Gorsuch Apes NIMBY Government Lies in Supreme Court’s Grants Pass Decision
by Christian Britschgi, Reason, July 2, 2024.
Excerpt:
Phoenix’s amicus brief in the Grants Pass case was co-written by the League of Arizona Cities and Towns—a taxpayer-funded lobbying group that spent most of this past year fighting efforts in the Arizona Legislature to liberalize local zoning codes.
Local governments love to blame Martin for rising homelessness because it relieves them of any real responsibility for the problem. Homelessness is something that happened to them, and here comes the 9th Circuit preventing them from doing anything about it.
It’s an incredible act of blame-shifting. In fact, local and state governments bear a considerable share of the blame for the rising homeless population by making housing so hard to build in the first place.
Nothing correlates more with homelessness rates than high housing costs. And nothing drives up housing costs like government restrictions on building housing.
When getting city approval for a new apartment building takes two years, state environmental law lets anyone delay an approved project with lawsuits, and the cheapest forms of housing are banned completely, is it any surprise that thousands of people end up on the streets?
Social Security’s $4.1 Trillion Hidden Government Deficit
by Romina Boccia, Reason, July 2, 2024.
Excerpt:
In reality, Social Security operates on a pay‐as‐you‐go basis. This means that the payroll taxes collected from current workers are immediately used to pay benefits to current retirees. Any surplus funds are credited to the Social Security Trust Fund, but these are not cash reserves; they are special‐issue Treasury bonds, which are essentially IOUs from the federal government.
When Social Security runs a deficit—meaning it pays out more in benefits than it collects in taxes—it must redeem these bonds to cover the shortfall. The federal government then has to come up with the cash to honor these IOUs, either by raising taxes, cutting spending in other areas, or borrowing more money. Thus, the Trust Fund does not contain real, liquid assets but rather a promise that the government will pay itself back, which ultimately depends on the federal budget’s overall health and fiscal policy. (bold in original)
DRH story:
In 2004, when Dan Klein taught at Santa Clara University, he asked me to come up and give an evening talk to the students. We discussed what might be a good topic that would grab them and I suggested “Social Security: The Nightmare in Your Future.” That’s what I spoke on. My daughter, Karen, was a student there and although she wasn’t required to attend, she showed up with a guy friend. It was on a Tuesday evening and, just as had been the schedule when her mother and I had taught there in the early 1980s (that’s where we met), there were no classes on Wednesday. That’s relevant because my daughter told me that she would stay for the first half hour and then leave because it was party night. I told her that was fine and asked her permission to use a story about an interaction we had had when she was 11. She said yes.
Here’s the story I told to drive home the fact that the Trust Fund is not really a trust fund. When Karen was 11, she asked me if I’d been saving for her college. I answered that I had just started to in the last year. Being the daughter of an economist, she asked, “How much?” I answered that I was saving $10,000 a year for 8 years. That satisfied her. Then I said to the audience, “Imagine that, instead of putting $10,000 a year in a money market fund, I had written, ‘IOU $10,000’ on a scrap of paper and put it in a jar, and did that 8 years in a row. Who here believes that when I emptied the jar in 8 years, I would have $80,000?”
By the way, the talk lasted 45 minutes and Q&A another 40. At the end, Karen came up with her friend. They had stayed the whole time. She said, excitedly, “I didn’t know those things.”
ULTRAs: The Worst Idea You’ve Never Heard Of
by Michael Munger, AIER, July 1, 2024.
Excerpt:
It would be possible to treat such as value as “mark to market” estimates, but again for assets that have thin markets—stocks in closely held or family corporations — or no annual market at all — for a unique mansion, or a large piece of real estate for which no “comparables” exist — such estimates are likely to be inaccurate, and expensive to check.
That’s where “ULTRAs” come in. Instead of taking two percent (say) of the liquidated value of the wealth, the state would simply take ownership of the wealth, in place. An ULTRA is a “notional equity interest.” The government literally takes a portion of the value of the asset; that value will be paid to the state when the asset is sold. Now, it is only a “notional” stake, in the sense that no shared right of control or voting rights exists. But for those who advocate for ULTRAs, in any situation where tax agencies are authorized to tax an asset today, but cannot because there is no evaluation event, the taxpayer could be made to pay with an ULTRA rather than with cash.
And:
It is very difficult to know the value of the asset, but ULTRA to the rescue! As Delmotte puts it:
Without knowing its economic value, the government takes 2 percent equity in Plenty in Year One while in Year Two the remaining 98 percent of the asset is subject to a 2 percent charge (leaving 96.04 percent for Giselle); in Year Three, another 2 percent ULTRA-tax leaves Giselle with 94.12 percent of the original asset’s value. After twenty years of wealth taxes, this leaves Giselle with 66.4 percent equity in Plenty, and the tax authorities now own 33.6 percent of the company’s value. Under ULTRAs, there is no current cash tax payment, but when Giselle sells her shares in Plenty after 20 years, 33.6 percent of whatever the sales price turns out to be goes to the tax authorities.
The effect is rather startling, looking at the example. In a relatively short time, the government literally takes substantial ownership of all successful private businesses. Rather than being a drawback, advocates have actually become excited about government ownership of “the Metaverse,” and giving the Treasury Secretary extremely broad and unilateral discretion about the use of ULTRAs in lieu of cash payments.
Why It Is So Hard to Become an Acupuncturist in California?
by Krit Chanwong, Cato at Liberty, July 5, 2024.
Excerpt:
Forty-six states and DC require acupuncturists to be certified with the National Certification Commission for Acupuncture and Oriental Medicine (NCCAOM). To obtain certification, aspiring acupuncturists must hold a degree from one of the 49 accredited schools of acupuncture. Aspiring acupuncturists also need to pass at least two of four exams administered by the NCCAOM. The number of exams required differs by state. Delaware, for example, mandates that its acupuncturists take all four NCCAOM exams. On the other hand, Pennsylvania mandates only two exams.
California does not recognize any NCCAOM certification. Instead, the state has its own licensing rules. Aspiring acupuncturists in California need to graduate from one of 29 universities accredited by California’s Acupuncture Board and take California’s acupuncture licensing exams. According to the People’s Organization of Community Acupuncture (POCA), California’s acupuncture licensing exams “has been held up as the gold standard for acupuncture licensing tests.” The high regard given to California’s exam is due to the test’s increased rigor and depth when compared to the NCCAOM’s.
And:
Acupuncture licensing is just one small example of California’s licensing mania. For 20 years, California was ranked 49 out of 50 in Cato’s Freedom in the 50 States survey for occupational licensing freedom. A 2023 Archbridge Institute study found that California requires occupational licensing for 189 occupations, which is higher than the national average of 179. These licensing regulations harm all Californians: a 2018 Institute of Justice study suggests that California’s licensing regime costs 195,000 jobs annually—perhaps one reason the Golden State has one of the highest state unemployment rates.
READER COMMENTS
Thomas L Hutcheson
Jul 7 2024 at 9:06am
We can’t really blame FDR for using a tax on wages (though why it should have been capped is another issue) to pay for pensions. The VAT had not been invented and that was the closest approximation to a broad-based consumption tax them available. And a “trust fund” is not a bad way to manage an earmarked tax. And if one wants to avoid changing rates of taxation as the demography of taxpayers and beneficiaries change, it makes sense for the “fund” to run a surplus when the population is younger.
Much of the huffing and puffing about SS and then Medicare ultimate boils down to not having shifted to a proper consumption tax like VAT when that came along and disinclination to set tax rates so that revenues equaled expenditures, the same disinclination seen outside of safety net expenditures.
The “retirement age” (terrible concept) should also have been indexed to keep the average number of years for receiving pensions constant.
Of course it’s not too late for these reforms today; better than tomorrow.
Jim Glass
Jul 8 2024 at 4:04am
FDR was surprisingly conservative fiscally. Many wanted him to fund SS “progressively” with general revenue, but that could have let the program expand without end according to the political winds and he wanted to block that. Or if the winds blew the other way the program could be cut — but workers paying for their benefits “with their own money” blocked that too.
His original program was funded, not going to pay full benefits for a couple decades, IIRC, while the trust fund balance built up, then would pay each annual cohort benefits based on the federal bond rate. He declared SS to be “actuarially sound and out of the Treasury forever” and meant it. When he read a draft of the SS bill sent to Congress and saw that it included an injection from general revenue in the 1960s(!) he had a famous tantrum and forced his people to withdraw the bill and re-write it.
But when the tax revenue to pre-fund benefits started coming in, Congress couldn’t bear it. The liberals wanted to spend it all right away on socialist programs, and the conservatives wanted to block that by just slashing the tax. They compromised by expanding and accelerating benefits while cutting the tax rate by half, making SS paygo. FDR vetoed the changes. Congress over-rode the veto. The rest is history.
Junio
Jul 7 2024 at 9:38am
California just keeps disappointing more and more.
Richard W Fulmer
Jul 7 2024 at 1:17pm
It is if the “trust fund” is nothing more than a cookie jar filled with IOUs. Yet how would government manage a real trust fund? If physical dollars were simply placed in a vault, opening the vault and spending the money would have the same effect as printing new money. If the trust fund were to be invested, what would that look like? “Investing” in government securities would be little different from today’s process of paying retirees out of the general treasury. If the trust fund were invested in market securities, how would politics be kept out of investment decisions? What would happen to the value of the securities when the government cashed them in?
Craig
Jul 7 2024 at 5:53pm
“If the trust fund were to be invested, what would that look like?”
I would suggest probably like CALPERS or some kind of fireman’s / police / teacher pension fund.
” how would politics be kept out of investment decisions?”
It won’t be.
Richard W Fulmer
Jul 8 2024 at 9:28am
A real Social Security trust fund would make CALPERS look like a piggy bank. The impact it would have on the economy would be enormous.
Jim Glass
Jul 8 2024 at 3:21am
The “Trust Fund” as we know it was never created. It exists only by contingent accident. It’s a great example of the political version of “when legend becomes fact print the legend — then have everybody argue and argue about it forever.”
Social Security has already gone broke — unable to pay all promised benefits — once, ~ 1983. People today generally somehow are oblivious to that fact. The Social Security Reform Act of 1983 reset the program (via tax increase, a new disguised means test, and reduced benefits for the then young), generally following the recommendations of the bipartisan Greenspan Commission. If one looks at the Act and all the Commission’s recommendations one won’t find even *one word* about newly ‘saving’ any tax revenue ‘to finance future benefits’ in a ‘trust fund’. The idea never occurred to any of the bipartisans. Yet it has been afflicting us for 30+ years.
In 1944 Congress converted FDR’s original funded SS program to unfunded paygo, making it actuarially unsound in the long run, over-riding his veto to do so — but that’s another story. As a paygo program its revenue was supposed to equal its expenditures. Of course that never exactly happened because of fluctuations in both. So the mechanism to keep the two on track together over the years was an account at times called a reserve fund, balance account, or trust fund. This was credited with the running net balance between the two, using “special” nonmarketable bonds as counters to adjust the time-value of money into the tally. Nobody treated this account as “funding” anything. It was an accounting device to keep taxes and expenditures close to each other. If it moved down to zero or up much over it Congress would incrementally adjust taxes/spending accordingly to keep them in line, which happened repeatedly.
In 1983 “the long run” arrived and the ’83 Act was enacted. Its provisions were set to keep SS paygo balanced for hopefully another several years until the tally required the next adjustment, so the same politicians wouldn’t have to do it again. All just as before. Then the unexpected happened. The Act’s projections were based on past trends, and the decade through 1982 had been rough — but then the 1980s boom started and payroll taxes poured in far above projection.
Senator Daniel Patrick Moynihan, the legislator probably most responsible for the ’83 Act, openly said the payroll tax rate should be reduced to keep SS paygo. But the rest of Congress said “Nah. What’s smarter than saving for the future? And safer than using T-Bonds in a Trust fund?” and spent the surplus taxes. When Moynihan was asked if Congress was committing “theft” from the trust fund, he said “Not theft, embezzlement.” Meaning: There was nothing in the trust fund to steal, but labeling a payroll tax “Social Security” then spending the tax on everything else was embezzling from taxpayers. The Treasury’s Analytical Perspectives on the Budget back then used to state: “The Trust Fund is not a trust fund in the general understanding of the term”. (“The trust fund is not a trust fund” — my favorite government disclaimer ever.)
Nevertheless, the myth that Congress created the trust fund to fund future benefits promptly became powerful political legend. People then only argued over how effective it was. In my clip file I have a Krugman article arguing: Congress created the trust fund to fund future benefits, thus it must have real economic value, else this would be the biggest political fraud in US history. What?? I talked to some AARPers back then, they made the same argument: Congress created the trust fund to finance future benefits, so … and looked at me like I was a flat-earther. The legend is mesmerizing. So much so that it blows the subject up out of all proportion.
I just looked at the Trustees reports. The 75-year unfunded liability for Social Security is $23 trillion. For Medicare it is $38 trillion. (Somehow, nobody ever mentions that!) The SS trust fund is $2.8 trillion. However bogus it is, in the big picture that’s just a rounding error. It’s just not worth being the focus of arguments over SS for the last 30 years.
Moynihan used to say: Fixing SS is easy, it’s just cash flow. Fixing Medicare will be difficult, it’s the health care system of the country. If we can’t even fix SS we’re doomed.
BTW, the best history of Social Security I’ve ever seen is The Real Deal, by John Shoven of Stanford/Hoover, and Sylvester Schieber, who was a member of SS Advisory Boards for both Clinton and Bush. It details the politics and economics of SS from the 1930s through the 1990s. Out of print now, but if anyone is interested, it’s probably in libraries.
Herb
Jul 9 2024 at 2:06am
When I returned to California from Texas (where I had a Professional Engineering License), I would have needed to take all of the California exams to obtain a PE License in California. The job I held in California was not covered by the board, so I could pursue my career without it. I do have a national certification in my field, but California cares not. For many this can be a big expense in time and effort. Similar to my wife, who passed both the California and Texas bar exams.
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