My Early Retirement and The Government's Role

[ERD50]

We decided as a society to "take the next step" and help people save for their eventual old age, since people stunk at doing so themselves.

They still stink at it.

Well, I think we are on to something meaningful now.

I actually agree, and some of the 'opposing' posts have driven it home a bit for me (I am not kidding when I say I throw out these challenges to learn).

The sad reality is that a bunch of people are going to need help, and IMO, it is in the 'common good' to do something about it. Since we don't live in a perfect world where everyone is suddenly going to get smart overnight, and responsibly save for retirement, the govt probably should have a hand in it, somehow.... Education should at least be a part of it.

What gets me going though, is the inferences that some people make (not saying you are one of them CFB), that things like SS are paying out more than what goes in - a 'benefit'. It just strikes me as disingenuous to not see it for what it is - a redistribution of wealth.

And I don't even have a problem with redistribution of wealth, in fact, I support it - I can 'afford' a higher tax rate than the guy making half what I do. Just call it what it is, and then figure out how to do it efficiently and effectively. I don't want the govt to waste the money they collect with all sorts of conflicting, counter-productive programs that require a high cost of compliance.

But seeing that stat that Congress has passed on average, over 2 tax code changes every day of every year from 1986-2005, and their three-stooges attempts at an 'energy policy'.... well, it seems futile doesn't it?

That doesn't mean I have to like it though....

-ERD50

 

[Bill T]

Redistribution of wealth is going on right now in South America at the hands of a "thug". So since you suport taking someone else hard earned money to give it to some one whom maybe did not want to put the effort into working hard and planning for there own future. At the very least you should give more of your personal money to the government for redistribution & let me choose what charity I will give to.

 

[samclem]

The "pro" of letting everyone fend for themselves is clear: People will be more motivated to produce--a lot--if there's no safety net under them and if they get to keep more of what they earn.

The "con" of this approach is a little less clear to those of us who favor limited government. But, it is real and history has shown it repeatedly. A complete "hands-off" approach by government leads to some fairly wild economic cycles, and it also leads to the rich taking advantage of their money to leverage the work of others (exactly what we all do when we invest in stocks). The result is a growing number of very poor people over time. Now, even if you believe that this is the natural order of things, it's not a good thing for a very pragmatic reason--people who are envious and who do not believe they have a hope of advancing their interests through hard work will eventually take from those who have more. They may do it legally (by voting for a socialist or communist system or increasingly confiscatory taxation) or they may do it illegally through rioting. Our own country came very close to instituting socialism in the 1930s, and the CPUSA and socialist parties were very influential in the 1920s through the 1940s. In fact, FDR's actions to increase labor rights and the moderate steps toward socialism encompassed in the New Deal did a lot to take the wind out of the more extreme leftist elements. Some of the nations of Europe stuck to "pure capitalism" longer than we did, spurred the growth of socialism and saddled them with the [-]mess[/-] "utopia" they have now.

As long as we have a democracy, the people can vote to take the property of others. Unless we have a police state, they'll be able to riot to accomplish the same thing. Moderate redistributions of wealth serve as a painful but necessary mechanism to enable capitalism to continue in the real world. Which is good for everyone, because heavy-handed collectivism just leads to a descending spiral of poverty for the whole society.

 

[ERD50]

Bill T & samclem, yes - it's all about striking a balance.

Of course, reasonable people (as well as unreasonable people!) will disagree on where that balance should be, but that's about it.

Even if the balance fell outside of where I thought it should be, I'd still be much happier if we just had some clarity, understanding, education and reasonable expectations about what it can and cannot accomplish. I'd prefer that to the mish-mash-smoke-and-mirrors-labyrinth that we have today.

even if you believe that this is the natural order of things, it's not a good thing for a very pragmatic reason--people who are envious and who do not believe they have a hope of advancing their interests through hard work will eventually take from those who have more.

samclem, just have to add a comment to that. It is something I have also thought about - and it is a very powerful statement if one thinks about the implications. It can be applied to all sorts of scenarios.

Is there some author/philosopher or work that uses that as a theme? Probably zillions of them if I think about it long enough...

Anyhow, thanks for those posts - very interesting.

-ERD50

 

[armor99]

The "pro" of letting everyone fend for themselves is clear: People will be more motivated to produce--a lot--if there's no safety net under them and if they get to keep more of what they earn.

The "con" of this approach is a little less clear to those of us who favor limited government. But, it is real and history has shown it repeatedly. A complete "hands-off" approach by government leads to some fairly wild economic cycles, and it also leads to the rich taking advantage of their money to leverage the work of others (exactly what we all do when we invest in stocks). The result is a growing number of very poor people over time. Now, even if you believe that this is the natural order of things, it's not a good thing for a very pragmatic reason--people who are envious and who do not believe they have a hope of advancing their interests through hard work will eventually take from those who have more. They may do it legally (by voting for a socialist or communist system or increasingly confiscatory taxation) or they may do it illegally through rioting. Our own country came very close to instituting socialism in the 1930s, and the CPUSA and socialist parties were very influential in the 1920s through the 1940s. In fact, FDR's actions to increase labor rights and the moderate steps toward socialism encompassed in the New Deal did a lot to take the wind out of the more extreme leftist elements. Some of the nations of Europe stuck to "pure capitalism" longer than we did, spurred the growth of socialism and saddled them with the [-]mess[/-] "utopia" they have now.

As long as we have a democracy, the people can vote to take the property of others. Unless we have a police state, they'll be able to riot to accomplish the same thing. Moderate redistributions of wealth serve as a painful but necessary mechanism to enable capitalism to continue in the real world. Which is good for everyone, because heavy-handed collectivism just leads to a descending spiral of poverty for the whole society.

Like ERD50 I too really do challenge people to learn other points of view. I am sincere in this, and hope no one takes anything that I might say as a personal attack, because it is not meant to be. Really interesting point of view Samclem!
So basically what you are saying (and I must admit, I really never thought about it this way). Is that all of these social programs are basically a means of pacifying the masses? Almost like the government paying protection money to those who choose not to earn for themselves. Sadly.... I cannot fault the logic of your arguement. I would like to believe that a majority of people that are given the choice, would rather earn their keep then sit on their butts and be dictated to. But you might be right.
If that is all true, then I guess a better question might be. what percentage of a free society can be like that before you run the risk of rioters getting the upper hand? It is certainly true that if a whole city decided to riot and take whatever they wanted by force that no police force could stop it. Then again people that have something to loose (ie property, money, etc) tend not to riot in the first place. A very interesting counterpoint that I never really thought about... thanks for pointing it out...

 

[cute fuzzy bunny]

Like ERD50 I too really do challenge people to learn other points of view.

I dont think anyone has an issue with challenging other peoples ideas and thats not what "went wrong" here.

Like you, I'd hope that in the greater society people would be more likely than not to pull their own weight, solve their own problems and do for themselves. But they dont. I try time and again to have faith in my fellow people only to find that they're largely opportunistic, trade long term benefits for minute short term gains, and will take on enormous risks that they dont fully comprehend.

Its honorable to think that we should all be able to fully enjoy the fruits of our labors. But I'd suspect that the minute you created the utopian society somebody would try to figure out how to suck money out of it without working and somewhere else someone would try to take something away from somebody by force or legislation.

 

[samclem]

Is there some author/philosopher or work that uses that as a theme? Probably zillions of them if I think about it long enough...

The article that got me thinking about this was a piece (God Bless this Ponzi Scheme )by William Bernstein at his excellent web site. I definitely don't agree with his happy-happy view of Social Security, but it certainly got me thinking about benefits of the program that extend beyond the monthly checks to individuals.

Regarding the people voting themselves a raise: We're very close to the "tipping point" right now. As it is, those above the median income pay 96.7% of all income taxes (their percentage of earned income is not important to this argument--this isn't about "fairness," it's just about the dynamics of populist politics). In effect, because our taxation is designed to relieve the burden of taxation from the poor, they have almost no reason not to choose elected representatives who favor more taxes (or "more government benefits"). Why shouldn't they vote for higher taxes--they aren't paying any of them. Higher taxes reduce economic activity and prosperity, which will produce more poor voters looking to get more benefits "from government" (i.e. from other people). This negative feedback loop continues until something very bad happens. I guess the corollary to "modest income redistribution benefits the wealthy by maintaining social stability" is "assuring everyone bears a meaningful tax burden helps reduce the threat of meltdown-by-taxation."

To your previous point: If we are going to have these taxes, it would sure be better to keep the rules of the game simple and constant. That minimizes the wasteful allocation of capital and energy needed to learn and comply with stunningly complex rules that keep changing. The simplicity and transparency of the national retail sales tax is the main reason I favor it.

Germane to CFB's observation on the wisdom of the masses as well as the ideas above about the need to avoid a death spiral to the political right or to the left, a wise philosopher once said:

"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded- here and there, now and then- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as "bad luck." ---- Robert A. Heinlein

 

[ERD50]

Is that all of these social programs are basically a means of pacifying the masses? Almost like the government paying protection money to those who choose not to earn for themselves. Sadly.... I cannot fault the logic of your arguement. I would like to believe that a majority of people that are given the choice, would rather earn their keep then sit on their butts and be dictated to. But you might be right.

armor99, from my POV I won't disagree with your reading of samclem's post, but I would say it is an extremely harsh and negative reading.

Let's face it - the world is NOT fair. People born into riches do have a head start over those w/o. Of course, some people overcome those disadvantages, and others throw away the advantages they were born with. But in general, it will impact the outcome.

So, good social programs can help to level the playing field. I guess, rather than calling it 'protection money' or 'give them just enough to keep them from rioting', maybe I'd say it is a somewhat natural fallout from our competitive DNA. A checks and balances.

I think the vast majority of people of any class are willing to work to succeed. I think some things can alter that. A loss of hope or a lack of sufficient reward/risk.

Unfortunately, I think some of our social programs have provided some of the unintended consequences that remove some hope and incentives. While I criticize congress for such poor programs, even under the best conditions, it is tough to be fair.

It might make for an interesting thread to throw out ideas on what would be fair. Like I said before, the SS seems backwards from what it would seem it's intended purpose is. It's easy to criticize, and I do more than my share, but sometimes thinking up solutions is tougher than it appears.

-ERD50

 

[ERD50]

As it is, those above the median income pay 96.7% of all income taxes

... the poor, they have almost no reason not to choose elected representatives who favor more taxes (or "more government benefits"). Why shouldn't they vote for higher taxes--they aren't paying any of them.

Wow. I guess I've seen those stats dozens of times, but never looked at them in that light.

Of course, there are sales taxes, gas taxes, SS, medicare that the lower class pays also - that would level the numbers some. These ebb and flow as the power in Congress shifts.... but still.

Maybe it highlights what we tend to see in these threads - many people tend to come down on one side of an issue or another. Maybe the root of the problem is that we don't all have a big enough 'stake' in the 'common good'? Tragedy of the commons - everyone wants theirs.

Depressing, but it seems to me that we are doomed to the cycle of political extremes unless some really well thought out social programs can help to create a reasonable (not perfect) balance. I sure wouldn't count on our leaders to deliver that.

Just like the markets go through boom/bust cycles. Why don't we learn and just have a nice steady growth every year? But we don't.

OTOH, as bad as some may think things are today, weren't they worse in the days of the all-powerful high priests, pharaohs, tribal leaders, kings? Weren't those days of more extreme divisions of wealth? So maybe we are oscillating back and forth, but with an overall positive trend? Like the markets?

OK, my brain hurts - time for some silly stuff.

-ERD50

 

[Danny]

Thank you all for taking part in my thread...I had no idea that it would spark this much discussion and that the topic of my retirement and the government role in enabling it would bring out as much emotion as it did. I hope that the sharing of my personal information and how I was able to retire early has been of some help for those attempting to do the same. I don't have any special skills, if I can do it I'm sure that you can to. All it takes is setting a realistic goal, LBYM, focus like a laser on making it come true, and using the tools available to us from the workplace, where we invest and from our government. I myself have learned how others from a different view point see the current state of affairs and how they would like to see it changed. Perhaps that day will come in my lifetime, perhaps in my grandchildrens, perhaps never, but in the meantime we all live in the world we have and we use the tools that we have. I know for many this thread became a waste of time. It became tiresome for me, but I felt a duty to continue to educate, to patiently explain as best I could how the tools I used worked to create wealth enough to retire early, to try to keep people focused on that, and to meet the challenge of others' need to learn other points of view and to provide a service for those that need to engage in intellectual masturbation. Now there maybe some people that will pick apart what I have said and come up with some examples where I fall short... please take it with a grain of salt and consider the source. Warm regards, good luck and good night!