Perspectives

This video was shared by someone on Facebook recently, and I’ve been mulling it over in my head quite a bit for the past few days.  You might want to take a few minutes to watch/listen to it.  The speaker/professor is very well-spoken, but some of her assertions I take issue with.

First, she equates tax-deductible mortgage interest with welfare spending.  She says that she receives state assistance on the mortgage for her home, which to her is no different than welfare spending or subsidies.  It’s sort of confusing,  because her exact verbage is that she considers her home-ownership to be public housing because what she receives in mortgage interest tax-deductions exceeds other “welfare” programs.  I’m not sure what she means.  Is it that the size of her tax-deductible mortgage interest (which in the Berkeley area, is undoubtedly quite a chunk of change!) is larger than any other single source of welfare?  Or is it simply that her mortgage interest tax deduction is the same as welfare aid?  

I appreciate the mortgage interest tax-deduction immensely, and so I can’t claim to be objective about this.  However, my understanding is that this tax-deduction is an incentive – an incentive to home ownership.  The fact that my wife and I are massively indebted to own a piece of land in an equally pricey part of the country to Berkeley is a benefit to our state and Federal government.  It represents a personal investment into both of these entities.  We pay a variety of additional fees and taxes, often in the form of bond initiatives, because of owning our home.  These monies benefit our community directly, helping to fund public schools in our area (even though we home school and do not personally reap any advantage of our public school system).  

So yes, I am receiving a benefit from my country.  I pay the mortgage interest to my lender, and the IRS reduces my Federal taxes by the amount of this interest.  It is a handout of sorts, but a handout based on the fact that my home-ownership is worth more to the State than the amount of interest they credit to me.  

Is public housing the same way?  Is there a benefit, an exchange of value in public housing funding?  What does the State receive in terms of investment from the people who live in public housing?  And let me be clear – I don’t necessarily think that all public housing is bad.  Nor do I believe that all people who utilize public housing are bad in some way.  But I disagree with the video’s equation of these two things as equal, as fundamentally similar.  Again, I’m biased, and so I’m very open to being shown why they aren’t different.  But I don’t see it at this point.  

There’s a clip in the middle of the video purporting to show how Walmart is the biggest “welfare mother” in history, how it systematically forces employees to avail themselves of welfare programs from the Federal government, essentially allowing Walmart to profit as a business at the expense of American taxpayers and the welfare system.  This is ludicrous.

I worked minimum wage jobs in high school and college.  I worked those jobs because they fit my schedule and matched the skill sets and/or expertise that I had.  I didn’t consider any of these jobs to be my long-term vocation.  In fact, much about these jobs spurred me on to find better jobs, to increase my skills and expertise so that I could earn more money.  Yes, there were people who had made careers in these same places that I was working for minimum wage.  But they were the exception.  And they had improved their skills and expertise so that they were earning more money as managers.  I presume that it was a living wage – or as close to a living wage as they needed.  I wasn’t aware that any of them was on welfare.

Would I have considered it reasonable or fair to be told by the government that they would make up the difference in my salary from my part-time, minimum wage job, to some arbitrary level deemed a “living wage”?  Hardly.  Would I have taken it?  You betcha!  Who wouldn’t take free money!  And at the same time, if I was assured that the government would continue to supplement my meager income to a living wage level, would my interest and desire to spend time and money on improving my skills and expertise have been dampened?  I’m pretty sure so.  Free stuff is hard to say no to, and free stuff very quickly begins to change how you see your role in this world.

Should a company be willing to invest in employees who wish to make a long-term commitment to the organization?  Who have developed their skills and expertise to a point where they are more valuable to the organization?  Sure.  But I’m pretty sure that Walmart looks at the vast majority of their employees as Burger King looked at me as a teenager short-term, unskilled labor.  People who need a job for a period of time before doing something else.  Walmart provides a benefit to these people by giving them a chance to develop (or discover) skills and expertise that they will either take elsewhere, or, in a small number of cases, continue to utilize within the organization to improve themselves and their pay level.  

The fact that Walmart hires a lot of part-time people does not mean that Walmart is directly contributing to welfare utilization.  And there is a big argument to be made – often by the folks who want those part-time jobs and lobby for Walmart to come to their community – that Walmart is doing a great service by providing a lot of jobs for unskilled, low-expertise individuals in a community.  

Ultimately it is the individual that determines whether they remain unskilled and without significant expertise – not Walmart.

Finally, the video concludes by lobbying for a universal minimum income. Not a minimum wage, where you are guaranteed so many dollars an hour to do a job, whether you’re really worth that amount of money in skill or expertise.  Rather, a guaranteed minimum income.  Whether you work or not.  Money to allow you to live life at an arbitrarily defined level of “goodness”, regardless of where you work, what you do, or whether or not you work or do anything.

The economics professor lauds the efforts of people who are demanding (and in some cases receiving) this sort of care from their government.  I wonder how long such a system is sustainable.  Where does all this money come from?  What expectations are there to receive it?  I presume that there aren’t expectations – just as there don’t seem to be a lot of expectations regarding the efforts and activities of at least some people who receive welfare assistance currently.  

In which case, it will fall as a harder burden on the backs of those who are working, who do have skills and expertise.  A harder burden in terms of greater levels of taxation (since we can’t just print more money, right?) to support people who not only do not have skills or expertise, but they quickly recognize that life is just as good without skills and expertise as with these things.  That only a sucker would pay money out of pocket for an education, or chain themselves to a 40-hour a week job, if you could receive the same amount of money just by sitting at home.  

I wish we lived in a perfect world.  I wish that corruption and tyranny did not deprive millions or even billions of people from the ability to work to better themselves and their circumsta
nces.  But the fact that tyranny and corruption do these things in some places does not necessarily mean that  the solutions they create to mollify their people are solutions appropriate for a nation that once upon a time boasted that individuals determined their worth and capabilities, not a government.  

What’s frustrating in this video is that there are lots of shorthand connections being made, many of which seem to either be outright fallacious, or only explainable in a more complicated manner.  But many people will watch this video and determine that a business is bad because it creates jobs but doesn’t pay people more than their skills or expertise warrant.  People will watch this video and decide that we can live in a perfect world where everyone has the same amount of money which will mean the same amount of happiness even if skills and expertise are nowhere near the same.  

And they will turn to the government to make this dream a reality.  They will be willing to give up many of their privileges and freedoms and rights that make our country unique and still a constant draw to the underprivileged around the world.  They will give these things up for the promise that the State will give them stuff for free.  That the State will make them fulfilled and happy and at least moderately wealthy.  And with the assumption that the State will never abuse this relationship, never renege on it.  Never go bankrupt, leaving generations of citizens unable to earn a living because they never bothered to go to skill or go to work.  

It’s a recipe for disaster not just on a societal level but on a personal one as well.  But it sure sounds good on paper.  And I sure would have been happy with a lot more free money when I was in college.  And I’m sure I would have figured out that I could maximize that free money by *not* paying tuition and buying overpriced textbooks every semester.  

Good thing people like me don’t exist in these beautiful economic models.  Things might go seriously wrong, seriously fast!