Monday, February 14, 2011
Reading the Budget
There's some money for the states in the form of an expansion of the Build America bond program.
But here are the economic assumptions:
You know the deal. Right click or left click, and open the thing up to get something readable.
The ten-year treasury bill is assumed to be 3.0%. It's yielding 3.62% now.
Assumption is that the 10-year will rise to 5.3% in 2017 and the 3 month will go to 4.1%, and there they'll stay.
GDP growth is assumed to be 2.7% this year (real), and rise to a height of 4.4% (real) in 2013, afterwards stepping slowly down to 2.5% in 2019. 2012 3.6%. There is a disagreement with CBO on this.
Debt held by the public is supposed to rise 1.838 trillion in 2011 and 1.025 trillion in 2012, but they're listing debt held by the public in 2013 as only 12.784 trillion. According to Treasury Debt to the Penny, debt held by the public is 9.455 trillion as of 2/11/11, and ended 2010 at 9.39 trillion. However budgeting is done by fiscal year, and as of Sept 30th, 2010, debt held by the public was listed at 9.022 trillion. Yes, folks, we have ratcheted up public debt over 430 billion since last September.
As a percent of GDP, individual income tax receipts are projected to rise from 6.2% of GDP in 2010 to 9.9% of GDP in 2021. That requires quite some tax increase. By 2014 they are supposed to rise to 8.5% of GDP. In terms of nominal dollars, individual income taxes net are supposed to rise from 899 billion in 2010 to 2,439 billion in 2021. They are estimated at 956 this year. Social Security taxes are projected to rise from 559 billion this year to 1,109 billion in 2021. Basically they are figuring a very big rise in wages paid over the decade.
Social Security payroll taxes this year are estimated at 559 billion (remember, these are fiscal years), with outlays of 742 billion. That includes the payroll tax cut, so it is not representative. SS payroll taxes are estimated at 1,109 in 2021, and outlays are estimated at 1,269 in 2021, for a net deficit of 160 billion. Since by 2021 debt held by the public is supposed to reach 18,967, I doubt anyone is going to want to lend us that. Gross federal debt is supposed to be at 26 trillion plus in 2021. Kind of a daunting figure which includes the increasingly mythical trust fund balances.
Net interest on the public debt is projected to rise from 196 billion last year to 844 billion in 2021.
Energy: There are a whole bunch of tax increases on fossil fuels. Expect the cost of gas and electricity to rise to compensate. See the bottom of pages 21 and 22, and pages 17 and 18. He really was serious about bankrupting coal.
Businesses: There is a big tax increase for companies in the form of repealing LIFO (last in, first out) accounting. Estimated tax increase for just 2014 is 5.6 billion. Page 16. There is something called a "financial crisis accountability fee" which is going to be a tax on investments. 4 billion a year.
Some of the proceeds from taxes on fossil fuels are going to "cool" businesses:
These numbers are in millions, so the ten year net for the research, experimentation etc is 106 billion, and it's 3.6 billion for qualified property used in a qualified advanced energy project.
We are also wanting to spend 5 billion on wireless broadband. Because that's cool. That's sooo cool.
Tax Cuts for Families and Individuals:
Highlights, ten year cost:
A) Expand Earned Income Tax Credit for larger families: 12.3 billion.
B) Expand Child and Dependent Care credit: 9.6 billion.
C) American Opportunity tax credit: 14.3 billion. (college tuition, must pay off professors).
D) Tax qualified dividends and net long-term capital gains at 20% for upper-income earners: 123.6 billion.
I'm thinking that last is going to make cutting Social Security benefits for granny a touch of a hard sell. But our priorities are clear - and they align well with David Brooks' scheme of things.
Once we put everyone back to work we can afford all that we deserve. And so much more!
I have no timeline on when we will put everyone back to work, but we better hurry. The long-term trend isn't good.
Tom Friedman & Co may fantasize about China being powered by wind, solar, and helpful unicorns, but the leaders of that country surely know that if they can generate electricity for less than the price that will be being paid in the US, they will have a big advantage in manufacturing. Coal, clean or otherwise, feeds into that strategy.
You deprecate David Brooks, but despite his lack of an Ivy League education, he DOES write for the NYT, so he clearly is morally, intellectually, and most importantly, aesthetically fit to tell the nation what to think; to point out to the rubes what is inferior; what is superior.
This ruling class ethos extends across all journalists reporting from or on Washington, and they do like what they see in the new administration. I am a bit surprised that you might expect anything but groupthink from Brooks: after all, to Washington journalists, Democrat politicians alone can bring progress to the nation; because only Democrats share their enlightened vison of a " just " society: They bring progressive light to illuminate the darkness they see in America.
"Sigh. I never did like the "Divine Right of Kings" bit, and I like it less in its modern incarnation."
The Middle Ages: Constitutional Peasants
The Modern Age: Constitutional Peasants
The projected GDP growth is "comforting". The projected inflation rate is well within Bernancke's range. He must be smiling seeing how he has now fooled the budget office. Interest rates are "manageable". Obama projects blue skies forever.
Now, since we are operating under a continuing resolution, isn't that at about a $3.3 trillion budget? So, Obama projects a 10% raise for next year. But, there is no stimulus and TARP has expired, so it is unclear why there is so much additional spending.
I am seeing pundits claiming this budget is all political strategy. Obama knows this budget is fantasy, but he wants the GOP to make the cuts and then he can claim they have hurt "granny" and coast to reelection. If so, that is truly a Machiavellian plan and deeply cynical. Even Andrew Sullivan is claiming this is a "screw the children" budget. We are setting up for a confrontation that will determine if we continue as a Republic and a world power or if we sink into nothingness. At least we can say we live in "interesting times".
I'm assuming you meant 2021.
Don't forget this year's SS taxes are lower because of the legislation passed recently. Still, a doubling over 10 years generally means a 7% increase each and every year. So this is going to require the best decade-long recovery in history or a boatload of quantitative easing.
I did indeed mean 2021, and I have fixed it.
Housing Prices and Demographics
I have fairly liberal tendencies, so I don't care for the idea of government encouraging any particular sort of family. I also have my doubts whether the government is competent to change such behavior--I'm having visions of the Julian Laws here. I can do math, though, and demographics say we need two-parent families with 2.3 kids.
Goldman builds a house of cards where half the deck is an illusion. Reading through it, I really get the impression that he started with an ideological position in mind ("we have to restore the traditional family") and then tried to construct an argument for it. His sky-is-falling take on falling housing prices has the ring of the whip-and-buggy crowd of yesteryear.
The only demographics crisis that exist are those created by the government. The government creates inflation which makes it much harder to save for your own retirement (forcing you to "invest" in later generations to avoid losing wealth, still losing wealth if you can't at least match the real inflation rate, and maybe still losing wealth even if you do as the government taxes all nominal gains, not just real gains). And the government sets up a quasi ponzi scheme called social security (stealing your income so you can neither save nor invest it, which may then force you to rely on others which in their scheme is the next generation). Get government out of the business of just these two things, and most of Goldman's argument crumbles. Instead, most of Goldman's "solutions" are for the government to pile on more wealth redistribution.
I just had to LOL at this:
"For aging Americans to trust their savings to young Asians, a generation's worth of institutional reforms would be required."
He says that as if present-day aging Americans trust their savings to young Americans! Many have been burned twice in the previous decade, and "trust" is not likely a word they would use. They might use the word "stuck", as in "stuck" in 401Ks and IRAs due to government rules.
This is especially repugnant:
"Tax and social-insurance policy should reflect the effort and cost of rearing children and require those who avoid such effort and cost to pay their fair share."
And from there to the end of his post is just way off the deep end.
Huh?? Anyone can buy stock directly in a wide array of Indian or Chinese companies, or invest in a number of funds focused on those countries. Indeed, many people **do** have their savings entrusted to young Asians, to the extent their pension funds have chosen to make such investments. (Although the "young" part is less true in China than in India.)
foo--You are incorrect.
Government does not create the need for young people to borrow capital from the elderly to get started in life, or for the elderly to receive an income stream as they slow down, based on the surplus wealth they've created over their lifetimes. You can't escape that dynamic.
Whether it's structured as a master/apprentice relationship, as a bondholder/mortgage payer, or as a FICA payer/Social Security recipient, it's the same dynamic at work. The only choice is in how a society facilitates the exchange. I am skeptical of Goldman's solutions to the problem, but he states the problem well enough.
Also, if you take a middle-class household income, and divide it by four or five or more family members, monthly income per capita can be lower than the Social Security retirement benefits that MaxedOutMama mentioned a couple of posts ago. (I can't compare the relative living costs of children vs. elderly offhand; both are quite variable.)
"Government does not create the need for young people to borrow capital from the elderly to get started in life"
There are many issues with that statement:
1) I never made any statement about young people borrowing.
2) Goldman's thesis has no dependency on young people "needing" to borrowing -- his poorly contrived thesis only depends on the old people having a "need" to lend to the young. (I.e., his claim is that the old people will be screwed because there won't be enough young people looking to borrow.)
3) If a parent fails to provide for their children's needs (say, things a person needs before they can get a decent job and "stand on their own two feet"), then the parent has acted immorally. Either parents should be prepared to provide their child what they need to get started in life, or they should refrain from having the child in the first place. When one person (e.g., parents) makes a voluntary decision and expects someone else (e.g., the rest of society) to pay the consequences, that is immoral.
4) Government does a ton of crap to make things more expensive for everyone, including young people. They have created a massive bubble in education via guaranteed student loans (making school more expensive). They are still trying to prop up housing prices (making houses more expensive). Their actions to prop up housing are leaking into commodities (making food, cotton, oil and many other commodities more expensive). They committed that atrocity known as "cash for clunkers" (eliminating many cars that people could actually afford). They outlawed breeder reactors (making electricity more expensive, making nuke plants generate an order of magnitude more radioactive waste, and making massive-polution-generating coal plants more abundant). Education, housing, food, cloths, fuel, cars, electricity -- that's just about everything. US Government slogan: We don't make the essential items you need. We make the essential items you need more expensive.
"or for the elderly to receive an income stream as they slow down, based on the surplus wealth they've created over their lifetimes."
If an elderly person has worked productively and profitably and saved appropriately, then they should be able to live on their saved wealth and not need an income stream. What they should *not* be required to do is risk their wealth on investments just to avoid having their wealth evaporate (via inflation) before they get around to spending it. (If they want to invest, and can find an investment they consider suitable, and choose to *voluntarily* take on the *risk* of such investment, then there is nothing wrong with that. But coercing them into such risks is immoral.)
And please realize that there is no such thing as a risk-free income stream, not if you are talking *real* income and not just *nominal* income. If you are only getting positive nominal returns, but negative real returns, they you are losing wealth, not gaining it. One of the best, most morally wonderful and outstanding things the government could do would be to actually stabilize the currency and give its citizens somewhere they can go and be safe. Right now there is no such place. Dollars are dangerous. US bonds are dangerous. The stock market is dangerous. The current status is the economic equivalent of not being able to even walk down the street without a major chance of getting mugged or killed.
[continued in next post...]
1) Parents take care of their kids' needs until their kids are able to take care of themselves, and
2) Government stabilizes the currency instead of constantly devaluing it,
then the dynamic is completely avoidable.
You have to realize that wealth doesn't just appear out of thin air. People have to create it.
A person creates a certain amount of wealth in their life time. Some part of that will be consumed as they go. Some part of that will be needed to live out their "twilight years". And with what is left, they can decide what they want to do. If they have enough, then they can raise some number of kids if they choose to do so. (Or maybe they'll create art or take a chance at starting their own business or whatever else they choose.) There is no "magic" created by shifting money back and forth between generations. Yes, people can invest, but investment always means risk. There's no such thing as "sure thing" returns (as so many pension funds are now learning the hard way). Only liars like Bernie Madoff promise "sure things", and only suckers like those who lost their money in his ponzi believe such lies. (Unfortunately our society has an abundance of such suckers, and many of them vote.) By claiming that the older generation *needs* an income stream, you are already saying that the system is a failure, because there is no way to guarantee real returns.
You seem to be criticizing this from a libertarian point of view, but you're not recognizing that even if you're talking about a market-based or clan-based mechanism for satisfying the capital and income needs of young and old, people are still going to use that mechanism to satisfy those same needs.
You may be using a much more restrictive definition of the word "capital" than I am.
1) Goldman (and I) talked about young people needing capital. You claim that's complete BS, that if there were no such thing as Social Security, young people would not need to borrow capital. Therefore you made a statement about young people borrowing capital.
2) Goldman: "Young people need to borrow capital to start families and businesses; old people need to earn income on the capital they have saved." I guess you are arguing about the meaning of either the word need or capital here, but please use Goldman's definition when critiquing his statement.
3) You implicitly contradict yourself here. You said young people don't need capital, but here you say that parents are morally obligated to give a child what they require to get started in life, thus recognizing that young people need capital at the start of their life.
Think about what you're saying there--you're implying that as a moral imperative, a child should be constrained to having only as much success as their parents can afford to prepare them for. Regardless of their talents or potential, they should not be allowed the capital required to realize that potential if it comes from someone other than their parents. For example, nobody can start a business unless it can be capitalized by their parents. I don't think you really meant to say that, but that's the implication of what you did say.
5) You claim the elderly should not need an income stream, but should instead retire by eating their seed corn (living off savings). First, there are only a tiny number of people who can actually do that. Second, as a society why would we want the elderly to eat their seed corn? We pay people an income on their savings to induce them not to liquidate it, so that the capital can continue to be productive for the rest of society.
6) I'm not sure what you're trying to say about investment risk. I didn't say anything about risk-free income streams. You are taking my (and Goldman's) statements about the aggregate behavior of large groups of people, and trying to make it specific to each and every person.
Of course some people will lose money. In the aggregate, however, what happens is that the young borrow capital from the old and pay it off as an income stream to the old. This is true no matter what the financing mechanism may be. Given your favored mechanism (people limited to the capital their parents can provide), parents would provide what capital they can to their children, and in practice their children would be expected to provide for the parents in their old age. You're going to claim that the parents should provide for their children and then eat their seed corn during retirement, but that's not what would actually happen, because no society can afford to destroy its capital that way.
As an example: A plumber runs a small contracting firm. He's ready to retire, so by your moral code he should give a portion of the firm to his son, liquidate the rest and live off the proceeds of the liquidation. Unfortunately, the firm is nowhere near as valuable reduced to a pile of pipes, fittings, and tools in a liquidation sale. So the plumber, his son, and society at large are worse off than if the contracting business had remained whole. The correct solution is for the plumber to transfer the firm to his son (or to someone else) in exchange for a lien payment--an income stream.
I was unable to determine what you were trying to convey in your first paragraph.
"You may be using a much more restrictive definition of the word "capital" than I am."
I tend to use the word "wealth" in a way which I think encompasses what you mean by capital, and more -- the more being that wealth is to some degree in the eyes of the beholder. People value different things differently, and their own wealth is determined not just by what they have, but also by what value those things have to them personally. (That is how trade manages the magic of making both parties wealthier -- they both end up with something they wanted more than what they gave.)
"You claim that's complete BS, that if there were no such thing as Social Security, young people would not need to borrow capital. Therefore you made a statement about young people borrowing capital."
No, I said no such thing. I claimed that having to pay into social security makes it harder to save for your own retirement. I did not relate social security to young people borrowing.
Example: I have been putting about 50% of my net (after tax) earnings into savings for many years. Call that amount $X per year. If the government did not steal FICA taxes from me, I would instantly be able to start saving about $1.4*X per year instead of $X. That would make a significant impact on the amount of wealth I can save before retirement. (Having more savings also opens up more investment opportunities.)
"I guess you are arguing about the meaning of either the word need or capital here, but please use Goldman's definition when critiquing his statement."
There may indeed be an issue with the word "need" here, but I do not believe the problem is on my end. It's pretty well accepted that people have a need for things such as basic food, shelter, clothing (and I would throw in basic communication - we are inherently social animals and extended solitude can do very bad things to our psyche; also throw in time for sleep and a bit for play/unwinding; there may be a bit more that qualifies as fundamental "need", but not much more). People do not have a need for paychecks or business ownership or anything else except to the extent that those are derived from the need for the previously listed basics. (Of course they have the right to try to [legally and morally] acquire as many things as they like.) For example, I don't necessarily believe that education is a fundamental "need", but some education is very useful (and even necessary) for obtaining the other needs, and is therefore a common derived need. But restraint has to be exercised -- people will be tempted to label *everything* they "want" as a derived "need".
I think my definition is compatible with the main definition from: http://en.wikipedia.org/wiki/Need
"A need is something that is necessary for organisms to live a healthy life."
If you insist on using Goldman's definition of "need", and his definition is somehow incompatible with mine (and wikipedia's), then I think you need to explain what that definition is exactly, because he doesn't provide one.
"You implicitly contradict yourself here. You said young people don't need capital, but here you say that parents are morally obligated to give a child what they require to get started in life, thus recognizing that young people need capital at the start of their life."
There is no contradiction there. I never said young people don't need capital (the expending and providing of wealth) before they can become (economically) self-sufficient. I agree that in order to get from fertilized egg to a person who is able to earn a living and take care of themselve, much wealth is required. The only question is who is responsible for supplying that wealth. I believe that morally the people who fertilized the egg are responsible. People should generally be held responsible for their own actions.
Now they're not responsible for making their child rich or able to support a lavish life-style or anything like that. They don't have any moral obligation to supply everything the child needs to live a life of luxury or provide for every "want" that child might decide to redefine as a "need". But taking care of their kid until that kid has had sufficient opportunity to make it on their own (not make it big, just make it in a reasonable sense) is, I believe, the parents' responsibility.
And when parents *give* a child what that child needs to reach a state where that child can provide for his/her own needs (as per their moral obligation), then the child has no need to *borrow* from anyone. (They may voluntarily do so for their own reasons, but it's not due to some need-deficit that the child was saddled with due to any failing of the parents.)
"Think about what you're saying there--you're implying that as a moral imperative, a child should be constrained to having only as much success as their parents can afford to prepare them for..."
No, I never implied any such thing. I am only saying that parents are responsible for taking care of and preparing their children up to a certain degree -- enough that the child is able to provide him/herself with a reasonable life. I never said that a child can't *choose* to go for more, to *chose* to take risk, to *choose* to borrow money or seek venture capital. However, at that point there is no *need* to borrow, it is a *choice* to borrow.
"but should instead retire by eating their seed corn"
It's only seed corn if they are still planting. These people are not planting, they are not personally working at building/running a business (otherwise they are not really "retired"). If you were honest you would not be comparing it with seed corn, but with poker chips, because *that* is what you are really talking about for most people -- gambling. (I address the "unusual" case of the business owner later -- I say "unusual" in the sense that only somewhere on the order 2% of the people in this country own a business with any employees, not counting minor share holders. Even in that case though, they are not planting -- they are reaping.)
"First, there are only a tiny number of people who can actually do that."
In a reality where the government steals wealth from every paycheck (SS) so you can't save it and the currency is constantly devalued (inflation) so your wealth disappears right out of your bank account, I would say yes, very few can manage it. But in a reality where that is not the case, and where parents give their kids a proper start in life, most everyone could manage it.
"We pay people an income on their savings to induce them not to liquidate it, so that the capital can continue to be productive for the rest of society."
First, you can't "induce them not to" expend some of their wealth on a regular basis, unless you think that they are going to be so eager to invest all of their wealth that they forego eating, or paying the electric bill, or paying property taxes / rent, etc.
Second, you talk about paying people an income, but for most people in today's reality it's a truth so worthless and misleading that it is essentially a lie. Please reread what I said about *real* returns (as opposed to *nominal* returns). In terms of real wealth, we aren't paying people jack s--t. Banks, governments and companies are providing less than 2% (nominal) return on 3 year bonds/CDs. In the meantime, commodities are rising in price at multiples of that. Now if retired people were saving to buy a house (house prices are dropping for the time being) 1.4% nominal would be a postive thing. But most old people don't need to buy a new house, they need to eat and pay for electricity, and those things are going up at way over 2%. So their real returns are *negative*.
So at best, you could say that "we steal their wealth less rapidly" if they "invest" it. I say that the moral default should be that we do not steal their wealth at all, and instead we should have a currency which preserves wealth. If there are sound investments, people will still have the incentive to do so with any wealth for which they don't have a more immediate/pressing use.
Third, in general entity A doesn't pay entity B to "induce them not to liquidate". A pays B because B is willing to give A something in return for that payment. (Your statement appears to just be deep-seeded ideology rather than economic reality.) Entity A may pay B interest because A wants some limited-term access to B's capital, or A may pay B "the plumber" to fix his sink. A does *not* pay B just so B will keep his plumbing business going into the future. (Hell, look at how smaller stores have been decimated with the rise of Walmart -- it's pretty clear that most people are not willing to pay to keep stores from liquidating, and rather they are paying for goods and services at what they believe is the cheapest costs.)
"I didn't say anything about risk-free income streams. You are taking my (and Goldman's) statements about the aggregate behavior of large groups of people, and trying to make it specific to each and every person."
You can't say people *need* an income stream and have there be any moral imperative to it unless you are talking about actual people and not just some abstract aggregate. (If there's no moral imperative, then there is no "need". Abstractions don't need wealth, individual people do.) If an individual *needs* an income stream, then certainly their needs will not be met if they lose their money due to investment risk.
In my experience, people who insist on talking about the aggregate and use baseless/meaningless claims about what the aggregate wants/needs/feels/thinks/etc. and avoid talking about the wants/needs/goals/motivations/morals in terms of individuals do so because that makes it easier to fool people (or because they are so fooled themselves and have been indoctrinated into the method). People can understand things more readily from the individual perspective, but tend to yield to (perceieved) authority when it comes to the (mythical) aggregate. And reality is much more easily introduced at the individual level when it comes to these subjects. I.e., talking about the aggregate on these subjects is the tool of charlatans, and having reality and people's first-hand experience interfere with the charlatan's preconceived ideology is rather inconvenient for them. It is also the tool of statists/tyrants who blithely ignore, marginalize and/or are prepared to take away an individual's freedoms/choices. (That's not to say aggregates are worthless for all subjects -- numerical items where sums and/or other aggregation operations preserve meaning can be usefully discussed in aggregate. E.g., total US private and public debt and obligations is a meaningful [and scary] metric. But even there, where the aggregate has meaning, it must be remembered that *much* meaning has been left behind by the process of summation.)
"Of course some people will lose money."
The fact that many people will be (are) forced into investing, a task for which they have no real training or skill, a task in which even those with PhDs in economics have proven to be totally incompetent, and that as a result of being so coerced they may lose their life's savings, and you just take this as a given, I find that more than a bit sickening.
"In the aggregate, however, what happens is that the young borrow capital from the old and pay it off as an income stream to the old."
I do not deny that this is what generally happens in aggregate (though I would take issue with the "pay it off" part in the face of inflation -- it is well understood that inflation is one means a government uses to default on its debt, with the side-effect of letting other borrowers do the same). Even if all parents have properly provided for their children such that they have no need to borrow just to live a reasonable life, it would still be the case that young and middle-aged people are more likely than old people to be the current day's "go getters" and trying to start businesses, so are more likely to be borrowers than old people. (I haven't done a statistics search yet, but I would actually expect that those who start successful businesses tend to be closer to middle-aged than young, at least for businesses that require a lot of capital to start. Experience and a track record [to go along with that "great idea"] can be useful in attracting venture capital.) However, such a statistical result does not provide a moral permission to coerce the young (or middle-aged) to borrow nor to coerce the old to lend (nor any other coercion) -- such things should be voluntary choices.
"Given your favored mechanism (people limited to the capital their parents can provide)"
Again, that's not what I said. Parents should at least provide for some minimum standard, but children are free to choose to try to achieve more than that. And that may very well include seeking startup capital from people who are not their parents.
"parents would provide what capital they can to their children, and in practice their children would be expected to provide for the parents in their old age"
No, parents should not expect that. Children aren't (or at least shouldn't be) born into slavery. (Unfortunately most children are born slaves in this country, due to the national debt and the vast amounts of government-enforced wealth transfer.) Yes, moral parents will have, after "giving" the child life, raised them and provided for them so that they can become independently able to take care of themselves. A child may be grateful for that, or a child may be so disgusted with the world around them that they wonder why their parents brought them into it in the first place, or maybe something in between or something else. A child may choose to help their parents out when they get old, or they might not. A parent might see the child as such an investment, trying to make the child be in the "grateful" and "choose to help their parents out" category, but like all investments there is risk, and the child is really not under a moral obligation because the child had no choice in being born, the parents made that choice without the child's consent. However, parents and a sufficiently mature child may of course enter into an agreement which is quite agreeable for both, whereby the parent provides the child with some amount of preparation for life which is above and beyond what is required for the child to eventually meet their own basic needs, and in return the child agrees to provide care for his/her parents when the time comes.
"He's ready to retire, so by your moral code he should give a portion of the firm to his son, liquidate the rest and live off the proceeds of the liquidation."
Um, no. He may have prepared his son (education, etc.) such that his son was able to get a job entirely unrelated to plumbing, or he may have taught his son the business and given him a job there, or maybe his son learned well enough to put him in charge of the business. The exact manner in which he helped his son prepare for life is up to him to decide, as is the exact manner in which he provides for his own retirement wealth. There are in general a multitude of solutions that can meet one's moral obligations -- the father just has to offer at least one of those.
"The correct solution is..."
Sorry, but there is no single correct solution for all cases. E.g., this contract firm may depend so much on the father for its success that his absence will leave it a money sink, and liquidation may be the best solution.
As far as understanding the ethics of this situation, it helps to break it down into various possiblities:
1. If the plumber wants to retire and finds some 3rd party who agrees it is a mutually beneficial arrangement for the plumber to sell the company to the third party in exchange for some kind of agreed-upon payment plan, and the father has met his obligations to his son by some other means (i.e., that doesn't involve his son taking over the business), I see nothing wrong with that. (I think in reality most such deals would involve a bank or insurance company in order to reduce the risk exposure, especially if the proceeds from this sale are critical to the retired plumber's ability to live out his years.)
2. If the plumber has provided his son more than one (reasonable/realistic) oppurtunity to become self-sufficient, at least one of which is *not* encumbered with debt, that also would be OK. The son is free to choose (and has actual choices) about how he provides for himself, and if he decides to take over the plumbing business and take on the debt to his father as part of that because it is the better deal (or a good enough deal, not necessarily in purely economic terms, but just from the son's point of view which may include such things as the value he personally places in "taking care of" his father), then that is fine.
3. If the plumber provides his son no other opportunities, so the son's only choices are to take over the plumbing business and take on debt to his father or get some other job or business which will require the son to go into debt to someone else, then it's a much stickier/problematic situation. Depending on the specific details of the situation (which would not be 100% objective -- the son's view of the situation matters here), the father may or may not meet his moral obligations going this route. You could write an entire book about the potential nuances of this situation. If I try to boil it down, what I come to is that the father needs to provide a deal to the son that is good enough that, even if the father had provided the son a reasonable, debt-free option for self-sufficiency, the son would have found the business + debt solution to be an as good or better option (i.e., a fair deal that he would have entered into voluntarily). But reality may make that hard to judge -- different people react differently to be give no real choice which in turn colors their valuation of that choice.
I'm sorry, I don't have time to sort out all the ad-hominem attacks, evasions, and contradictions in your answer. We will have to disagree.
Contradictions? The only contradictions you pointed out were in the strawmen you manufactured yourself. It's hardly my fault if you can not or will not read what I actually wrote and instead insist on seeing something that I did not write, and which does not even follow from what I wrote. (And this is not just an unsupported claim -- I detailed each such case in my previous post-set which is one reason it was so long, though I did not label them "strawmen" at the time because I was working under the assumption that they were simple misunderstandings on your part.)
Ad hominems? If I were to say that your argument is false because you are a socialist, or a muslim, or short, or stupid, or something like that, *that* would be an ad hom. I did no such thing. Perhaps you are using your own definition again. From http://en.wikipedia.org/wiki/Ad_hominem:
"An ad hominem (Latin: "to the man"), also known as argumentum ad hominem, is an attempt to link the validity of a premise to a characteristic or belief of the person advocating the premise."
(Hint: If you can't even identify which "characteristic or belief" of yourself I was allegedly linking to, then it's not an ad hom. Ditto if you can't identify where I claim cause and effect between that characteristic/belief and the [in]validity of the argument.)
So, you make a 100% vacuous post, falsely labeling your adversary's thoughtful arguments as being full of evasions, contradictions and ad homs while offering not a single shred of evidence. That you would exit with such a pathetic attempt at vilification as your parting shot is quite telling, and disappointing.
You claimed I am not honest. Either you believe that, in which case further discussion is fruitless. Or you were just using it as an ad hominem attack, in which case further discussion is fruitless.
Sorry to disappoint, but I hold discussions to learn. You discussions to score points.
I guess nuance is really not your thing. I was using "honest" in the same sense as in the phrase "being honest with yourself". It was not meant as an accusation of lying (which requires intent), nor as a statement about your character, but as a suggestion that you were not fully considering this particular situation with an open mind. You seemed to be too focused on special cases while ignoring the plight of the much more typical person which was resulting in a skewed view. And I believed if you took the time to think about it you would reach the conclusion given -- that most people are essentially stuck gambling (with their alternative being to watch their savings get eaten away by inflation).
"but I hold discussions to learn. You discussions to score points."
I am an avid seeker of truth. I vigorously defend a position I believe to be sound, but I will turn on a dime when I find that it is not.
Vigorously defending a position means (among other things) poking any hole in your adversary's position you can. This poking of course has to be based in reason and fact, but it doesn't have to be "gentle". In fact, if you don't want your point to be ignored, it's best if it's a good hard poke. That in turn encourages your adversary to respond to the point -- either showing how you messed up or altering their position (i.e., advancing the debate, which is the whole point). The more wrong I believe a position to be, and the more central to the issue under debate I believe that position to be, and the more real-world importance I believe it has, the harder I am going to poke any holes in that position.
You can try to deride it by labeling it "scoring points", but it *is* an integral part of how real debates work.
And that was an example of your evasions. You are now claiming that when you say I'm dishonest, you didn't really mean I'm dishonest. It's fruitless to hold any discussion with you, because of your humpty-dumpty approach to language. Your words mean whatever you say they mean, which is whatever allows you to score points.
And no, I don't find any particular nuance in logic. Unless you're messing with the definition of "nuance", too.
1a. I've already referenced wikipedia a couple of times for definitional issues. In this latest case (the word "honest") I tried something different. I didn't give a reference to wikipedia right away. Instead I specified the meaning I was using and let you dig yourself deeper. And here you go:
"Your words mean whatever you say they mean, which is whatever allows you to score points."
Except they don't. I have been using standard meanings in every case. Consider the current case. The word is "honest". The context of that word is this discussion (aka "discourse"). So let's go to the same reference (wikipedia) I went to previously: http://en.wikipedia.org/wiki/Honest
And oh, look, they even have a section on "Discourse". And what does it say?:
"In discourse a statement can be strictly true and still be dishonest if the intention of the statement is to deceive its audience. Similarly, a falsehood can be spoken honestly if the speaker actually believes it to be true, assuming the speaker doesn't unfairly reject or suppress evidence."
Pay particular attention to this requirement for speaking honestly: "assuming the speaker doesn't unfairly reject or suppress evidence". And note that corresponds very well with the reason I gave for suggesting you were not being honest: "you were not fully considering this particular situation with an open mind [...] ignoring the plight of the much more typical person"
In other words, I am using the word "honest" in a textbook fashion, and not in a "humpty-dumpty approach to language".
And ironically (and I guess I am treading dangerous waters using that word here because it's definition is so up in the air these days), you exhibit the exact same flavor of dishonesty (rejecting or suppressing evidence) by ignoring what I already pointed out to you: The existence of the phrase "being honest with yourself" which uses exactly this meaning. (Failing to be honest with oneself implies rejecting or suppressing evidence and does not imply being immoral or intentional lying.)
1b. Wow, twice in one short post:
"And no, I don't find any particular nuance in logic. Unless you're messing with the definition of "nuance", too."
Unfortunately I can't reference wikipedia this time because it doesn't have an actual entry for this (just a disambiguation page). But wiktionary does:
"1.Having nuances; possessed of multiple layers of detail, pattern, or meaning"
Now look at that. Nuance can be related to having multiple layers of meaning. And my claim (well, smart-alec remark really) was "I guess nuance is really not your thing." And the subject at hand was which meaning of the word "honest" I was using (which is language, not logic BTW). And you were apparently having difficulty accepting that it has multiple meanings (and that the one I was using was a valid one). [The layers, in case you are unable to see them without further assistance, are: At the simplest layer "honest" is about truthfullness. At a slightly deeper layer it's not so much about truthfullness and is instead more about intent. And at a deeper, more subtle layer it's not even just about superficial intent of truthfullness but also about making a reasonable effort at evaluating the evidence.]
So, that would be another case of me using a word in textbook fashion, and you taking a shit all over it for no good reason.
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