Who’s a Freeloader?

By James Kwak

A year ago, Vanessa Williamson, Theda Skocpol, and John Coggin published a paper based on their in-depth interviews of Tea Party activists. A longer presentation of their research was published as a book a few months ago, and I was reminded of it by historian Daniel Rodgers’s review in Democracy.*

Rodgers’s review is titled “‘Moocher Class’ Warfare,” picking up on one of their key findings: in general, Tea Party members like Medicare and Social Security, which they think they have earned through their work, but don’t like perceived freeloaders who live off of other peoples’ work. From the paper (p. 33):

The distinction between “workers” and “people who don’t work” is fundamental to Tea Party ideology on the ground. First and foremost, Tea Party activists identify themselves as productive citizens. . . . This self-definition is posed in opposition to nonworkers seen as profiting from government support for whom Tea Party adherents see themselves as footing the bill. . . . Tea Party anger is stoked by perceived redistributions—and the threat of future redistributions—from the deserving to the undeserving. Government programs are not intrinsically objectionable in the minds of Tea Party activists, and certainly not when they go to help them. Rather, government spending is seen as corrupted by creating benefits for people who do not contribute, who take handouts at the expense of hard-working Americans.

Let’s leave aside the self-serving nature of this distinction—I deserve my entitlement programs, but you don’t deserve yours. Does it even make any sense?

Imagine Alice works from twenty-five to fifty-five making $30,000 per year, more than double the minimum wage. Then she loses her job and goes on Medicaid—a classic “welfare” program. Then imagine Beatrice, who works from twenty-five to sixty-five making $30,000 per year. (For simplicity, let’s assume each person goes on benefits in 2012, and those $30,000 are constant 2012 dollars.) Then she retires and goes on Medicare—an entitlement she has “earned,” according to Tea Party logic. Assume that each person paid $1,000 in federal income taxes each year. Who’s the freeloader?

Each year, Beatrice paid $870 in Medicare payroll taxes. In addition, about 16 percent of her income taxes went to Medicare,** for another $160 per year. So over forty years, she contributed about $41,000. At retirement, she will have a life expectancy of about twenty years. Annual Medicare spending per beneficiary is projected by the CBO to be about $15,000 in 2022 (right in the middle of her benefit period), or maybe $12,000 in 2012 dollars, so she can expect to receive total Medicare benefits of about $240,000. That means her net transfer is about $199,000, or $10,000 per year.

About 21 percent of Alice’s federal income taxes go to Medicaid,*** so she contributed $210 per year, or about $6,000. (Let’s assume she paid no state taxes, which makes her look worse.) Total federal Medicaid expenditures were $273 billion in 2010; the federal government pays 57 percent of total Medicaid expenses; and there are about 56 million beneficiaries at any one time; so the average cost per full-year beneficiary is about $8,600. 49 percent of Medicaid spending, however, goes to long-term care, even though only 7 percent of Medicaid beneficiaries received long-term care benefits,**** so the average annual cost per non-long-term care beneficiary is about $4,700.***** So between the ages of 55 and 65, Alice’s total benefits are worth $47,000, for a net transfer of $41,000, or $4,100 per year. Even if we double her average cost because of her age, we still get net benefits of $88,000, or $8,800 per year.

By now, the answer should be obvious. From the perspective of net benefits, they are both freeloaders. There are a host of approximations in the above calculations, but the bottom line is clear: low- to middle-income workers benefit massively from redistribution in both Medicare and Medicaid. On an annual basis, it seems like Medicare beneficiaries are freeloading even more than Medicaid beneficiaries, primarily because Medicare is more generous and because Medicare beneficiaries are older and hence consume more health care. From a lifetime perspective, however, Alice is a bit more of a freeloader than Beatrice because she will benefit both from Medicaid for ten years and then from Medicare for the rest of her life.

(In the example above, I had Alice work for thirty years and then go on Medicaid for ten. If she worked for ten and went on Medicaid for thirty, you would get similar results. Then her total benefits would be 3 x $47,000 = $141,000, her contributions would be $2,000, her total transfer would be $139,000—still less than Beatrice’s total Medicare transfer—are her annual transfer would $4,600. The major driving factor is simply that Medicaid isn’t that generous.)

The moral of the story is that if you follow the money, almost everyone is a freeloader; by this criterion, there’s no meaningful distinction between Social Security and Medicare, on the one hand, and welfare programs, on the other hand.

But from my perspective, neither Alice nor Beatrice is a freeloader. The right way to look at Social Security, Medicare, and Medicaid, in my opinion, is as insurance programs. They protect people against risks that may not materialize until decades in the future (unemployment, disability, death of a spouse, poor health, health care inflation, etc.). When Alice and Beatrice entered the workforce at age twenty-five, neither one could know which of the two would lose her job thirty years later, so they both benefit equally from the existence of Medicaid. I guess if someone never has any intention of working but plans to simply live off of welfare programs you could call her a freeloader, but given the paucity of the current safety net I don’t think that’s a viable strategy in this country.

As I wrote in yesterday’s post, Americans like the things that government spends money on, but they claim not to like government, which leads to our current political mess. In White House Burning, we argue that providing social insurance is an essential and valuable function of the federal government. If people realize that the government’s principal activity is protecting them against long-term risks through programs that they already like, they may change their opinions of the government and their willingness to pay for it. We can all dream.

* I have not read the book, but I did read the paper.

** In 2010, general revenue contributions to Medicare were $213 billion, which is 16 percent of total tax revenues, excluding payroll taxes, of $1,298 billion. Those figures are from the OMB Fiscal Year 2012 budget, Historical Tables, Tables 2.1 and 13.1.

*** In 2010, federal spending on Medicaid was $273 billion. That’s from Table 11.3.

**** Total Medicaid spending in 2009 was $251 billion (Table 11.3). Long-term care spending was $122 billion.

***** It is appropriate to subtract out Medicaid long-term care benefits because Medicaid is the long-term care safety net for Medicare beneficiaries, so the value of those benefits is the same for Medicaid and Medicare enrollees.

48 thoughts on “Who’s a Freeloader?

  1. It seems that by Tea Party, you are talking about Neocons that have hijacked the Tea Party movement. The Tea Party movement was started by Ron Paul supporters. If you look at what he is trying to do, this article totally misses the boat. His priority is to get sound money and cut foreign spending not the social spending. He wants to give people the ability to opt out of this social *insurance* that the government forces on everyone. He will continue to support those that are already dependent on the government.

    To respond to the article and the arguments it is making, I think these discussions about health care is too early. The cost of care certainly has increased. And I would argue, beyond a point where most people can afford it. This however, is not the problem, but only a symptom. If you decide to give free health care to everyone because it is too expensive, then you are trying to fix the symptom. What the *original* Tea Party supporters want to do is to fix the *problem*. If you think about it, the first thing to do is to NOT waste money. Which means ending wars and foreign occupation. So basically you need to talk about the real problem before you talk about the symptoms.

    I think if you really wanted to write a post about problems, you would talk about the debt based monetary system which is unsustainable and the main reason we have most of these problems today.

    Another crappy post. You guys gotta start doing better.

  2. The Tea Party was started by Santelli’s rant. People that where mad at home ower’s bailouts, but apparently didn’t have issue with bank bailouts. I’m sure there where other issues as well (and differences of opinion within the TP are most certainly there), but that metastasized the movement. The poor logic and unfairness of that is no different then that illustrated above. I suppose that is similar to the freeloader’s logic above.

    the macro point is that to the Tea Party, data doesn’t seam to matter.

  3. Great post.

    It can be approached from a macro/aggregate level as well. Social Security and Medicare make up a much greater percentage of federal spending than “welfare”. Furthermore, as you point out towards the end, a significant portion of Medicaid spending goes to nursing home care for the elderly not medical services for the poor, and so rightly should be lumped in with Medicare rather than welfare. The entire argument that SS and Medicare represent getting back money that you paid in is nonsense – most modern retirees will receive far more in benefits than they ever paid in and this will only increase over time.

  4. like most things, the answer you get depends on the question you ask. How about this question: How much of a freeloader is Jaime Dimon? Lloyd Blankfein? How much is the Fed insuring the survival of Goldman worth, and when did Goldman pay the premiums? How much did the AIG employees pay in to have a system that paid their bonuses after they FAILED to understand that loans need to be paid back???
    If I pay 500 dollars for fire insurance, and my 650,000$ house burns down, am I a freeloader?
    Medicare and Social Security are social INSURANCE – either government can run an actuarialy sound program, or liberals should just admit that they want to run a command economy.
    The problem is “liberals” who say keeping banks from failing is the most important thing government does, and “conservatives” who want profit without loss.

  5. Well, I guess they wouldn’t like bondholders much, either. Isn’t that the very definition of “living on someone else’s labor?”

  6. Their argument doesn’t make sense because the underlying argument is racial, which they don’t want to say. White to Brown/Black transfers are what Tea Party activists truly oppose.

  7. The ‘freeloaders’ meme was a brilliant strategy which took attention away from the economic disaster engineered by Wall Street, and its subsequent government bailout, and put the blame instead on
    foolish homeowners, welfare ‘cheats’ etc. Otherwise, the rabble might well have gone after the freeloaders at the top.

    You can spend the rest of your life writing rebuttals to the Tea Party / right wing nonsense and it won’t make a difference- they will find a new scapegoat tomorrow. Real prosecutions would provide an object lesson in responsibility to both the public and Wall Street. Unfortunately, the Obama administration seems more intent on bailing out and protecting criminal businesses than bringing the criminals to justice or helping their victims. People know they are being screwed- and the Tea Party is providing an explanation, however wrong it might be.

  8. @dhuv

    As noted by Ian, I don’t think you can attribute the creation of the Tea Party to Ron Paul. Certainly it has had a strong Libertarian component, but it’s really a conservative melange that in many ways (in my opinion) mixes to form something worse than its base components.

    Effective insurance is predicated on high participation. Being able to “opt-out” breaks the paradigm. For instance, if someone opts out of insurance because they are “healthy” then:

    a) If they are correct, they leave the remaining pool saddled with high risk members, potentially making the pool unsustainable.
    b) If they are wrong, they still need health care because our society (rightly) values life too much to let them suffer/die.

    “b” is in many ways is just stealth insurance (and represents “private gain, public risk”).

    “a” is a false choice because everyone eventually gets old and sick. Thus when they represent “high risk” they will need insurance. At that point, assuming a lot of people make a similar choice, they will join pools with mostly high risk individuals, effectively making the pools unaffordable.

    The only way to make this work is to have everyone share in these pools, even when they’re healthy or consider themselves “low risk”. The “low risk” subsidize the “high risk”, until either the “low risk” find out they aren’t (anyone can get sick) or get old and are no longer “low risk”. It’s a sort of “pay it forward” investment.

    Social Security is similar. Everyone believes that they can invest better than the government and get a higher return. History however shows mostly they are wrong – they either don’t actually save or the return isn’t sufficient to cover their retirement. In a less enlightened society we would just let them starve (personal responsibility and all)(and remember, many seniors are incapable of working due to health). However, smartly we pay into a common pool that protects us all from a failure to be safely prepared for retirement.

    Certainly some of us will not need the benefit as much or for as long, and it might seem unfair in that respect, but it is a sort of “insurance” as well – we don’t know if we’ll need it. Even the best prepared could be hit by circumstances (again, stock market crash, personal bankruptcy, etc.) which could destroy their best efforts. In that case society will have to pick up the pieces anyway. In that sense, being forced to pay is more fair than not.

    Unless we want to go back to the dark ages when we just watched people die (and no, as history clearly shows, private charity is not enough).

  9. Kenny is an able-bodied white male who grew-up in Kansas. Kenny now lives in Huntington Beach, Ca. where he supports himself with a combination of food stamps, general assistance (GA), by buying legal marijuana which he sells to those who are not old enough to meet the age requirements for buying marijuana legally, and, he steals hard liquor from grocery stores which he also sells to minors. Kenny also earns some extra money by using his EBT card to buy soft drinks which are then sold to the same minors who buy Kenny’s other goods. (Kenny rarely uses his EBT card for food, instead, his food is supplied by the 2 food banks in H.B.).

    Kenny’s wife, Tara, lives at her grandparent’s house although she spends most of her time with Kenny on the street (they have a motor-home that they live in). However, their 2 year old daughter does stay with the grandparents full-time. Tara’s grandparents though do also rely exclusively on social aid and food which Kenny and Tara collect from the food banks. All of the funding for this child has come from what might be described as unearned sources, even things such as toys and clothing come from charities. Tara’s grandparents live in a nice neighborhood in one of California’s most expensive towns. Tara’s grandfather did have a job up until 1987 although he went on SSDI due to back problems which caused chronic depression, also, he now is old enough to receive SS.

    Kenny and Tara have things pretty well worked out. Their only consistent complaint is that the “wets” tend to make lines too long, and this does in fact cut into the time that is otherwise a never ending party. A party though that is also the central dynamic in their family business, and time is of course money.

    Every neighborhood in the US now has people similar to the people described here, and nearly entire neighborhoods consist of people such as these, could these people be what are meant by ‘freeloaders’? And we should probably also keep in mind that 25% of the global prison population is incarcerated in US prisons. Could it be that our incentives are more than just a little off, should the Left not be fighting for higher wages and reasonable wealth distribution? As opposed to pretending that we have no freeloaders.

    Raymond L. Love

  10. Good one, eddie.

    I should probably add that when I first met Kenny and his family he was working at a tire shop in HB. He was paid about $9.00 an hour and he typically worked fewer than 32 hours. What his employer did was to have an extra worker or two show up each day and, if things started off ‘busy’ he was covered, if it was slow, he sent some workers home early. This of course limits the employer’s insurance costs but also has the benefit of pitting workers against each-other in a competition to become too valuable to be sent home. Workers put in these conditions are quick to share information with their employers to gain favor and, make sure the employer is made aware of any and all shortcomings of fellow employees. This dynamic can be so effective that the need for supervision is minimized and workers will in fact strive to show just how productive they can be.

    So is Kenny a freeloader or is he just too ethical to be a full-time, low wage, employee? He is after all selling drugs to the children of an exploitative class partly because he was unwilling to benefit at the expense of his fellow workers. And Kenny , has in the end, been conditioned to believe that the lessor contribution made by workers dictates that he is of a different ‘class’ than his employer[s]. So a ‘freeloader’ can be seen as ‘nobodies fool’. But, at the core of this issue, there is massive waste of human potential that is the result of unintended consequences and poorly aligned incentives.


  11. free·load (frld)
    intr.v. free·load·ed, free·load·ing, free·loads Slang
    To take advantage of the charity, generosity, or hospitality of others.

  12. If only life were so simple as to allow the definitions of words to guide our way forward, (maybe someday). For now we live in a world where the utility of words has as much to do with deception as otherwise. And everyone here almost certainly knows the definition of ‘freeload’, so Anon and anon, what is your point? I already knew that people who refuse to back-up their opinions with their names are more inclined waste other people’s time. So what gives?

  13. And while Kenny may be a “freeloader”, Kenny represents a small minority both of the population, but also those in need. So, let’s by all mean design our policies around the few “Kenny”s of the world, and not the the average recipient of the services in question. After all, clearly the unfairness of one jerk like Kenny, outweighs any benfit to the other 20 that were truly deserving.

  14. Ray’s hitting something important, and doing so, I think, in a sophisticated and nuanced way. Supposing Kenny is a jerk or a very small percentage of society doesn’t get at the systems analysis Ray is pointing to–and that Dr. Kwak can and should appreciate.

    There are two Tea Party realities that compete for dominance in the media. Reality 1 is that TP is a manufactured propaganda arm for the 1 percent class. A political feint. Reality 1 gets a fair amount of press coverage.

    Reality 2 is that TP members are real people with real experience and observations, and quite a few of them know a Kenny or two or five. Reality 2 gets very little exposure in the main stream media. And Kenny-type stories get even less–not because there aren’t a lot of Kennys, but because reporters are trained and groomed to go after bigger fish, and many now live in neighborhoods and travel in circles where few Kennys are on open display.

    As with the size and shape of the shadow economy generally, the aggregate costs of Kennys may not be a small matter. But because it is not a subject for much academic study–either sociological or economic–it is generally overlooked by respectable commentators.

    The idea of seeing Kenny as both a freeloader and a waste of potential–the waste being inherent in (or even a designed-in feature of) the economic system in which Kenny resides–is central, obvious and all but unknown in academia, where economic models usually reduce prospective human behavior to a single axis.

    This is why it’s doubtful that Ray is a professor. I know professors, economists especially. The things they don’t know about how people actually act and business is actually done could overflow all the craters on the moon, with enough ignorance left over to displace the sun.

  15. So one could argue either that tea partiers are wrong just like most Americans are to enjoy entitlements because all the money comes out of thin air (according to your example) OR that tea partiers are wrong for pushing a merit-based, responsibility driven agenda.

    Why did you choose to argue the latter over the prior?

    I suspect there has been a conflation of the issues in your article. For example mixing most older Americans enjoyment of Medicare and Social Security with Tea Party members enjoyment of reduced gov’t.

    So, in your example, was it the 1% that paid the bill for the entitlements in the end?

    That seems to be your conclusion when you say, “The moral of the story is that if you follow the money, almost everyone is a freeloader.”

  16. Carl,
    Of the other 20 who are deserving, who are these people, the unemployed don’t count if they are truly trying to find a job, we are after all talking about ‘freeloaders’, so who are these other non-contributing folks being referred to by the teaparty clan? The two women portrayed in the article are most certainly not those who drive the concern. But our inner cities do have large areas where the streets are controlled by thugs and they have nearly all been subsidized by the government in some way.

  17. I generally agree with the point you’re trying to make in this post, James, but I do not think that your counterfactual example with Beatrice and Alice demonstrates anything. Has anyone asked that kind of specific scenario-based question to Tea Partiers? Please link research if so (I can’t see the Williamson et. al. paper behind a paywall, and I am skeptical that it treats such a rich and detailed sort of counterfactual among Tea Partiers.)

    My guess is that Tea Party support for benefiting from “handouts” would be a function of years in the work force and perceived effort working. If Alice worked hard to 55 and then a random unlucky circumstance befell her, I’m guess Tea Partiers would see her as barely different than Beatrice, and both are “legitimate workers”. I think the Tea Partiers tend to focus only on extreme counterfactuals, like contrasting Beatrice with a 23-year-old unmarried waitress who has multiple children with no identified fathers and receives assistance and doesn’t make effort to get a better job.

    Do not misunderstand me please.. I would be in favor of government programs for that overburdened young mother… but that’s the kind of counterfactual I hear about from Tea Party friends, not the one between two people who worked hard for decades and then had random different unfortunate problems arise.

    So, I think you’re setting up a straw man here. And it’s very unproductive because these Tea Party folks, whether you like it or not, believe that their values are coherent and important. How much better to represent them accurately and address them at their own, self-perceived real issues rather than to denigrate them with silly counterfactuals that just make them into a caricature. Even if you think they really are a caricature, you’ll never achieve any progress towards compromise or helping them see your point of view if you treat them that way.

  18. Eddie,

    Your last comment is one of the best I’ve yet seen on these blogs, and I’ve been an econ blogger for a couple of years now. You are getting into the layers where the important stuff is hidden from plain view, as opposed to just regurgitating the conventional wisdom, a nice change.

    And no, I’m not a professor, nor an economist. I am a homeless guy who has been reading economics material since I was drawn in by a book that JK Galbraith wrote (in the very late ’70s IIRC). Shortly thereafter, I found SUPERIMPERIALISM by of course M. Hudson, (I was then spending lots of time at the San Francisco Public library). I’ve been fascinated with this nonsense ever since, but I have never so much as seen an economics classroom; For that matter, I only attended high-school for the free driver’s ed course, I skipped most of the rest of the ‘crap’.

    As for the number of kenny types out there, some 50,000 homeless are estimated to be living on the streets of LA alone. I have lived among these very folks, and their ilk in other cities as well, and… I have never met a single person on the street who was not scamming so long as their mental faculties allowed them to do so. There is also an occasional ‘newbie’ passing through and these folks have varied stories, but the actual street people are all freeloaders so far as I know. They do in fact boast of their prowess and freeloading is seen as a craft, or a skill. And there is no shortage of advice and guidance for those of us who appear to be apprentices (I don’t like being dirty or unkempt so I get loads of advice). The most efficient way to utilize the system, whether a person is deserving or not, is best done with the guidance of people who the average citizen would be afraid to talk to. Ask a charity volunteer or a social worker how to move your case ahead and you will probably get the phone number to an automated system. Ask some old bum the same question and he might walk you through the whole process while telling interesting stories. Being ‘out in the world’ is not at all like it is portrayed in the media, but then of course nothing is. And if there is any actual difference between the homeless and a much larger strata of urban street people, I am not sure that anyone can see the line between these two groups, most of them shift back and forth over time. But they always share the same streets, areas, and I have never witnessed any of these people turn down any drug or alcoholic beverage, never. These folks are simply disenfranchised and who knows how many strong but if any of them have any compunctions about ‘freeloading’, I am not aware of such a person. They simply have stopped caring what the franchised-class thinks of them, that is where part of their freedom stems from.


  19. I think one of the points of James’ post is that when confronted with the situation where a ‘deserving’ person somehow gets less than he or she needs for survival or health care, Tea Party members point to the ‘undeserving’ as the reason there is insufficient money available in the social insurance programs. But in fact, very few of the ‘deserving’ have paid in enough to those programs to provide full or even partial support for themselves, let alone others. Eliminating the ‘undeserving’ recipients wouldn’t correct this problem in Medicaid funding, since such a high percentage of the spending goes for dual eligible beneficiaries.

    But I also don’t think that Tea Party members think that ‘deserving’ and ‘undeserving’ involves parity between taxes paid and services received; it seems to me that they are more concerned about defining and coercing certain behaviors that earn one a place in the social structure and the right to receive whatever limited benefits that place confers on the properly behaved citizen.

  20. I don’t think Ray is saying that. But what I’m saying is that one has to build policy up from the reality one starts with. And the reality is that there are a lot of “freeloaders” in the underclass. There are also a lot–probably more–in the overclass, as this recently published set of experiments illustrates. (see: http://www.thecenterlane.com/?tag=dishonesty )

    Our two related problems right now are that Americans generally cannot agree on the nature of the country’s problems (as Dr. Kwak so often points out), and that most people in a position to make positive systemic change do not understand the system, because they have made limited observations of its full spectrum in actual practice.

    So it’s practically tautology to note that very few recipients of Social Security or Medicare truly “earned” it in the actuarial sense–even though the majority of voters still don’t realize this. Bob the Bayesian is getting at this; “caricature” is the right word for the general level of discourse.

    It’s arguably more important to set down the baseline reality of how actual humans behave when confronted with an economic system that deliberately destroyed job security more than a generation ago.

    People find a way to get by. And if the system includes vestigial benefits that were instituted during a time when people who had jobs generally could count on keeping them (SSDI, for example), then those benefits will be tapped in great numbers by people who need them, whatever anyone outside their experience may think about the ethical justification of that “need.”

    People are funny that way. The ways they find to get by seldom conform completely to the design of either the system they find themselves in or the much simplified model of that system policy makers typically use to try to understand it.

    How those primary benefits echo through the larger economy, and what ethical compromises people make in order to benefit from them, and what (if anything) those ethical compromises do to change the nature of the system itself–these are the kinds of questions I think Ray is pointing to.

    The base point is that people cheat, and that calling them “freeloaders” or “creative entrepreneurs” changes nothing about the reality–it just distorts our understanding.

  21. From a professional website where people talk about their own industry (not *banking* btw) comes this in reply to MSM propaganda:

    “Hi Fleck,

    Despite all the foaming at the mouth at CNBC about Dow 13,000 (where they rarely mention that it amounts to years of nothing), and the “numbers” that are improving and inflation that remains under control I can’t help but notice the following.

    1. A full 25.4% of houses are underwater in my city.
    2. Gas prices are killing the economy
    3. I have an acquaintance who just contributed to the lower unemployment rate. After 3 years he took an entry level position for $22,500 after making over $100,000 in his last job.
    4. My neighbor, in commercial real estate, “hasn’t done a deal for 2 years”.
    5. An applicant for a mortgage on a $51000 short sale condo got turned down. They were willing to put up a fully paid building appraised at $250,00. A low credit score was blamed.
    6. My attorney asked me for a loan.
    7. A doctor went for a loan. When he filled out the part about real estate owned, 401k assets, IRA assets, etc., the total was zero.
    8. Seniors are liquidating at warp speed. The lump sums that they worked their whole lives for net them nothing. So they are forced into the market by crappy advisors who exacerbate the situation with losses.

    Sorry. I hear what I hear. But I KNOW what I see. Is this the largest disconnect between what is being said is happening and what’s really going on? I guess this isn’t a question.”

    Drugs in the ‘hood…? How about a 600% increase in heroin production worldwide in the past decade in Afghanistan? Oil and opium?

    It’s PATHETIC to pick on one freekin’ dude in CA – what a PREDATORY mind! Did that private citizen, and his grandparents, give rl love PERMISSION to come on this blog and use him as a pinata to see what character flaws come falling out after you *economists* beat him with your sticks and attempt to micro manage his life in a way that maximizes your pocket’s profit and pay off the slave interest on the debt, er, *fiat money*…?

    Yeah, didn’t think so. This merciless focus on the SYMPTOMS of a much much much higher problem will no longer be tolerated as some kind of faux intellectual homework exercise!

    The economic policies supported by the government (Paulsen’s stick up note to USA MIDDLE CLASS) to pay off the mercenaries for a decade of *service* and the interest on the FIAT $$$$ they supposedly Borrowed from Martians, or whomever in the Matrix, slammed down the MIDDLE CLASS OF PRODUCERS below the GLOBAL war lords and drug lords and slave lords. You can bet your sweet bippy that a JUST WAR is coming for that insane act of iniquity.

    IRAN CONTRA, rl love – so what’s the beef? Small time crooks cutting in too far on CIA’s inner city turf? Or cutting in on Homeland Insecurity’s cash flow sources?

  22. I believe that the Triffin Dilemma left the string-pullers with a choice between moving some of our manufacturing base abroad, or, giving up reserve currency status. Thereafter, as we shifted from a manufacturing nation to this ‘effort’ to become a nation of investors, those who were displaced were given just enough to alleviate the guilt of those who knew there would be hardships for the working-class. There is though a conflict in regards to wealth distribution because those in power have a jingoistic agenda in regards to the maximizing the national ownership of global market share. They see the losses being incurred by the working-class as something similar to the ultimate sacrifice but without the respect and the honor and etc. And perhaps these string-pullers may hold some delusions based in Marginal Utility assumptions but I suspect that they are smarter than that. They know that there must be sacrifices in a world where they see themselves and their kind as being hundreds and thousands of times more contribution than the average worker. The problem is that their delusions have convinced the average worker that he is of so little value that many forms of self-destructive behavior come as a result. But the various forms of charity simply alleviate guilt for those who prefer to pretend that the playing field is level and… the charity and aid are underwriting a hedonistic option for self-destruction, an option that is very prevalent and being expressed through drug and alcohol abuse. I doubt very much that these problems would be so severe had the working-class not been elevated to a respectful position back in the post WW2 era, but now we have generations not able to live at the same level that their parents did, this in terms of compensation and when measured in regards to respect. We are seeing an historical anomaly.

    Essentially though, the Triffin Dilemma provided perfect cover for the Fascist/jingoist element to bring about this regression back to a new version of feudalism. Money must be put in the hands of investors as a matter of national security. They are preparing for a time when labor has little value. And with wars no longer being a practical way of controlling population, the working-class is being provided with the incentives to destroy itself, in a hedonistic way. The tea-partiers are simply seeing a trend that they don’t understand, but a trend on the ground as Eddie suggested, and thereafter reacting with a combination of ignorance and with superior sensitivity, interesting stuff all around.

  23. The premise of this article is that interviews of people idenitified with the TEA party bunch, hold the views espoused in the second paragraph. I find that paragraph hard to believe. I am certain that the methodology is neither valid nor reliable. I have interviewed many TEA party members. The only consensus opinion was that they do not want their taxes raised–for any reason. None agree on what to cut. It is an amorphous collection of individuals, just like OWS. I have interviewed a large number of OWS. Some where outright communists in their beliefs. Others were surfers who want to save the planet. The only consensus opinion I could derive was that the elites and the government are too aligned such that society is wrong the track. They, too, do not agree on what should be prescribed or postscribed. As I can grant no credence to the initial premise, I cannot believe that the analysis has value other than to smear another populist movement as irrational. The marketplace of ideas needs more speach. I am sure that a couple of good ideas will come from the TEA bunch and from the OWS bunch. Characterizing either group as holding particular opinions for the purpose of striking down those opinions, and by extension the groups themselves, as irrational, serves no purpose but demoguary.

  24. «“They protect people against risks that may not materialize until decades in the future”

    You mean like old age?»

    Indeed. Perhaps you happen to know your day of death, and you can plan accordingly, but mere humans like me run a big risk of living longer than expected, and thus undersaving, and a smaller risk of living less than expected, and thus having oversaved.

  25. The obvious solution to the tea party member’s concerns about the minority of freeloaders is to create two or more separate national budgets (on both the tax and spending sides), one per race (or per income quintile).

    The tea party demographic were all for unions, welfare and bigger government when other races (or income quintiles) were excluded from it, as they were by FDR, quite deliberately, to ensure the political viability of the New Deal. Then the federal government started enforcing the 14th amendment.

    As BdL put it:

    «As I see it, back in the 1960s, 1970s, and 1980s the spinmasters for Goldwater, Nixon, and Reagan rooted the Republican Party in three beliefs:
    1. the government is not on your side – the government is on the side of the Negroes»

    The middle classes were very happy to tax heavily themselves and in particular the upper classes, if they were the sole beneficiaries. When the federals started enforcing the 14th they were no longer so happy to share the fruits of taxing the upper classes with the lower classes.

    In part because dark skinned cocitizens behaved very badly in the race riots.

  26. «Money must be put in the hands of investors as a matter of national security. They are preparing for a time when labor has little value.»

    I would add two bigger causes, the first being theology, in particular that Ayn Rand has happened, and a lot of middle and upper class usians are Objectivists. They were in effect Objectivists before, but without the support of a “movement” or “philosophy”. I found a quote about the core tenet of Objectivism at the time of the Irish Famine:

    «James Wilson, the Editor of the British publication, The Economist, responded to Irish pleas for assistance during the famine by saying, “It is no man’s business to provide for another.” He thought it was wrong for officials to reallocate scarce resources, since “If left to the natural law of distribution, those who deserve more would obtain it.”»

    Change the name to Ron Paul and see little has changed.

    As to how little things change, there is a collection of british political cartoons of the time depicting the irish as vile parasitical freeloaders, which could be instantly recognized by many tea party enthusiasts, and they only need the captions changed:

    «This untitled cartoon shows the Irish as obese, wasteful, violent, drug abusing monkeys.»
    «Cartoons for magazines such as Harper’s Weekly featured cartoons by Thomas Nast and depicted Irish immigrants as ape-like barbarians prone to lawlessness, laziness and drunkenness.»

    The second point is that there was a unionization bubble in the 1970s that led to unending strikes and high inflation, and the political class resolved that should not happen again, and therefore “managed” two important indices, the “pure” CPI to become a proxy for wages, to be kept down to avoid triggering a wage-price spiral, and the unemployment percentage, to be reduced by excluding as many categories of non-working people as possible. With the idea that there must be enough unemployment to break labor’s pricing power and union power.

    The focus of economic policy has been therefore for 30 years to keep down wages, by any means necessary, and since 1995 to achieve this by redistributing income as much as possible from workers to proprietors via low/no tax capital gains thanks to a series of asset bubbles.

  27. Amen to all that. Seriously though, the Irish really are apes. Let Kevin be exhibit A. And we all know who threw the overalls in Mrs. Murphy’s chowder.

  28. «And it’s very unproductive because these Tea Party folks, whether you like it or not, believe that their values are coherent and important.»

    Some of the tea partiers go on about the envy of the inferiors for their superiors, but in the USA superiors are widely admired and celebrated.

    The dominant value of the tea party, and indeed of Real America, is the spite of the superiors for their inferiors. “F*ck YOU! I got mine” is the Real American Dream.

    That indeed is a coherent and important value, and the point that merely attacking that value is not going to sway the tea partiers is very realistic. But what can you do? Tea partiers are usually emotionally invested in their spite.

    Spiteful southerners 150 years ago started a war and went enthusiastically to be shredded by USA cannon in their hundreds of thousands to validate their spite for their inferiors, and USA ordnance was the only argument that they heeded.

    Perhaps the tea partiers are less invested in their theology and their less intense spite, and they may be persuaded more gently that after all a tiny percentage of freeloaders does not matter that much, and that the USA is rich enough not only to afford supporting the tiny percentage of freeloaders with mansions in Manhattan, but also those 50,000 homeless in LA even if they are mostly dark-skinned, as well as pay for a massive nuclear arsenal and lose track of a few dozen billions per year in “accounting errors” in Iraq, or pay a few hundreds thousands per year in overheads to support each soldier in Afghanistan.

    Myself I would have no difficulty with seeing 5-10% of the population being given no-questions-asked “time off” small stipends and pay taxes for that (and I am high rate taxpayer), for example. As long as that was an option also available to me, for when I wanted it.

    And I am sure that the tea partiers would with the rational parts of their minds see the point too, only to seethe with spite at the thought that dark skinned beasts and dirty hippies and other despicable inferiors might benefit from that too.

  29. «a unionization bubble in the 1970s that led to unending strikes and high inflation,»

    Correction: the unionization bubble contributed to high inflation; a large part of the inflation in 1970s/80s was cost-push from oil and commodities as Japan and Korea developed, and this gave OPEC and other commodity producers a lot of leverage.

  30. Blissex,
    I too just want to add an amen. I in fact started a rant about religion in an additional comment that I didn’t have time to finish… so I deleted it.
    I am simply out of time, I’ve been stuck in Twin Falls for nearly a month while waiting for some repairs on an old Pete that I am delivering to North Dakota. Ol’ Betty is finely roadworthy, I hope.

  31. Simon,

    I like where you are going with this post, but your example is long, confusing, and overcomplicated. Alice and Beatrice? Asterisk notes? Writing out “2 percent” instead of “2%”? Really? You would have hit this one out of the park if you were more concise and used a simpler example.

    … And you wonder why the average American votes against their own economic interests.

  32. Uh oh, another Brit in town. Mephisto, check to see what year it is, and beware of fires.

  33. Confusion about who is a freeloader is understandable. We are told repeatedly that SS and Medicare are earned over the years by contributions deducted from our pay. So recipients do tend to be people who worked for their benefits. That this is not true is not their fault.

    Medicaid, housing assistance, food stamps, WIC, home heating assistance, Head Start, and any other straight welfare program are clearly NOT earned benefits and never have been. Those receiving these welfare benefits, often also including SS disability, which might fall into the benefit earned category, allow someone to live quite nicely without working – especially in situations where these benefits are “pooled” by family members – usually great grandma, grandma, mom, daughter and child.

    If you want to change this dynamic, you have to change the notion that somehow what we’ve paid in to SS and MC covers the cost of the benefits we are paid out in old age.

  34. The real freeloaders are defense contractors and the brass in the Pentagon. While $250 billion seems like a lot to spend on Medicaid, that is one-third of the misnamed “defense” budget. But we don’t really have any national “defense” – we couldn’t defend ourselves against 19 men with boxcutters. We have an aggressive forward power projection force to ensure we have access to resources that aren’t ours in the first place.

  35. Oh, how things have changed from the time of our founding fathers. Thomas Jefferson, regarded as the most remarkably intelligent statesman of his time, but of all time, said the following:

    The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

    It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-falf the wars of the world.

    I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

    My reading of history convinces me that most bad government results from too much government.

    To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.

    I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of alll property – until their children wake-up homeless on the continent their fathers conquered.

  36. In government, I’m mostly for “a balance of powers”, not just by having 2 competing sides, but structurally. If we had to pay more directly and more up front for our insurance programs, that would be great. We’d get to decide what we really wanted with what we could afford. If a pension plan doesn’t pay for itself, then I have no real time idea what wages I’m really paying.

    Similarly, rather than bond measures, what about saving measures? People want a new freeway, save up for it and get it. I wouldn’t make this strict, I think we should do most of the save for it during flush years and allow for flex during the lean.

  37. One issue with your functions of government. I see, as a vital function of government, providing for long term research. For many reasons, long term research does not make sense for private companies. For instance, very little market money is going into brain medications right now because they have such a high failure rate. I think government should be stepping in and doing that research now. That is a function of gov.

  38. @GaryB – “the ONLY role of *government* is to protect the INDIVIDUAL against force and fraud” – that phrase on the Libertarian web site when Bob Barr was running against Obambi is long gone….poof – as if it never was….

    Every human being has the RIGHT to make their lives less miserable through HONEST WORK. That is what any *government* should protect – the human being’s right to HONEST work AND THE RIGHT TO ENJOY THE FRUITS OF THEIR WORK.

    Government and big pharma have no use for scientists – check out the carnage of unemployed from research and development…past ten years of hallelujia embedding of rethugs had *sales* take over quality assurance at manufacturing plants and collecting patient data…which means NO ONE has any real data on which to make decisions that can lead to progress – it your totalitarian data is crap – (GIGO) – you’ve got *failure* – that’s why the hig rates – they DID NOT WANT the real data….

  39. I guess if someone never has any intention of working but plans to simply live off of welfare programs you could call her a freeloader, but given the paucity of the current safety net I don’t think that’s a viable strategy in this country.

    I laughed heartily when I read this. There are many communities in the
    US filled with people have chosen this strategy and feel it’s been very
    “viable”. I personally have come in contact with many people whose lives depend on this strategy generation after generation. Where have you been?

  40. @Ann – looks like the elite had the same plan for *generations* – ie. “…banks got bailed out, we got sold out…” Aren’t the banksters on tax-payer welfare now and that’s why there is no commerce currency in place for the life-maintenance needs of living breathing human beings…?

    You (collective *you* which means *us* :-)) have nothing in the way of civilization and accompanying law and order when labor is not allowed to enjoy its own JUST fruits. You’ve got philosophical Nihilism (supported by math *theories*), and functioning anarchy (thieves writing the laws). It’s dark, pre-civilization SAVAGERY in the final analysis….nothing remotely resembling a functioning *economy*….

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