Retirement Savings

I often hear people say that Social Security should be eliminated, that we'd do better with our own 401K's.

There are a lot of problems with that argument.

The argument is that people could invest their money better. Maybe. But they can also invest their money worse. So it's a very uneven policy. And that is ultimately cruel. It makes gamblers of us all, and experience shows that gamblers are often a lot more confident than is warranted.

Moral Failing

The sociopaths among us often say, “Too bad. Individuals should take responsibility for their lack of saving. It's not my fault that some people don't plan.” Is that so? I doubt it.

You see, those same people are telling us that we should eliminate the minimum wage, asking “if the market doesn't want to pay someone enough to even live, why should it have to?” So exactly where is the savings supposed to come from?

On the one side, people work hard for hardly any money. On the other side, they're told their failure to save is a moral failing. But where is the discussion of moral failing in having more money than God and yet still being unwilling to help raise people out of poverty? That seems the biggest moral failing.

Dynastic Wealth & Connection

Moreover, a lot of what makes the difference in who succeeds or fails is one's parents. Dynastic fortunes. Better schools. Better connections. Race. Sometimes even just better health or better clothing. The narrative is spun that the rich worked hard for their money, but, in my personal experience, poor people work much harder for the scraps they are thrown than rich people ever do, and the notion of “meritocracy” is nonsense because the people who get ahead are just those who get to start ahead of the others.

Social Security as Moral Agent

While on the topic of morality, let's also look at the structure of Social Security itself. People like to compare it to a 401K, but it's not like that. It's not a bank account. It's a very different beast.

As an example, if you become suddenly unable to work, it kicks in right away, even if you haven't paid a lot up front. That's very different than a bank account. Also, if you live for only a short while or for a long time, it continues to pay you through your life.

There might be issues with getting necessary cost of living adjustments, but the only reason we don't do those more often is that the aforementioned rich sociopaths insist it's more important to give tax breaks to the wealthy.

They'll tell you that Social Security is intended only to supplement your retirement, not to be the full amount, and yet they'll happily attach penalties for those using Social Security if they try to draw money out of it while also getting other income. That's not really how supplements work, and it's a disincentive to additional work.

A Social Contract

But my point is that the contract is not for a specific quantity of money. It is a social contract. You pay into it while you're able and you are paid when you're not able. We could do better in the “helping people to get paid” part, but the point is for it to keep a great many people from falling into poverty—to add dignity.

It's worth noting that Social Security did not arise in a vacuum. While people could invest their money, a lot of people didn't, or else were losers in that gambling. Before Social Security, in the 1930s, the elderly poverty rate in the depression was something like 70%. So there is an objective way to understand what this did for the public. Some have called it the most successful anti-poverty program in the history of the US.

Implementation Details

If we were sincerely worried that investing in the market were a better bet, we could arrange for the Social Security trust fund to do that. That's just an implementation detail and has nothing to do with the overall social promise. If DOGE wanted to do something helpful, instead of aggressively dismantling all of the US government's ability to provide value to the public, they could analyze whether there are better ways to manage the funds.

But, ultimately, government is not a business and Social Security is not a profit & loss center, even if it's popular for some who don't like it to portray it that way. It mostly pays for itself, but from a moral point of view, its real purpose is to say that we as a society need to have a commitment to our sick and elderly, to assure they are taken care of, before we declare a profit.

If we as a nation are able to give tax breaks to rich citizens only by cutting social programs, then the rich are preying on the poor. The health and welfare of all citizens is our first priority as a nation. We should not be preferencing the already-preferenced before we have attended to that.

The Present Day

This topic is very apropos in the current market. We may be about to enter another recession, perhaps a depression. 401K's are down. So the claim that we could do better investing on our own is uncertain, but is again certainly going to test a lot of ordinary citizens, postponing their ability to retire.

And I emphasize that the choice of when to retire is not just a whim. Even ignoring age discrimination, age wears on a person, and some people do physical jobs—actual hard work, as opposed to the metaphorically hard work done by rich executives—that leaves them depleted. So, delayed retirement is not just an inconvenience, it is in some cases cruel torture, and in some cases impossible.

But even as we are potentially entering a depression, the billionaires are salivating. They are looking forward to “buying low”. They're treating this roller coaster as a buying opportunity! They plan to get rich on this depression. Even as others suffer and probably many die. As homes and farms are foreclosed upon. They are gleeful.

Betting on Regular Citizens

This is the time when Social Security should be doubling down and assuring people it will increase benefits to cover rising costs—although it wouldn't be terrible if we also just impeached the President who's artificially causing those rising costs by imposing tariffs that really no sane business people think are a good idea. Social Security is a social contract with the population about what our priority is, even in tough times. Especially then. So, if we need more money, we should be bumping the tax on those gleeful about what a great buying opportunity this is. That would properly reflect our societal morality.

They, the rich, would probably whine that such a tax singles them out. They'd speak of their pain, and claim that others were just jealous of their wealth and cleverness. No one should stand for such rhetoric. The rich folks making noise did not get their power by dealing honorably with us citizens. This is not jealousy speaking. It is a desire for justice. Be glad I'm not suggesting—as some have and still do—that we just “eat the rich” and be done with it. Proper taxation of accumulated wealth (not just income) works for me.

No one needs that much money anyway. It's clear from their observed behavior that one can only buy so many gold toilet seats before one starts to wonder what the point of excess riches is, and really it seems the only thing that one can find to spend such wealth on is buying governments. And then, apparently, running them badly and cruelly. The Peter Principle in its most high stakes form. No, I'm not going to feel sorry about suggesting taxation.

 

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Author's Notes:

If you got value from this post, please “Share” it.

An early version of this post lost some text from the original that was restored a few hours after posting.

This post originated as a rant by me on Mastodon. Small amounts of content have been aded, it has been lightly copy-edited, and its typography has been adjusted to fit this forum. Also, some of the tariffs were paused today as this revised version of the essay goes online, along with claims that this was all strategic. But that only underscores my point about gambling. There is no certainty in the 401K approach like there would be in a societal commitment to care for its weaker members.

The graphic was produced using abacus.ai using RouteLLM and FLUX 1.1 [pro] Ultra, then post-processing in Gimp.

Maybe You Have Two Cows

There are some descriptions of various political systems running around the net that are expressed in terms of you having two cows and how each political system affects you.

Here’s one about Democratic Socialism that a friend quoted on Facebook:

Democratic Socialism
You have 2 cows.
You pay your taxes.
You now have free healthcare and free college
 and a government that isn’t owned by billionaires.

I don’t find this to be as useful as it could be. Its tone hints that Democratic Socialism isn’t carefully thought through. Or, at least, that’s how the opposition spins it, unquestioned by media.

I would prefer something more plain and to-the-point. Then again, I don’t know if this describes Democratic Socialism. It just describes what I want. Yet somehow I doubt that Bernie would disagree with a lot of this:

Common Sense Politics
 (as interpreted by Kent Pitman)

Maybe you have 2 cows, maybe not.

Many have far less. Can we stop pretending everyone has it good? People are getting left behind.

People making enough to have a surplus
 pay tax on surplus.

Why are we taxing people who have less than they need to get by? So we can give it back to them later and call ourselves heroes? Leave them alone and get the money we need from the people who can afford it.

Forget this “skin in the game” crap
 about why everyone should pay tax.

Being poor IS having skin in the game. No additional reminder is necessary. The poor are not parasites, they are people society has failed.
And anyway, if you want fewer people, fund birth control.

Rich people pay their fair share
 and stop calling it pain.

Less luxury is not pain. Of course the money for a society is going to come from those who have a surplus. To do otherwise is irresponsible or inhumane.

Corporations pay tax on surplus, too.

Profitable corporations don’t need or ask for subsidies.
And it should go without saying, but...
Corporations are not People.

Corporations pay a living wage.

So employees don’t have to ask for government subsidy. Duh.

The military doesn’t get to waste money either.

No more buying stuff we don’t need just to supply pork to someone’s district.

A healthy and educated society benefits us all.

We pay for these collectively out of society’s surpluses, not by making people choose between these things and basic needs. And we stop calling the money that society pays for these things “expenses.” They are “investments.” It’s not “should we spend on healthcare or education?” but “should we invest in healthcare or education?”

To decide our future, we count citizens, not dollars.

Everyone should participate. Yet another reason education matters: We need well-informed voters. But it’s citizens, not dollars, that need a voice. Money always speaks loudly. Government is supposed to counterbalance that. Any suggestion that money needs a voice in politics misses the point of the Constitution, which assigns no special privilege to wealth, but rather takes it as given that we are all equal.
End Citizens United.
End gerrymandering.
Make voter registration easy and fair.

Fix Climate.
 Now.

Or none of the rest of this will matter.

But, either way... Go Bernie!

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Corporations Are Not People

Part 1 | Part 2 | Part 3

Corporations are not people, my friends, no matter what Mitt Romney says.

Corporations are corporations. People are people.

If corporations were people, they would obey the same tax laws as regular people do. Instead, they have a separate set of rules. What an amazing irony, given that “legal personhood” arose, in part, from a desire for equal protection under tax law.

If corporations were people, when they broke the law, they would be punished, not just by fines but sometimes by imprisonment or death.

If corporations were people, they could not urinate in public. This would be a relief to the employees of certain corporations, who are presently asked to enjoy humiliating public displays of trickle down. We'd insist corporations use a rest room like everyone else. Although that would usually require knowing their gender. If something doesn't have a gender, that's a big clue that the something is not actually a person.

If corporations were people, they would be counted in the US census.

“Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.”

 —13^th Amendment
    to US Constitution

If corporations were people, some would be old enough to receive Social Security.

If corporations were people, taking money out of them would be called robbery, not profit or dividends. Owners would surely justify this robbery by saying the corporation was a dependent body, but we would see quickly enough that it was the owner that was dependent on the corporation, not vice versa.

If corporations were people, other people could not buy, sell, trade or own them. We don't let people own people in the US. We call that slavery. Every person controls his own destiny.

If corporations were people, they could not be dissolved by other people. We'd call that murder.

If corporations were people, then from the moment of their very conception, their ultimate existence would be assured—no backing out allowed. If any other person interfered with or otherwise aborted plans to sign articles of incorporation, pro-life groups would insist that was murder, too.

If corporations were people, they would have a childhood. During their first eighteen years, they would attend school and learn how to be good citizens. They would not be allowed to sign contracts.

If corporations were people, they could not exist simultaneously in multiple countries at the same time. We would know when they were in one country or another. They would need passports and visas to move around, just like people do.

If corporations were people, we'd give them freedom of speech, but no more such freedom than we give any other person.

If corporations were people, there would be limits on how much they could donate to political campaigns. Because people have such limits.

If corporations were people, some could even vote or run for office—if they were old enough and born or living in the right place. But if we caught them coercing the vote of another person, perhaps an employee, we'd throw them in jail.

If corporations were people, they might need freedom of religion. But not so that they could coerce the rights of others, and instead so that they could explore what they thought of life, death, and ethics, independent of the people who gave birth to them. Religion is a very personal choice we should each make for ourselves, not owners for corporations, nor corporations for employees.

If corporations were people, I wouldn't have to write this article. Because when two things are the same thing, so many questions like this just don't come up. And yet the questions keep coming and this list could go on. Corporations are not people in so many ways.

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This first part of a 3-part series was originally published December 2, 2013 at Open Salon, where I wrote under my own name, Kent Pitman. The next part is We The People (and Corporations). The series concludes with Employers of Religion.

The public domain liberty bell graphic came from freeclipartnow.com.

Tags (from Open Salon): politics, incorporation, corporations, corporate personhood, legal personhood, legal person, legal personality, taxation, crimes, punishment, imprisonment, life, death, death penalty, urination, trickle down, census, social security, robbery, slavery, human trafficking, murder, pro-life, childhood, contracts, travel, passport, visa, home country, citizen, citizenship, speech, religion, freedom, freedom of speech, freedom of religion, religious freedom, philosophy, ethics, vote, voter, voting, run for office, running for office, candidate, elect, election, elected, office holder

The Overtime Loophole

Part 1 | Part 2 | Part 3

President Obama has been talking up the idea of raising the minimum wage. I would certainly support such a move. But until we require the minimum wage to always be a living wage, there's more work to do.

Author's Note: This is the last in a three-part series that began with Breaching the Social Contract and Lien Times for Startups.

“No one who works full-time
should have to live in poverty.”

—President Barack Obama
in his State of the Union speech, February, 2013

People are having trouble making ends meet. There are signs of it all around, but it's not always spoken about. It's embarrassing, after all, and something people often just endure rather than talk about out loud. But shame gave way to outrage recently, and shy silence to loud cries of incredulity, when when McDonald's published a “Sample Monthly Budget”  (see excerpt at right).

What caught they eye of many was the unabashed acknowledgement, right up front, that McDonald's knows they are not paying enough for a person to live on, and that of course their employees will need a second job. That their pay is not a living wage was no surprise to anyone, but that McDonald's was willing to so casually acknowledge that fact was quite striking.

Not only that, but also striking was that the sample budget doesn't even mention obvious costs like food, clothing, and gasoline. And though it mentions health care, it seems to think $20/month is enough. That's not even a full copay for a doctor visit on most plans, much less a payment for the plan itself.

Curiously, the McDonald's 2012 annual report speaks proudly of its employees as part of its McFamily, and of their jobs as “a career.” I asked the all-knowing web what the difference was between a job and a career, and it referred me to Yahoo, which offered lots of talk about careers being things you build, things you work toward, or something that doesn't just pay the bills but is a passion. Merriam Webster defines career as “a profession for which one trains and which is undertaken as a permanent calling.” Hmmm. A permanent calling that doesn't pay enough to live. What could possibly go wrong?

In fairness, though, we probably owe McDonald's a thank you for publishing this budget. It doesn't show them to be much different than I'd imagine many other employers to be. It's just unusually honest and invites public discussion with a new degree of specificity. We don't have to guess what they're thinking. They've spelled things out.

For example, what leapt out at when I saw this budget, was that it acknowledges an ugly reality of modern employment that everyone probably knows about, but that gets far too little open discussion: that Big Business has found a pretty reliable way around overtime laws.

In the McDonald's budget, it's plain that they expect employees to work additional hours to break even. That's the reason for the second job. But just as obviously, they're not offering to let their employee work those hours at McDonald's. Why?

Is it that they're not open that many hours a week? No, McDonald's has a lot of interest in being open late. Is it that they want their employees to be well rested? Well, obviously not. The budget says the company expects their employees will be working long hours, just not for them. So it's not about more hours to rest up.

Antitrust laws notwithstanding, I imagine what's really going on is something like this: Suppose I have a company where I want to employ 100 workers at very little money for 80 hours without overtime. And suppose you do, too. That would violate employment laws and maybe also make a mess of various corporate policies. So I get an idea. I call up my friend Donald, who has a business similar to mine, and we get together to brainstorm about this problem:

Donald has an idea: “How about I cut my workers to 40 hours a week and you do the same? Then I'll hire your 100 workers, also for 40 hours, and you can do the same for me. We'll each now have 200 workers instead of 100, each working at 40 hours instead of 80 hours. Presto. Problem solved: We each get what we want, 8000 hours of work a week, but with no messy overtime for the employees.”

I'm skeptical this is what's intended, but Donald is insistent: “Nonsense,” he says of my concerns, “if they didn't want us to do this, they'd pass a law against it. Instead, they've created an economic incentive for us to do this. Congress must know it happens, so since they don't make a law against it, they must want us to do it.”

“But this Congress doesn't want to pass any laws,” I reply, still not convinced.

“Not my problem,” Donald responds. “I can't be running my business based on made-up constraints that my competitors aren't shackled by. It wouldn't be a fair fight.”

“But what's fair about cheating workers out of overtime?”

Donald scowls at me. “First, it's not cheating. And second, they signed up voluntarily. They could have gone elsewhere if they didn't like the deal you were offering.

“Like where? To your company? You'll offer them the same rotten deal that you suggest I offer. What if everyone does that trick you're suggesting?”

I don't know if a conversation like that ever happened. It might have. If it did, I'm sure there are no records. But, conversation or not, it seems clear to me that the companies engaged in this practice know they are doing it.

If the reason people were taking second jobs was to reach for something extra—not something they need to live, but something nonessential—that might be okay. But the McDonald's budget is a clear admission that these companies know that they aren't paying any kind of living wage. A claim to the contrary wouldn't pass the laugh test.

Employees have no real choice but to work overtime to break even. And since they have to do the overtime with another company, they won't get overtime pay. That's called an externality: These companies get the benefit, and the cost is someone else's problem—the employee's, to be exact. If the companies were paying time-and-a-half for that overtime work, the employee wouldn't have to work as many hours for the same money, or the employee would make more money for working so many hours. That seems the clear intent of the overtime law, even if not the letter of it. But the companies have found a way around it.

So what's to be done? To get the discussion onto something concrete, I suggest a tax. There being no employer to collect the extra money from, I suggest the government can pay it—up to the level of a living wage. Then the government can tax the employers to recover the cost. In that way it's also “revenue neutral” and the anti-tax folks should have nothing to object to.

If a worker is paid so little that he must work 80 hours for two employers, he's due 40 hours of half-time pay because he was only paid a straight wage, not time-and-a-half. At tax time, he gets a credit for the half-time pay. The government then taxes the two employers for their share of the cost, based on the number of hours each employed the worker and how much they paid him below a living wage. For every hour they underpaid him, a bit of tax is held in reserve to cover the very likely situation that he'll file for overtime.

None of this keeps an employer from offering overtime work directly and honestly with their own company. That would avoid the tax. Or they can just pay a living wage. That would avoid the tax, too. I'm not suggesting a tax because I'm fixed on taxing people. It's just a tool of last resort to make sure employers can't find a legal loopholes to hide from what should be their responsibility.

Let businesses find another way to make their money than on the backs of employees. Let them offer good products and services at prices that more fairly incorporate all legitimate costs of those products and services rather than hiding those costs by pushing them onto workers and society.

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This third part of a 3-part series was originally published August 10, 2013 at Open Salon, where I wrote under my own name, Kent Pitman.

The other articles in this series are:
Breaching the Social Contract (part 1)
Lien Times for Startups (part 2)

Original graphic created from data obtained at motherjones.com.

Tags (from Open Salon): monthly budget, budget, necessities, essentials, paying enough, overtime, forced overtime, unpaid overtime, overtime law, antitrust, antitrust law, collusion, tax, poverty, jobs, employment, mcdonald's, sample monthly budget, loophole, overtime loophole, second job, another job, extra job, make ends meet, making ends meet, business, taxation, politics, social contract, minimum wage, living wage, externality

Enough

A lot of the discussions we have about what's fair to tax seem to refer to questions of how people should “share the pain.” I don't like the way that discussion usually goes, but not because I don't think people should share pain. I just question the definition of “pain” that seems to get used.

And I should say at the outset that frequently when this discussion of alleged pain sharing comes up, a flat tax gets suggested as well. For some reason this is often asserted to be more fair. I don't think it is. But I'm going to assume a flat tax for presentation purposes here because a lot of people don't seem to understand how to visualize our present progressive tax system. Doing so won't affect any of the points I have to make.

Let's begin by looking at how this sharing of the pain is supposed to work. We'll imagine three different incomes of different sizes. We'll assume everyone is paying a proportional amount of their income. 15% is often suggested as an ideal flat tax. But it made my picture hard to annotate. So I'm going to use 30%. Again, it won't affect my point.

So here are some typical incomes. The green indicates the take-home that you have, and the gray is tax taken out. The longer bars are people making more income. The shorter bar is someone making less income. But it's all proportional, so it's all fair—right? Well, we'll come back to that.

Now the discussion is about the current suggestion that we take out more tax on people who have very high incomes. That would look like this:

The argument is made by those who might stand to lose that they're already paying a huge amount of tax. And now we want more. Oh woe is them. Look at that giant red bite. In fact, look hard at it. Focus on it. Be hypnotized by it. Especially don't look at the green part to the left of it because if you look there, you might not feel like the person who's complaining is hurting so much. Just look to the red.

Actually, that's not the real argument I want to make. But it is one thing that should already have you thinking “Maybe proportionality isn't all there is to this picture.” Those pushing proportionality would be happier with this picture because they like the idea of shared pain:

There's another concept I want to introduce at this point. I'm going to call it the concept of “enough.” We can have a discussion later about what that line is. But wherever it is, the line of “enough” is what I want to define as the line where people can reasonably live. It supports sentences like “I don't have enough.” or “You have more than enough.” It looks like this:

Right away, you notice that some people might not make enough. In this chart, everyone makes enough before taxes, but after existing taxes, one person is already hurting. I've marked that in red. And that's with the proportional tax. They had just barely enough, but merely asking them to participate in taxes meant they didn't have enough after all. I don't think people who make exactly enough or less than enough should have to pay taxes. It's a sham. If they're really not making enough, someone will have to help them—either another person or the government. Why take money away just to give it back? Unless people are making enough, there's no real money to take.

And if we want to add more tax, is that increasing the pain? Well, sure, for those who are not making enough. Because they're the ones whose needs are being cut into. Above the line of enough, I don't think it's fair to say you're experiencing pain in the first place, and unless the increase in tax causes you to cross the enough line, I don't think you get to complain about increased pain—or pain at all.

And this is the thing. Incomes scale but needs really don't. Oh, sure, we can all get used to having really big houses, vacation homes, jets, really nice clothes, etc. I think it's great to have things like that. But when you get to the point of not just having them but not knowing how you'd live without them, and not being willing to sacrifice some of that for the sake of others who are truly needy, you're pushing a line with me. Certainly, at minimum, if you claim to be experiencing pain because you don't receive money at quite the lavish level you've been used to receiving it, you've lost all touch. It's time to be reminded that you're behaving like a spoiled child and to be told that you should be ashamed.

Proportionality doesn't work without exemptions for the low end. That's why we have a progressive tax system.

And sharing the pain equally is meaningless because we're not all in pain. If you're making enough, at least have the courtesy to acknowledge the fact. You're not showing yourself in a flattering light when you behave like you're hurting if you're not. The world has bigger problems than your imagined pain.

Enough of that.

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Originally published August 10, 2011 at Open Salon, where I wrote under my own name, Kent Pitman.

This post was an Open Salon “Editor’s Pick”.

Past Articles by me on Related Topics
Tax Policy and the Dewey Decimal System
Redistributing Burden

Tags (from Open Salon): politics, fair tax, proportional tax, shame, ashamed, hurting, pain, share the pain, sharing the pain, proportional, proportionality, enough, not enough, more than enough, surplus, need, needs, want, wants, taxation

My Slice of the Pie (Again)

I thought I had written this already, but apparently it was stem cell research I'd written about back in March, not abortion. Since the observation I have to make applies identically to both issues, I just copied the old article and changed the nouns in two places.

Ever pooled money with a group of people for pizza? Five bucks a head and someone calls out a big order. It can be a little tricky since not everyone likes the same toppings, but with a little effort, it can be made to work. A veggie pizza here, a pepperoni there, maybe the chicken pizza has olives only on one half of it. Pretty soon everyone who's pitched in their five dollars is satisfied.

Of course, the guy who wants the veggie might be irritated that someone in the group was eating meat. But what's he going to do? Force his ethics on others? No matter how morally sure he is of his beliefs, it wouldn't fly for him to try to control what others are doing. His $5 hardly buys him the right to tell everyone else what they can or can't eat. Chipping in buys him the right to ask that a little bit of the pizza is something he'd enjoy, but it doesn't give him the right to veto what others might like.

So now let's talk about another kind of pie: The national budget.

Why do people say silly things like “I don't want my tax dollars going toward abortion”? Why aren't they laughed out of town for such a ridiculous statement? It's fine for them to say something like “I want a few of my tax dollars to go to funding something I do like,” but unless they're paying a lot more than I'm sure they are in taxes, they just haven't bought the right to control what others are chipping in for.

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Originally published September 30, 2009 at Open Salon, where I wrote under my own name, Kent Pitman.

Tags (from Open Salon): taking responsibility, overpopulation, pregnancy, unwanted pregnancy, pro-choice, pro-life, anti-choice, anti-abortion, pro-abortion, short-sighted, selfish, separately coded, separate account, federal funds, state funds, tax deduction, tax credit, my tax dollars, single payer, health care, public option, abortion rights, abortion, sharing, pizza, economics, funding, pluralism, politics, family planning, planned parenthood

Credit Cards: A Tax on “Being Poor”

A long time ago, credit card interest was deductible. I think it should be again. The present system is not fair—certain practices are not acknowledged for the substantively regressive hardship they present.

The Public Government Safety Net

In times of need, we may draw on savings or turn to friends, family, and community resources. But when these fall short, we look to government as our final safety net. Since the time of the New Deal, and later the Great Society, and as our society has become more affluent, we have tended toward acknowledging the importance of the role of government in protecting our weakest citizens. I have argued that a society that is both prosperous and humane should take on the goal of providing a safety net for reasons that go beyond mere charity.

Anything from food to clothing to health care to education still needs to be paid for when one has no job, and yet—whether by oversight or by deliberate design—the government isn't always racing in with help.

Unemployment insurance sometimes helps, but it is limited in its scope to less than the person was making while employed, so there's a problem right out of the box. And it doesn't cover health care, which is often tied to the employment and typically becomes very expensive at that moment of a layoff when the unemployed person is suddenly paying not only their own contribution but their employer's as well. Everyone's situation is different, but the point is this: the public safety net we now offer has holes in it big enough for people to fall through.

It's nice to say that people should always plan ahead, but sometimes they don't, and quite often they can't—probably more often than appeases the conscience of the Haves in a society that is increasingly sharply divided into Haves and Have Nots. But for whatever reason, the situation comes where help is required and no help is there even from the government.

And yet life must go on.

Payments for mortgages, medical bills, home heating (and cooling), and food must still be made even at times that are financially inconvenient.

Commercial Lines of Credit

So when you're out of work and have bills to pay or when you're sick and cannot afford health care, if the public government cannot help, and regular bank loans are not readily available, all paths lead to the option that doesn't pester you with stupid, demeaning, or embarrassing questions about why you need money when you're making no money—the option that doesn't force you to admit the obvious, that you wouldn't be asking for an unsecured loan if you had an asset to offer as collateral.

We are at our most vulnerable when we're out of work, and yet it's assumed that the free market will resolve matters. Yet the free market knows that it can prey on people in times like these and get concessions no reasonable person would want to make—because for an individual thus alone, thus abandoned by their job, there is no other option. These are often people who did not let their company down—their company let them down. And yet we treat them as if they have nothing to offer and throw them to the wolves by allowing them to negotiate credit at these most vulnerable of times.

Commercial business needs credit at these times, too. But the government makes lines of credit more easily available to them, and at much better interest rates. Many prospective businesses have no asset to their name and may well outright fail, even spectacularly, and yet loans are available to businesses at rates that are not 25%, 36%, 75%, etc.—the kinds of rates that the free market capitalists tell us are not usury and are merely the market working happily to reach a fair price.

It isn't that the risk of business is less. The entire business world just collapsed around a hard-working workforce, and even now the government is seeking to offer single-digit rates to businesses that have a track record of failure to get them back on their feet, while doing nothing to help hard-working individuals who have never failed to do their job. It's just that the Public Government cares more about business than about ordinary citizens , especially those at low income levels. Public Government actively monitors and manages the economic health of business credit. Not so for the lesser class—for people, especially people who are not “of means.”

It's become fashionable for people who have not run into economic difficulty to claim that everyone should cut up their credit cards and operate with no such safety net, but I find it doubtful that business would advise shredding their line of credit. Credit is necessary to span unpredictable variabilities in expenses and income. It's one thing to not use a credit card. It's quite another to not have one.

While a commercial line of credit is an ordinary business tool, a credit card really is not. For one thing, it is not adequately regulated. So thinking of it as a poor man's business tool is not quite right. Let's try an alternate metaphor more suited to the lack of control that ordinary people experience when dealing with credit cards.

Private Government, and Commercial Safety Nets

A credit card issuer is a kind of private government, issuing passports freely in times of calm, allowing you to pretend a credit card is really just a charge card, something you pay back every month.

Those who are not wealthy know another truth about these cards: They are a place to request economic asylum when bills get out of hand.

Government is “a compulsory territorial monopolist of protection and jurisdiction equipped with the power to tax without unanimous consent.”
   —The Myth of National Defense, page 8, as quoted by Wikipedia

As private governments, they offer a safety net to their citizens not offered to many citizens of the United States. Yes, they take people at their most vulnerable. Yes, they dictate their own terms with no fear of retribution. Yes, they tax mercilessly. But they provide aid where the public government does not, shelter in life's most awful of storms. As horrible as they are, they are also the savior of many people because they offer a chance just to survive where there may be no other chance.

So if one doesn't have cash and no one, including the public government, is offering help, there may be little other option than to use credit cards if they are available. This is true even of people who have faithfully maintained a zero balance on their cards. Because when you need money, you take it where you can get it at the rates it is offered.

It's sometimes easy to get lulled into believing that all problems with credit cards are the result of casual overspending that could be avoided by merely applying more self-control. Doubtless that's sometimes true. But not always. It is important to see that credit cards often serve a critical societal function that is not so easily dismissed: They offer necessary economic insurance to those to whom the public government turns a blind eye.

Private Tax

Black’s Law Dictionary (sixth edition, page 1457) defines a tax as a “pecuniary [i.e., monetary] burden laid upon individuals or property to support the government,” and goes on to call it “a payment exacted by legislative authority.”

Credit card interest rates operate as a “private tax.” The operating costs of citizenship in the private government of a credit card issuer are paid for by these taxes. It's set high by the credit card companies and there's no one there to say it should be otherwise. Congress has better things to do. But with their silence, they give consent. And Congress does the various laws to stand that provide enforcement of whatever these private governments decide about how the lives of certain people will play out.

What the credit card companies decide is, effectively, law. It's easy for the affluent to say that people could opt not to use the cards, or they could go for a different card, but the decisions that bind one to a credit card company are made at times when these are really not options, and when there is no one there offering alternatives. Such assertions show callous ignorance of the true burdens of being poor.

And, of course, if these interest rates were really recognized as what they are, a tax, the real government, the public government, would allow a tax deduction, not just on investment-grade loans like rich people with houses can afford, but also on street-grade loans like ordinary people who can't afford houses are left to take. It's not normally considered ok to tax someone twice. But it is when it's the poor. Who's going to speak for them? They're too busy working to pay their taxes to complain.

It can happen that all of one's income is going into paying this private tax even while the government—the real one, the public one—is looking at the person's income and thinking all of that money is available to be taxed. The ordinary citizen, the person who depends on credit cards to make ends meet, does not get a break on this.

If they were a business, they could deduct this interest. Because the government that caters to business—the public government—cares about this matter. Not only does a business get a lower borrowing rate, it gets a tax break to help pay the interest on money borrowed. But private citizens of the private government, the government of the lesser class, get higher rates and no help from the public government in paying the interest.

They may be living at a subsistence level with all of the money they pay credit card companies going toward interest. That means they are creeping ever more into debt and yet the the public government is still taxing them as if they have net income they should be sharing—ironically, so that more affluent people, those who really do have net income, don't have to pay tax. No wonder the poor cannot climb out of this state. The basic accounting is simply not fair.

Handouts vs. Double Taxation

There are some who manage their finances in such a way that they save up money for emergencies. And sometimes this works. But it's disingenuous to say that this can always work. It's trivially possible to show that there are possible emergencies that can come up in life that are bigger than one has had time to save for. Those who don't run into this case should count themselves lucky, but should stop claiming that just because that worked for them it will necessarily work for others. In the general case, it simply can't. And while it's clear that an increased savings rate would be helpful, it's not a complete solution.

Also, insurances such as life insurance and medical insurance are luxuries that many simply cannot afford because they already have too little money to meet today's needs, much less tomorrow's. Such people go uninsured not because they are too stupid to realize that insurance matters, but because they simply have no other choice.

It would be nice if money were made cheaply available to poor people in urgent need, as it is to rich people and businesses in urgent need. But I'll make the case for that another day. We can't solve every problem at once. Sometimes people have to help themselves.

That's my point. A person asking to not be taxed twice is not asking for a handout. They are trying to help themselves. But if they are faced with double taxation, they are not going to be able to do that. To borrow a phrase so often heard from Republican lips (usually when talking about the need to reduce “onerous” taxes on millionaires): “it's their money.” It only becomes the government's money when the government sees the opportunity to prey on them. It isn't asking for a handout to say that a person who is not breaking even should not be taxed; it's just asking that the government refrain from kicking people when they're down by doubly taxing them.

Pay-As-You-Go Socialism

Maybe we'll fix some of these inequities in upcoming years—health care, for example—but we probably won't fix all of them. People will still have emergencies they're not prepared for. So since the US is not a socialist state, we offer the capitalistic alternative: “pay-as-you-go socialism,” in the form of credit cards, available at market prices to those too poor to qualify for the well-regulated and more affordable interest rates the federal government offers to people of means. And, realizing credit cards are their only available alternative, less-well-off consumers swallow their pride and agree to pledge allegiance to these private quasi-governmental entities and to pay whatever private tax is required, in exchange for the financial services they require to get them through times of need where the real, public government has left them helpless.

And perhaps this seems fair to die-hard fans of the free market. But I'm not so sure that's a fair analysis since, the terms under which these cards are offered are not really subject to market forces. And, importantly, people of greater means would not have to be going through this because they qualify for government-sponsored loans at much lower rates.

They're in this position not because of some crime, but merely because they're poor. Had they been a bit richer, they might have qualified for the better loan rates straight from the government, or for tax deductions. So yes, maybe they do voluntarily enter into the agreement with the credit card company once they realize they are involuntarily not part of the elite club of people who don't need to do that. But I find that way of saying it just a little disingenuous; pardon me if I prefer other phrasing.

When people of greater means have access to lower interest rates and tax deductions, while people of lesser means do not, social justice cannot be achieved. People who have very little option but to use high rate credit cards to get them through hard economic times must put up with a practice that amounts to double taxation tax on money already consumed by their payment of this private tax. If you don't like the terminology I've picked, it doesn't change the fact of the inequity. One way or another there is an extra tax that needs to be accounted for. Call it, if you prefer, a tax on being poor.

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Originally published January 9, 2009 at Open Salon, where I wrote under my own name, Kent Pitman.

Tags (from Open Salon): line of credit, paygo, pay-as-you-go, capitalism, socialism, government handouts, safety net, public taxation, private taxation, public tax, public government, private tax, private government, interest, interest deduction, deductible interest, great society, new deal, double taxation, taxation, charge cards, credit cards, politics

Redistributing Burden

McCain's near-spastic surge of emotional hotbutton issues is hard to follow, but among the spread spectrum of ideas he's been frequently hopping between is his allegation that Obama is a “socialist” seeking to “redistribute wealth.”

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A number of people are already doing a pretty good job of shedding sunlight on McCain's confused use, or cynical abuse, of the term “socialist.” For example, Stephen Colbert recently interviewed Brian Moore, socialist candidate for US President in the 2008 election. In the interview, he asks Brian Moore whether Obama could pass for a socialist.

I wanted to make a different point, though... that is, if you're done watching the video. Hello? Is this microphone still on? Ah, there you are. I thought for a moment I'd lost you. I should know not to put myself in deliberate competition with the likes of Colbert, especially to illustrate what I don't want to talk about!

What I really wanted to talk about is the notion of redistributing wealth. I want to suggest that's a bad paradigm for viewing the question, and suggest a way to reframe the discussion. I want to discuss “redistributing burden” instead.

To start, let's look for a moment at the process of summarization. There are a lot of ways to summarize an issue, even something that seems so simple you can just count it up. Depending on what you count or how you count it, the answer can be different. For example, we have a Senate and a House of Representatives in part because one of them counts up what states think, and one counts up what people think. It was believed by our founders, and I think they were right, that sometimes one of these is the right way to count, and sometimes the other. But the point is that they're different, even though they're at some level both counting up the same thing, that is, “how much will the nation has on an issue” or “how much need the nation has.”

So it is with wealth and burden. For some things where money is involved, wealth may seem an inverse measure of burden. That is, if you have a lot of wealth, you have less burden. But the problem with that is that it sounds like it's all proportional. Wealth uses words like “more” and “less.” People who claim they have no wealth at all are rarely sympathized with, even though the use of the word is probably correct, but rather they are quibbled with. “What are you talking about? You have a family. Isn't that a form of wealth? You live in the richest country in the world. Isn't that a form of wealth?” (Given our debt burden, I'm not sure I'd call this the richest country in the world, by the way, but you still hear people say it.)

Sometimes the word wealth is a relative measure. We cannot all be wealthy because we don't all live in Lake Wobegon (“all the children are above average”). It's a necessary fact of relative wealth that for some people to have it, others don't. Now, it's certainly true that there is another kind of wealth, an absolute kind, that says that if you have more than you need to survive, you're also wealthy. And that kind of wealth we could theoretically all have at the same time. We just don't. We have many people who have enough to survive, and more, while we have many others who don't have enough to survive, to care for their families, to address medical issues, etc.

So when it comes time to pay the nation's taxes, the question is what the burden is on them to give up a little of their money to help with that cause. The answer is pretty plainly right now that there are people who are barely getting by, if at all, who are being asked to pay money they don't have in order to help with that. For example, for Sally making $30,000 to pay $3000 in taxes while Bill making $1,000,000 pays $100,000 might seem a simple issue of scale. Both pay 10%. But the $3000 that the Sally is giving up might have been just enough to afford some critical expense, perhaps a health care plan. While at his income level, Bill is at no serious risk of not being covered by a health care plan. So it's not that there is a proportional burden. Sally's basic needs are not met and Bill's are. It might not even be the case that Sally's needs were met with no taxes at all. $30,000 is not much to scrape by on, especially if she has a family. But I'd argue Bill could still manage to raise a family even if he paid $103,000 dollars in taxes, so that Sally had to pay none. Or even if he paid $130,000 dollars in taxes, so that ten Sally's had to pay none.

I hear murmurs of “he's redistributing wealth” but that's my point. I'm not necessarily redistributing burden. At least, I'm not creating a burden on anyone that didn't have it; I'm just removing it from someone who did. If Sally pays no tax, so keeps all $30,000, she's not made rich, she just fails to be quite so impoverished. And if Bill pays only 3% more in taxes, which is $30,000, he's not impoverished by that. He's just slightly less rich. Before the change, 10 people might have been struggling and 1 surviving (well). After the change, 11 people might be surviving. That's a big benefit. The mathematics of burden redistribution are very different than the mathematics of wealth redistibution. Speaking in terms of wealth rather than burden can muddy things a lot by focusing on things that don't matter at the expense of things that do.

“But,” I hear you protest, “she doesn't have to pay taxes and he does.” Not so, I claim. She pays a tax. She is poor. Being poor is a tax. (On another day, I can perhaps even explain that might be quantifiable. But today you can just assume I mean that being poor is no fun, and that Bill won't trade places with her if he has the chance. So saying Bill is enduring an inequity in this arrangement is disingenuous.)

And yes, we can argue where the line is between rich and poor, but we should not argue that there is no such line. Surely there must be some amount of money beyond which if you have it, you're set. Just as surely is some amount of money below which if you don't have it, you're in bad shape. The precise amount may differ with time and geography and other factors, but we shouldn't let that uninteresting fact distract us from admitting that are real effects worthy of discussion.

And please note well—I'm not saying that the wealthy need to just give all their money to the poor. The capitalist system is about the hope that the opportunity to get rich will cause people to work hard for that goal so that others will benefit. But we need to watch that in fact the others do benefit. If we allow the one person (or a small number of people) to get rich at the expense of the others, then capitalism hasn't done what it set out to do. Those who have succeeded under our system need to remember that this is a society in which the populace, by majority vote, chooses how we run things. And if that group gets things to the place where a majority of voters think they're not doing well, they should expect that such an unhappy majority has good reason to start pulling plugs on the process. That's what I think is in play right now, and what will continue to be in play until a basic fairness to the original premise that we should all benefit to a reasonable degree from the success of the few.

A bit of enlightened self-interest on the part of the rich would go a long way just now. Holding firm to the “it's mine and you can't have it” line is not going to serve the rich well when talking to people headed for the ballot box.

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Originally published October 30, 2008 at Open Salon, where I wrote under my own name, Kent Pitman.

Tags (from Open Salon): politics, economy, wealth, burden, needs, basic needs, health care, food, redistribution, redistribution of wealth, redistribution of burden, income redistribution, tax, taxes, taxation, regressive tax, tax fairness