Sunday, February 13, 2011

Thoma on What we Pay for and What we Get

Kudos to Mark Thoma for his injection of a bracing note of clarity into the debate over what we get v. what we pay in "social welfare" taxes.  It's a theme I've tried to tackle before, perhaps never so well.  I herewith offer my spin, not his, but I think I catch the thrust of his piece:  you can separate our social welfare taxes into two categories: "class action buying," where we transfer money from ourselves to ourselves (on the one hand), and wealth  transfers from haves to have-nots.  Scandinavians seem tolerant of taxes because they see a lot of it as just group buying (the same would go, I suspect, for lots of local government taxation).  "Liberals" in the United States don't like to talk about the wealth-transfer aspect because they understand that once you call something a wealth transfer program, it fails.  Conservatives are happy to leave them hoist on their own petard: if it is not a wealth transfer program, why not just leave it to private discretion?

Thoma counts himself as a defender of social programs, although his approach differs a bit from my own:
The key here is to overcome the belief that the majority of people using these services are "gaming" the system to get handouts they don't deserve. If we are going to successfully defend the social insurance system, it is this belief that must be countered. Of course such behavior goes on, there will always be people who try to take advantage of any system that is put in place (in the public or private sector), but this is not the predominant feature of these programs. The share of "deadbeats" is not large, it is relatively small given all the good such programs do, and that's the message that needs to be delivered. The social benefits clearly exceed the costs of providing these services, but it will be tough to make this case convincingly -- the opposition can always find isolated cases where people take advantage of the system and surround them with negative publicity. This has been a successful strategy, and it will take a concerted effort to counter overcome such efforts.
 I'd put  it a bit differently.  I suspect we have a bit more going on than mere gaming of the system: we do have a fair amount of wealth transfer.  The question is, should I mind?  It's a complicated topic, but on the whole I rather think not.  I grant it is should be a primary goal of any decent society to try to create a system where nobody needs wealth transfers, where nobody feels the need to game the system.  But that's a utopian vision and in a world this side of the grave, I'm willing to live with the cost.

Commentators inject two other pertinent issues.  One, how much is it all a matter of "racism?"  I'd say there is a fair amount of racism in the system, but I think we may confuse cause with effect.  Durkheim taught that every society needs an outsider class to affirm its own solidarity.  So whoever is in the hand-out class will find himself branded with an outsider label.  The other questions whether the whole system is run not for the recipients but for the provider lobby--in particular the health care companies that profit so prodigally from a government-mandated payment system.  Too true, too true, and as I guess I've said before, I think too little attention is being paid the fact that the big winners from Romney Obamacare are those same providers.

No comments: