Everybody Gets Rich

04 Jan

Came across this article on New Criterion, and found it so ludicrous thought I would share.  The author, Kevin Williamson, after reading short stories of Raymond Carver, and Stephen King’s The Stand, has come upon a musing on the solution to our “welfare state.” He starts of with the Norwegian butter shortage.

There’s a whole economics in the price of a pound of butter: Adjusted for inflation, a pound of butter cost nearly $7 a hundred years ago, about three times what it costs today. By the time of The Stand, it was down to about $6 a pound in inflation-adjusted dollars. And it has fallen further faster. But not everywhere: In Norway, as of this writing, a combination of protectionist trade policies and bad luck has sent the cost of butter to nearly $500/pound—prosperity only emerges when governments allow it to emerge. In 1950, the typical family had to dedicate more than one-third of household income to buying groceries. Today, that number runs from 10 percent to 14 percent, and a great many households spend more eating out than they do on groceries.

Is there a point in there? A temporary butter shortage is a sign that a exceptionally well functioning social system is horribly flawed?  He goes on to show how a man earning minimum wage in NYC can easily live a comfortable life,

Earning the New York minimum wage, he could report for work at 9 a.m. and by noon have earned enough to have a two-inch thick USDA prime twenty-one-day-aged filet mignon for lunch, providing he is willing to cook it himself. If he reports back to work at 1 p.m., he must then work until 3:15 p.m. to pay the rent on his modest New York City apartment ($500/month in the Bronx, via Craigslist, with hardwood floors, heat, and hot water included) and then until about 3:45 p.m. to pay for his monthly subway pass or to make the lease payment on his Kia—which, at $99 a month, is a bit less expensive than the subway pass, but then there’s gasoline and insurance to think about. The money he earns between then and 6 p.m. ought to be sufficient to cover his other meals and incidentals, if he’s thrifty, though he’ll probably need to put in a few extra shifts a month or get some overtime to keep current on his taxes.

Where did he find this fantasy apartment?  You’d be hard pressed to find that here in Albuquerque, much less NYC.  A $99 car payment?!? Even taking these numbers at face value our mythical minimum wage earner makes enough for one meal a day, a roof over his head and a transit pass. Wow! I was so wrong to think of minimum wage as “barely surviving wage”, I was oh so wrong.  And to drive his point home, we have a mythical minimum wage couple example to show how awful Social Security is. See how many errors you can find in this one.

The welfare state isn’t a very good buy. The average Social Security benefit runs just over $1,100 a month—peanuts, hardly enough to keep you in cut-rate butter once your median rent of more than $800 has been paid. For that, you’re taxed 12 percent of your take-home pay. Compare that to this: A married couple, each earning the minimum wage, investing only 10 percent of their earnings at a modest 7 percent return, retires with an annual income of more than $100,000 a year—even if they never touch the $1.5 million principle they’ll leave to their children. President George W. Bush was mocked for calling his proposal to cultivate such minimum-wage millionaires the “Ownership Society,” but it was the most important initiative of his presidency.

First off the tax rate is 6.2% for employees and the employer pays the other 6.2%. Don’t think for a second that if the Social Security tax went away that your employer would give you their contribution back. A 7% return for the average schmuck with his extensive knowledge of finance?  Ummmm … have you looked at the returns on the Dow, Nasdaq,S&P for the last thirty years? I don’t think so.  And even given 7% I don’t see the math working out that delightfully for our mythical couple.

On and on he goes on with this bizarre and factually challenged logic.  It is well worth the read for some more insight into the conservative viewpoint.

1 Comment

Posted by on January 4, 2012 in Economy, Rant


Tags: , ,

One response to “Everybody Gets Rich

  1. h2dog

    January 5, 2012 at 8:01 am

    My God these people are factually, mathematically, and reality challenged.
    I’m just going to throw into the works that small, but I see totally ignored, thing called health care, and the premiums which keep climbing.
    Couldn’t afford it. Wouldn’t have it. And therefore be regulated to pay-to-play status, which breaks people of medium income. That or ER visits. Which, if it concerned anything at all serious, would cost any of these people a half year’s salary. Probably more.
    This guy is an idiot.


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