One big circle

Hillary Clinton cannot be this stupid:

Democratic presidential candidate Hillary Rodham Clinton said Friday 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.

Clinton, her party's front-runner in the 2008 race, made the suggestion during a forum hosted by the Congressional Black Caucus.

"I like the idea of giving every baby born in America a $5,000 account that will grow over time, so that when that young person turns 18 if they have finished high school they will be able to access it to go to college or maybe they will be able to make that downpayment on their first home," she said.

Where does she think this money will come from?  That's right - the baby's parents!

There's a difference between welfare programs and socialist programs.  Welfare programs (ideally) transfer money to the poor from everyone else.  Socialist programs transfer money from everyone to themselves.  I don't support the former though I admit they might work in an ideal world of selfless government agents.  Socialist programs, on the other hand, are complete nonsense.

 "I think it's a wonderful idea," said Rep. Stephanie Stubbs Jones, an Ohio Democrat who attended the event and has already endorsed Clinton. "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 their 18?"

Hahaha!  Free money.  Weeeeeee!

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That's Hill

It's not for nothing that nationalized health care was called Hillarycare. It wasn't Bill's baby, it was Hillary's. Hillary is pretty hard core in her socialism, as far as I can tell. Bill was all right for a Democrat, but don't expect Hillary to be a repeat.

Well...

It means all else equal people with low income will have less babies. Overall this mean eugenics and less welfare recipients.

While one could defend these two goals on consequentialist ground (I won't this law is evil) I doubt this is what Hillary has in mind.

I also wonder how she plans to enforce it... do you get the key to a chastety belt once you secure $5k in escrow ? Do you get a forced abortion if you get pregnant and can't secure the five grands ?

P.S
I read "the babies parents" as the *actual* parents but maybe she plan to do that through pooled taxation, in which case it's even sillier. It means a huge baby boom followed by the bankruptcy of the program and a generation of unwanted kids.

No they don't.

"I don't support the former though I admit they might work in an ideal world of selfless government agents."
No they don't. Not even with such unrealistic hypotheses. Any scheme that transfers money from category A to category B just induces an opposite and equal distortion in the prices of what one category buys to the other, directly or indirectly, meaning the benefits expected from the redistribution are nil.

yeah they do

The distorsion is not equal. It is very possible to make B better of at the expense of A, even on the long term.

Take a guy and create a law which says everyone in the world must give him one dollar. No amount of change in price structure or desincentive to produce is going to make this a bad deal for him.

No they do not.

No. As long as you retain a market, it can't work in the long term: the only really consistent redistribution is through complete authoritarian communism that dictates prices as well as distribution of wealth. Of course this assumes such control is possible, which it ain't in the real world.

Otherwise the supply just adjusts in the long term. In your example, everyone would simply stop possessing a dollar. You cannot take that dollar from people who don't have any, and in the long term your guy is just a poor as everyone else, proving my point. As a side-note I think Ronald Coase already demonstrated this, which earned him a Nobel Prize in Economics.

Huhhhhh. No. Not everyone

Huhhhhh. No. Not everyone would stop possessing a dollar. How would you support such a crazy claim... Once again assume everyone on earth has to pay one dollar to mister X every year. This is not going to be desincentive enough to significantly alter production and it is definitely going to make X better of, in the long and short term.

Your example actually

Your example actually depends on a frigging huge lot of untold additional authoritative measures, which completely destroy your argument. If the only law applied was that everyone gives some specific guy a dollar every year, people would simply shift to another currency and the dollar would lose all its value, making your guy not better off in the long term, sitting on a pile of worthless dollars. My additional guess is that people would resent him, so he wouldn't even be able to buy anything in the meantime and starve to death, alone in the cold. How's that for "making him better off" ?

The deep-down truth is that without price control, taxes end up being paid by every agent of the market so they *cannot* make anyone "better off".

They don't, and get over it already

Let me illustrate more clearly my point: let's say we assume all your untold assumptions, and let's imagine some aliens from Sirius come to Earth and say that, every year from now, on the date of their landing, every person in the world will give one dollar worth of money or wealth to Joe Schmoe, no questions asked, no dissent tolerated (thanks to mind-control rays of theirs).

Case 1: everyone wanted to give him a dollar every year anyway, so the redistributive measure is useless and uneeded anyway, besides adding time constraints that weren't there before, as people everywhere now wait for the proper date to give instead of giving over the whole year. Joe Schmoe is not better off.

Case 2: at least one person does not agree to give a dollar worth. That person will therefore be recapturing that dollar through price distortions: upon learning of the coming forced transfer, they will jack up the price of one thing up one dollar, or of two things by half a dollar, etc. so the redistributed dollar in Joe Schmoe will be paid by other agents in the market, to the extent that this one dissenter can actually earn one more dollar... which he can, because Joe Schmoe has one more dollar (or is expecting to have one) to spend and inject in the market - and therefore can, all things being equal between the "before" and "after" redistribution, afford paying one more dollar for the exact same wealth over the coming year: Joe Schmoe is not better off.

Case 3: let's take an extreme but illustrative situation, in which no one agrees to the redistribution at all. On the landing date of the aliens, people are compelled to give one dollar worth. Immediately afterward, they all unanimously boycott Joe Schmoe unless he:

a) gives back all the dollars to everyone

or:

b) gives back the dollar to the person he wants to trade with, first

In situation a), Joe Schmoe is actually worse off than before if people demand that he reimburses interest (time preference) in addition of the base "damage" of the "alien subsidy".

In situation b) we're simply back to the previous case.

There you have it: in the absence of price control, forced redistribution cannot help anyone because price distortions compensate for it exactly. In the end, the only amount worth of help being effectively redistributed is the amount people agree to give, anything in excess of that amount is recaptured by the spreading price distortion in the market.

Here is a rigorous study which shows that observed facts are consistent with this statement:

http://www.carleton.ca/economics/cep/cep99-01.pdf

If you think about it some more you'll see that any positive or negative effect beyond that inescapable amount of voluntary transfer of wealth is purely speculative: if Joe Schmoe ever manages, by clever trading or by immediate consumption, to trick the rest of the world and not give back part of the "subsidy", it is not thanks to the transfer of wealth itself, but thanks to speculation on his behalf. In this age of quick information trading, rational anticipation by the market makes this especially more improbable. This is why "expected" redistribution, in the form of regular and publicised transfers of wealth, is incapable in itself of making people better off by force ; whereas unexpected transfers of wealth (crime) can sometimes do it (although in the long term they tend to get people much worse off: fined, jailed or killed).

Like Social Security

Milton Friedman once remarked that Social Security is a welfare program so bad no one would support it (because it benefits the wealthy) welded to a retirement program so bad no one would support it (because yields are abysmal). But, together it's unassailable.

Hillary's baby plan is the same emotional/political calculus (assuming the money comes from the general income tax pool). While it's economic folly, it makes a certain amount of political sense: in the interest of subsidizing the poor, you give the rich the same dollar-valued subsidy so that would-be critics (who don't understand the pay yourself part) are largely bought off.

There is another angle: people with kids, or who expect to have kids, are a clear majority of voters so there is a tyranny-of-majority electoral logic to this proposal as a minority is taxed to subsidize the majority. Even better for HRC, one of the mostly likely childless groups, gay men, are going to likely vote for the Dem candidate regardless, so raising their taxes is not such a big electoral hit for her.

Having read the article it

Having read the article it looks like the 5000 would be provided through pooled taxation, not paid by the parents directly as might have been understood from the blog entry.

If this is paid through an income tax for example, the rich will definitely be worst off.

I do not know much about social security apart that it hurts on my paycheck (and I won't even collect the benefits) can you explain how it benefits the rich?

 

Yeah, I meant "general pool of taxation"

For most people, this means they'll end up transferring their own money to themselves.

Why ? If it's a tax

Why ? If it's a tax proportional on income certainly not... similarly not everyone has the same number of chidlren. With a pool, it means the cost of having children will go down (it is bore by all the taxpayers) so people will have more children, the state will need to increase the tax, etc etc.

Most people?

For most people, this means they'll end up transferring their own money to themselves.

Suppose the average person has two children and the costs are distributed equally among citizens. Then those with two children will effectively transfer the costs to themselves. But *most* people will have more or less than two children, and thus either get a big discount or a big penalty.

And that's the best case for your assertion, HRC certainly intends to rob from the rich to pay for this. She was essentially offering free money to the people she was addressing.

Why Not?

Seems to me a great idea if this payments takes the place of all other welfare payments and comes from general taxation - that is everyone gets a reasonable start in life and it is then up to them how they deal with it. They buy a house and start work or get an education (which they pay for) so perhaps earn more. Perhaps the initial payment needs to be a little higher!

Such a scheme was recommended in the Economist some years ago if I remember.

Data bleg

Could someone apply the last few years of inflation of medical costs to the average cost of giving birth and calculate when it was $5000 cheaper than today?

There are much more costs to

There are much more costs to having children than the medical cost of giving birth.

 

edit: gasp... turns out the mode is currently around $10k+ this seems insane.

I realize that.

It just seemed like a quick and easy comeback to say, "if government managed healthcare hadn't doubled the cost in the last five years, we'd already have your stinking $5000 when we left the hospital."