Arnold Kling  

Thrift vs. Paternalism

The Summers Speech... Who are the Empiricists?...

In this essay, I argue that

For those of us who value self-reliance and thrift, the economic trends suggest a need to increase saving and to invest heavily in human capital. For those who value paternalism and redistribution, those trends provide an excuse to "help" more people in more ways. This tends to exacerbate the conflict of values, because ultimately the redistribution policies require heavy taxes on those of us who save and try to educate ourselves.

For Discussion. Is this a real conflict in values? If so, what is the best approach for dealing with it?

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COMMENTS (8 to date)
Randy writes:

Conflict of values is exactly right. As a middle class "PAW", I am often accused by the "PIWs" of voting against my own best interests. They may be right - but I am not voting against my values. They accuse me of greed and immorality. I am immoral for refusing to support theft?

The terms PAW and PIW are polite and academically correct - very good. But let me be a bit more blunt. I use the terms Producer and Parasite. I do understand that we are all born parasitic, usually become parasitic in old age, and may become parasitic by fate. But I also believe I have a moral responsibility to do everything in my power to avoid being a parasite.

Perhaps this sounds a bit harsh. I think it would not have seemed so to my grandfather.

Randy writes:

As to what can be done about it;

Convince people that the idea, "what is mine is yours", is moral under any circumstances.

And that the idea, "what is yours is mine", is immoral under any circumstances.

Charity is good - but true charity requires a willing giver and a grateful receiver.

Dave Schuler writes:

I completely agree with you about the need to increase saving and self-reliance. As a thrifty person myself that shouldn't be too surprising. How does compulsory savings (as has recently been proposed—not necessarily by you) do either of those things?

Lawrance George Lux writes:

There is a real conflict of values, but the remedy is not Victory of one side or the other; it remains the development of Government services by design to fulfill both sets of values.

This was an excellent Article, Arnold. lgl

Movie Guy writes:

Frankly, you're swinging after the ball.

It is clear that federal and state funding restraints, created in part by deficit spending on other federal and state programs, will cause a strong and necessary shift to self reliance. The Prodigious Accumulators of Wealth (PAWs) shall achieve success in reshaping or eliminating future governmental social safety nets for our society.

Moreover, your presentation overlooks the extensive Fed discussions that were scheduled at Jackson Hole, Wyoming a few years back. But let's skip those macro social concerns and deal with the present political environment.

The existing social safety net programs shall be reduced. Period. But there will be consequences and net costs.

Paternalism and significant redistribution of wealth via the federal government will not grow. A contraction should be expected. Perhaps a large contraction within the next fifteen years.

The problem with your analysis, in my opinion, is a failure to include any discussion of the potential for retirees to not receive their underfunded future DB pensions, or not have sufficient 401(k) and other personal savings to carry them through the remainder of their lives. And a failure to address rising costs in healthcare and similar "essential services" for consumers.

Moreover, there is little likelihood that wages or employment will continue to grow at previous paces. One look at BLS U6 unemployment (including underemployment) provides a clue.

Additionally, there are indications which suggest that the need for higher education will be more limited than previously projected. In order to compete with global labor, it is likely that we will need to grow a larger segment of the work force which is willing to accept lower standards of living and expectation. Harsh realities, perhaps, but likely. Most skills, technology, and non-direct community and residential level services can be exported from the United States. It's that simple.

The potential for household savings to increase substantially is limited in my opinion. Yes, it can be done, but the marketing focus from the government down to the local radio and television spot ads is to spend. Greenspan saluted consumer spending in his testimony this week, and then expressed concern over lack of savings.

If we are to improve household savings to the levels necessary to offset the loss of all federal social safety net programs, major shifts in citizen thinking will be required.

I fully expect the standards of living for over 50% of our society to decline. Without question, I believe that this is acceptable to the forces within the PAW movement. Fine. But build those community fences very high and change your locks and alarm codes frequently.

Any thinking that government growth in social safety net spending will succeed overlooks the declining role of trade unions, defined benefit plans, and other features of an "older" economic model. That stuff is over. As is the future role of government social safety net programs. We're in the dismantling phase now. Game on.

Dewey Munson writes:
" social safety net programs "I

Let's start analyzing at the beginning instead of the "parasitic" end.

For 20 years the young absorb societies' programs without payment. to get their "parasitic start.

It's time we emphasized that we are at once both young and old.

Corinna writes:

I appreciate the effort you've put into the article, but it really shows its bias. I think you've set up a conflict of values where there really is none, except in the most extreme cases.

I believe most Americans would acknowledge the value of saving and planning for the future. I know many Americans who try to save a little from each paycheck, and I'm sure that others would do so if they had a better financial education. Saving is tough to do when living from paycheck to paycheck, and that describes an unfortunate number of workers.

On the other hand, I believe that most Americans would express a need for a social safety net to support those in our society who for whatever reason require financial assistance.

I'm sure the rationale is like this: Yes, save back a bit from each paycheck, even if it's only ten or twenty dollars. Put that into your savings account, and when you can save a little more, put that into an IRA or college fund, or some other savings plan. But if you get really ill, if you can't afford the deductibles on your insurance, if you face some sort of catastrophic financial crisis, then your neighbors are here to help you.

You draw a contrast between the PAW concept of private schools and the PIW concept of public. The truth is that there will always be public schools and they'd be necessary no matter the values of the society. It is less of a burden to pay for a child's education to produce a useful member of the workforce than it is to support an ignorameous for life.

Jen Larson writes:

17% for food clothing and SHELTER?

reality check.

Meducaid for nursing homes occurs because most people can't afford insurance to cover it, their resources are used up (with the possible exception of a house) at which point it's throw them into the street or cover them. It is true a number of people hustle the system, they are old and supposedly of the old values. My observation is that people of anti government (eg. self relaince in theory) tend to be more comfortable with games of this type, just as Republican states tend to take taxes, Democratic to get less than they offer.

It should also be noted that traditional small business often fails when presented with immigrants who compete effectively, these milioniares have benefited from protected systems. It's like real estate agents who are working to restrain zip realty and have passed laws in many states to make it illegal to cut commissions. As a general rule this old timie businessman you mention doersn't like real competition.

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