The Two Income Trap says the following:
While family income has increased a great deal in real terms in the last 40 years, so have expenses, leaving the average family marginally worse off. Why?
2IT response: Expenses rising faster than income in real terms. Details:
75 percent higher [income]However, Todd notes that this explanation cheats MASSIVELY. Only by careful obfuscation do you get the number 25%...in reality, if you measure tax expeditures the way you measure any of the other factors, it looks more like this:
BUT
mortgages (up 76 percent), cars (up 52 percent), taxes (up 25 percent), and health insurance (up 74 percent)
tax expenditures rose 140%So with increases in income, many big expeditures (mortgage, health insurance) kept up with increases in income (not that surprising...we should see education on that list too). However, taxation increased by 140%...which cancelled out all the gains for the average family. Government=parasites. Had they paid the same amount in taxes (a lower percentage rather than a higher percentage), in the last few years, rather than having exactly the same disposable income as a 1970s family (about 17k), they'd have done better than a 2/3 increase in standard of living, (about 29K) . Even a flat tax RATE would leave extra on the table, increasing the average family's discretionary income by about 1/4 (about 22K).
The key point, again.
Incomes are up 75% on the average family in 40 years.
Government taxation is up 140% on the average family in 40 years.
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8 comments:
Baumol's cost disease rears its ugly head again; especially for goods like housing where rising prices correlate extremely weakly with increasing quality. (Healthcare you can make a better argument for being an improving product.)
Of course you could go even further - a lot of the money taken in government revenue is not only wasted but goes to fund actively growth-killing products.
I wonder whether the desire for government is a normal good. Most people's political opinions are fundamentally feel-good: either a signal to show they care, a signal of in-group loyalty, or a way to elevate their group's status over other groups. Seems like these desires would remain or intensify as we climb Maslow's pyramid, and now that we're rich we don't mind wealth-destroying effects as much. If so, that is a *very* depressing thought.
It's remarkable how reliably journalists and scientists fraudulently display facts to be favourable to government.
Still they are getting more house, and somewhere between 0 and 1 more cars, and can be forgiven for thinking their health insurance buys better doctors. (Trauma surgeons, at least, are way better.)
I'm staring at my blinking text cursor and considering what 140% more government is, exactly. I intended to write something, but instead I just recommend doing the staring thing yourself.
For comparison, if progressive fantasies were true, what would 140% more government look like?
CF,
I seem to remember a GMU econoomist arguing a point similar to yours sometime in the last 10 years. I know I've argued roughly that point as well.
As wealth gets higher, you buy more ethics. For most people ethics is nearly equivalent to care for others. So...higher ethics means either higher charity, or higher government (or both).
Given the disconnect in much ethics between effect and goal (better to lose honorably, or try to help and fail than to be Henry Ford who helped a lot on accident.), I can't imagine a good result from this.
Actually...I can imagine a post-singularity, nearly scarcity-free society. Potentially, this is even government run.
On the other hand...between now and then...we desperately need more left-libertarians screaming "Your goals are good, but the government is the wrong path".
Rand ain't going to turn Leviathan. But the bleeding heart libertarians might.
Alrenous, Good call on the house/car thing.
Health insurance? Pure government action -- Singapore's Catastrophic Insurance is rising at no more than inflation.
I think education is in line with government on cost...though strangely, government is heavily involved.
Actually...I can imagine a post-singularity, nearly scarcity-free society. Potentially, this is even government run.
The Culture books by Ian M. Banks.
Only desirable presentation of socialism I've ever seen, and it needs AI to make it work.
Good books, those.
...and now that we're rich we don't mind wealth-destroying effects as much. (cephalicfurrow)
That's why rich nations dabbled in large amounts of immigration.
rsf,
Immigration as a percentage of population was higher in several decades of the high-growth, relatively poor 1800s than it is today. And the imports were stupider, because of the flynn effect. Your prejudice against immigration doesn't fit the data we have.
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