Posted by
Andrews on Monday, August 04, 2008 1:20:45 PM
Introduction
There has never yet been a law justified with the excuse "it will cause you harm". Every law or regulation is, at least nominally, intended to promote the common weal. Of course, some may be intended to help some subset of the common weal, to help women, or minorities, or the poor, or that good old standby "the children", but every law is justified by claims that it will help some or all of our fellow citizens to live a better life.
The only problem is that good intentions don't always translate into good results. Far too often, even when they act with the best of intentions, law makers, through a combination of economic illiteracy and short sightedness, manage to write laws that do more harm than good. And worse still, the laws they write often end up harming the very groups they were supposedly benefiting.
In fact, having looked at the question, I find it almost impossible to come up with an interventionist government policy which did not have, in the euphemism of economists "negative externalities". That is, whenever the government says they want to help you, run away screaming.
The best example is the old saw about the problem of food safety regulations, that the moment the government says ground beef can contain no more than 1% rat droppings, every portion of ground beef will certainly be 1% rat droppings. And there is truth to that. Once the government establishes a floor on quality, there really is very little incentive to compete in quality, so that floor also becomes a ceiling, nothing will be worse than the government requires, but it is very unlikely much will be any better either.
But as I have no hard evidence about rat dropping in ground beef (and thank G-d for that!) I figure I should provide some examples about which we can all agree, a set of quite a few government programs which, while intended to help, and perhaps even providing some small measure of help to a few, actually ended up doing more harm than good for the very groups supposed to benefit.
1. Bankruptcy Laws
I wrote about this before, when discussing the so-called
subprime lending crisis, but let us look at bankruptcy laws from a more general perspective. Rather than looking at them solely in terms of those taking out mortgages they cannot afford, we should look at
bankruptcy's effect on borrowers as a whole
Now, as I wrote before, there are three ways we can approach the question of those who cannot meet their financial obligations.
We can do nothing, leaving it up to the debtors, the creditors and the courts to work out everything, but that is bad for everyone. Basically, it means the first creditors to the courthouse get their claims satisfied, while those who come later have to wait for the debtor to accumulate more assets, spurring another rush to the court. This leaves the debtor with no money for even necessities, and will likely leave many creditors completely unsatisfied. So, for both the creditors and the debtors, some sort of receivership is certainly beneficial.
The question is what receivership entails. Under both possible approaches to receivership, the receiver will manage the assets of the debtor, ensuring he has enough left for his necessities while trying to arrange fair payment schedules for those he owes money. The only difference between the two approaches to receivership is whether or not there will be any "debt forgiveness". That is, whether or not the debtor will be obligated to pay all legitimate claims against him, or if he will only have to pay some fraction of those claims.
In general, people see receivership without forgiveness as "pro-creditor" and debt forgiveness as "pro-debtor". So, when they wish to be seen as working in the interest "of the common man", they tend to pass laws granting increasing degrees of debt forgiveness to those in receivership.
1 This has been conventional wisdom in the political classes for so long that they can't even see that, in reality, the "pro-debtor" policy actually harms those who try to borrow, and those with worse credit even more than those with good credit. In short, it harms exactly the people the policy supposedly helps.
How so? Simply enough, by making it likely that a lender will be legally forced to forgo collecting part or all of certain loans, the policy of debt forgiveness makes lending more expensive. When the possible losses rise, lenders tend to either raise rates, or if they are unable to raise rates high enough, usually due to rate caps (see below), they refuse to lend at all. Thus, by instituting forgiveness, "pro-debtor" bankruptcy laws make loans harder to obtain, and makes those than can be obtained more expensive for the borrower.
Worse still, form the perspective of the borrower, the forgiveness policy makes the worse credit risks exceptionally risky, making lenders very wary of lending to them at all. So, instead of helping those who have trouble paying their debts, the policy makes it very difficult for these credit risks to borrow at all.
So, rather than helping the borrower, lenient bankruptcy laws help only one very small subset, those who already have debts and who default on them. For everyone else, the laws simply make borrowing more expensive, or, in many cases, simply impossible
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2. Banking Regulations
This topic is quite similar to the one preceding. As it is a rather broad topic, I shall focus on just two topics
3. First I will look at interest rate caps, and then I will look at the efforts of some states to prohibit "pay day loans". Both of which were enacted as regulations intended to protect the consumer, and both of which had a paradoxically harmful effect on those they claim to protect.
I already spent quite some time explaining the function of interest
in an earlier essay, so I won't revisit that topic. Instead, I will rely on very simple logic to show why caps on interest rates harm borrowers, specifically the very same borrowers they supposedly protect.
The rationale for caps on allowable interest is simple, if wrong. The idea is that lenders set interest rates arbitrarily, and that left to their own devices they would charge rates far greater than justified by any economic considerations. The borrowers, either by being at such a disadvantage in negotiating strength or from simple ignorance, will accept these usurious rates and end up being bankrupted by unscrupulous lenders. It is basically the Snidely Whiplash caricature of lenders, twirling his mustache, gleefully foreclosing on the family farm while demanding the virtue of the borrower's daughter or tying her to the tracks.
It is a bit absurd, butt here is a tiny bit of truth to it. Those who deal with bad credit risks tend to be pretty hard nosed, but they have to be, because bad credit risks are, well, bad credit risks. Given the choice, most lenders would prefer to lend to those who pay all their bills in full and on time, but some, either because the market for A credit borrowers is saturated, or because C and D credit borrowers pay a better return, choose to lend to those whose repayment history is a little less consistent. And yes, they do tend to threaten legal action more often than those whose borrowers are more dependable, and they do tend to charge a higher rate of interest, but only because, in general, their borrowers default at a higher rate.
Let me give an example. I have some money to loan. I can lend it to Al, a reliable man with a steady job, large savings and spotless credit history, or to Bob, a man who has a spotty work history, no credit history at all, and meager savings. All things being equal, obviously, Al gets the loan. The only way Bob could convince em to lend to him rather than Al would be to pay me more, that is to raise the interest rate. But let us suppose there is a third borrower, Chuck. Chuck is like Bob, but more so. He has a spotty work history, no savings, and a long history of defaulting on loans. He would have to offer me even more than Bob to make me chose him as the recipient of my loan.
The problem with this is, when regulators decide certain interest rates are "unconscionable", they effectively put a limit on how much a borrower can offer to induce me to lend him my money. And that can be a problem if the borrower's credit is bad enough.
For instance, using our example above, let us suppose that Bob makes an offer, and the interest rate is just below the legal limit. Well, since Chuck has even worse credit than Bob, offering to pay the same rate won't convince me to lend to him, Bob is a safer choice if the interest rate is the same. But Chuck, even if he wants to do so, cannot increase the rate, as it would be criminal for me to accept. Which means that, unless Bob decides not to take a loan, there is simply no way Chuck can borrow the money he needs.
And that is the problem. Despite the portrayal of people "forced" into "usurious" loans, the truth is borrowers agreed to those rates of interest because they needed the money and their credit histories, incomes, and so on would not allow them to borrow at a better rate. Putting a cap on interest rates did not suddenly allow them to borrow at lower interest, it simply made it impossible to borrow at all. Which means that the law meant to protect them instead prevented them from exercising their own judgment and also kept them from obtaining money they needed.
Given that, it is easy to understand how the state bans on pay day loans were harmful as well
4.
The justification is similar to that on interest caps. Borrowers, desperate for money, take short term loans at excessive rates, and do so on a regular basis. And my argument against it should be just as obvious. By substituting their judgment for the borrowers'
5 regulators are trying to help those taking such loans, but in reality are preventing them from getting money they need. While the regulators may think, in the abstract, such loans are exploitive, in reality those taking such loans usually do so only because they are in dire need, and in such circumstances they are willing to accept bad rates to have the money available.
The question in both cases is this: Would you rather have the option of taking what may be a bad deal in a dire situation, or simply have no options at all? Borrowers will always have the option of not taking a loan, so by regulating caps on interest rates, or prohibiting pay day loans, the regulators did not help, they simply removed an option that was once available.
3. The Small Business Administration
The Small Business Administration is one of those government agencies which usually gets little criticism. One or two specific policies may come in for an attack now and then, but in general it gets pretty broad support across the boards. And it is easy to see why. The left likes that it provides a lot of support for inner city entrepreneurs, as well as single women, minorities, and other important constituencies, while conservatives often see it as an effort by the government to bolster self-reliance. So, while it is still in essence a government hand out, it largely avoids the criticism other programs receive.
However, that lack of criticism does not mean it is a good idea
6. While on the surface the idea seems a good one, providing loans to new and existing businesses which cannot obtain traditional financing
7, in reality the SBA, despite its positive image and success stories
8, does more harm than good.
There are two types of SBA loans, those granted to businesses which could obtain a conventional loan and those granted to borrowers who could not. In the first case it is simply a matter of using taxpayer funds to favor businesses meeting SBA guidelines over those who do not. It creates market distortions and is basically a waste of taxpayer funds, but it it is the less harmful of the programs. While it is clear there is no reason for the SBA to grant loans where private loans are available, and it is questionable at best to favor small businesses with tax payer subsidies, they do less harm than the other loans.
The loans that cause problems are those which would not have been granted by private lenders.
To see why let us first ask why private lenders would not grant loans. Either the lender does not see merit in the business plan for a new enterprise, or else he thinks an existing enterprise is destined for failure. Now, lenders are not omniscient, and these calls can be wrong, but private lenders have quite an incentive to make these calls correctly. First, their income depends largely on knowing what will succeed or fail. If they miss too many successes they reduce their profits, and if they back too many failures they lose their shirt. Thanks to these incentives and lots of hands on experience, they tend to make the right call pretty often.
On the other hand, bureaucrats at the SBA tend to have none of these incentives. Most performance metrics have nothing to do with success or failure, instead concentrating on demographics, geographic location, race, sex, age, and other non-economic considerations. Outside of those distribution concerns, the primary focus of most bureaucrats is on rules, rules which are set by a central authority, which generally are uniform across the nation, allow for almost no flexibility, and which change slowly if at all. None of which is conducive to deciding between profitable and unprofitable businesses.
"But," I am sure some are asking, "how does this harm the borrower? You said these programs hurt the people they should help."
And they do. Quite a lot.
Let us think about it. You are a business owner. Either you are starting a new venture, or need cash to bail out an existing one. You draw up some business plans, put together a presentation, and visit a lender, maybe a bank or a venture capitalism, someone who will lend you money. After the presentation, he tells you that, in his opinion, businesses such as yours are likely to fail, and he is not giving you a loan. It hurts to hear it, but you accept his decision, and either never open the business or close down the existing enterprise.
That may hurt, at least emotionally, but let us look at the alternative.
Instead of folding, you get an SBA loan. You either open the new firm or keep the old one going. However, the original lender was correct, your firm simply does not match consumer needs. Six months later, you are still foundering and cannot pay the SBA loan. You are still forced to shut your doors. But now you are not only out of business, but you wasted six months and took on a hefty SBA loan as well.
So, how precisely, doe sit benefit those small business owners to be allowed to take out a loan for a venture which is likely to fail? Would they not be better off being stopped as early as possible, rather than wasting time and taking on debt only to fail in the future?
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4. Student Loans
I wrote some time ago about how the institution of the GI Bill and later federal student loans exerted pressure to make college education less rigorous and to basically dumb down the bachelor's degree, so I won't go into that here, instead I will talk about two related topics. How student loans made excessive educational requirements more common and how it encouraged needless education.
Before we start, I think I should remind readers that our current demand for college degrees in every position is unusual. In the past, for example, lawyers were apprenticed to other lawyers, even those who went to university to study did so as what we would call undergraduate work. Likewise, even as late as the early to mid 20th century, most newspaper work was done by those who had worked their way up through the ranks, the journalism degree simply did not exist. Similarly, accountants were largely drawn from the ranks of bookkeeping apprentices until recent times. Today it seems even positions such as secretary require at least an associate's degree, where in the past even a high school diploma was not required.
It is important to remember that when I talk about the demand for excessive education
10.
The student loan made bachelor's degrees available to almost anyone. Even for those who could not meet the modest intellectual or educational requirements to achieve a bachelor's degree, they could use their student loans to get an associate's degree. Which means that, as student loans were instituted, the pool of applicants for any position came to contain a disparate number of people with college degrees. Where in the past even a bachelor's degree could qualify one for a relatively prominent position, the bachelor's came to be the bare minimum for many positions. After all, if 80% of applicants have a degree, why even bother considering those who don't?
And colleges and universities responded. Since the bachelor's degree was no longer the province solely of those entering the upper levels of the job market, the educational system started creating degrees targeted at those seeking less illustrious positions. Jobs that would have demanded a high school diploma became majors at community colleges (eg. hotel management), degrees once considered associate's degree subjects became bachelor's degrees (eg. nursing), and positions which once required only a bachelor's degree came to require graduate work (eg. law). As higher education became more common, the value dropped, as did the prestige.
So, rather than opening up the realm of higher education to the public at large, effectively student loans simply created a four year extension of high school, delaying by four years the time required to obtain the same position while dramatically increasing the cost. Students probably did emerge somewhat better educated, but not to the degree they would have had they attended a four year university prior to the era of student loans. We may have given many four more years of schooling, but likely we gave them at best one more year of knowledge.
But that is not the only harm. Student loans created one other unique modern phenomenon, the useless degree.
In the past, the combination of exclusivity and cost meant that those pursuing a degree were doing so either to enter a specific profession, to become a professor, or out of some deep and abiding love for the topic. Some did still get degrees in unemployable fields, such as fine arts or music, but thanks to the prestige of a bachelor's degree, they could still find employment. And even if they could not, usually those pursuing such degrees were intending to remain in the academic realm.
But thanks to student loans, bachelor's degrees are now both affordable and expected of the middle class. However, many have no idea what they want to do for a living, and thus end up working toward a degree which interests them, but has no application to employment
11. Of course, since bachelor's degrees are so common, the degree in English or Fine Art is no longer employable, and, though the student loan deferred the costs, it did not eliminate them. Which means, thanks to the environment student loans have created, many middle class youths find themselves, at 22, saddled with massive debt to pay for a degree which does nothing to help them get a job. In some abstract sense they may be better educated, but it is hard to argue that the student loan program was of much benefit to them.
5. Social Security
I have
written on social security before, though mainly to explain how the designation of "insurance" is completely false
12. However, that is largely irrelevant for this essay. Instead I plan to talk about three specific ways that social security harms those it claims to benefit. First, by taking money and paying a return far below market. Second by encouraging some to fail to plan for retirement. Third, by allowing families to disclaim any responsibility to care for family members.
Let us take those last two first, as they are related.
The promise of social security is, in essence, the government will take care of you in retirement. At least that the government won't let you starve or go homeless when you are too old to work. And some take this at face value. As a result some people fail to plan for retirement, expecting that the state will be there for them. In a similar vein many family members, glad to be freed of the burden of taking care of a family member, believe the state will handle their aged relatives for them. In other words, by having the state take over functions people once performed for themselves or for family members, the state caused many people to stop planning for themselves and caring for family members.
However, by far, the biggest harm is in the money that social security takes. As with any tax, the money taken in social security could have been used by the individual. Now, this isn't a big problem when the money goes for vital services, such as police and an army, as without those the income would all be worthless. However, in the case of social security, the money taken is supposedly returned later int he form of retirement checks. However, this is a bad deal for the individual, as the yield of an average investment is better than social security. Not to mention the fact that, early in his career, when every dollar counts, he is still forced to contribute. If he had the cash available, instead of social security taking it, he could have invested it for a higher yield, put it into a business, or otherwise spent it to a better result.
The counter argument is that people would not invest, but would simply "waste" the money. And it is possible that does describe some. However, I think the growth of IRAs, 401Ks, 403bs and the general growth in private investment argues otherwise. Most Americans are well aware of the need to put away money, but social security makes that harder. By taking 12.4% of their check
13 social security makes it harder to save, while paying them returns far below market.
So, while pretending to provide for people in their old age, social security discourages some from saving, while making it harder for those who still would save to do so, by taking a large portion of their income.
6. Welfare Benefits
I will write about disability benefits below, as those benefits have a specific problem all their own, in this section I am simply speaking of the remaining welfare benefits
14, food stamps, cash benefits unrelated to disability, medical assistance, section 8, WIC, and all the rest of the panoply of benefits provided by the state to various individuals.
The nominal purpose of welfare is to provide individuals and families with assistance until they can get on their feet. But there is a small problem, the welfare system itself provide perverse incentives, which actively discourage those receiving welfare form ever getting off. In addition, the system actually encourages activities that are generally believed to be detrimental.
For an example of the latter, let us look at the cash assistance to women with children (what was once called AFDC, Aid to Families with Dependent Children)
15. The original program, prior to reform in the mid-1990's was an outright incentive to have children. For each child the recipient would get more money. This was changed in the mid-90's so that children born after starting to receive benefits did not increase the cash component. However, this did not stop the incentives to have children. For example, the mother herself is only covered by medical assistance while pregnant and afterward, so to receive the equivalent of thousands of dollars worth of medical insurance, she needs to keep having children. Food stamps and day care assistance also increase with each child. WIC too is increased by another child. So, while it is true that reform cut off additional explicit cash payments for having more children, the remaining programs still provide incentives to continue procreating.
But along with the incentives to behave in counter-productive ways, the welfare system also provides strong disincentives to ever getting off welfare.
As I described in
an earlier essay, the problem with welfare is that welfare recipients are rational when considering work. If they receive benefits of $500 per month, and they are offered a job paying $400 per month which would result in them losing their benefits, they will not take it, as it would mean working a number of hours to receive $100 less. Even if the job offered $500 per month they would probably not take it, as they can get $500 per month for doing nothing, so why work for the same pay? Even at $600 per month it is less than attractive. Why? Well, while others would see they were getting $600 for working X hours, the welfare recipient would effectively only be earning $100 for working X hours, as he could get the remaining $500 for doing nothing. In short, by paying people to do nothing, with no time horizon, it means that those seeking work see their pay as only the difference between the salary and their benefits, making jobs much less attractive.
Nor is it only cash assistance which acts as a disincentive, nor cash and food stamps. The recipient also may lose health insurance, rental subsidies, child care subsidies, and a host of other benefits which accrue to those receiving welfare. So, in order to make a job attractive to a welfare recipient it not only has to pay more than the combined value of all those benefits, but pay as much more as required to make working attractive. Which, considering that most welfare recipients are not terribly skilled, is incredibly unlikely.
So, rather than being a "hand up", welfare is of necessity a life-long handout. Once on welfare, the incentives are set up to keep recipients on it forever. Even with all the efforts to reform the system, welfare remains the Chinese finger trap of social programs, one which does nothing but encourage ever greater dependence.
7. Disability Benefits
Disability benefits suffer from all the problems of welfare, but more so. The reason being that, while welfare benefits are usually prorated as one's earnings increase, allowing one to work some small number of hours while receiving reduced benefits, disability benefits are an all or nothing proposition, where earning even a dollar causes one to lose all benefits
16.
The rationale for this rule make sense. One is considered disabled because one is incapable of working, so if one works, he is, by definition, no longer disabled. As he is not disabled, he is not entitled to disability benefits.It all makes sense, but, it also prevents many from returning tot he work force.
How so? Well, we have to recognize that, to some degree, one's ability to work is a subjective matter. Two people could have the exact same symptoms, yet one finds he can work while the other cannot. Even with conditions we consider clearly disabling, there are those who find ways to work. Think of Stephen Hawking or the protagonist in the film
My Left Foot, both individuals we would consider unable to work, who through their determination force themselves to carry on.
Disability payments work as the opposite of will power. Let us take a hypothetical individual, and let us imagine he suffers from horrible lower back pain. As he is without much education and has experience only in construction, it is quite fair to claim that his injury renders him disabled.
Now, let us look at two situations. First, let us imagine there is no disability insurance. That if he can't work, he will starve. It might be that that is exactly what happens, the man can't work, spends up his savings, and finds himself begging on the street. On the other hand, it is possible that, faced with starvation, he will decide his pain is more tolerable than he thought, or allows him to perform lighter duty construction work, or maybe work shorter shifts. Perhaps he will find a way to learn a new trade, or will work his way through menial jobs to a better position which requires no heavy lifting. It is remarkable what options one finds when faced with starvation.
On the other hand, let us imagine there is disability money available, and our individual qualifies. As he is getting money for nothing, there is no incentive to take any menial job, as it will pay less than doing nothing. Nor is there much incentive to work his way up in a new profession, as, while he may earn more in the long run, he will be losing money for a long time, with no guarantee he will eventually work his way up. And, while this sounds a lot like the welfare discussion above, it is even worse, as the moment he earns even one dollar, he loses
ALL his benefits, making even the most trivial job immensely costly.
And it is not just work, even taking the steps to prepare oneself for work can be risky. As disability is determined by a combination of injury, work history and education, training to qualify for a new position can be enough in itself to make one no longer disabled. Which means that if our hypothetical construction worker planned to take courses in computer programming so that when he got a job it would pay enough to make it worth his while, he could find that, during medical review of his case, he is no longer considered disabled well before he is ready to get a new job. Which obviously acts as quite a brake on efforts to better oneself.
All of which means that the existence of disability payments, by their very nature, will ensure that those qualifying will remain disabled for longer and will do very little to try to return themselves to the work force, as efforts in that direction are likely to cause them to lose their benefits without providing them with a commensurate income from work. Rather than providing money to carry them through recuperation, disability payments tend to encourage workers to remain disabled as long as possible.
8. Affirmative Action and Quotas
Affirmative action is a little different in that it does provide some concrete benefits. However, it still fits my pattern, as, though it provides benefits, it also serves to exacerbate the problem it was intended to remedy.
The concrete benefits are easy to see. Affirmative action was instituted to ensure that minorities are admitted to colleges and hired for jobs in greater numbers. And it does that quite well. The problem comes when we look at the reasoning behind affirmative action, and the results of those hiring and admission decisions.
The rationale behind affirmative action is that minorities suffered discrimination for so long that, even after any discriminatory practices are eliminated, they are at a competitive disadvantage and need some assistance to achieve proportional representation in schools or workplaces
17. Along with this justification, the argument is usually offered that, by being exposed to minorities in school and the workplace, any lingering trace of racism will be eliminated in the majority population, and they will come to understand that minorities are their equals.
And it is precisely there that affirmative action fails. While it may get jobs for minorities, and may allow them admission to the best colleges, as far as attitudes are concerned, affirmative action does incredible harm.
Now, it is not precisely racism that affirmative action inspires, though it may in some, instead affirmative action engenders other damaging attitudes. By giving minority applicants preference, affirmative action causes every minority student or employee to be suspect. Those around them begin to ask themselves whether a minority was admitted or hired on his merits or due to his race. While it is not explicitly racist, the new attitude has a pattern similar tot he result of racism, as it makes the qualifications of every minority student or employee suspect.
Nor do the supposed beneficiaries escape harm. Not only do they suffer from the suspicions of those around them, but they themselves are often troubled by the question of whether they are achieving their successes entirely on their own merits or because of affirmative action. They can never truly know that they are earning their own successes, and that doubt can be quite troubling. Which means that, while trying to improve the lot of minorities and improve racial relations, affirmative action actually introduces both self-doubt and suspicion, making the situation worse, not better.
Conclusion
This essay could go on and on. Originally I had intended to include bits on how biofuel laws resulted in massive deforestation and intensive farming, as well as how business licensing restricted competition and raised prices for consumers. I even had planned to write about how unemployment insurance, by providing a safety net, encouraged prolonged unemployment and applications to inappropriate positions to maintain eligibility. But I then realized that I could continue adding examples until the essay ran 100,000 words or more, so I cut myself off. The eight examples above should be more than enough to make my point.
And what is my point?
Simply that just because a law says it is to benefit a group, there is no reason to take it at face value. In reality, intentions have little to do with outcomes, and even though a law is intended to benefit a specific individual or group, it may harm another group, or may even harm its supposed beneficiaries. In fact, the more I look at specific examples, the more frequently I notice laws which provide some tiny transient benefit to a specific group, but at the same time do that group massive, if less obvious, harm.
But that is the price for using government to solve inappropriate problems. Government is great at policing, at adjudicating, and providing for defense. Beyond that, government is a poor fit. It can be used to solve everything from poverty to indigestion, but the question is "at what cost?" The government just is ill suited to such uses, and forcing a fit often means we expend a lot more effort finding a government solution than we would resolving it privately.
And that is truly what is at the root of all these sets of mismatched costs and benefits. It is not that government is inherently bad, it is that government is bad at these sorts of problems. The harms we see above are nothing but the added costs incurred by trying to use the wrong tool for the job. Just as using a crowbar to drive in finishing nails will result in a bit of damage, using government to cure poverty will as well. Which is why we need to look very closely at a problem before we decide that the state is the best way to fix it.
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1. Though politicians often sell the story that the general public is largely made up of debtors and that "big business" are largely creditors, in reality corporations are largely debtors, while bond holders are creditors, as are those holding some types of preferred stock. In fact, as investment has become more widespread, the truth is that more "common men" are creditors than they realize. Even with the division of personal and corporate bankruptcy, individuals are often hurt by lenient personal bankruptcy laws, as they own stocks in companies which hold personal debt, making them creditors to individuals who now have debt forgiveness. So the attempt to equate debtors and "the common man" is mistaken, though it does make political sense for demagogues trying to buy votes.
2. I am ignoring here the truth that often the money being lent is actually money owned by "the common man". Either through direct investment or through savings accounts, the average man's money is often the money which is not being repaid due to bankruptcy laws. In other words, while helping a few defaulters, lenient bankruptcy laws make those with savings accounts or investments earn lower returns. So, not only do these laws make borrowing harder for the common man, but they also impede the accumulation of wealth by the common man.
3. I also dealt with the role some banking regulations played in causing bank failures in the essays "
How to Blame the Free Market", "
The Limits of Technocracy", "
Inventing a Crisis", "
Inventing a Crisis III", "
And Here It Comes Again" and "
To Correct Debra Saunders".
4. In the interest of full disclosure, I must reveal that, before Maryland outlawed them, I used a "pay day" loan service twice. In one case my wife and I were out of cash, had no credit cards at the time, and needed to have emergency car repairs done a few days before we were paid. The pay day loan, though the rate was steep, allowed me to get to work when I would otherwise have had to use nearly a week of vacation waiting for a pay check to pay for car repairs. (I don't recall the reason for the second time we used it, though I recall it was to pay some urgent outstanding bill.)
5. I have written often on how arrogance is a part of liberalism, including the assumption that most people make bad choices and the assumption that regulators and legislators have better judgment than the public. You can read more on the topic in my essays "
Arrogance", "
The Essence of Liberalism", "
Arrogance and Gun Control", "
Liberal Tolerance", "
The Racism of the Left", "
Our View of Our Fellow Citizens", "
Hilarious!", "
Those Other People", "
Seeing People as Stupid", "
Man's Nature and Government", "
It Is All In How You Say It", "
Pride", "
Lying Politicians and 'Other People'", and "
Two Kinds of Liberal".
6. I would argue that when both sides of the aisle agree on something, it is more often than not a truly awful idea. Anything that can appeal to both parties usually means nothing good for the citizens.
7. The SBA also provides some education and counseling to business owners, but that is a small part of what it does. In terms of budget, granting loans is clearly its principal function.
8. I am sure there are a handful of success stories, businesses which could not get traditional loans and which were saved by the SBA before going on to great success. That proves nothing. If I were to open fire with a machine gun in a crowded city intersection I would doubtless kill a few criminals along with many innocent, that does not mean it is a good law enforcement technique.
9. Some will argue the SBA serves the same role as the venture capitalist, but my question is, if they do screen that thoroughly, why do we need them? If they only grant loans private lenders would, then why waste taxes on the SBA? Unless they are giving loans where private enterprise would not, there is no reason for the SBA. And if they are, then they do more harm than good. In short, I can't imagine why we need the SBA.
10. To some degree the demand for college education in many positions where it was previously not required is due to the dumbing down of public education. But with many universities doing no better, and with bachelor's degree available in fluff topics such as "media studies", even a bachelor's guarantees nothing. So, while bad high schools are somewhat to blame, I think the real culprit is the simple ease with which anyone can obtain a degree in modern times. Similarly, the transformation of many fields from undergraduate degrees to graduate degrees (eg. law) is largely due to the lack of respect granted bachelor's degrees now that they are almost universally available.
11. Just ask your humble author, the holder of a BA in history. Originally I intended to get a doctorate in history, but as I was surprised to figure out I would graduate in mid-year (I hadn't kept track of my credits), I missed the GRE deadline, and ended up taking the LSAT as it was the only test with open dates. Getting a 48 out of 48, I decided maybe I was a lawyer after all. A year of law school corrected that mistaken impression, and I returned to get a BA in both economics and finance. When I did take the GRE I got 800/800/800, but sadly that didn't qualify for cash from Perdue's doctoral program. Underfunded, I gave up on education for a long time. But academia' loss is your gain. Had I received my doctorate, doubtless I would be writing for dull journals rather than amusing my handful of regulars here.
12. I also discuss the significance of the deceptive claim that Social Security is insurance in my essay "
Justified Lies?"
13. While many only see the half of the social security tax they pay, the employer considers both halves when calculating salary, so, while the state hides it, the individual really pays the full tax, regardless of what the paycheck says. I explain this in greater detail in "
Justified Lies".
14. I discuss similar topics in my essays "
Exit Strategy", "
Consequences", and "
Why Must the Government Do It? Part I".
15. My terminology may be out of date, as my time working at social services was some time ago. As I left a little after the Clinton era welfare reforms took place, I am not current with the terminology, so excuse me if I use somewhat outdated names for the programs.
16. The military has a more practical system of allowing partial disability. Basically they recognize that, while one may not be completely unable to work, being disqualified from certain types of work, or from working for more than a certain amount of time can also be an impediment to earning a living, and allow for payments for partial disability. Doing something similar in the general welfare rolls would be prohibitively expensive, but I do have to say that the military approach allows for disabled veterans to rejoin the work force more easily.
17. I am not going to debate the validity of this position. I am simply presenting the rationale as I understand it. Whether it is valid or not is a matter for other essays. For our purposes we do not need to know whether or not this is a valid argument.
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Spell Checker Note: I haven't complained about my spell check software in a long time, but today it came up with a very peculiar complaint. Unlike its complain that "advisor" is misspelled, this one is not even arguable. My spell checker thinks "renders" is not a proper word. I can't even begin to guess why. It also dislikes "associate's", which I don't understand either. If anyone who worked on Firefox's spell check software happens by, can you please explain what happened? Honestly, you make old Microsoft Works' spell checker seem a marvel of engineering by comparison.