Monday, October 01, 2007

Baby Bonds and the anti-logic

According to the Associated Press reports, Democrat presidential candidate Hillary Clinton suggested, during a forum hosted by the Congressional Black Caucus, that every child born in the United States should get a $5,000 "baby bond" from the government to help pay for future costs of college or buying a home.

First, this appears to have been an off-the-cuff comment because the Clinton campaign had no numbers on the estimated cost or potential funding sources. But that didn't stop others from warmly embracing the idea.

Ohio Congresswoman Stephanie Tubbs Jones (D - OH 11th District) thought it was a "wonderful idea." She went on to explain that "every child born in the United States today owes $27,000 on the national debt, why not let them come get $5,000 to grow until they're 18?"

Yes, this is what passes for intelligence in Congress. It's anti-logic. You're born owing $27,000 toward the national debt so let's just 'borrow' more money and give it to you, ignoring the idea that you might be getting $5,000 now, but that $5,000 just gets added to the $27,000 you already owe. The problem is that so many have such little understanding of how this works, that they'll think they're getting a 'reduction' of some sort in the debt. While it's sad that the public will misunderstand this, it's atrocious that our elected representatives are perpetuating the anti-logic of the idea - not to mention the media which failed to understand the implications of the comment and clarify it further.

And then there is the concept in general. Nowhere does the Constitution give Congress the authority to take from people in general in order to give a $5,000 handout to babies born in the U.S. But then, constitutional restrictions on authority went down the drain quite some time ago.

Even if this were constitutional, there are a host of unintended consequences and questions which I'm sure weren't thought through.

For instance, what about couples who cannot have children. They'll be paying taxes which will be spent on other peoples' kids...I'm sure there's some sort of discrimination here based upon their inability to have children. After all, we can't discriminate against those who, through no fault of their own, don't have kids. So that means some sort of equal payment to them, as well.

And what about the abortion lobby? If you start paying people who have kids (in this case, in the form of a bond for the baby), you might have less abortions. Talk about unintended consequences.

And if the parent is on public assistance, does the 'baby bond' encourage more children who are then raised in, what has become for many (but not all), a 'welfare mentality' of entitlement?

What if a child is given up for adoption? Does the 'baby bond' go with the kid or stay under control of the parents? Logic says it'd go with the child, but this being the government, anything is possible and anti-logic is more common.

However, knowing the penchant of government to control, I anticipate such a program being more like Social Security. We'll just create an account in your name, dear baby, and when you're 18, the money will be there for you. Yes, we'll put it in a lock box that can never be touched. Yeah - right - we've seen how well THAT works...

Then there is the concept which led to the idea...Clinton said such a program will "help Americans get back to the tradition of savings that she remembers as a child." As Glenn Beck says, get out the duck tape so your head doesn't explode....

Giving people money doesn't help them learn how to save. All it does is teach them that the government will give them something for nothing - failing to recognize that someone - meaning you and me and even the recipients - will always end up paying the bill. Government has only what it takes from each of us ... but that never stopped them from being so generous with other people's money.

The best way to teach the need for savings - and so many other lessons - is to give individuals the freedom to fail. It was Henry Ford who said, "Failure is the opportunity to begin again more intelligently." It's just that individual responsibility contradicts so much of what government is about, further contributing to the anti-logic we see so much of today.

19 comments:

Robin said...

What would be cool is if a parent could set up a savings account that the child could access after the age of 18, with the first $5,000 not taxed.

Maggie Thurber said...

Robin - what a great idea.

And changing the tax code is certainly a more appropriate role for Congress than 'give-aways.'

I know that states have college savings accounts that can be set up for kids and parents can contribute very generously to these accounts. I don't know the tax implications, and they can't be used for buying a house or car...only for college, I believe.

So that's another aspect - why would the federal government need to jump on the band wagon when states have already addressed the 'college savings' account issue?

Roo said...

Maggie - great logic. I knew you would come up with a solid way of putting it all into perspective.

Tim Higgins said...

Does this strike anyone else as paying off an overdrawn credit card with another credit card?

Upon listening to the statements of Sen. Clinton and Rep Tubbs, one can only conclude that: "Radical liberalism is a disease that can never be cured; but with luck, it can be contained."

Art A Layman said...

Cannot disagree that the proposal needs work but the thought is not necessarily a bad one.

Recent articles on the staggering amount of the student loans that college graduates must begin paying back as they begin their careers portends a significant economic problem looming for future generations. College tuition, fees, books, etc. are increasing exponentially and the size of the student loans even today's graduates are facing will inhibit their ability to enter the consumer marketplace or at least seriously impair the discretionary income they will have to join in the fray. This can have a deleterious effect on a GDP made up of 67-75% consumer spending.

For many years our government has provided 12 years of public financed education. For many of those years this was sufficient for most to commence employment and seek a career path in all but the most technical of professions. Our culture/society/government has, over time, imposed a more stringent requirement that now requires a college education to enter a career path that will provide even just a middle class income.

It is clear that some program must be established that provides a higher education without the huge costs that many can only afford by student loans. There are no simple solutions to this dilemma but let's thank Hillary and earlier John Edwards for at least starting a dialogue about the issue.

College savings accounts have been one attempt to overcome the conundrum. Many folks, a lot of them your previous constituents I'm sure, Maggie, don't have the excess discretionary income to make sizable contributions to such an account: What are they to do?

It is comical to use the statistics related to the average citizens share of the national debt as a basis for your argument. This is a number calculated merely to try and bring perspective to the astronomical national debt because the total number is beyond the comprehension of the average citizen and even some above average. The speciousness of your use of this statistic is it begs the logical solution that having more babies will therefore reduce the average citizens indebtedness to almost zero.

You can make good arguments against Hillary's proposal without denigrating the debate to typical rightwing spin.

Maggie Thurber said...

art a layman:

First, I didn't make the comparison to national debt - that was done by Ohio's own Rep. Stephanie Tubb Jones. All I did was point out the error of her logic in presenting this $5,000 as some way to 'negate' said debt.

Second, I don't disagree with your explanation of the issues facing children today as they look toward higher education.

Third, it appears we have a core philosophical disagreement. I don't see that it is the role of GOVERNMENT to address the problem via another hand-out/entitlement with other peoples' money.

If you'd really like to address the problem, you need to first look at how government subsidies to colleges have actually INCREASED the costs of higher education. There are numerous studies which say, basically, that government providing funds to colleges results in more 'amenities' on college campuses to the detriment of the actual education. One study I read compared the increase in tuition between 'public' and 'private' colleges/universities. Interestingly, it was the 'public' ones that had a higher percentage increases in tuition and costs.

If the government (local, state and federal) didn't take so much of our money in the first place, perhaps families of all earnings would have more disposable income that could be put toward such savings plans. Ever look at where the majority of a person's earnings go? It may surprise you to know that taxes take up about 33% of earnings - in fact, when you look at the 'tax freedom day,' you'll find that Americans will work longer to afford federal taxes alone (79 days) than they will to afford housing (62 days).

Additionally, I reject the idea that an individual must have some sort of government assistance in order to attend college. It's nice if you can qualify, but there are other ways to afford a college education - it's called WORK. It may mean that you attend part-time and take longer than 4 years to get your degree, but you're better served by having work experience and earning - for yourself - the degree.

Finally, I don't know what "right-wing spin" you refer to. This is a bad proposal that was presented with no research or analysis and with no basis of authority in the Constitution. And it appears that a majority of Americans polled immediately after the announcement agree with me.

If congress - and presidential candidates - were really interested in helping people save money, they wouldn't spend like they do and would reduce the size and scope of government, thus reducing how much it costs each one of us in terms of tax dollars. That would do more to solve the problem than any amount of hand-out they can come up with. But that's a much more difficult task than just handing out money and it's easier to appeal to the emotions associated with "for the children" campaigns...

Frank said...

Good information once again Maggie.
When I attended college, I paid for all of it with hard work, some loans, grants and scholarships. Granted, it took me 5 years to get my degree, but I was able to pay off my loans within 7 years after graduation. There are plenty of places that offer scholarships, grants and other financial aid to help a person attain a college degree. But in today's world, the word WORK and SAVE are not in too many peoples vocabulary. Of course other ideas like joining the military would be able to off set the cost of going to college. If students really wanted to go to college to get a better job or the chance to have a good job, then they should apply themselves to the best of their abilities. This would work on all levels.
Now if we could only cut the pork out of some bills....

Art A Layman said...

Maggie:

I would guess you could interpret Rep. Tubb-Jones comments in the way you did but my take was more along the lines of; what's another $5,000?

One could posit that we have a philosophical disagreement and that one would be grossly underestimating our differences. It is the role of government to provide for the security of its people, both militarily and through regulations and programs that insure equal opportunity for all. Both of these methods of providing security require government to at times spend money. I attempted to point out that what we are talking about here is the welfare of our economic growth. About the engine that provides all that we value and strive for. On our present course our only salvation will be entitlement programs from China so we can maintain our consumer, as opposed to producer, economy.

Will take your word for it that government subsidies have contributed to some increased costs in higher education. Have not read the studies but would have to believe it is a neglible increase. The college experience is more than just "actual education". The entire environment is an education process and some of these "amenities" may provide educational benefits themselves. Have not read studies on private vs. public tuition costs but from my reading am well aware that your statement is true. There are many reasons for this phenomenon, not the least of which are rising costs, and public universities seldom have endowments of the size of those at private universities. It is also possible that as many of our public institutions become more and more enamored with our free market system, they see the discrepancy in tuition rates between public and private as motivation to close the gap a little.

"Tax Freedom Day" is a cute little statistic but one that is based on averages and therefore lacks substance when trying to use it as a debate tool. The percentages you state bear little resemblance to each individual's experience.

Am well aware of the option of WORKING ones way through college. Did it myself, with a full time job and a family, graduating with a BSBA from Wright State University at the ripe old age of 31, after 7 years. It is doable but requires a tremendous amount of stamina, diligence, perserverance and the ever present knowledge that it is worth all the stress and energy. There are in fact many students doing just that. Do they get the full benefit of the educational resource available to them? Often not. Those from families or environments that have not been exposed to the necessity of higher education often fail to muster the fortitude to complete the process.

"Right-wing spin" as I interpret it, is the posing of a simplistic, emotional argument which does little to engage the debate with intellect but rather appeals to things like; not with my money you don't. It is to automatically label an idea as another "Liberal" attempt to steal my money. Many corporations hold brainstroming sessions where any idea can be floated and considered. It is a method that spurs thought, dialogue and often drives specific actions. Why not approach this idea the same way? You raised many viable issues in the implementation of this idea and that is the beginning of intellectual debate. It is much more valuable to the conversation than whining.

Many of those who would benefit from a proposal like Hillary's would enjoy no change in their plight in life if all taxes were eliminated since many of them don't pay taxes. Keep in mind also that wages are what they are, in part, due to the taxes impact. If taxes were lower or didn't exist wage growth would slow even more than it has, at least for the working folks.

Is a pleasure chatting with you.

Tim Higgins said...

You made some very good points Maggie and presented a well-refuted argument to art. I hesitate to attempt to add to it, but let me throw this out there anyway.

People (especially young people) tend to place a value on things based on their cost. If it doesn't cost anything, it tends to have little or no value. Anything worked and achieved as a result of hard work has a far greater value than something simply given. There are far too few opportunities for young people today to compete, earn, and achieve out there; and we should not take another one away from them.

As for the arguments of a right-wing spin on this issue, they are specious. While some of us may have presented conservative opinions on the subject in the comment section, you did nothing but present cold, hard facts and logical argument. The argument on this subject however, is simply that government has no business in wealth re-distribution, and that is what this proposal really was. Even Clinton’s campaign appears to be running away from this it, something that I am sure that they would not do if there was any merit there.

Maggie Thurber said...

Thanks to your explanation, I understand your "spin" comment better.

And you raise an interesting point that many who might benefit from this $5,000 would not see a change in their economic conditions as that don't pay much in taxes.

But I must ask...as you seem to perceive this concept as a way to provide for 'equal opportunity,' how is this equal for all? I believe that issues of kids vs. no-kids would show quite plainly that it is not equal for all since childless couples would be 'paying' (through taxation) for children that are not their own.

By having people (parents and kids) thinking that this will pay for their education, I fear two things: 1) that many will not understand it's just supposed to be a portion and will then expect more money in the future in order to keep up with inflation and other costs...and 2) that by having the government provide this, some will expect that it absolves the parents and children from their responsibility in the manner. We've seen these same kinds of issues with Social Security - why would we expect this program to be any different?

Equal opportunity does not always equate to government involvement in terms of hand-outs. I believe you said it best ... while everyone currently has an equal opportunity to attend college, they don't do so under the same conditions.

"Those from families or environments that have not been exposed to the necessity of higher education often fail to muster the fortitude to complete the process."

A baby bond isn't going to change this. But what will? There are so many ideas, but the main difference I've seen between many people is the methodology for implementing ideas: government vs. individual.

Art A Layman said...

Aha! Now you're getting it. Good response.

Question of no-kids is a viable one. I guess the first criteria might be choice. If a couple chooses not to have kids then they are forsaking the opportunity for the "baby bond" in which case I'm not sure it's unfair for them to help pay for it. But what of those that cannot have children? You could, I suppose, hash about adoption (both of my children were adopted) but this is a very personal issue and it would seem unfair for a couple to be penalized if they chose not to adopt. This question does become enmeshed with the issue of what is in the best interests of all citizens. If it were posited that a better educated populace benefits all of us and to further that goal this kind of program seems necessary then you could argue that the small portion of the general taxes paid to provide this benefit might be in the best interests of all. Surely is debatable. Suffice it to say that absolute equality is never truly attainable but that does not negate that striving for it is a worthwhile goal.

Communicating and maintaining the idea that this is a help, a start, that it is by no means an answer to the full cost of college for your child, is always a problem with any program, government or otherwise. In some cases it may serve as a catalyst to motivate parents toward more college savings for their child simply because they see a jump start that begins to breakdown what seems an insurmountable barrier to many. In other cases it may allow a student to work only part time and use the savings to supplement his paycheck.

Not sure I get the analogy with Social Security. During much of the working lifetime of pre and current babyboomers there were not available, pension programs nor 401Ks, where it was economically feasible for folks to save for retirement. Even today these programs are not offered by many employers. It is hard to dispute that when you are young you should start saving for your retirement but that's a long window and it is difficult for many to envision that they will have amassed enough after 40-50 years to last very long, even with SS benefits. A failing no doubt but had we all crystal balls we'd all be rich.

Interesting aside: Where would those folks be who invested their small portion of privatized SS, per GWBs plan, given the Stock Market events of the past month? I am hypothesizing about someone who had been doing this over a number of years and was about to cash out of stocks and invest in secure bonds. This someone is looking at near-term retirement and has been doing all the right things and the bottom just fell out of his savings. For those young enough you ride it out, the market will rebound which it has. For those about to retire they no longer have the working years necessary to cover their losses. So what seems to many a good idea leaves some with only partial SS to provide for them. Just a thought.

Curious that governmental help to conservatives is a hand-out and to we liberals is a helping hand. As I said absolute equality is not attainable but there are so many in our society, who by virtue of the environment they were born into, never really have the advantages or opportunities that many others of us take for granted. Because the government is the only collective enterprise with the potential resources to overcome some of this inequality it is reasonable that government should be the focal point for solutions.

I have never advocated a shirking of individual responsibility. But this is not your founding fathers United States anymore. In our beginnings the vast majority of the people were, if not totally, at least partially self sufficient. We were principally an agrarian economy. Most of our food was attained from hunting or growing by individuals. The Industrial Age changed much of that over time. As the industrial complex grew and grew we became much more dependent on wages for making our way in life. For a long while, albeit with some egregious faults, industry provided for many of its workers. That model began declining 30 or 40 years ago and left individuals to fend for themselves with little advance warning of the turn around. We have replicated this scenario with globalization leaving many workers, many middle-aged, with minimal or specific skill sets that are no longer needed and not trained for anything else. All while they were trying to follow the American way and provide for themselves.

There are far too many inequities in our society and governments are the only institutions with the means and processes to deal with them. Money is power and those with no money have no power.

I have been known to be verbose.

Maggie Thurber said...

Money is not the only power...lol

But here is the philosophical difference...I get the impression that you see government as a way to attain equal outcome. If someone has been 'disadvantaged' in some way (birth, ability, etc...) it seems as it you're saying government should correct the inequality.

I believe government should support equal opportunity, and that the individual (through individual actions or collectively through community and other non-government groups) can work to address such 'disadvantages' through various means.

The reason this is no longer the nation our Founding Fathers envisioned isn't just a result of our technological and other advances, it's because government - and I mean primarily the federal government - has far exceeded the enumerated powers defined in the Constitution. Simply because this has occurred does not make it right nor does it remove from all of us the responsibility to speak against further violations.

I was always taught that life is not fair. Some people have advantages others do not (athletic ability, learning ability, etc...), but there is no way to make everyone equal - and our founding fathers, recognizing this fact, did not set up the government as the institution to ensure equality in the outcomes.

You do not "help" people by making them comfortable in their ignorances, taking care of them when they should be learning how to take care of themselves, or by telling them (through various means) that they do not have to rely upon themselves because the "government" is there to take care of them if they fail in an endeavor. Further, you do not encourage others to care for the "needy" by indicating (through legislation and programs) that the government will take on that role for them.

As I originally quoted Henry Ford, "Failure is the opportunity to begin again more intelligently."

Sometimes it's better to let people fail. Every problem does not require a government solution.

So before going further, please provide the portion of the Constitution which grants such authority to Congress. Absent the authority to DO, the discussion about HOW is mute.

Art A Layman said...

The Constitution of the United States
Preamble Note
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Please note: "promote the general welfare" and "secure the Blessings of Liberty to ourselves and our Posterity" those should be sufficient.

But to be more specific:

Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States;

Congress is to have the power to "provide for the general welfare".

This should satisfy the authority to DO. I will have to continue the HOW later.

Keep in mind should you be inclined to suggest a Supreme Court decision as to the Congressional powers, the Supreme Court was not given in the Constitution the right of "judicial review" or judging the constitutionality of a Congressional act. This power was assumed in Marbury v. Madison and is really nothing more than a legal precedent. We can discuss that later should you desire.

Maggie Thurber said...

And the difference between "provide" - as in provide for the general defense - and "promote" - as in promote the general welfare?

And how, exactly, does taxing all people to redirect those funds to babies "secure" liberty for me and others?

And do you see a distinction between providing for the general welfare of the United States - and providing for the general welfare of the citizens of the U.S.?

Mad Jack said...

Giving people money doesn't help them learn how to save.

Real wrong, Maggie. And I can prove it. You give me $25,000 then check back in five years or so and you'll see that I've learned how to save stuff, like money.

So according to Tubbs I'm 28K to the bad just by sitting up and taking notice. Fine. Let me pay off my 28 large, then stop taxing me. After all, I've just paid off my fair share, right?

Maggie Thurber said...

okay, Madjack, I'll give you half of that...if you 'save' the money you've been given, you have, in fact, saved...

However, saving money given to you doesn't teach you how to allocate a portion of your earnings now for longer-term benefits later...

But I like the rest of your reasoning....

:)

Art A Layman said...

C'mon Maggie! Don't go semantic on me. The preamble does say "provide" for the general defense and "promote" the general welfare this could lead to a semantic argument but a weak one. It is further rendered moot (not mute by the way) by Section 8 where the Constitution states: "provide for the common defense 'and' the general welfare of the United States". A compound predicate for the singular verb, "provide".

This specific process likely does little to "secure" your liberty other than a better educated populace would lead to a more tranquil society enabling you and others to enjoy your liberty even more.

I'm not sure how you provide for the general welfare of the US without providing for the general welfare of the citizens of the US. Conversely providing for the welfare of the citizens will improve the welfare of the country.

Maggie Thurber said...

Art - I ask you some questions and you don't respond but accuse me of semantics...

What we are discussing here is semantics - the meaning of 'general welfare' and how that is interpreted today, versus how it was intended by the founders and interpreted previously.

And while we both believe that the general welfare of the nation could be enhanced by an educated workforce, we disagree on the best way to achieve the educated workforce. You see it as a function of government to take from some to give to others in order to achieve the goal. I believe that the motivation should come from within the individual and that my money would be better spent on my own personal goals - and any 'charity' I prefer rather than on a 'charity' selected by the government.

You seem to be one of those who interpret 'general welfare' very broadly to include many things not originally intended. I'd suggest you read the federalist papers relating to this clause and the explanation the founders gave for this provision. It was the subject of much debate prior to the ratification of the Constitution.

Further, as late at the 1830s, Congress was faithful to the original intent of the clause - as an example, I'd suggest you read this. At the time, Congress rejected spending money out of the treasury for the 'general welfare' of individuals, even though such 'general welfare' might - note the term "might" - contribute to the general welfare of the nation.

After doing so, I'd be interested in your reasoning for why this most recent idea of baby bonds is 'necessary' for the operation of the government and why something clearly understood in the 1830s is so contrary to what Congress does today.

Maggie Thurber said...

art a layman - While I find your posts on my blog to be interesting and thoughtful, your two most recent dissertations on capitalism are not in keeping with what I'm hoping for in terms of comments.

I have saved them, but not published them, because they're very long and not exactly pertinent to the 'baby bonds.'

Please note, this has nothing to do with your positions on issues, but more to do with my goal of keeping comments succinct and relevant to the topic of the original post. I appreciate your understanding.

If you'd like to continue our discussions, that's fine...but it should be via email. You can reach me here: maggie at maggiethurber dot com

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