There Is NO Free Lunch!

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Cosima___J
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There Is NO Free Lunch!

Post by Cosima___J » Wed Dec 29, 2010 11:45 am

OK, CMGers, I promise that this is the last thread I'll start for the rest of the week!!!!

But I continue to be exercised, troubled, dumb-founded by the economic situation we as a country have gotten ourselves into. I worry about what the results will be down the road (and not that far down the road). So here's another interesting article:


Thomas Sowell
Promises and Riots

Economists are the real "party of No." They keep saying that there is no such thing as a free lunch-- and politicians keep on getting elected by promising free lunches.

Such promises may seem to be kept, for a while. There are ways the government can juggle money around to make everything look OK, but it is only a matter of time before that money runs out and the ultimate reality hits, that there is no free lunch.

We are currently seeing what happens, in fierce riots raging in various countries in Europe, when the money runs out and the brutal truth is finally revealed, that there is no free lunch.

You cannot have generous welfare state laws that allow people to retire on government pensions while they are in their 50s, in an era when most people live decades longer.

In the United States, that kind of generosity exists mostly for members of state government employees' unions-- which is why some states are running out of money, and why the Obama administration is bailing them out, in the name of "stimulus."

Once you buy the idea that the government should be a sort of year-around Santa Claus, you have bought the kinds of consequences that follow.

The results are not pretty, as we can see on TV, in pictures of rioters in the streets, smashing and burning the property of innocent people, who had nothing to do with giving them unrealistic hopes of living off somebody else, or with the inevitable disappointing of those hopes with cutbacks on the giveaways.

Nothing is easier for politicians than to play Santa Claus by promising benefits, without mentioning the costs-- or lying about the costs and leaving it to future governments to figure out what to do when the money runs out.

In the United States, the biggest and longest-running scam of this sort is Social Security. Fulfilling all the promises that were made, as commitments in the law, would cost more money than Social Security has ever had.

This particular scam has kept going for generations by the fact that the first generation-- a small generation-- that paid into Social Security had its pensions paid by the money that the second and much bigger "baby boom" generation paid in.

What the first generation got back in benefits was far greater than what they themselves had paid in. It was something for nothing-- apparently.

This is the way a Ponzi scheme works, with the first wave of "investors" getting paid with the money paid in by the second wave. But, like Social Security, a Ponzi scheme creates no wealth but only an illusion that cannot last. That is why Mr. Ponzi was sent to prison. But politicians get re-elected for doing the same thing.

As the baby boomers begin to retire, and there are now fewer working people per retired person to pay for Social Security pensions, this scam is likewise headed for a rude revelation of reality-- and perhaps riots like those in Europe.

All the incentives are for politicians to do what they have done, namely to promise benefits without raising enough taxes to pay for them. That way, it looks like you are getting something for nothing.

When crunch time comes and politicians are either going to have to tell people the truth or raise taxes, the almost inevitable choice is to raise taxes. If the people think they are already taxed too much, then the taxes can be raised only for people designated as "the rich."

If "the rich" object, then demagogues can denounce them for their selfishness and "greed" for objecting to turning over ever-growing amounts of what they have earned to politicians.

Economists often make stronger objections than the high-income people themselves. That is because history has shown repeatedly that very high rates of taxation lead to all sorts of ways by which those very high rates of taxation do not have to be paid.

No matter how high the tax rates are, they do not bring in more revenue when many of the people subject to those tax rates do not in fact pay them. The scams inherent in welfare states are not only economically counterproductive, they turn group against group, straining the ties that hold a society together.

John F
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Location: Brooklyn, NY

Re: There Is NO Free Lunch!

Post by John F » Wed Dec 29, 2010 8:01 pm

I'd observe only that 50 is a normal age for a policeman or firefighter (or a soldier) to retire, after some 30 years of going into harm's way and risking life and health to serve and save us. We don't really want older men and women in those strenuous and stressful roles, do we? If Sowell means to include them among the "people [who] retire on government pensions while they are in their 50s," which indeed they are, then he should say so.
John Francis

Cosima___J
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Joined: Wed Jul 07, 2010 1:38 pm
Location: Georgia

Re: There Is NO Free Lunch!

Post by Cosima___J » Wed Dec 29, 2010 9:58 pm

I assumed he was talking about white collar employees.

dulcinea
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Re: There Is NO Free Lunch!

Post by dulcinea » Wed Dec 29, 2010 10:00 pm

How will the Thief-in-Chief now in charge in Puerto Rico explain away to the supporters of his kleptocracy that Uncle Sam's gullible generosity cannot be relied on any longer?
Let every thing that has breath praise the Lord! Alleluya!

John F
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Location: Brooklyn, NY

Re: There Is NO Free Lunch!

Post by John F » Thu Dec 30, 2010 4:52 am

He doesn't say so, does he? And soldiers are no less government employees than typists in the Pentagon.
John Francis

JackC
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Re: There Is NO Free Lunch!

Post by JackC » Thu Dec 30, 2010 2:29 pm

John F wrote:I'd observe only that 50 is a normal age for a policeman or firefighter (or a soldier) to retire, after some 30 years of going into harm's way and risking life and health to serve and save us. We don't really want older men and women in those strenuous and stressful roles, do we? If Sowell means to include them among the "people [who] retire on government pensions while they are in their 50s," which indeed they are, then he should say so.

I don't see any reason why policemen or firefighters can't and shouldn't work past 50. I know LOTS of people who are in better shape at 60 than many people at 50. Also, I have seen a LOT of out of shape policemen at age 50 and less-!! If it is REALLY a risk on the job, then maybe they could work in some other position on the force or in the fire department.

John F
Posts: 21076
Joined: Mon Mar 26, 2007 4:41 am
Location: Brooklyn, NY

Re: There Is NO Free Lunch!

Post by John F » Sun Jan 02, 2011 4:37 am

For those who believe that public sector workers are overcompensated, that this applies mainly to white collar workers (notably schoolteachers), and that they are getting a "free lunch":

January 1, 2011

Public Workers Facing Outrage as Budget Crises Grow
By MICHAEL POWELL

FLEMINGTON, N.J. — Ever since Marie Corfield’s confrontation with Gov. Chris Christie this fall over the state’s education cuts became a YouTube classic, she has received a stream of vituperative e-mails and Facebook postings.

“People I don’t even know are calling me horrible names,” said Ms. Corfield, an art teacher who had pleaded the case of struggling teachers. “The mantra is that the problem is the unions, the unions, the unions.”

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy. In California, New York, Michigan and New Jersey, states where public unions wield much power and the culture historically tends to be pro-labor, even longtime liberal political leaders have demanded concessions — wage freezes, benefit cuts and tougher work rules.

It is an angry conversation. Union chiefs, who sometimes persuaded members to take pension sweeteners in lieu of raises, are loath to surrender ground. Taxpayers are split between those who want cuts and those who hope that rising tax receipts might bring easier choices.

And a growing cadre of political leaders and municipal finance experts argue that much of the edifice of municipal and state finance is jury-rigged and, without new revenue, perhaps unsustainable. Too many political leaders, they argue, acted too irresponsibly, failing to either raise taxes or cut spending.

A brutal reckoning awaits, they say.

These battles play out in many corners, but few are more passionate than in New Jersey, where politics tend toward the moderately liberal and nearly 20 percent of the work force is unionized (compared with less than 14 percent nationally). From tony horse-country towns to middle-class suburbs to hard-edged cities, property tax and unemployment rates are high, and budgets are pools of red ink.

A new regime in state politics is venting frustration less at Goldman Sachs executives (Governor Christie vetoed a proposed “millionaire’s tax” this year) than at unions. Newark recently laid off police officers after they refused to accept cuts, and Camden has threatened to lay off half of its officers in January.

Fred Siegel, a historian at the conservative-leaning Manhattan Institute, has written of the “New Tammany Hall,” which he describes as the incestuous alliance between public officials and labor.

“Public unions have had no natural adversary; they give politicians political support and get good contracts back,” Mr. Siegel said. “It’s uniquely dysfunctional.”

Even if that is so, this battle comes woven with complications. Across the nation in the last two years, public workers have experienced furloughs and pay cuts. Local governments shed 212,000 jobs last year.

A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers. The Manhattan Institute, which is not terribly sympathetic to unions, studied New Jersey and concluded that teachers earned wages roughly comparable to people in the private sector with a similar education.


etc.

http://www.nytimes.com/2011/01/02/busin ... wdown.html
John Francis

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