Free Ebook.

Enter your email address:

Delivered by FeedBurner

« Review: Kmart | Main | Help a Reader: Money Spread Among Many Investment Accounts? »

March 26, 2008


Feed You can follow this conversation by subscribing to the comment feed for this post.

Tax and spend, borrow and spend, I kind of agree with (although I'm not American so I'm not totally sure).
But if the democrats tax and spend, how is debt increasing? True, you'd get less money in the hand which could mean you're forced to borrow more, but surely people can adjust and spend less?
After 'borrow and spend,' I don't agree with what he says. Especially the "all funded by taking as much of your money as possible." Funny stuff!

Giving Robert the benefit of the doubt (which I rarely do.. I think his "advice" borders along the dangerous), I believe he was referring to overall debt and not just government debt. When a tax is imposed, money from the taxpayer is removed. We live in a mostly "paycheck to paycheck" society which means a higher tax leaves less money for the taxpayer who then engages debt to survive. When the government borrows, the impact isn't felt immediately, but adds to the overall debt (and interest accumulated) that we all must pay at some point - usually when the offending politicians are no longer in office. Either way, the taxpayer is straddled with a debt burden, one is more immediate and has interest up front, the other is gradual and most won't realize their burden until much later. Back in '03, the Republicans proposed a budget that I called "The 64 Thousand Dollar Question"; if passed (and it did) then the debt obligation for every American (babe-in-arms up to grandma on a fixed income) would be slightly over $64k - right now we're at $31k per person.

FMF - there is a party that has spending and debt control as one of their main planks: the Libertarian party. Granted, until one of the major parties goes belly-up, there isn't much of a chance to get a Lib in higher office, but they do have a rather large number of offices held at the local and regional level (far more than the Green Party, I believe.)

And to your point about how much debt is too much; the simple answer to that is the same as one would find in personal finance: too much debt is when your creditors stop lending you money. The US creditors are still lending us money, but the flow has trickled and they are getting nervous (telling us that we'd better get a sane budget and control our "spending like drunken sailors" habits or the party is over.) How long? Nobody knows. If I had to wager, I'd guess within the next 5 years; we need to borrow roughly 3 billion each day to keep the country running. Keep an eye on the USDX and TICS data to get a feel for how comfortable our creditors are in lending us money.

- Mixer

Control spending, and the taxing and borrowing will fall into place.

Some conservatives subscribe to the "starve the beast" theory of reducing government spending. That is, lower taxes, and there won't be money left to spend. But it really just treats the symptom, hence the borrowing.

In a sense though, the spending is in turn itself a symptom of a political system that always seems to reward lawmakers for spending more, not less. You get reelected by bringing home more loot to your district.

McCain-Feingold tried to reform the system by severing the link between campaign finance and spending at the behest of special interests. It didn't work though. The link just takes a more circuitous route now, and in the process they weakened the first amendment.

The problem is that the legislators still have the power to direct vast sums of taxpayer money at special interests. As long as that is the case, the special interests will find a way to reward them for doing so.

What we need instead is changes to the constitution that directly limit what the federal government may spend for nonmilitary purposes. That could break the cycle.

Another idea is to go to a tricameral legislature. This third house of congress would be the only one that could introduce spending bills (but all 3 houses could introduce bills to reduce spending). It would consist of 3 people, each with 6 year terms staggered 2 years apart and each person would have a one-term limit. They wouldn't represent any geographic area, they would all be directly elected by the entire nation in a simple popular vote. This way they're more likely to represent the general interest of all taxpayers rather than special interests.

Write to your congress person and request the closure of your local military base, social security office or some government sponsored initiative in your district. As long as we expect the government to trim costs "somewhere" and presume it isn't in our back yard nothing will happen.

Mr. Kiyosaki's view of the two major parties I find to be true. If you like what you see from them, vote for one of them. If you don't like what you see, explore your option of voting for a trird party. There are many of them. I have supported the Libertarian and the Constitution parties in the last several eletions. Did I expect my candidate to win? NO! I believe that the message I am sending to the two major parties will be heard loud and clear when a few million more people get fed up like me. Remember Ross Perot? He never had a chance. But he succeeded to change the debate for a few years. A small victory that was quickly swept under the rug by the two major parties. I LOVE MY COUNTRY, BUT I FEAR MY GOVERNMENT!!!!

I agree 100% with his comment. And there is a politician who wants to control spending and taxes. His name is Ron Paul.

Considering that our government was running a budget surplus when our current president first came into office, I can't really say that I agree 100% with that statement. I remember discussions of whether to further fund Social Security and Medicare, or whether to start paying the national debt.

Taxes are the dues that we pay as members of a free society. If you have ever benefited from the security of being able to call 911 in an emergency, if you have ever driven your car on public roads or ridden public transportation, if you have purchased products that were shipped *anywhere*, if you have ever felt grateful for not having the world suffer under the iron boot of fascism as a result of fighting in World War II, if you have benefited from a medical procedure performed by a doctor who graduated from the K-12 school system and went to a state college to obtain a medical degree, if you have taken your medications feeling secure that they actually contain what they say they do, or you are able to take a bath and wash your clothes in water that will not make you ill, you have reaped the benefits of the taxes that you pay, as you do in a thousand other ways that I cannot even begin to list here.

I hate paying taxes. I also hate going to the dentist, but I know that there are distinct benefits to each. Americans pay the lowest percentage of taxes in the industrialized world, and we need to grow up about it if we expect to have roads, schools (for *everybody*), public services, and so many of the other advantages that we reap from this society. A safe populace, an educated workforce, healthy children, and clean air and water benefit us all, even if we have no children of our own, have finished our education, live in the country, or live in a low crime area.

As concerned citizens it is important that we ensure that our dues to this society are spent wisely. This involves more than just voting in a presidential election and complaining about how much money is taken out of our paychecks. If we want to invest less money, we need to make sure that the money we invest in our country is spent more efficiently through engagement and participation with our communities and our local, state and federal governments.

We live in a society, not a Wal-Mart, thank goodness. The sooner we stop treating the government as someplace to shop for services the sooner we will be able to improve the services we are providing ourselves and each other. Think past your own wallet for a moment and you'll realize what a great deal we're getting out of this. Then take care of it instead of trying to "starve the beast."

Hey, I pay a water bill, does that mean I am paying twice for water that doesn't make me ill?

Both Demo. and Rep or pretty worthless in my opinion!

Well, I'm no Kiyosaki fan so bear that in mind. Plus government spending is an easy target.

We need to carefully consider the question of government spending. What spending do we -- as a society -- want to reduce? Governments will always spend money and as a previous comment noted, some of the spending is for the public good.

Roads, education, parks, bridges, the defense of the country's borders, the insurance of the financial system -- all of these are necessary.

How they should be financed and to what degree government, on a state and federal level, should be involved is the actual crux of this question and it's not always clearly split on party lines.

When you pay your water bill you are paying for the water that you use. You are not paying for the EPA's oversight of local water facilities and of environmental water quality, which contributes to the quality of your local municipal water.

The first poster is right. Assuming spending is the same in both cases (a big if, granted), borrowing and spending is not the same as taxing and spending. Seems clear to me.

As an "independent" I completely agree with this view by Kyosaki, however I don't think it's limited to Democrat vs. Republican.

I appreciate the idealism of Libertarians (though I don't agree with all of their common stands) I think that it is the nature of government that it will continuously grow and consume more of our money because we, in general, act as if we want it that way.

I've never heard a politician get voted in because they said: "Well, I didn't really do anything in my past term because I didn't want to increase spending." Saying, I reduced taxes isn't nearly as attractive as saying "I fed a bunch of poor kids." except to a very limited subset of the populace. I often wonder what the tipping point would be to get us there.

The solution? I don't know. I pay my taxes and am looking for ways to avoid paying those that I don't have to without running into legal or ethical problems. I look for candidates that are fiscally conservative without being cruelly dismissive of the real and immediate problems of the poor and weak. In other words, I never find what I like and I am stuck with choosing the lesser of 2 evils (ie: still an evil)

Politicians will cease their profligate ways when the voters cease demanding goodies from Washington.

There is a politician. Ron Paul.

Let's say John (or Jane) Doe is running for office. They attempt to make an issue of the annnual deficits and the national debt. They bring up history, everything from ancient Rome to the Dutch and British. They say we're heading in the same direction if we continue our current policies of global intervention financed by borrowed money. They suggest modest tax increases, modest spending reductions and a reduced global presence as a way to gradually right the ship.

Their opponent(s) respond with "I see a brighter future for America than Mr. (Ms.) Doe". or... "I will never allow America to become diminished internationally". or... "Why does Doe hate America?"

Using history as your guide, who do you think gets elected?

I wonder how many people take the time to actually read into the economics that drive our nation, and the things that need to be done to get us out of debt?

Taxes, borrowing (which, you know, supplements the taxes they all ready get) and spending - we can't really stop this cycle yet. People act as if one president will just "make it all okay." The current hole we're in will probably take two (or more) presidents to fix to reverse the trend we're in (and it's pointless to whine about WHY we're here - it's more important to figure out HOW to not be here and HOW to get things better).


It's not just that the voters demand goodies from Washington (though some of that goes on too). It's also that often, the interests of the people demanding the spending are highly concentrated, while the interests of people whose money is being spent are highly diffuse.

If you're Archer Daniels Midland or Boeing, it makes perfect sense to spend millions on lobbying, because you can get congress to send billions of dollars your way. Meanwhile, who is going to lobby against it? A program or contract costing a couple billion dollars mean only a couple extra bucks from the average taxpayer, so it's not worthwhile to fight it. Repeat this process several thousand times, and you have a stifling tax burden.

Profligate spending is not entirely a problem of any particular party or ideology. It's a predictable consequence of an unbalanced political system that stacks all the incentives in favor of more spending.

Lisa, Thanks for the posting. I collected my thoughts better than I could have.
Specially the comparison of taxes and the dentist.
If you don't go to the dentist, your teeth decay. If you keep taxes from reaching needed maintenance your infrastructure decays. This is exactly what is happening to our roads. The gas tax, which pays for road maintenance has not been increased in more than 25 years, so technically it has been decreased an avg. 3% a year by inflation. Result? 40% of our bridges are at the same risk as the one in Minnesota that collapsed a few months ago. But what politician/voter/consumer will have the grown-up pants to tell it like it is and request proper use of our money to keep us safe from "falling through the cracks" (pun intended). That's just one example.
Bottom line, Tax = Dentist. I hate both but as a grown up, I understand I need to bow to them once a year.
At the same time I'm very vigilant my dentist does not get me (or my insurance) to spend more than is needed on my teeth. The same should be true for our taxes.

Perhaps a better title would be:
How Democrats and Republicans RUIN the Nations Finances.

Lisa: If only taxes were like dues! Most organizations whose members pay dues have very simple fee structures. Typically it's something like if you're a student or retired, you pay smaller dues, but otherwise everyone pays the same amount. It's rare for dues to depend on income directly.

And why should taxes depend on income? As far as I know, Warren Buffet doesn't use the library several thousand times more than I do, nor drive his car several thousand times more miles per year, so why should he pay several thousand times the taxes?

On the spending side, there are only a few government services that couldn't be gotten more efficiently (or perhaps at all) through the private sector. National defense and law enforcement (include environmental laws if you wish) are the clearest examples. I'll even concede roads and scientific research, though I'm sure some hard-core libertarians would disagree.

But when you look at much else of what the government does, it ranges from jaw-dropping inefficiency to outright menace.

For instance, I'm sure we'd like to think that agricultural spending keeps our food supply safe and preserves family farms. What it really does is transfer wealth from taxpayers to big agribusiness, raise the price of food to consumers and harm the environment. What little it accomplishes in food safety versus what we could get by relying on companies to protect their own reputations is overwhelmed by the cost; it's grossly inefficient.

Matt, I'll concede some of your points, but you should choose your examples more carefully. For instance, this:

And why should taxes depend on income? As far as I know, Warren Buffet doesn't use the library several thousand times more than I do, nor drive his car several thousand times more miles per year, so why should he pay several thousand times the taxes?

The library in Warren Buffet's hometown is probably financed like my library, though local property taxes and millages. It is my understanding that Warren Buffet lives pretty modestly and his property tax would reflect that. He is also paying the same gas tax as the rest of us, getting charged every time he or someone who works for him fills up his car. So his gas tax would be based on how often and far he drives, not on his income.

I agree that he is paying a much higher income tax and his capital gains taxes are probably astronomical. So he is paying more for federally maintained roads, defense spending, and, as you mentioned, agriculture subsidies. (Among other things). When he votes, or lobbies, I'm sure he, and others who have high net worths, keep those things in mind.

I don't mean to be snarky, but taxes are complicated and they are administered by so many different agencies, there is no one single answer to managing all of them. The individual has to be a savvy consumer when voting and not just in presidential elections.

Matt: I agree that our government is not nearly as efficient as it could be, nor is our tax structure inherently equitable. Unfortunately, we get the democracy we deserve, not the one that we pay for, which is why I said that we need to become more involved in our government ("...of the people, by the people, for the people..." as so eloquently stated by Abraham Lincoln in the Gettysburg Address) than simply paying taxes, voting occasionally and complaining. If we spent as much time and effort engaging our government as we do figuring out how to get out of paying taxes we would probably have a much better and more efficient government to show for it, and the balance of power would be swayed in our favor, rather than in the direction of large multinationals corporations and lobbies.

You argue that most government services could be provided more efficiently by private institutions. The problem that I have with this is that private industries have a single motivation: To create profit. Therefore, they tend to serve only the moneyed individuals in the moneyed areas of their markets and ignore constituencies that offer little or nothing in the way of profits.

For example, left to their own devices, private health insurance companies find ways of excluding anyone who poses a higher risk than average or who has had any sort of illness in the past, leaving a large number of individuals ineligible for coverage. This is great for these businesses' bottom lines, and it's cheaper for the healthy people left in the pool, but it doesn't do much for the individual with a congenital heart disease or a family history of breast cancer.

Many private K-12 schools do not admit students with special needs because they are not required to maintain staffing and facilities that public schools are required to provide. Privatizing the school system would ghettoize students who are deemed to expensive or problematic for private schools that wish to keep costs at a minimum or to only provide services to the "best" students.

As for current government contractors, not everybody is completely impressed with the efficiency and accountability of Halliburton or Blackwater, for instance. They don't seem particularly interested in protecting their own reputations, either, so I am not at all sure that government oversight can be eliminated through exercise of consumer opinion.

Government's role is to fulfill duties deemed a public trust, including public safety, equal access to education that ensures opportunities for the future of all individuals, infrastructure, and defense, among others. Entrusting such important tasks to a system whose sole purpose is to enrich shareholders because we are too busy trying to devise ways to avoid paying for them seems much too risky to me.

I am not thrilled with the way that the government operates on many levels. My local roads aren't that great, and I wish that they would spend more time and money looking at international shipments than at my email and phone records in order to protect national security. On the other hand, if all I do is pay less and less, vote occasionally, and complain I can't really expect much more to come out of my government than what I'm already getting.

With regard to the point:
"How much debt is too much? I know there are varying opinions on this, but at some point we'll certainly reach a point of no return. Is that next year or 100 years from now?"

Let me ask the rhetorical question : would you lend the nation of Japan money? I think most people would. But their national debt is MUCH worse than ours in terms of % of GDP.

When we hear our nation owes TRILLIONs of dollars in national debt that giant number seem very bad. But keep in mind that the USA is the worlds largest economy. And the USA is definitely not the worst off when you compare our debt as % of GDP to other nations.

The CIA world factbook ranks nations debt/GDP and the USA is #65th in the world:

As a nation our debt as % of GDP is 36.8%.

Most western industrialized nations have worse debt/gdp than the USA: Japan, Canada, Germany, France, Italy, United Kingdom, Norway and even the financial hub of Switzerland are all worse than us.

Now just to be clear, I'm not saying I'm happy with our debt. I'm just making a point about the perspective of the numbers and how our situation compares to other nations. Of course I'd like our debt to be lower and I'd prefer our government and political leaders to be much more financially responsible with OUR money.


Wow!! Very intelligent people making some great points and not taking cheap shots and "playing politics." How refreshing. There is hope for this country and I hope those of you whom I've described above consider getting more involved in your local, state, and federal government.

I've linked to this post and posted your blog to my links list.

I wouldn't mind being on your blog roll, either. ;-)

Silly question, no one to blame but oneselves.

We simply don't vote for those politicians.

Heard of Howard Dean?

Lisa - yes, taxes are needed to run society. Otherwise, we'd have to rotate amongst ourselves the tasks of public service while keeping our day jobs.. and nobody wants that. The problem that people don't seem to realize is the sheer volume of spending the government does, on things necessary and unnecessary. The parties do tend to disagree on what is necessary and what isn't, however, so the end result is we end up doing everything so everyone gets their little "necessity." The problem with spending in government is there is no accountability. Even the US comptroller has been saying the last few years that it's both impossible to hold the government accountable (and he's the one who is supposed to be able to do it), and the government as an entity is spending the nation into insolvency. We just can't maintain a "guns and butter" spending program; eventually we won't have the luxury of choosing between guns or butter because we won't be able to afford either.

Zen - the President has little to say about taxing and spending. Congress controls that. I agree a lot of people act as if the President can do something about it, but in reality, the only power the office has is to say 'No, that budget is unacceptable'. The problems occur when Legislative and Executive branches are the same party; little chance for veto, so Congress has a field day.

Matt - that's what happens when you tax a percentage of income versus a dollar amount. The flip side of this would be everyone pays $39,500 in taxes (total of $1.2 trillion in tax revenue divided amongst the 303 million US citizens) regardless of income level. I'm not in favor of soaking the rich, but lets be realistic here.

Jim - the factbook is an estimate based on June 2007 numbers. The year-end report was much worse than anticipated. We're close to 60% of GDP, and that's just for existing debt - not anticipated debt (Social Security, Medicare, etc,) which bumps our debt from 9.3 trillion (currently) to approximately 53 trillion, or about 210% of GDP. Another way to look at it would be each citizen's liability of the debt would be about $175,000 each. The bump came from a rise in the debt ceiling of an extra trillion dollars in October combined with emergency bailouts of a half-trillion last fall (every time you see the Fed put 100 or 200 billion on the market, that translates to Treasury bills being bought and a debt obligation taken by the government - that's how the Fed maintains the "full faith and credit of the US government" in the dollar.) No, we're still not Japan, yet, but we need to make changes now before we become Japan down the road and the pain really starts.

You're right about the inefficiency and lack of accountability of government contractors. I've worked for a couple. In fact, I'm "working" for one right now. The time I'm taking to participate in debate on FMF during the workday should give you a clue as to how efficient and accountable I am. :) I also bring this up to point out that I make my living through government spending, so I'm definitely "thinking past my own wallet".

Nevertheless, I know from working with counterparts in the federal government that the only thing more wasteful and ineffective than a government contractor is a government agency. At least contractors have to compete with each other for business. Even so, inefficiency and lack of accountability will always remain because of whose business they're competing for.

But that's all really tangential to the argument I'm making anyway. When I advocate letting the private sector provide services that the government currently provides, I don't mean having the government hire contractors instead of performing the function itself, I mean having the government simply stop providing the services altogether and letting people buy the services directly themselves.

Much like government contractors, health insurance isn't really a good example of letting market forces work. Even if the companies themselves are private, the government gets involved in the system in all the wrong ways. Instead of finding ways to deal with issues like adverse selection, the government makes employer-provided health insurance tax-deductible. That cements the perverse link between employment and insurance.

So let's consider education. If all public schools shut down and the government provided vouchers instead, I think that the most disadvantaged kids would have the most to gain from that. Driven by profit motive, some schools would make it their niche to serve special needs children (who would have larger vouchers to spend). Since parents would have a choice, I think we'd end up with schools that do a much better job of helping special needs children reach their potential.

The children of poor people living in ghettos would benefit too. They could choose from among several schools competing for their voucher dollars. The schools themselves would be able to fire teachers who are ineffective, which is almost impossible to do in the public schools.

Often, when people with different ideologies debate, they end up talking past each other because their fundamental assumptions are so different. So let me address the issue of profit motive directly. You seem to use it as a dirty word. You never said so explicitly, but I get the feeling you think it's almost synonymous with avarice. So here's where I stand on it: profit and greed are independent. You can be the greediest person in the world, but in a free market, you'll only be as profitable as you are useful to others. Also, profit is only one side of the coin. The other is loss. Together, they are a powerful signal and motivation to adjust behavior to maximize usefulness to one's fellow man. To me, sustainability and accountability are nearly synonymous with profit.

I'm advocating for less spending too, not just a per-capita tax. I figure the government spends about 20 times what it should, so how's a $2,000 tax bill sound? In fact, that's one of the things I like about a per-capita tax: we all have a motive to keep it down, unlike now, when 60% of the population (as reported previously in this blog) doesn't even pay taxes. If that is true, by the way, I don't see why those people should get to vote.


Looks like you might be refering to Wiki since you're using #'s found there:

Our national debt most certainly did not go from 36% of GDP to 60% in just a year. The CIA is *probably* citing the "debt held by the public" which does not count debt between government depts (like raiding the social security reserve). Wiki cites that as $5.3T. CIA says US GDP is $13.86T for 2007 and 36.8% of that would be $4.99T. I'm sure the CIA is using numbers that provide apples to apples comparisons between each country so whatever kind of debt figure they use the relative comparisons between nations is still valid.

The $53T cited is if you account for all FUTURE expected obligations for social security, medicare etc. This is not a debt that we borrowed but is instead a future expected obligation. By similar token our future expected GDP should be at least $520T over the next 4 decades assuming 0% growth.

Whenever I hear debt defined, debt is what you owe other people today. It is not what you borrowed from yourself and it is not what you expect to spend in the future.


Actually it looks like the numbers Mixer cited and the numbers on the Wiki page are a little different.

On this topic though, I did find another page on Wiki with some interesting figures about the history of our national debt and how the debt has increased under each president. The debt as % of GPD was a lot higher in the 40's and 50's:

And it looks like those figures are the higher total debt not just the "debt held by the public"


Jim - I've read the Comptrollers report for FY 2007:

and ran some of my own numbers from other sources. It's long and very, very dry. If you want to read the condensed version, check out:

BTW - I don't want imply I don't use or like Wikipedia, but you have to remember that with user generated content that the content is only as good as the user generating it. For hard numbers I prefer to go to the source.

Sorry - I just noticed this:

"Whenever I hear debt defined, debt is what you owe other people today. It is not what you borrowed from yourself and it is not what you expect to spend in the future."

Those obligations are just that - obligations.

For the inter-departmental debt: Think of borrowing against your 401k. Sure, it's money you borrowed against yourself, but it is also most certainly debt that must be repaid. The money "borrowed" against Social Security must be repaid or we'll just end up paying more into SS to meet the obligations we have.

For future debt: Think of the mortgage on a house. The bank "spent" the money on a house by granting you a loan for that house and you are now obligated to pay for the loan in set increments. If the bank makes too many loans (especially to just any Joe off the street) it tends to become insolvent. The government "spent" the money on my Social Security as soon as I got the number even though not a cent has been disbursed to me yet and I continue to contribute to it. Governments are not immune to insolvency.

Part of the problem we have is most people think the way you do in this regard - ignore future obligations and downplay debt to ourselves because the future may change or we can just "forgive" the debt to ourselves. It doesn't work that way. We need to renegotiate some of our future obligations and we need to start running our nation within our means.

Great topic. Good job everyone. I really don't know that much about these figures, but a great read. Thanks.

What happens if our government becomes insolvent? Unable to pay for what we owe.

Bobby - either a thing called economic colonization occurs, or we become Britain in the 1950's. Or both.

Democrats tax the rich while Republicans tax the poor.

Conservatives believe that if you tax something, you get less of it; hence if you tax poverty, you should get less of it.

The favorite Stupid Tax Trick of Republicans is to cut property taxes while increasing sales taxes. Guaranteed to redistribute income from the working poor (zero property tax cut plus non-zero sales tax increase) to the propertied wealthy (large property tax cut plus modest sales tax increase).


First, let me address the concept of closing the public school systems. First, in order to figure out what these more valuable vouchers for special needs students would be one would have to figure out what a child's special needs are worth. How much is a blind child worth in voucher dollars, as opposed to an autistic child, a dyslexic child, a developmentally disabled child, or a deaf child? There are a million different variations on this theme. What if there was no school in my area that specialized in the special needs of my child? Also, sending special needs students to specialized schools with "separate but equal" facilities is a step back to the 1950's. These students, many of whom are brilliant pupils with great potential, would be stigmatized by the schools they were required to attend through default. It is a disservice as well to students in mainstream schools who would never have the opportunity to interact with anybody from "those schools" until they are in college or out in the real world, and are suddenly confronted with the reality of working with individuals who use canes or service dogs, or need to be spoken to directly so that they can read lips.

When I wrote earlier of "ghettoization," I was not referring to poor people in inner city neighborhoods. I was speaking of the situations described above. However, this brings up another issue regarding education: funding. A fundamental flaw in the funding of our education system is the property-tax base, which penalizes individuals in low-income areas. I maintain that if we actually had "flat" funding for education it would create many of the benefits of the voucher system many individuals endorse without the unintended bad consequences. (For the record, I am a staff member in a private higher ed institution.)

I guess that my main issue with privatizing the education system is the same problem that I have with privatizing many services: Privatization is a virtual guarantee of lack of access for some individuals, particularly those who have the fewest alternatives. Right now anybody can choose to opt out of the public education system. There are even loans available from Sallie Mae to those who wish to finance a private K-12 education, just as there are book stores available for those who prefer not to use the library. Because I choose to go to Barnes and Noble instead of going to the library, or I choose to go to the movies instead of reading does not mean that I shouldn't pay taxes to keep the library running.

Second, I would like to make my position on profits very clear: I LOVE PROFITS! I love money. I love my money, and I love to see the private institution that I work for make money. I love to see my husband's company make money, too. I heart my TIAA CREF, my hubby's 401k, and our Roth IRAs, and I especially heart seeing the numbers increase. I do freelance work on the side, and I love to sell stuff. Profit is not a dirty word. Profit, profit, profit!!! ;-) See? I didn't even blush, there.

But profit is not what providing public services is about. Money follows money, and when services are provided on a for-profit basis, those services become available to only those who can afford them, not necessarily those who need them. Before the days of publicly funded fire departments in the UK, their services were purchased through "insurance companies" whose coverage was indicated by a wrought iron plaque posted on the insured building. No plaque, no firemen. When people realized that their house caught on fire when their next door neighbor's burned down regardless of whether they purchased insurance, the government eventually started to protect life and property through the development of the modern fire department. While this is an extreme example, it is a very real consequence of privatization of something that should be a public trust.

We all benefit from many of the services that our government provides, whether we use them or not. Tangentially, making sure that the kid down the street (or in the neighborhood a mile away) gets a good education and enough to eat saves me a hell of a lot of money down the road when that kid doesn't have to be supported on his way through the penal system.

Oh, and as an aside, I hope you were joking about the people who don't pay *income* taxes not getting to vote. The poll (voting) tax was abolished in 1966 because of its discriminatory nature. These were originally established (in America) as a form of discrimination in response to the right to vote being extended to individuals of all races. It would be a shame to see something like that come into existence again in the form of class and income discrimination.

Another useful observation is Republicans believe in lax regulation that leads to financial crises, while Democrats regulate to try to prevent them, though the regulators become captive of the industries they regulate.


"Right now anybody can choose to opt out of the public education system. There are even loans available from Sallie Mae to those who wish to finance a private K-12 education, just as there are book stores available for those who prefer not to use the library. Because I choose to go to Barnes and Noble instead of going to the library, or I choose to go to the movies instead of reading does not mean that I shouldn't pay taxes to keep the library running."

I disagree, even if loans are available to those to go to private school, it doesn't mean everybody has the resources to pay these loans. Let's face it, in our current system, private schools are for the rich/upper middle class, not everybody.

Face it, despite the claims of some, this country still maintains a lot of classism.

The poll tax was banished only 50 years ago, and there are still elected public offices which require property ownership.


You made some good points but also some I'd like to debate further.
Unfortunately I do have to work today.

If you still care, check back late tonight. I'll try to have something posted by then.

"A Republican stands up in congress and says 'I GOT A REALLY BAD IDEA!!' and the Democrat stands up after him and says 'AND I CAN MAKE IT SHITTIER!!'” - Lewis Black

I realize that coming up with a dollar amount to spend on every kind of special need a child might have seems distasteful, but rationing of resources has to happen no matter what kind of system one chooses. Even in our current public education system, sooner or later, through various bureaucratic and political processes, people have to decide just how much to spend on what. I would think that putting a dollar amount on it would tend to lead to a more fair and open process than happens now.

The problem of private schools that wouldn't want to accept children with special needs is easy enough to fix. The law could say that in order to redeem the vouchers, they cannot turn such people away. It's not so different from the ADA requiring that public accommodations, even if they are privately owned, make their facilities accessible to people with disabilities. It would just be a cost of doing business.

I think that the specialization in education I mentioned would be most likely to happen in areas with higher population density. In more rural areas, a one-stop-shopping model would probably prevail. If there is a ghettoization in the former situation, it would probably be because the parents of special needs children chose it. It happens pretty often that minorities such as immigrant populations or people with disabilities seek out proximity with people like themselves. That phenomenon is in no way the moral equivalent of Jim Crow-era "separate-but-equal." If the parents of children with special needs choose to send them to specialized schools, I wouldn't be inclined to second guess them and say, "no, you must place your child in a mainstream school, so that the mainstream children don't have to grow up never having met a person with a cane."

I knew what you meant by ghettoization; when I mentioned poor people living in ghettos, I was bringing up another reason I favor abolishing public education as we know it. Sorry if that caused any confusion. Kids from middle-class-and-up families don't have nearly as much to gain from privatization. Their schools are already pretty good and their parents are more likely to be able to afford private school tuition (on top of public school "tuition", in the form of their property taxes). It's the poorest parents and their kids, stuck in the worst public schools, who would benefit the most.

If we kept the present K-12 education system, but flattened funding, I doubt that additional money would be well spent by the failing schools. It seems like whenever additional funding for that type of schools is tried, performance is at best unaffected, and the people running the teachers' unions end up with fur coats.

I took a guess that you were anti-profit, and I'll take your word for it that I was wrong. But I also said you appeared to be equating profit with greed. Your most recent comment seems to reinforce that I was at least close on that count. If not greed, exactly, perhaps self-enrichment? I have no problem with that, I like money as much as anyone else. But none of the reasons you listed for loving profit went much beyond that.

My position is that profit motive is a force for the greater good of humanity, and that it's not allowed to function in as many places as it should. Profits reward people in proportion to what they do for their fellow man. In that sense, even when the rewards aren't equal, they're fair. Loss prevents activities that are counterproductive and wasteful of resources from continuing indefinitely. It all leads to accountability. It's not so clear, from your last comment, what your position is on that aspect.

I have no problem with considering education a public trust. People who have children are (usually) providing a positive externality. In other words, they're doing something that's good for other people, but there's no free-market mechanism to sufficiently compensate them for that. When there's a positive externality, subsidies are appropriate and fair.

I think you're drawing a false dichotomy between privatizing education and living up to our duty to share in the burden of educating the next generation. I'm not saying stop funding education, I'm saying get out of the business of directly providing it.

The greater efficiency that could be realized by moving to a system of vouchers and school choice could be used to reduce spending or improve quality, or some combination of both.

On your point that we all benefit from many of the services that the government provides: there are other things that are currently considered a public trust, but probably shouldn't be quite so much. Funding for roads, public transportation and airports comes from a variety of places and rarely ends up meeting demand as well as it should because it goes through a clunky political process. To some extent that's unavoidable of course, but I bet people would make better choices if all road maintenance and construction came from tolls and gas taxes(which could contain an extra charge for the negative externality of noise and air pollution), and all public transit funding came from fares.

I was partly joking about disenfranchising people at the federal level if they don't pay income taxes. More like exaggerating. I suppose everyone should get a vote for having to live under the same laws. But I think that people should get an additional vote for every $10,000 in taxes they have to pay. My hope is that such a system would lead to less redistributive policies.


That's a pretty good assessment.


Great quote. I have another one that's almost the same idea. I wish I could find it to quote verbatim; I'll recall as best I can:

"If the Democrats came up with a proposal to jump off a 100 foot cliff tomorrow, the Republicans would counter with a proposal to jump off a 50 foot cliff next week." -Thomas Sowell

Some people say that President Bush spends too much money. I think Bush should have ran has a democrat. Democrats are known to spend lots of money. Reagan was a republican and the United States was better under him. I think President Bush doesn't know what to spend money on or where to get it from. I think the current gas spike is hurting the poor horribly. I think gas taxes are regressive. Regressive taxes hurt the poor the most. Under that circumstance President Bush's way of acting is right of a republican. If Obama was president, I think he would increase the taxes on oil companies. I think if McCain was elected, I think he would keep it the way it is right now. Either way if gas keeps going up, we're all going to be hurt. I say leave the companies alone and raise the exports and imports fees. If we can make more money from importing and exporting goods, some day the value of the dollar will go back up. If our government doesn't raise imports and exports fees then the dollar will keep going down. That won't be good.

The comments to this entry are closed.

Start a Blog


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.