Oh. +1 to Wade for the Bill of Rights mention. That's something that has gone back in forth in my head before - what's better, the Bill of Rights or Declaration of Independence. Both brilliant docs.


And Europeans wonder why we think they're a bunch of commies. :magnifyglass:

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Three questions:

1. What percentage of real GDP is government spending?
(real GDP is a measure of how much income is earned in the economy in a year; it's not a particularly good measure, but its probably about as good as there is.)

Note: you have to count all spending here, including social security, medicare and interest on the national debt. (You don't have to include repayment of the principal yet -- though that might be coming sooner rather than later, just assume for chuckles that the US is still solvent and so can roll over its debt for the rest of its life (i.e., forever).

2. What percentage of all government spending constitutes "transfer payments"? (Define a transfer payment as any payment other than a payment for the production or creation of new wealth.) Think "taking out of one pocket (yours) and putting it in another (mine)."

3. Can the percentage of people producing and creating new wealth (1 - the answer to #2) support #2?

Answer to #1: I've heard numbers everywhere from 30 percent to 45 percent. Let's say 40%.

Answer to #2: This is the hardest one for people to see, since everyone likes to think of government spending as spending on "public goods" and providing necessary "stuff." But if you think carefully about that spending, its almost all transfer payments. I'd put the number at 90 percent. Let's be radically optimistic and say its only 50 percent of the total.

(Why radically optimistic? Social security, medicare, medicaid, welfare, government grants to education and the arts, unemployment compensation, subsidies on student loans, tobacco, and milk, foreign aid, interest on debts... these are all in total or part transfer payments.)

But, just for chuckles, again, let's stay with the 50 percent figure.

Multiply 50 percent times 40 percent. You have twenty percent.

So, looking at things optimistically, you have 80 percent of the income being "production of wealth" and 20 percent just a transfer of wealth from more fortunate pigs on the animal farm to less fortunate pigs.

Doesn't sound so bad, right?

But you have to think again. Do you really think 80 percent of us can produce enough to cover the other 20 percent of us year after year?

To do that, we'd have to somehow be able to invest our 80 percent to get 100 percent next year. That means getting a return on investment of 25%. A return over and above what we use to maintain that 80 percent.

Oh yes, and by the way, the average rate of growth of income in the United States over its history, i.e., the return on investment for the economy as a whole, the return on investment for the single most successful growth economy in human history, know what it is?

Less than 2 percent per year.

This is why you cannot cure the problems by raising taxes. Not unless you somehow manage to invest those tax revenues, not in transfer payments, but in activities that are even more productive than the activities to which they would be put by their original owner.

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That certainly deserves a +1, Wade.

No shit, I have a headache. How about we just steal all the rich people's money and pay the debt off with it, and we all have an equal playing field again. They all have ivy league educations and should be no problem at all for them to survive.

Wade, didn't Rockerfeller or one of those railroad guys bail out the US government once by simply writing a check?

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Sorry, just got back from eating out an expensive restaurant. 🙂

Cutting spending of course, just so it isn't at the expense of those in need.

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I'm pretty sure that is an urban legend. Certainly it's of questionable economic accuracy, though it might still make the high school textbooks (which also still say that the railroad explains Americas growth in the 19th century).

Even though the government might have been small enough then (relative to Rockefeller's wealth), since it was a lot lot smaller in those days, I don't think it was even close to enough to bail the government out.

The most Rockefeller might have been able to do is temporarily quiet a panic, sort of like Warren Buffett or Gates might be able to do. But it would have to be a panic based on perceptions more than on actual economic danger. Rockefeller's wealth was huge, just as Buffett's and Gates are, but it was a small fraction of the American economy.

He might have been able to bail out an insolvent state with a check. But not a truly insolvent federal.

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I'm starting a Stupid Party. I know where to get the votes.

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WEAC takes money from my wallet which is food off my table. The government being controlled by the unions keeps us thin and healthy.

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FU man. Say that to my face.

The Stupid Party is in full force - rubes called Tea Baggers.

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This country has 2 stupid parties - the Democrats and the Republicans.

Wade - Yes, that was urban legend.

The truth is they encouraged people to buy stock by buying stock and they themselves lost a lot of money by doing so.

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