this question, but is it a complete answer or am I missing something?

The aforementioned adults are able to get $40 to $50 for cutting a quarter of an acre of grass. Where is the cheap labor (legal or illegal) in this instance? Do the laws of economics not apply when it snows or when the grass gets long?

[iwealth]

Technology is pulling these kids in early, especially if their parents have the means to provide the tools. They may not care for yard work, but they aren't necessarily sitting around playing video games all day. They have blogs, large social networks, Youtube channels, they are learning how to code, and if they aren't already making money online, the seeds are being planted.

And yeah, plenty of kids are spoiled. Snow is cold. Yuck.

[barrett]

My take: If you live in a nice area, most kids are too spoiled to work a manual labor job for peanuts.

And if you live in a crappy area, there's no grass to cut and nobody cares if the damn snow gets cleared... Hmm, maybe. The thing is that we are in a middle-class neighborhood. Or let's just say that lots of people do their own yard work & snow clearing but there are those who hire that work out. There are adults who will do the work, and from what I can tell most are citizens (with maybe an illegal alien helper).

Ah, just saw your post, iwealth. Yeah, not sure how many of the kids who are NOT offering to shovel our driveway are actually doing anything so productive as learning to code. But maybe I am passing over into the time of life when grousing about the younger generation is my go to reaction.

[iwealth]

And if you live in a crappy area, there's no grass to cut and nobody cares if the damn snow gets cleared... Hmm, maybe. The thing is that we are in a middle-class neighborhood. Or let's just say that lots of people do their own yard work & snow clearing but there are those who hire that work out. There are adults who will do the work, and from what I can tell most are citizens (with maybe an illegal alien helper).

Ah, just saw your post, iwealth. Yeah, not sure how many of the kids who are NOT offering to shovel our driveway are actually doing anything so productive as learning to code. But maybe I am passing over into the time of life when grousing about the younger generation is my go to reaction.

Not to mention parents are much more protective over their children nowadays, even teenagers. They'd rather pay an allowance than allow their children to knock on doors. I guess it depends on the neighborhood and how well everyone gets along.

And maybe business has dried up a bit...from the perspective of the homeowner who needs a driveway shoveled, how many are willing to take the risk that a child gets hurt on their property?

[Pointedstick]

Technology is pulling these kids in early, especially if their parents have the means to provide the tools. They may not care for yard work, but they aren't necessarily sitting around playing video games all day. They have blogs, large social networks, Youtube channels, they are learning how to code, and if they aren't already making money online, the seeds are being planted.

And yeah, plenty of kids are spoiled. Snow is cold. Yuck.

The bright and entrepreneurial ones, sure. So it may well be the same set of kids; there's much more opportunity to build your future online than mowing lawns for $10.

But as for the rest, I think it's largely true that spoiling, over-worried, overprotective, over-litigious, parents are to blame.

[barrett]

The bright and entrepreneurial ones, sure. So it may well be the same set of kids; there's much more opportunity to build your future online than mowing lawns for $10.

Been waiting for you to wake up out there in NM, PS. I think you are on to something. Though the going rate for lawns is way higher than $10, you are probably right that the kids who were motivated to shovel and cut 40 years ago are now likely indoors being productive.

[Libertarian666]

The really awkward thing about immigration is that it shows how many foreigners can economically outcompete natural-born Americans. Asian immigrants and their children roundly outperform most everyone except for Jews when it comes to college enrollment and placement in high-status jobs. Hispanics and their children have taken over the construction and labor trades because they're willing to work harder, longer, and for less money than everyone else.

Maybe we should welcome the fact that these newcomers are improving the economic gene pool, on average.

I have read somewhere that if the Ivies went solely by academic achievement and SATs, almost the only students would be Asians, homeschoolers and Jews, so they have adopted quotas for those groups.

I don't have a citation, so this may not be precisely accurate, but I believe it is pretty close.

[Libertarian666]

or at least doesn't result in all the social animosity of our current welfare state where only "those people" get "welfare."

It also eliminates a lot of the "moral hazard" associated with having benefits phase-out as you earn more.

Until taxpayers realize that they're the ones footing the bill.

With the right propagandaexplanation, that won't happen for a long time!

[moda0306]

or at least doesn't result in all the social animosity of our current welfare state where only "those people" get "welfare."

It also eliminates a lot of the "moral hazard" associated with having benefits phase-out as you earn more.

Until taxpayers realize that they're the ones footing the bill.

With the right propagandaexplanation, that won't happen for a long time!

Most people don't really care about footing the bill... they just care about how it makes them feel.  If they feel like benefits are only going to "those people," then they care.  If everyone in the country is getting a check for $400 per month, they don't care as much because it FEELS more fair.

For instance, our country is willing to spend a TON of money on war that it wouldn't on any other thing (think post-depression deficit economics vs post-Pearl-Harbor deficit economics).  If you run deficits that appeal to people's tribal sensibilities, they're all for it.  If you run deficits in an effort that runs inconsistent with those tribalist sensibilities, they start getting upset.

But everyone has propaganda, including anarchists and capitalists.  In the world of actually doing things in a way that's palateable for people is useful, I'm willing to give credence to it if the ultimate result is beneficial to some likely alternative and lies aren't being told.

[Libertarian666]

Until taxpayers realize that they're the ones footing the bill.

With the right propagandaexplanation, that won't happen for a long time!

Most people don't really care about footing the bill... they just care about how it makes them feel.  If they feel like benefits are only going to "those people," then they care.  If everyone in the country is getting a check for $400 per month, they don't care as much because it FEELS more fair.

For instance, our country is willing to spend a TON of money on war that it wouldn't on any other thing (think post-depression deficit economics vs post-Pearl-Harbor deficit economics).  If you run deficits that appeal to people's tribal sensibilities, they're all for it.  If you run deficits in an effort that runs inconsistent with those tribalist sensibilities, they start getting upset.

But everyone has propaganda, including anarchists and capitalists.  In the world of actually doing things in a way that's palateable for people is useful, I'm willing to give credence to it if the ultimate result is beneficial to some likely alternative and lies aren't being told.

I'm fine with that... because your last clause eliminates every government program.

[moda0306]

With the right propagandaexplanation, that won't happen for a long time!

Most people don't really care about footing the bill... they just care about how it makes them feel.  If they feel like benefits are only going to "those people," then they care.  If everyone in the country is getting a check for $400 per month, they don't care as much because it FEELS more fair.

For instance, our country is willing to spend a TON of money on war that it wouldn't on any other thing (think post-depression deficit economics vs post-Pearl-Harbor deficit economics).  If you run deficits that appeal to people's tribal sensibilities, they're all for it.  If you run deficits in an effort that runs inconsistent with those tribalist sensibilities, they start getting upset.

But everyone has propaganda, including anarchists and capitalists.  In the world of actually doing things in a way that's palateable for people is useful, I'm willing to give credence to it if the ultimate result is beneficial to some likely alternative and lies aren't being told.

I'm fine with that... because your last clause eliminates every government program.

tech,

In your view, perhaps.  But the vast majority of people see the inherent flaws with having NO government (or what is, ostensibly, no government), and that those flaws are far larger than those the government programs produce.

Obviously people are free to disagree here, but I have yet to see a good argument that abolishing what people think of as government would result in positive utilitarian results for most folks (the closest one commits the fallacy of composition, where it claims that a society where every individual seeks his maximum happiness will itself experience maximum happiness).  I have to think that anarcho-capitalists make up an extremely tiny portion of the population.  Now I don't put much credit on popularity of ethical or political ideas, but I do think they say something about our personal preferences.  Do you ever wonder why that is... that anarcho-capitalists are so rare?

[Libertarian666]

Most people don't really care about footing the bill... they just care about how it makes them feel.  If they feel like benefits are only going to "those people," then they care.  If everyone in the country is getting a check for $400 per month, they don't care as much because it FEELS more fair.

For instance, our country is willing to spend a TON of money on war that it wouldn't on any other thing (think post-depression deficit economics vs post-Pearl-Harbor deficit economics).  If you run deficits that appeal to people's tribal sensibilities, they're all for it.  If you run deficits in an effort that runs inconsistent with those tribalist sensibilities, they start getting upset.

But everyone has propaganda, including anarchists and capitalists.  In the world of actually doing things in a way that's palateable for people is useful, I'm willing to give credence to it if the ultimate result is beneficial to some likely alternative and lies aren't being told.

I'm fine with that... because your last clause eliminates every government program.

tech,

In your view, perhaps.  But the vast majority of people see the inherent flaws with having NO government (or what is, ostensibly, no government), and that those flaws are far larger than those the government programs produce.

Obviously people are free to disagree here, but I have yet to see a good argument that abolishing what people think of as government would result in positive utilitarian results for most folks (the closest one commits the fallacy of composition, where it claims that a society where every individual seeks his maximum happiness will itself experience maximum happiness).  I have to think that anarcho-capitalists make up an extremely tiny portion of the population.  Now I don't put much credit on popularity of ethical or political ideas, but I do think they say something about our personal preferences.  Do you ever wonder why that is... that anarcho-capitalists are so rare?

The last clause I was referring to was "lies aren't being told". There is no government program that can pass that test.

As for why there are so few anarcho-capitalists? Of course they are a persecuted minority in almost every country, but why is that? My guess is that most people are unwilling to take responsibility for their actions and want someone else to blame for their problems.

Which is fine with me, as long as they are willing not to try to make others pay for their mistakes.

Oh, wait...

[MachineGhost]

As for why there are so few anarcho-capitalists? Of course they are a persecuted minority in almost every country, but why is that? My guess is that most people are unwilling to take responsibility for their actions and want someone else to blame for their problems

You won't have much, if any, defense in your anarchy when your fellow neighbor on the island decides to be weak and give in to the path of least resistance and exploit you.  Whoever does it first to each other, wins!  Now multiply that by an order of magnitude.

And you're going to be happy with that?  Only a masochist would.

[Stewardship]

You won't have much, if any, defense in your anarchy when your fellow neighbor on the island decides to be weak and give in to the path of least resistance and exploit you.  Whoever does it first to each other, wins!  Now multiply that by an order of magnitude.

And you're going to be happy with that?  Only a masochist would.

Meh, that sounds more like statism than anarchy.  Fear not!

[Libertarian666]

As for why there are so few anarcho-capitalists? Of course they are a persecuted minority in almost every country, but why is that? My guess is that most people are unwilling to take responsibility for their actions and want someone else to blame for their problems

You won't have much, if any, defense in your anarchy when your fellow neighbor on the island decides to be weak and give in to the path of least resistance and exploit you.  Whoever does it first to each other, wins!  Now multiply that by an order of magnitude.

And you're going to be happy with that?  Only a masochist would.

No, I would rely on the defense company I would have hired, precisely to prevent that.

[MachineGhost]

Meh, that sounds more like statism than anarchy.  Fear not!

$64K Question: Is the Law of the Jungle statism or is it anarchy?

[MachineGhost]

No, I would rely on the defense company I would have hired, precisely to prevent that.

Oh, so you're that kind of anarchist.  What's your plan to prevent the private defense company from engaging in crony capitalism and starting a protection racket?  After all, 1 vote by withholding your paycheck is pretty inconsequential when you're fighting against a business gobbling up all the market share of its competitors into a de facto monopoly AND you cannot really withhold your paycheck anyway lest you become defenseless.  Do you plan on vesting your sovereign authority into a council ("government") to rule on such anti-trust issues?

[Libertarian666]

No, I would rely on the defense company I would have hired, precisely to prevent that.

Oh, so you're that kind of anarchist.  What's your plan to prevent the private defense company from engaging in crony capitalism and starting a protection racket?  After all, 1 vote by withholding your paycheck is pretty inconsequential when you're fighting against a business gobbling up all the market share of its competitors into a de facto monopoly AND you cannot really withhold your paycheck anyway lest you become defenseless.  Do you plan on vesting your sovereign authority into a council ("government") to rule on such anti-trust issues?

Nothing... other than all the OTHER private defense companies, who would all be united against their businesses being destroyed by such a statist takeover, and the clients of both the one trying to take over (who don't want to be ruled by statists) and the clients of the other ones (who ALSO don't want to be ruled by statists); in other words, everyone else other than the owners of the private defense company in question. Since there is no natural monopoly on defense (contrary to the claims of statists everywhere), the balance of power should not be a problem.