Sunday, January 07, 2007

Murray's end to motley entitlements

I've finally gotten around to reading Charles Murray's In Our Hands, an endeavor long overdue. Although I've only churned through the introduction, his refreshing candor about innate differences between people in terms of ability, attractiveness, charm, etc has solidified a new maxim to live by: If an author dealing with social policy doesn't acknowledge what Darwin made clear, he's not worth the time. That's not to sound close-minded, and if the writing dealt explicitly with trying to refute the existence of meaningful human biodiversity, I'd consider giving it a whirl. But if blank-slatism is simply assumed ipse dixit, forget it.

Recall that Murray's plan is to consolidate the profligate and inefficient governmental wealth transfers into direct cash transfers to the citizenry via funds wired to personal bank accounts at $10,000 per person annually, phased out to a minimum $5,000 when income exceeds $50,000.
Combine this with a scrapping of the federal income tax in favor of a national sales tax, and we deracinate the economic advantages of using illegal unskilled labor. Down $10,000 to begin with and without free healthcare and other governmental services to enjoy, it will be much more difficult for illegals to accept wages lower than the going rate at the bottom of the native pecking order. And being subject to the same taxes as the American citizen (as taxes are embedded into the price of goods and services, not in income that may go unreported), third-world Hispanic menials lose the unfair gross-equals-net advantage many of them currently enjoy.

While $10,000 per person over the age of 21 raises the potential problem of disincentive to work, it is superior to regressive benefits like the EITC and other public assistance programs that lead low income earners to choose between minimum wage occupations and entitlement benefits. This way working even part-time at a low wage wouldn't compromise the transfer. And of course jobs paying such low wages add virtually nothing to total economic activity or to the US' global economic competitiveness anyway.

Since the $10,000 stipend will be received by individuals irrespective of habitation status, it'll encourage marriage and other more efficient living arrangements, allowing resources to be pooled. But without an added benefit for children, its effect on US fecundity may push us in an even more barren direction. On the other hand, by removing regressive benefits like the Child Tax Credit, it will likely have a moderately eugenic effect on procreation patterns.

An end to discretionary entitlement spending will mean an end to Medicare, and that means a drastic reduction in medical costs. Echoing the argument made frequently by Rush Limbaugh, if the government gives everyone full warranty car insurance, every minor malfunction down to a dim bulb in the glove compartment will lead to the vehicle being taken in!

With Social Security out of the picture, an opt-out retirement plan will be able to insure larger retirement cushions with less up-front costs (yeah, we can spend less and get more when the deadweight loss of government is removed--wealth creation isn't a zero-sum game).

One of the most fallacious arguments made in opposition to the private account push is the one claiming that said accounts run the risk of some people realizing a negative return, an unacceptable risk given that Social Security is supposed to be just that--guaranteed security. But as I pointed out at Parapundit when the issue was hot (and please don't read through most of what I wrote--lord have I progressed a lot in the last two years, not that it's saying much), historically, with a broad-based index fund, losing money is an impossibility.

If you'd have put $1,000 in the DJIA at the end of of '72 (when the market was at an all-time high prior to dropping by a quarter over the next half decade) and pulled it out upon retirement following 9/11 when the market was at a nadir, your annual return would still be just north of 7.4%. That's about the worst you could have done. The expected return on the money you put into a Social Security system that may not even be able to deliver on its paltry 'promises'? Less than 1.5%.

What if returns stagnate and the DJIA stalls? Well, if that happens, how the heck do you expect the current Social Security system to survive? If the DJIA approaches zero growth, the global economy is in deep recession and any unfunded governmental liabilities become utterly and irredeemably insolvent. In that case precious metals will be about the only thing to hold real value. The market will always beat (handily) the CPI and average wage growth over time.

I digress from Murray, having meant only to highlight the new maxim worth adhering to (as many probably already do).

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