The meaning of “socialism” in American politics
So, call me a philistine, but I really think that the Tea Party types have gotten a bum rap over their whole “Keep Government Out Of My Medicare” slogan. Yes, Medicare is a government benefit. One’s Medicare card represents a claim on the government that can be redeemed for goods and services, usually delivered by private sector providers.
You know what else is a claim on government that can be surrendered for goods and services from private sector providers? Money. Yet there is no part of the political spectrum that considers it incoherent to say “Keep Government Out Of My Pocketbook”, even though the only relevant thing your pocketbook contains is government scrip. If the money analogy seems to forced, consider a retirement account chock-full of government bonds. The account contains nothing more or less than government promises to pay, but that doesn’t render it incoherent to object to the government’s altering the terms of the bundle of promises, whether by restructuring the debt or more aggressive taxation.
What the Tea Partiers are accurately if not artfully expressing is that Medicare feels a lot like a property right. Our most important property rights are often claims on people or institutions. This includes all financial wealth — dollar bills, stocks and bonds, pensions and 401-K plans, every form of insurance we buy for ourselves or others provide for us. Medicare and Social Security are, from users’ perspective, property, no different from a privately funded health or pension plan. Why should users think of them as “government benefits” any more than they think of interest payments on a Treasury bond that way? Human beings are notoriously territorial about property. All it takes to turn a human being into a urinating canine is the combination of 1) a readily comprehensible set of nonuniversal rights; and 2) some account that legitimizes differential claims to those rights. Medicare and Social Security have all that in spades. They provide rights to tangible, extraordinarily valuable, transfers and services. People endowed with those rights believe themselves to have earned them, by virtue of having contributed to the programs specifically and to society generally in a quasicontractual arrangement. People consider themselves “entitled” to their entitlements because they view them as property.
Matt Yglesias writes:
Any effort to reduce government spending on health care for the elderly is intolerable socialism, and any effort to increase government spending on health care for the non-elderly is also intolerable socialism. That’s cynical, but it also reflects the objective difference in the age structure between the parties.
I think it’s fair to point out that it’s cynically exploited, but I think the underlying feeling is not really so cynical. The meaning of socialism in American politics is government action to redistribute property rights. It is socialism in America to tax the rich and it is socialism in America to give to the poor. Similarly, it is socialism for the government to change the terms of the extraordinarily valuable set of rights that constitute property to Medicare incumbents, and it is socialism to extend those extraordinarily valuable rights to people who haven’t “earned” them. That may be objectively bizarre for a program that is universal after age 65. But the median Medicare recipient has worked and paid taxes most of those 65 years, views her benefits as earned, and takes herself as representative of Medicare recipients as a class.
Americans, for better and for worse, are unreasonably — almost limitlessly — respectful of what they understand to be property rights. That’s just a fact on the ground. Some interest groups get this: Consider the decades long project of recasting copyright, patent, trademark, and trade-secret protection into “intellectual property” that can be “stolen”, rather than narrow government dispensations intended to advance specific social purposes. People trying to design policy that will actually work in America have to keep this property fetish in mind. It creates both constraints and opportunities, but it is there.
And yet ’eminent domain’ seems to be used and abused freely? Or is it just that respect which makes Americans notice?
March 11th, 2011 at 11:45 pm PST
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I so totally don’t view Social Security as my property. One reason I prefer my 401(k) to a more generous pension is that I feel like I own those stocks and somebody would have a really hard time taking them away, compared to a pension that’s just a promise. And even if Social Security involved putting all my contributions into 30-year savings bonds, I still would only feel like it was the bonds that were my property — not the income payments I was expecting in thirty years, if the government were still around to make them.
But actually the bond-to-Social Security comparison does tamp down my hatred of Social Security a bit… I hate the idea of anyone thinking they deserve hundreds of dollars from the government every month instead of being lucky to get it… but not when that hundreds of dollars is Treasury bond interest. I hate the idea of people getting a lot more money back than they paid in… but not if it were just a higher-interest-rate Treasury bond. I hate the idea of cutting Social Security seeming politically untouchable… but not the idea that you can’t cut Treasury bond interest. I hate that Social Security is a transfer from the politically weak to the strong — but I hate it less than the similar case of interest on the debt. Maybe you’ve got a point here.
March 12th, 2011 at 3:35 am PST
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The cynicism is not a quality of the underlying feeling but a quality of its unequal application. You seem to be trying to avoid this by noting that the underlying principle, were it universally applied, would be valid. That seems to be irrelevant. The relevant fact is that the principle is being applied in such a way that its benefits and self-servingly selective.
The idea that government entitlements might constitute a property right was asserted by the Supreme Court in 1970 (Goldberg). Fair enough. But the idea has been pretty much abandoned since then with respect to entitlements for the poor. To insist on that principle with respect to entitlements for the wealthy is cynical. It’s cynicism has nothing to do with the principle. It’s cynicism derives solely from its uneven application.
March 12th, 2011 at 6:10 am PST
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[…] Steve Randy Waldman has a great insight: Americans tend to view Social Security and Medicare benefit as property, similar to Treasury bonds. Once you’be put your money in, you have a right to the benefits. This bodes ill for entitlement reform. […]
March 12th, 2011 at 7:37 am PST
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I believe many people would argue that the government is messing with our “pocket book.” The constant fiddling by the Fed and the war on savings and savers is just as much an attack on property rights as the attack on Medicare.
Anyway good article just wanted to point out that the arguments used apply very much to money
MC
March 12th, 2011 at 9:01 am PST
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[…] An interesting post over at interfluidity described the way that people can simultaneously look at their claims on government as property, and the idea of giving it to everyone else as socialism. But look at this analogy to let tea partiers off the hook: So, call me a philistine, but I really think that the Tea Party types have gotten a bum rap over their whole “Keep Government Out Of My Medicare” slogan. Yes, Medicare is a government benefit. One’s Medicare card represents a claim on the government that can be redeemed for goods and services, usually delivered by private sector providers. […]
March 12th, 2011 at 10:26 am PST
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But see the 51-year-old famous case Flemming v. Nestor, 363 US 603 (1960). I quote:
Now, I know, that despite the passage of half a century since this landmark case (itself based on the reservation written into the 1935 law), many still people don’t “feel” this way about their expectations of future transfer payments – that is, they don’t see them as gifts and/or charity. Perhaps it is more accurate to say they do not want to see these payments to them as unenforceable gifts or want to feel them as merely a form of social charity, entirely dependent on the generosity and capacity of future congresses.
But they should feel this way because these transfers have none of the essential attributes of “a property right” and all of those of a “gift”. With one exception – “promissory estoppel” or “detrimental reliance”. When one is promised a future gift, reasonable and justifiably relies on that promise, and changes position to their detriment in that reliance, then a promisor (who ordinary cannot be forced to make any unilateral gift in the absence of contractual consideration) may nevertheless be compelled to pay the promisee.
This kind of logic will almost certainly not ever be held to apply to the government transfer programs, but the degree to which it becomes reasonable to “feel” that transfer promises are “property-like” can be analyzed this way. Were people reasonable and justified in relying on these promises of future transfers? Are promises that contain unilateral reservations “promises” at all, or just illusory? Did people in fact rely on them? Did they fail to make sufficient provision for their retirements that they definitely would have in the absence of their reliance on these promises?
In my opinion, these factors give transfer payments something like a 15-25% property-like character. I think government bonds and dollar bills have something like an 90-95% property-like character (P), especially since, unlike transfer programs, they are freely alienable, transferable, and marketable. The degree of “Socialism” that a change in the value of the promise implies is therefore asymmetric depending on P. A decrease in the value of a high-P promise is more Socialist (or disappropriationist) like an increase in the value of low-P is more Socialist, but a decrease in the value of low-P may be less Socialist overall. You could easily make a little dS = F(P, dV/V) equation to map how socialist government-promise-changes are.
March 12th, 2011 at 10:42 am PST
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I think you give (some) tea partiers too much credit. I don’t think the slogan “Keep government out of my Medicare” reflects a belief in a property right in Medicare. I think it reflects the fact that many of them don’t realize Medicare is a government program. That’s the real issue here. Most people have no clue the real extent to which they benefit from various government programs.
March 12th, 2011 at 11:51 am PST
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[…] The meaning of “socialism” in American politics – via Interfluidity – I think it’s fair to point out that it’s cynically exploited, but I think the underlying feeling is not really so cynical. The meaning of socialism in American politics is government action to redistribute property rights. It is socialism in America to tax the rich and it is socialism in America to give to the poor. Similarly, it is socialism for the government to change the terms of the extraordinarily valuable set of rights that constitute property to Medicare incumbents, and it is socialism to extend those extraordinarily valuable rights to people who haven’t “earned” them. That may be objectively bizarre for a program that is universal after age 65. But the median Medicare recipient has worked and paid taxes most of those 65 years, views her benefits as earned, and takes herself as representative of Medicare recipients as a class. […]
March 13th, 2011 at 1:54 am PST
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Tom — Eminent domain is a subject of enormous public controversy in America, and while doable, can be remarkably difficult and costly for localities. The most famous alleged abuse of eminent domain, of course, is Kelo, which sparked a whole movement and legal backlash in several states, driven by the significant part of the American polity that views private property rights as almost sacrosanct. I certainly won’t defend abuse of eminent domain — who would defend abuse of anything? — and I don’t doubt that there are times and places where it is abused. But overall, my suspicion is that eminent domain is too hard, not too easy in the US. My view is that localities that want to take over property should be required to pay up — that is, they should be required to pay something like twice the appraised tax value of the properties. People who value their property more highly than appraised market value should have the freedom to simply state their valuation, and be taxed accordingly. Municipalities would then have to pay twice the stated and taxed valuation. (Obviously there’d have to be lags and procedural protections against upping ones property valuation just when some proposed project is leaked or announced.) Overall, I think it should be relatively easy for municipalities to exercise eminent domain, if they are willing to pay up and they can demonstrate some public purpose. My view is a minority view in the United States, and perhaps even quite radical. It is starkly opposed to the view of, say, Megan McArdle, who suggests our relatively strong property rights are worth a high price in foregone public goods. I think we forego too many public goods, and that lavish monetary compensation is more than sufficient to balance individuals’ interest in their property with the polity’s interest in public goods provision.
March 13th, 2011 at 3:49 am PDT
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Noumenon — I’m glad I’ve perhaps persuaded you a bit. It doesn’t trouble me at all that people think they “deserve” their Social Security. That was part of the (quite intentional) genius of the program’s design. Social Security and Medicare are the least regressive entitlements that have managed to survive, exactly because the wealthier half of the country that largely controls political debate perceives these benefits as property as much as the poorer half of the country. Flattish programs are in fact very progressive relative to the baseline of government interventions, which tend to subsidize the very rich with bones thrown to the very poor, hollowing out the middle.
Positive real interest payments on default-risk-free government bonds are welfare for the rich, and bad finance to boot. And yet almost no one, on any side of the US political spectrum, is willing to say that Warren Buffett and his Berkshire Hathaway investors are “lucky” or a “welfare queen” for receiving vast real wealth transfers on funds they fail to allocate or risk at all.
In a legal sense, Buffett’s bonds are much more secure as property than anyone’s Social Security benefits. Yet the moral case for a property interest is at least as strong for someone who has worked and was coerced to contribute the Social Security and now expects to draw promised benefits.
March 13th, 2011 at 3:58 am PDT
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Bradford — I won’t disagree at all that the leadership of the tea party and other “conservative” groups have been cynical.
But that doesn’t contradict the core point, which is not ultimately about what is right or wrong but how American politics and ideology work.
Entitlements that go to the median effective voter (who earns much more than the median income, as wealthier and older people vote disproportionately) are politically safe, because they are viewed as property by people with the power to persuade politicians to respect what they understand as property rights.
Entitlements that go only to the poor are politically weak, and create opportunities for cynical politicians to play the identity politics game of villifying recipients to win over the effective median voter and those above her. Smart, durable, entitlement programs therefore, must supply significant benefits-perceived-as-property to the median effective voter. You may like this or dislike this — I am not trying to be too normative here — but it is both comprehensible and true.
Entitlements that go only to the very poor are twice damned. The group that controls politics views it as discretionary charity, rather than a property right, so it is always on the table. Further, even beneficiaries of means-tested entitlements understand whatever is called “welfare” in the United States to be charity, and do not resist confiscation in the same way, with the self-righteousness and even violence, that attends confiscation of settled property. Thus the whole attempt from the right and political elite to redefine Social Security as “welfare”. If it is welfare, it is charity not property. If it is charity not property, you should say thank you if you get it and walk away humbly if you don’t. (See, e.g. Mark Thoma fighting the good fight, rebutting Robert Samuelson.)
I think you overstate the downside of all this. Universal programs aren’t as progressive as means-tested programs, but they are far more progressive that the median use of government transfers and expenditures (including tax expenditures). Yes, it sucks that this logic means that “out of the money” social insurance programs, i.e. social insurance programs that are very unlikely to benefit the median effective voter, cannot be politically durable. But it also means that we can design politically durable forms of social insurance by crafting programs in such a way that the median effective voter perceives a significant property right. This is true even if benefits have a progressive tilt (as they do in Social Security), as long as those rich enough to be “mainstream” from Washington’s perspective feels that the terms of the program are valuable property to them.
Whatever your political perspective, there are pluses and minuses to this dynamic. But the dynamic is real, and we miss an important lesson by not listening to people we might perceive as Tea Party hypocrites are actually saying. We miss an opportunity if we prefer to use their apparent hypocrisy to mock them and feel better about our own side in some controversy.
March 13th, 2011 at 3:16 am PDT
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MC — I certainly agree. People very much think government is “messing with their pocket books”, and the same people who a very “conservative” with respect to existing entitlement arrangements tend to be upset about that, even though those conservatism might be inconsistent (if you think that government fiscal constraints bind).
March 13th, 2011 at 3:26 am PDT
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Indy — As usual, lots of good comments.
Rather than your weight-of-property-like-ness, I’d define a kind of hierarchy, going from legally enforceable property rights, to what colorably are property rights in a moral sense, but are not legally enforceable, to rights that many people perceive as property but which are neither legally enforceable and whose moral case is tenuous, down to rights that are not rights at all, just temporary tolerance or charity that all parties acknowledge can be withdrawn at any time.
It’s pretty clear (although I’m sure we’d see challenges, and who knows?) that existing headline entitlements are not legally enforceable property rights. That’s an important fact: It means that individuals are powerless to protect themselves from usurpation of those rights. But we should not consider legal enforceability dispositive of what “are” or “are not” property rights. All equity arrangements involve unenforceable property interests. As a small-minority shareholder in a firm, I have a property interest in the firm although I have almost no legal right whatsoever to enforce that interest. That fact doesn’t abnegate, in moral terms or as a social fact of practical importance, that we nevertheless maintain a property interest in the firm. (Shareholders have certain legally enforceable rights, i.e. a right to equitable distribution in accordance with claimant priority when distributions are made. But entitlement recipients have similarly enforceable rights to fair dealing within the currently prevailing terms of the program.) As a political matter, legal enforceability is not the interesting level or definition of property rights. Individuals require legal enforceability, but groups require political protection. As long as a property right is at the second level of my little hierarchy — not enforceable, but widely perceived and colorably legitimate — it is importantly “real” for political purposes.
I think that, for political purposes, anything that messes with what are widely perceived to be legitimate property rights, regardless of legal enforceability, is liable to be tarnished as “socialism”, and further, that much of American politics is a contest precisely about whose interests get embedded in notions of property. The lesson I am hoping to take and convey in all this is rather than making fun of people for being pretty representative of the polity that we and they belong to, we should try to understand how that polity works, and use that understanding constructively to design policies that are both wise and durable. This isn’t really a partisan point: people on all sides of US politics would be smart to try to embed their views and interests into the structure of property in America. But I have a bit of a partisan agenda to pointing it out. I think this post pisses off people on the left, because it takes Tea Party types seriously rather than using their “gaffes” as a rallying point for confirmation bias and feelings of superiority. But it is a lesson that I think people on the left of the political spectrum need to hear, because they mostly don’t get it. People on the right, I think, already work assiduously to maximize the propertiness of their own interests and diminish the propertiness of interests they are preparing to attack. But people on the left, I think, tend to view the meaning of property as fixed and antagonistic to the interests they support, and try to find other bases for the legitimacy of their programs. I think that’s tactically a huge mistake, it concedes the central basis for legitimacy in America unnecessarily and without a fight.
BTW: I want to object a bit to your use of alienability and marketability as a marker of the propertiness of things. Those are important aspects of some forms of property, but they are not good correlates to the legitimacy of putative property rights. This may seem like a pedantic sort of point, but much of what I do is sit around thinking about ways of constituting property rights that would suit my own vision of a better world. Alienability and marketability are important variables in the design space. To put that differently, it is important I think when designing a property right to be able to define it either as alienable or inalienable, marketable or not marketable, and still have it be legitimate property. (What rights are/ought to be legally enforceable are yet another dimension of the design space.) It’s clear that things needn’t be aliemable and marketable to be property: we have a property interest in our own bodies and lives, despite their inalienability and nonmarketability. We have property interests in items of sentimental value that are practically nonmarketable. We have property interests in retirement funds that are non-hypothecable (hypothecability is a variation on marketability).
March 13th, 2011 at 4:00 am PDT
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Steve (who is not me!) — I think it’s probably true that some Tea Partiers don’t understand that Medicare is a government program, although frankly I think that characterizes very few of them. Regardless, I think it a huge mistake to jump to an unflattering conclusion and let that fuel our self-satisfaction rather than to understand where the remark is coming from and learn what concerns we might address to better persuade fellow citizens of what we think to be right. It hurts me not at all to give Tea Partiers too much credit. It blinds me and makes me stupid to give them too little credit. I think the slogan “Keep government out of my Medicare” expresses a very comprehensible and legitimate concern, regardless of whether the speaker does or does not understand that Medicare is a government program. To make fun of the slogan while ignoring the concern does us very little credit, as tacticians or as citizens.
If the issue really is that people don’t understand that Medicare is a government program, then we should remedy that, and it’s easy to remedy. But that really isn’t the issue, or if it is, ACA supporters did a terrible job of addressing it. (If ACA supporters really did think misunderstanding the government affiliation of Medicare was the problem, they ought to have responded by publicizing that well-known and difficult to dispute fact, rather than by ridiculing the slogan.)
March 13th, 2011 at 4:06 am PDT
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“And yet almost no one, on any side of the US political spectrum, is willing to say that Warren Buffett and his Berkshire Hathaway investors are “lucky” or a “welfare queen” for receiving vast real wealth transfers on funds they fail to allocate or risk at all”
MMT’ers excepted of course!
good analogy between bond obligations and entitlement payments
but what about changing the nature of the contract for “new entrants” (i.e. future benefits that have yet to be “earned”)?
versus breaking existing contracts on what already has been earned?
March 13th, 2011 at 6:59 am PDT
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“…It hurts me not at all to give Tea Partiers too much credit. It blinds me and makes me stupid to give them too little credit. I think the slogan “Keep government out of my Medicare” expresses a very comprehensible and legitimate concern, regardless of whether the speaker does or does not understand that Medicare is a government program. To make fun of the slogan while ignoring the concern does us very little credit, as tacticians or as citizens….”
There’s more political wisdom in these four sentences than in the combined mass of the left blogosphere.
This breakdown of the “government hands off my Medicare!” meme is the best thing I’ve read all month.
March 13th, 2011 at 8:27 am PDT
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To what extent is ‘Keep Government out of my Medicare’ a typical Tea Party concern? I didn’t see such a sign at any of the (few) protests I saw.
March 13th, 2011 at 10:20 am PDT
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Steve,
I think the reason that eminent domain doesn’t pay out 2x is because then eminent domain becomes a boon that everyone wants a piece of, and politicians start using eminent domain on their donors property. Your greater point is taken though. Eminent domain should be a little less strict with price, trying as best it can to pay people enough that any reasonable person would consider it a good deal but not so much as people are lining up around the block to sign up.
I also like how in this piece you talk a lot about political realities. That social welfare programs need to acknowledge certain constraints or culture and morals rather then being wonkish exercises. The body of the post is excellent. I think that if democrats turn SS and Medicare into welfare programs via means testing they really are signing a death warrant. Most young people already see them as benefits they will pay into but never receive. If you also start excluding people who saved well over a lifetime you are really limiting the groups that will be supporters. For SS at least I think the best path is getting rid of the income cap on taxes. For Medicare I’m afraid the only way is to reduce the growth in cost.
As to the matter of why people view treasuries as more legitimate then government benefits I think it has to do with the fact that you need to actually earn the money to purchase treasuries. You’ve got to work and save, that creates a strong legitimacy for property ownership in peoples minds. Paying taxes for a program also creates legitimacy just to a lessor extent, because if benefits exceed taxes paid it is a partial welfare program. If one simply receives benefits without paying taxes, or by paying taxes dramatically lower then benefits received, then there is very little legitimacy. Yes, perhaps we could change the meaning of savings in peoples mind, to make it more equity based rather then debt based (would anyone object to SS if taxes and benefits where a % of GDP, making it more of an equity program, I wouldn’t). But that’s a long way off.
Anyway, overall another excellent post.
March 13th, 2011 at 1:48 pm PDT
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Also, went to your link: http://economistsview.typepad.com/economistsview/2011/03/social-security-is-not-welfare.html
There are two reasons that I don’t view SS as an insurance scheme:
1) Most people who buy insurance pay about the actuarial value of their insurance policy. Yes, most don’t collect, but they are paying a fare price for their risk.
By contrast some generations and some people within generations are being asked to pay a lot more in premiums (taxes) then the actuarial value of future benefits. People don’t consider an insurance company to be ripping them off whether there is a hurricane or not, but whether they are being charged a fair price for the risk ex-ante. Just like if an insurance company was ripping you off, if SS is ripping you off you get pissed.
2) Contributions are only contributions if they actually are set aside and earn a return. So the SS trust fund only exists in a meaningful way if those funds were used to make investments in public property that will allow the next generation to fulfill the obligations they represent. This distinction, between the guaranteed benefits treasuries in SS promise and the physical investments they represent, is the fundamental political challenge faced by entitlement reformers. They have to convince them of what you are talking about, that all ownership is essentially equity ownership and bonds are merely promises. Once that is reached the question becomes who deserves to have their treasury obligations honored and who doesn’t.
March 13th, 2011 at 1:58 pm PDT
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Came to your post via Mark Thoma, and was impressed by your analysis of what makes social insurance programs so politically durable. Your basically re-stating the social democratic rationale for universal entitlement programs, but in free-marketer’s lingo. Theda Skocpol and William Julius Wilson would approve. What you describe as peoples perceived property right to a decent retirement, I would just call an assertion of a basic social right. You’re correct that a lot of Liberals don’t seem to grasp the importance of the sense of earned right that people feel towards Social Security and Medicare. I blame the ascendancy of Neoliberal thinking in the Democratic Party.
One question though: Why hasn’t this dynamic taken as strong of hold with Unemployment Insurance? Its universal, everyone pays into it, and the recession has demonstrated that any one of us could lose our job through no fault of our own. Yet getting extensions to the system passed has been like pulling teeth and some politicians and commentators are painting a picture of recipients as chiseling deadbeats. Why hasn’t UI been as politically inviolate as our other Universal Insurance programs?
March 13th, 2011 at 2:24 pm PDT
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[…] Interfluidity has what I thought was a terrifically apt post on America’s fixation with property rights. Their central place–if not an exclusive one–in the cultural identity of Americans, and their expectations towards not just public authorities but also one another, holds enormous explanatory power when analyzing the movements of society and politics in the States. Waldman is his clever self: Our most important property rights are often claims on people or institutions. This includes all financial wealth — dollar bills, stocks and bonds, pensions and 401-K plans, every form of insurance we buy for ourselves or others provide for us. Medicare and Social Security are, from users’ perspective, property, no different from a privately funded health or pension plan. […]
March 13th, 2011 at 2:25 pm PDT
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The Fleming v Nestor quote was excellent. It indicates that Social Security benefits are not private property.
Here’s another Supreme Ct. case – Supreme Ct. of the U.S. Nos. 724, 797, 1936
Carmichael v Southern Coal & Coke Company
“The taxation of employees is not a prerequisite to the enjoyment of Social Security benefits. We find nothing in the language of the statute or its application to suggest that the tax on employees is so essential to the operation of the statute.”
“But if the tax be good and the purpose specified be one which would sustain a subsequent and separate appropriation from the General Funds of the Treasury, neither is made invalid by being bound to the other in the same act of legislation.”
“A tax is not an assessment of benefits . It is a means of distributing the burden of the cost of government.”
http://www.ssa.gov/history/supreme3.html.
People are entitled to the benefits if they meet the qualifications of the law.
The fact they have paid taxes has no binding effect on those benefits. The taxes go for the general welfare, of which Social Security is a part.
Don Levit
March 13th, 2011 at 3:19 pm PDT
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I just want to say that I wish every conversation I had in my life was as good as the ones I read here, and that almost none come close.
Also, I wish you could teach your views on property to the professors at most Law Schools, who, as is the custom in their profession, feel very strongly that there can be not even a glimmer of daylight between what rights may justly be considered “property” and those claims which can only be pursued by hiring lawyers. Preferably in a way that generates plenty of billable hours.
March 13th, 2011 at 5:11 pm PDT
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Matt12:
The phrase you mention is quite important:
“the importance of the sense of earned right that people feel towards Social Security and Medicare”
Those programs are seen as legitimate because they are viewed as something people earned. People feel that their overall contribution of their social group to those programs roughly equals what they will take out. Yes, particular folks get over or under compensated ex-post, but people feel they are making a reasonably fair deal ex-ante.
Welfare, by contrast, seems unearned. You talked about UE insurance. Its true everyone pays into it, but not everyone collects. Everyone gets old (SS) and everyone gets sick or recognizes the danger of getting sick (Medicare). But not everyone ends up being long term unemployed. While it is true that people don’t have complete control over their own employment prospects, they do have significant control. Enough that the public perceives a difference between the population of employed individuals and the population of unemployed individuals. Remember, such differences don’t need to be absolute or apply to every member of each population. Just that they are significant enough at an aggregate level that one can perceive the unemployed group as being both different from themselves and having some responsibility for its own condition. Myself, I see my odds of being long term unemployed as being very low ex-ante. By contrast, the odds of my peers that I consider to have less desirable characteristics is much higher. Such and insurance policy seems much more likely to benefit them then myself ex-ante.
I think a way better way of doing something like UE is a guaranteed income program. Everyone gets a flat amount no matter what they earn, so everyone feels a part of it. Its even a way to create new money without having to go through banks and make it debt based. You make it something really low, like a small % of GDP. Hopefully that will be enough that people won’t starve, but little enough that anyone that tries to live of just that will be at a subsistence level and be considered a loser. Then you don’t have to have a job to survive but you want to work to improve your life.
March 13th, 2011 at 6:43 pm PDT
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Dave:
Well, there are lots of insurance plans that people pay into but never collect. Fire insurance being a prime example.
But I think the frame of mind you describe probably does play a role in the moral downgrading of UI benefits among some voters and politicians. “Getting layed off is something that happens to other people, not me.” I happen to think that’s not the reality for most middle-class workers, since economic insecurity has been on the rise for decades, but I can see it being a prevalent view. Human beings can be really bad at assessing certain types of risk.
My own view is that it has to do with the polarizing of the labor market. A significant chunk of the Tea Party bloc are doing quite well financially. The same goes for their political representatives, of course. So for these folks, its not a totally unfounded view that it won’t happen to them. And if it did, they’d have the necessary assets and social capital to weather the storm. So activists disconnected from the experiences of the vast middle and working class, elect even wealthier politicians who are even more disconnected from the lives of common Americans. This leads to astoundingly ignorant comments like Orrin Hatch’s call to drug test UI recipients.
As for a guaranteed income program, I think the objections against welfare you talk about would come into play times a thousand. It makes sense from a technocratic, economic efficiency angle, but voters aren’t going to jump on board any plan that calls for giving “free” money to poor people to spend any way they want. Voters want government money to be spent purely on the necessities, like food, not on what an individual decides is best.
March 13th, 2011 at 9:23 pm PDT
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Matt12,
I tried to be clear but maybe I didn’t communicate it well. People don’t have get the same results ex-post (your fire insurance example) but they want to know they are paying a fair price ex-ante (risk adjusted actuarial fair value).
Also, I don’t think people are terrible at assessing risk. Current economic conditions are appalling in the sense that we can do much better, but they aren’t appalling in an absolute sense. Even 10% unemployment means 90% employment. Politically minded people overestimate how hard it is to make it in America, its just not that hard to become middle class. I think if you look at the demographics of the tea party your not going to find that they are particularly well off compared to the average person. The average person can still make it in this country pretty easily. Its just gotten a little harder for white dudes and a little easier for everyone else.
Now, I think everyone knows that sometimes you end up unemployed for reasons that you don’t have a ton of control over, or at the very least were so remote you couldn’t be expected to act differently ex-ante. So people support UE. But the longer it goes, the more people start to see unemployment less as a victim of circumstances and more a way to be lazy or stubborn. We all know a few people using UE to smoke pot and play video games all day. Or maybe they are just construction workers who are unwilling to take a job that doesn’t make them “feel like a man” or whatever. That’s ok for a little while, but when your still playing that card two years in and asking for another extension the charity is wearing thin.
Also, I think you misunderstand my guaranteed income program. Everyone gets it, no matter what they make. If you make $0, you get $10,000. If you make $70,000, you get $10,000. Its not free money to “the poor”. Its free money to everyone.
March 14th, 2011 at 9:11 am PDT
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What an interesting discussion. However, what is missing from the “property right” definition is both present and future value (where value may represent cost payout to the beneficiaries). Social Security has both (as we are reminded yearly with the nice table that outlines ones payments to the system and future benefits). I’ll defer on the question of whether it is or is not insurance as that is secondary in my mind (but from an actuarial perspective the program can be made solvent far into the future pretty easily through a relatively mild adjustment in tax receipts or benefits paid out). We also know both with respect to US bonds (barring default which may not be out of the question in these times).
Unfortunately, we don’t know the future value of Medicare because of the increasing costs of both medical technology and increasingly poor choices of life style on the part of our citizenry. Thus, there are only two ways to address this: exorbitant taxes that guarantee solvency (problematic as we don’t know what is really needed) or rationing of benefits (either through price controls or denial of benefits). A good example was on CNBC today where the CEO of Dendreon was discussing the $90,000 treatment for prostate cancer (in return for maybe four additional months of life) and how it is covered regionally by Medicare today and they are waiting for a national coverage decision. In a nutshell you see the problem. How many more <$95,000 treatments can the program take? Of course the other side of the coin here is the absolute reluctance to engage in any true comparative effectiveness research to figure out what really works!
March 14th, 2011 at 3:03 pm PDT
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Alan:
When you write about the program being made solvent, you are referring to accounting solvency, right?
You do agree that the surplus FiCA dollars have already been spent, so the trust fund principle is unfunded.
In addition, the interst is debt, so that is unfunded.
So, the entire trust fund is unfunded, which means from an actual dollars standpoint, paying for Social Security is no easier with the trust fund than without it, for the funds are redeemed through current revenues and debt.
All the trust fund provides is an outlet to access current revenues and debt without an official appropriation.
Don Levit
March 14th, 2011 at 3:18 pm PDT
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Could we not just make these benefits more equity like, to ease political issue. Simply state that SS will pay out X% of GDP and Medicare will structure benefit levels to target Y% of GDP. That way entitlement payments will never be so high as to cause insolvency, but at the same time you can make the case that people are receiving the same % of the economy in benefits as they paid when they were younger.
March 14th, 2011 at 3:38 pm PDT
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Don,
No, the dollars in the trust fund haven’t been spent. They are not spent until they get paid out. It’s the same thing with an insurance company (why do you think Warren Buffet is where he is today? It’s the float on the premiums). Social Security is constrained on what they can invest in but it’s the same principle. My point was not about that (and I know that there are lots of people out there that have contrary positions in terms of whether it is or is not a trust fund) but rather that Medicare is a sink hole where we don’t now how deep the hole is.
My own personal preference is for health care vouchers funded by a dedicated VAT with a defined minimum benefit for everyone. This eliminates Medicare and Medicaid and puts everyone on a common ground. Those who want additional benefits will be able to purchase it with their own money.
March 14th, 2011 at 3:46 pm PDT
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Alan:
The money has been spent on other federal expenses and (artificially lowered the deficits all these years).
From a paper entitled “SSA’s FY 2010 Performance and Accountability Report, ” published by the Social Security Admninistration:
Page 111 “The U.S. Treasury does not set aside financial assets to cover its liabilities associated with the OASI and DI Trust Funds. The cash received from the OASI and DI Trust Funds for investment in these securities is used by the U.S. Treasury for general Government purposes. Treasury special securities provide the OASI and DI Trust Funds with authority to draw upon the U.S. Treasury to make future benefit payments or other expenditures. When the OASI and DI Trust Funds require redemption of these securities to make expenditures, the Government finances those expenditures out of accumulated cash balances, by raising taxes, or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. This is the same way Government finances all other expenditures.” (Thus, the trust fund makes it no easier from a financial standpoint, than paying all other expenditures, even those that do not have a trust fund).
http://www.ssa.gov/finance/2010/Complete%20Financial%20Section.pdf.
Don Levit
March 14th, 2011 at 5:04 pm PDT
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Don:
I’m fully aware of what you note. The issue there is not the trust fund (or lack thereof if you believe that the US government will default on its obligations) but the foolish tax cuts and wars of Bush II (and other prior presidents save the last 2-3 years of the Clinton administration when a surplus was run).
March 14th, 2011 at 5:21 pm PDT
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Alan:
You said the dollars in the trust fund haven’t beeen spent, and that is inaccurate.
They have been spent and lowered the deficits to boot!
So, thoise were real, mreaningful dillars.
What remains is simply numbers, which provide a draw on the Treasuryu eoyhout an approproiation as lonf as there is a ositive blance in the trust fund.
The only difference between paying out of the trust fund and paying for battleships is that battleships need an appropriation.
There are many trust funds that are handled similarly, including Medicare.
The government provides the totals of all the trust funds, and these represemnt intragovernmental debt, which is part of our total debt.
Even the military and civilian trust fund dollars have been spent on other government expenses, and lowered the deficits.
So, when money is paid out of those funds, it must come from a new source., such as borrowing from the public.
When an insurance company pays from its reserves, it simply liquidates its investments.
It doesn’t cost then any new money, for the reserves are real.
In the case of Treasury secutities, extra money must be raised, for, unlike insurance company reserves, the amounmtis not set aside.
Don Levit
March 14th, 2011 at 5:41 pm PDT
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Don,
You probably should go back and read what Paul Krugman wrote about the trust fund: http://krugman.blogs.nytimes.com/2008/03/28/about-the-social-security-trust-fund/ If you accept concept of a unified budget to reject the existence of a trust fund then it’s a general budget crisis that needs to be dealt with and not one solely based on the concept of a Social Security Trust Fund.
March 14th, 2011 at 8:03 pm PDT
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Alan,
The trust fund is significant in that it is a political concept which makes it difficult address SS benefits as a general budget issue. Although in reality there is no “trust fund” under a unified budget, the political existence of the trust fund is like having a pre-allocated portion of the general budget. So instead of SS benefits being one of many things the government can spend its money on, they become non-discretionary “earned” property rights as OP alluded.
March 14th, 2011 at 11:53 pm PDT
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I like your quasi-property rights frame. It’s the same way I think of many debates in the context of zoning and urban development. Urban economics is more or less the study of spillover effects, or, externalities, since every development has some tangible effect on its neighbors. Explicit property rights and implicit property rights collide all of the time.
Every buyer is, in addition, to their own specific property, buying a basket of neighborhood amenities to which they have (or feel they have) quasi-property rights claims. So if current zoning and development means that there is one on street space per housing unit, it is not surprising that neighbors react with ferocity if a new development threatens that quasi-right by. The same with current view sheds and traffic patterns.
Part of reason we have sub-optimal density is the inability to match the real and perceived costs of new development, borne by immediate neighbors, and the gains to new development shared in greater efficiency by the wider area. So I think the quasi-property rights frame is very useful. If some of those implicit rights were made more explicit and tradable, I think we’d actually increase the political support and feasibility of increasing urban density.
March 15th, 2011 at 5:52 am PDT
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Alan:
I agree with you that the original intention of Social Security was to make it a self-supporting system, apart from general revenues.
And, indeed, many Americans understand it to be this way.
As alluded earlier, there could be a legal right to these benefits due to this understanding.
It is unfortunate that as important as Social Security is to so many people, that the government has treated the trust fund as a way to pay for current expenses, rather than as a serious, set aside fund.
The FASAB is the accounting advisor for the federal government.
In a paper entitled “Accounting for Social Insurance, Revised, Exposure Draft, Nov. 17, 2008”:
Page 31 “The Alternative View (the present view of the FASAB)is that social insurance comprises two separate nonexchange transactions – the compulsory payment of taxes and the government’s payment of benefits (in other words, taxes are mandatory and payment of benefits are discretionary – my words, but this is the actual definition of a non exchange transaction).
Page 35 “Social insurance benefits are not part of an exchange, but are a welfare program and/or an annual general fund program like Medicaid and defense.”
This is a far cry from how Roosevelt originally intended the program to be.
http://www.fasab.gov/pdffiles/socialins_exposurefinal.pdf.
Don Levit
March 15th, 2011 at 7:22 am PDT
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Don & Dave,
I’m not disagreeing much with your points. The benefits system has indeed morphed beyond what it was originally designed to be. We now have COLAs which get granted every year and the revenue side is capped above a certain income level (the COLA issue is particularly interesting if you look at it historically when President Reagan granted an increase in the early 80s despite the actual cost of living going down as a result of the recession; go figure). Until there is a serious revenue/expenditure discussion in this country (and I don’t count the Bowles/Simpson effort as one), there will be no resolution of the broader budget problem.
March 15th, 2011 at 8:12 am PDT
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Societies without strong property rights tend to be very poor societies. In fact, this is almost the definition of a poor country — see DeSoto’s Mystery of Capital on this. So let’s not call this attachment irrational. Americans intuitively understand the marginal propensity to produce, and that’s why we’re the richest 300M people you can pull from any group of states.
Social Security was not supposed to be a socialist redistribution program — it was intended to be a sort of mandated retirement scheme run by the government. That’s why revenue is capped: in theory, you have to EARN what you get back out. Naturally the government ended up turning this into an unsustainable quasi-Ponzi scheme by ignoring the actuarial realities and exploiting de Tocqueville’s warning about democracy, but the more you make Social Security redistributive the more Americans are going to scratch their heads and say “Hmmmm, this doesn’t seem quite right.”
March 16th, 2011 at 7:33 am PDT
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“The meaning of socialism in American politics is government action to redistribute property rights. It is socialism in America to tax the rich and it is socialism in America to give to the poor.”
I think that your statement quoted above is accurate for how Americans have traditionally viewed socialism. However, since the crash, one of the biggest recipients of socialized spending in America has been the financial sector.
Your idea that we view Medicare as a property right can be expanded to include all other tax-funded programs. As we see greater cuts to educational programs as bankers report bigger profits, we will begin to hear louder grumbling over the use of our shared “properties” (i.e tax dollars) that have gone to prop up the financial sector. We will begin to question what we value as a nation and how we want to invest our shared resources. As bonuses for bankers? Somehow I doubt it.
March 18th, 2011 at 1:38 pm PDT
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“What the Tea Partiers are accurately if not artfully expressing is that Medicare feels a lot like a property right.”
Oh, for God’s sake. This is the most ridiculous post I’ve ever read here.
Tea partiers are saying nothing more than, “I like my Medicare – don’t you take it away or screw it up.” No Tea Partier would call it “property.”
The obvious takeaway is that Tea Partiers don’t accept the idea that a government program can work, all the while they don’t even know that the very program they so don’t want messed up is a government program.
It really is that simple.
“The meaning of socialism in American politics is government action to redistribute property rights.”
Wrong. The meaning of socialism in American politics is “government doing it”. Health care reform was not seen as redistribution by a long shot. It was feared because it was unknown, and lied about constantly.
“Medicare and Social Security are, from users’ perspective, property, no different from a privately funded health or pension plan.”
What are you smoking? Medicare and Social Security (and health plans) are seen as the other side of a contract, a service to be rendered for a payment made.
Your attempts to redefine all sorts of concepts in to things they’re not in order to generate an interesting intellectual debate is laudable, but my God, you sure can stretch things to ridiculous extremes of absurdity.
March 18th, 2011 at 10:36 pm PDT
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“I like my Medicare – don’t you take it away or screw it up.”
How can someone take away something that isn’t property? People feel entitled to Medicare because they paid into it their whole life, just as you would feel entitled to a life insurance policy you paid premiums on your whole life.
If you are a current or soon to be current retiree you are legitimately concerned that the expansion of health care to current uninsured groups will be paid for with things like lower reimbursement rates for Medicare. Lower reimbursement rates = fewer doctors wanting to take medicare patients = lower quality of care. They feel like a benefit they paid for is being changed at the last second for the benefit of people other then themselves.
“It was feared because it was unknown, and lied about constantly.”
Health reform is unknown and it was lied about constantly, but probably not just in the manner you mean in your comment. Its effects on the deficit and premium rates are a huge lie, or at the very least omitted pertinent facts. Obama could have simply said, “giving health care to people is a moral good, but it will cost money so we will need to raise taxes and possibly do things that effect medicare. we will try to do this in the best possible way we can and there are many gains to be had from inefficiencies, but we can only guess at them and it may cost you in some way as current medicare beneficiaries.” Would that have sold, I don’t know. Its certainly potential redistribution from current medicare beneficiaries to younger uninsured. I’m on board with that, but you can certainly see where the objection comes from.
March 19th, 2011 at 8:21 pm PDT
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