Will Wilkinson - Latest Comments in Ain’t Nothin’ Like the Real Thing, Baby

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Fri, 13 May 2005 17:40:37 -0000

Of course assets are left as well. But it does *not* follow that unchosen benefits can rightfully bring unchosen obligations in their train. If I choose to give you $10 you didn't ask for, that doesn't mean I can later force you to pay back $12.

Moreover, the debt being accumulated today is mostly not being used to produce assets that will be of use to future generations, but rather for the current welfare state. If the government were limited to building assets like freeways and airports, it'd have no need for deficits, and I'd be a lot happier.

Re: Ain’t Nothin’ Like the Real Thing, Baby

monkyboy — Thu, 12 May 2005 18:41:42 -0000

Nicholas, each generation also leaves assets to the next one, not just debt.

Even though generations don't neatly end and begin in defined chunks, ideally, each new generation could vote whether they accept both the assets and the debts the preceeding generation has left them. I they didn't, the assets would be sold to pay off the debt.

Personally, I use the freeways, powerplants, airports, etc. that were built before I was born.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Thu, 12 May 2005 12:38:22 -0000

No, Gareth, I'm not saying anything of the sort; that's a plain strawman designed to avoid addressing my actual argument.

I'm saying that if you lend to the government money that can only be paid back by taxing future taxpayers, you don't have a moral right to expect that those taxpayers will actually pay you back. It is probably unwise for them to refuse, but it's not immoral. This is because they never-- not individually and not collectively/democratically-- had any choice in whether to contract the debt obligation, and taxation without representation is wrong *even if* taxation in general is OK.

It is thus not necessary to be a "sectarian libertarian" to accept this argument. The notion that taxation without representation is wrong is not a fringe one, and indeed is taught as part of every high school US history class-- though perhaps not many think through its implications.

There's no "deserving of punishment" here, nor do any of your other silly pseudo-implications actually follow. And BTW, I don't claim to speak for the Entire Libertarian Movement (tm) in saying this. I have no idea how prevalent my view on this is.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Thu, 12 May 2005 09:34:19 -0000

Before I started commenting on this blog, I had no idea so many libertarians are big on government debt default.

If I understand your argument, it is that a bondholder is culpable in lending money to the government in the first place, since her security comes from future taxpayers who don't get to vote (and who didn't ask to be born!). So they deserve it if we just default, whether we have to or not.

In your world, pretty much every American must be culpable and deserving of punishment. Those bastards who have federally insured bank deposits for instance. Bonny and Clyde had the right idea! Those damn kids in public school. Don't ge me started about those seniors.

Basically, you are saying that anyone who does not abide by your sectarian libertarian morality (which few Americans would even understand, let alone consider binding) has no rights.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Thu, 12 May 2005 05:34:54 -0000

Gareth,

The argument against long-term peacetime government debt does not require that one be against all taxation. You've heard of "taxation without representation", right? If somebody buys a 30-year bond from the government, many of the people responsible for paying it back will not even be *born* at the time the bond is issued, and so had no vote on whether it was going to be issued. How is it legitimate to bind those people, individually or collectively, to a debt obligation which they did not in any sense choose?

And the "unjustified transfer" bit holds no water at all. Suppose A robs B and sells the stolen goods to C, who thinks they aren't stolen, and then B demands that C give him back his stuff. C cannot rightly refuse on the ground that he bought the stuff innocently and the transfer from him to B is unjustified. Likewise, if bondholders buy illegitimate debt instruments-- debt that should not have been accumulated-- they have no business complaining when the taxpayers of tomorrow refuse to pay back debt that was immorally accumulated without their consent.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Wed, 11 May 2005 07:54:26 -0000

Nicholas,

Your argumentation is circular, in the sense that it can only convince an already-committed libertarian. For you, promises backed by taxes are always wrong. If I accepted that, then, of course, I would be committed to getting rid of Social Security (although I don't see why Bush or Cato's scheme would be an improvement).

But, of course, I don't think that. Promises backed by taxes can be good, depending on the consequences.

Social Security is similar in principle to, but better than, ownership of government bonds (or, if you are that purist, a federally insured bank deposit). A promise to pay $X 30 years from now is nice, but a promise to pay 60% of your pre-retirement income up to a maximum is better, because it spreads various risks that the first promise doesn't.

This program is widely popular. If the Democrats kick Bush's butt on this, then it will, in effect, be a property right.

On the question of posterity's obligation to pay public debt, I think you need to distinguish between the morality of accumulating the debt in the first place and the morality of paying it back. Accumulating the debt in the first place will be immoral unless it is invested in ways that leave posterity with assets worth more than the inherited liabilities. However, even if the debt should not have been accumulated, to repudiate it is just an unjustified transfer from bondholders to taxpayers generally. Not to mention that the transfer will make everyone worse off.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Tue, 10 May 2005 18:22:00 -0000

Well, as I said, I do think there's a moral difference between SS and government bonds-- one of degree, not of kind, but a difference nonetheless. The difference, as I explained, is that bond obligations are bounded in ways that SS obligations are not. Private bonds are of course different in kind, since they are not repaid through taxation.

There is also a practical difference in degree, thus a difference in "status as 'property right'". SS benefit reduction, default on government debt, and outright expropriation of people's houses are, we agree, all unlikely events. But I think it's clear that they are of three different degrees of unlikelihood, and go from most to least likely in the order stated.

As to the morality of default: defaulting on debt is immoral if the expectation of payback is itself legitimate and moral. When the debtor is a private actor who is paying the debt out of his/her own assets, this is the case. But the expectation that future generations will be taxed to pay government bondholders back, whether they want to be or not, is not a legitimate one. Certainly it is essentially fraudulent for the government to create such an expectation. But foisting the cost of the fraud on an innocent and unwilling third party only compounds the crime.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 14:32:00 -0000

I would consider defaulting on debt, unless you really had to, immoral, not just unwise. It is a species of fraud. Ex ante expectations matter. We consider lending money to the government to be no risk, if low in reward. It would be immoral to alter that expectation, which is why deliberate hyper-inflation (which, I might tangentially add, is the logical denoument of the Bush fiscal experiment) is wrong.

If I lend money at high interest to a corporate vehicle for a high interest rate, then I still expect the company to try to pay me back, but it is a bit different.

Anyway, if you don't think there is any moral difference or difference in status as "property right" between Social Security and owning bonds, then my work here is done.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Tue, 10 May 2005 12:35:45 -0000

Not a lot-- and the accumulation of government debt in peacetime is also an abhorrent practice (then, too, defaulting on that debt, while it may be unwise, is not generally considered immoral). But at least the debt doesn't, for example, automatically grow with real wages, so that the richer the next generation gets the greater the burden on them becomes.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 12:01:37 -0000

If I own a bunch of 30 year treasury bonds, I'm "forcing" the next generation to pay for my retirement. What's the difference?

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Tue, 10 May 2005 11:36:33 -0000

Because property rights in SS benefits are, in fact, abhorrent. Not nearly as abhorrent as chattel slavery, but abhorrent nonetheless. You have no right to commit your kids to pay for your retirement; this follows from, among other things, the sound, long-recognized principle that no Congress can bind future Congresses. And if your kids realize this, they may well decide to "renege" on the benefits deal, even if that means depriving themselves of the opportunity to bind their kids in turn. And they'll be fully justified in doing so, as true expropriators would not be.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 09:37:05 -0000

I would say slavery was an abhorrent system of property rights, rather than an unreal one. But this is beginning to sound like the really boring debate about legal positivism.

The point is that one of the good things about non-abhorrent systems of property rights is they provide a zone of security beyond the whims of the political process. Social democrats think these good things can come with SS benefits, if we there is a sufficiently resounding against the would-be expropriating-without-compensation Bolshevists at the Cato Institute. Why are we wrong?

Re: Ain’t Nothin’ Like the Real Thing, Baby

monkyboy — Mon, 09 May 2005 17:19:37 -0000

A few points for the Jefferson haters:

1. There is no proof it was T.J that fathered Sally's children, he is only one "suspect."

2. If you want to know how he felt about slavery, read his original draft of the Declaration of Independence or his plans to educate freed slaves at the University of Virginia.

3. Unlike today's politicians who are getting rich extorting companies or buying land in Iraq and Afghanistan, Jefferson died sick and penniless...

Please return to shilling for Wall Street

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Mon, 09 May 2005 16:45:54 -0000

He was mistaken. Other people generally respected his "ownership" of Ms. Hemings, and not her legitimate self-ownership; but they were wrong to do so.

On reflection, that ethics/politics distinction may be what I haven't made clear enough yet. You're saying that one has *politically enforced* rights if and only if the clear majority thinks so. That's true, but my point is that it's incomplete, because rights (or at least some rights) are more than political enforcement; they're also ethical quantities. And ethics comes before politics and is not subject to majority vote.

However, ethics is not totally without effect on politics. Property rights that are ethical obligations as well as political grants are in the long term more secure than those which are political grants alone, because people do sometimes recognize what is right by other means than looking to the verdict of the majority, and act accordingly. Your right not to have your house expropriated is an ethical one; it's wrong to violate it even if the majority thinks otherwise. Your "right" to continue receiving SS benefits is a political grant only.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Mon, 09 May 2005 15:11:44 -0000

Was Jefferson mistaken that he owned Sally Hemings, or was he correctly informed, but a jerk?

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Mon, 09 May 2005 14:15:32 -0000

Oops, "can be mistaken" above should be "cannot be mistaken".

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Mon, 09 May 2005 14:14:28 -0000

Gareth: my ellipses were perhaps unclear. :-) I understand that you're restricting the domain of things about which clear majorities can be mistaken. And I'm saying that, even within that domain, your claim fails. If a clear majority believes that some people lack the right not to be enslaved-- which is a property right-- then that clear majority is wrong.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Anonymous — Mon, 09 May 2005 08:53:49 -0000

I come at this from the perspective of bankruptcy law.

The report on Social Security harps on the difference between government “promises” to pay Social Security benefits and the “property rights” retirees have in corporate (and government) stocks and bonds. The biggest sales pitch seems to be that, while Congress could theoretically break its promise on Social Security benefits at any time – even to workers paying in their whole lives – stocks and bonds are a secure form of property that “cannot be held hostage, whittled down, or bargained away by future Congresses.”

Let’s start with bonds. “Bond” is just a fancy name for a debt that a corporation (or government) owes its creditors, the bond holders. But a debt is just a promise now to pay later. Through bankruptcy, the federal government offers both corporations and real people a chance to break these promises with relatively few consequences (although the government is trying its darndest to take back the offer when it comes to real people). Just ask Enron’s employees, whose pensions full of Enron bonds disappeared in bankruptcy without even a puff of smoke, about bonds never being “whittled down.”

But what about stocks? Stocks are a stake in the company – a chance to actually own a part of Google or Citibank. That’s gotta count for something, right?

Not so fast. Corporations that offer stocks can liquidate or reorganize under the bankruptcy code too. When that happens, stockholders have it even worse than bondholders. The downside of owning something is, if you’re in debt, your creditors can foreclose on what you own. So when a corporation has debts it can’t pay, the owners (that is, the stockholders) can’t keep what they “own” until their debtors are all paid off. This fact of life shows up in section 1129 of the corporate bankruptcy code (specifically, part (b)(2)(B)(ii)). When asbestos maker Johns-Manville filed for Chapter 11 to deal with lawsuits by workers it injured and killed, for instance, all its stockholders suddenly found themselves sitting on a worthless pile of certificates. So much for stocks and bonds as “property.”

Of course, Wilkinson is technically correct. Stocks and bonds cannot be “bargained away” by future Congresses without at least some Constitutional wrangling. But considering the alternative – depending entirely on promises from corporations, when stock and bond holders lost billions of dollars worth of “their” property in over a million bankrupt companies over the past 10 years – promises by a publicly accountable Congress seem like a pretty safe bet.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Will Wilkinson — Mon, 09 May 2005 08:51:56 -0000

You know when you think you have a headache!

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Mon, 09 May 2005 08:02:52 -0000

Will:

In your example, we all believe two things:

(1) No one is lawfully married unless the marriage is presided over by a person with the authority to do it.

(2) Bob is lawfully married to Alice.

But it turns out (contrary to our belief):

(3) The person who presided over Bob and Alice's wedding did not have the authority to do it.

First off, Bob might not legally be entitled to an anullment from Alice, even if (3) turns out to be the case, particularly if (3) is found out after Alice and Bob have had three kids, a mortgage and so on. So, your counter-example isn't necessarily one, even on the more specific level.

But, anyway, a belief that Social Security benefits are property is more like (1) than (2). I can, of course, be mistaken about my Social Security entitlement. The Social Security Administration can be mistaken about it. But the whole society can't be mistaken as to whether Social Security is an entitlement at all.

And I know when I'm having a headache.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Mon, 09 May 2005 07:55:25 -0000

Nicholas,

I don't think a clear majority of society can't be mistaken about anything. A clear majority of society can be mistaken about the cause of the extinction of the dinosaurs, or how many moons Pluto has. But there are a class of things about which a society can't be mistaken because if a clear majority believe it to be true, it is true.

An example is that treason (defined as opposition to the effective state authority) can never prosper becuase if it prosper, it isn't treason (because the previous state authority turned out not to be effective).

So, Americans could not, coherently, be mistaken that the dollar is legal tender. An individual could be mistaken (or deluded) that the piece of paper he had in his pocket was legal tender, but a clear majority could not.

It isn't incoherent to bemoan the fact that Americans view Social Security benefits as property rights. It is incoherent to say that the problem with Social Security benefits is that they aren't property rights, even though everyone (or almost everyone) thinks they are. That's like saying that the problem with fiat money is that it doesn't work as a medium of exchange, even when everything thinks it does (and acts on this belief). That's what I took Will to be arguing.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Will Wilkinson — Sun, 08 May 2005 09:18:40 -0000

Gareth, You can be mistaken about whether you have a headache!

I agree that property rights are social facts. But it is very easy for a society to be mistaken about social facts. Some facts depend on other social facts. If someone who does not have legal authority to marry you and your partner, but does it anyway, and everyone without exception believes it, it is still not true that you are legally married. The social fact of marriage piggybacks on the social fact of legal authority to marry, which piggybacks on the social fact of a body of laws, etc., etc.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Nicholas Weininger — Sun, 08 May 2005 06:42:21 -0000

Well, then, this is the nub of the disagreement. For one thing, any sentence starting "A society can't be mistaken..." is incoherent, because a society can't do or judge or believe anything; but this is perhaps tangential.

I think you mean "a clear majority of people in society can't be mistaken...", and if you mean that then you're mistaken. :-) If a vast majority of people think, for example, that a certain subclass of persons should have no property rights to their own bodies and thus can legitimately be enslaved, they're just wrong, no matter how much they outnumber the unfortunate slaves.

And there's nothing wrong with the simultaneous political positions you describe, because part of the point is that SS benefits *shouldn't* be property rights; that even if you believe in the legitimacy of government benefits in general, there's a good reason why no Congress can bind future Congresses; that the electorate of today should not be able to make a promise to retain a certain level of benefits that is binding, morally or legally, on future electorates. Whereas the moral obligation to respect real property rights is binding on all electorates, now and in the future.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Sat, 07 May 2005 10:51:01 -0000

Nicholas:

I'm not saying that property exists at the whim of the State. On the contrary, I'm saying that secure property rights exist only when it is politically unthinkable for a goverment to take them away.

But I would say that property rights are necessarily socially constructed. An individual might be mistaken about what property he holds, but only because his subjective view conflicts with the social view. A society can't be mistaken about the property rights that exist within it, anymore than I can be mistaken about whether I have a headache.

As a matter of degree, I would accept that taking away people's houses without compensation is even more unthinkable in American society than not paying Social Security benefits. But the point is that Cato and Will are simultaneously saying the problem with Social Security benefits is that they aren't secure property rights, while trying to bring about the situation it is complaining of.

Re: Ain’t Nothin’ Like the Real Thing, Baby

monkyboy — Fri, 06 May 2005 14:54:55 -0000

So lets sum up this weeks' offering from the Rupert Murdoch School of Philosophy:

1. SS is a "Rube Goldberg" contraption designed to hide its true purpose.

Nope, its probably the most straight-forward program the government runs.

2. SS isn't really insurance at all!

It is, 31% percent of SS payment went to survivors and the disabled. And for one third of retirement benefit recipients, their SS check is their sole source of income.

3. And now we get: Future congresses can't be trusted!

So, we should all get private accounts! Can we afford to start private accounts? Nope, the U.S. government already owes over $7 trillion.

Where will we get the money to fund private accounts? By selling $3 trillion of worthless promises to some unsuspecting rubes!

At what point did LINOs like Will go from simple lies to fraud? This week...