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Democracy is the theory that the common people know what they want, and they deserve to get it good and hard.
—H.L. Mencken
I’m not a fan of government.
I have a jaundiced view of government, not because a book told me to, and not because some blowhard on the radio told me to. No, I have a jaundiced view of government because I worked for a Long Island municipality for twenty-one years. And of all the “public servants” I worked with over those twenty-one long years, I don’t think I can name ten who really gave a crap about the taxpayers.
The vast majority of my co-workers viewed their employment as a dodge. Their objective was to do as little work as possible for as much taxpayer tribute as possible. And to this end—thanks to copious PTO, arcane work rules, money-grubbing politicians, and wantonly derelict management—they were stunningly successful. In fact, they were so stunningly successful, they used to refer to their jobs as “high-class welfare.”
Now here’s the real rub. The vast majority of my co-workers were good people. I know that sounds absurd, and for the longest time I couldn’t reconcile the gnawing contradiction between their values and their actions. How do decent, capable people off the clock become so lazy, incompetent, and shiftless on the clock? Then it hit me. Good people are no match for the inherent flaws of government.
The Inherent Flaws of Government
This isn’t a dissertation, so I’m not going to slam you with a lot of detail. But here in a nutshell are the inherent flaws of government. These are the reasons why government is so inept and why so many of its employees behave so poorly.
1. Government has a conscripted clientele. Apple can’t generate revenue by forcing people to buy its products. Likewise with GM, Walmart, and Netflix. Government on the other hand isn’t so constrained. It can legally force the people living or operating within its jurisdiction to fund its operation (hello taxes). And it doesn’t matter if the people like the quality of the services being provided, or even use the services.
Since government can’t lose “customers” as easily as private sector businesses can, it’s more apt to provide shoddy service. Why? Because providing a quality product or service is super hard work. Just ask Apple, GM, Walmart, and Netflix. And human nature being what it is, people won’t work super hard unless they absolutely have to.
Having a conscripted clientele removes the need for government employees to work hard.
2. Government spends other people’s money. Before I left for college, I was notoriously lackadaisical when it came to turning off lights. In college, however, I never exited a room without turning off the lights. Why? Why was I so profligate with electricity at home and not at college? Well, at home, dad was paying the electric bill. In college, I was. In other words, when I wasted electricity at home, my dad was punished. When I wasted electricity at college, I was punished.
Pain is a great motivator. Remove the pain of bad financial decisions and people will be more inclined to make bad financial decisions.
Government employees spend taxpayer money (i.e., other people’s money), and they never get punished for being poor stewards of that money. “Never,” of course, opens me up to charges of hyperbole. But I’m going to risk that because I’ve never in my fifty-seven years seen a headline reading anything close to this: “Humongous State Highway Project Finished Two-Years Late and Four Times Over Budget: DOT Head and All Assholes Involved in the Project Fired.”
If anyone has a news report of government employees being severely punished for grossly wasting taxpayer money, please send it my way.
3. Government can legally sell favors. Just recently, Amazon announced that one wing of its second headquarters will be located in Long Island City, New York. To woo Amazon to New York, New York State and New York City offered Amazon nearly $3 billion worth of subsidies and tax breaks. Now here’s a question for you. Is that $3 billion worth of taxpayer-funded goodies fair to the other businesses in New York? I mean, c’mon, whatever happened to equal protection of the law? Why is Amazon more special than your friendly, neighborhood bodega? I’m sure a bodega owner or two wouldn’t mind reduced property taxes and some construction grants to upgrade their facilities.
When it comes to taxes and subsidies anyway, the government can legally treat some Americans like second-class citizens. We are told by the fans of big government that this is a good thing. Government is wiser and nobler than private citizens and it should be able to encourage activities that better promote the commonweal.
Hogwash.
Because of inherent flaws one and two (and six and seven coming up), the government bestows favors based on campaign contributions and votes, not on reason, virtue, and an unflagging desire for a “more perfect union.”
Allowing the government to sell favors is the perfect way to favor the wealthy and organized (e.g., big defense, big finance, big medicine, big education, big law, etc.). This lamentable fact wouldn’t be so bad I suppose if the wealthy and organized were completely selfless. But that sadly is not the case.
4. Citizens can legally buy favors. Build it and they will come. Create a market for favors and favor seekers will beat a path to your door. And to the government’s credit, it doesn’t discriminate when it comes to favors. It’s an equal opportunity whore. As long as you’re wealthy and organized and can give politicians what they covet most—money or votes or both—then you’re entitled to government favors too.
5. Monetization of workplace rewards kills morale. This is a fancy way of saying that “politics” or “pay to play” or “honest graft” creates a lot of pissed off worker bees. In my municipality, promotions and bonuses were heavily monetized by management. If you wanted to get ahead, you did so not by doing your job extremely well, but by contributing a lot of money to the Republican Party. Those who neither had the money nor the stomach to become Republican lackeys naturally came to resent the monetization of promotions and bonuses. And many of the resentful rebelled against this injustice with the crudest of all weapons at their disposal: sloth, sloppiness, and sabotage.
6. People aren’t angels. Government must be manned with the same imperfect humans that make up our nation’s workforce. This means the average government employee has average morals. He or she obeys the law and follows the work rules. But don’t expect him or her to resist unethical or immoral behavior if that behavior is legal and complies with department policy or norms. At my municipality, for instance, most of my co-workers were bums. On the typical workday, they gave the taxpayers about two to three hours of half-assed effort. Such behavior was atrocious, of course, and a slap in the face to the taxpayers. But such behavior was legal (there’s no law against slackerism), and such behavior complied with department policies and norms (management seemingly had no interest in getting the most out of its labor resources, and there was no fiduciary-like law compelling them to put the taxpayers’ interests first).
And I’m not even going to address the damage to good government caused by the small number of government employees who have below average morals. Here’s the bottom line. Absent a major upgrade to our existing arsenal of checks and balances, there’s no way government can rise above inherent flaws one through five. In order to do so, it would need a workforce comprised entirely of people with Jesus-like integrity. And that ain’t happening anytime soon.
7. Voting is a poor check against government’s inherent flaws. One of the most pervasive arguments against investing in actively-managed mutual funds is that it’s very hard to pick tomorrow’s rockstar fund managers. Fund managers who are kicking-ass this year can very well be next year’s duds. The market is that fickle and cruel. Now a question. If the average retail investor can’t reliably pick the “right” fund managers, what are the odds that this very same guy or gal can step into the voting booth and—with really no objective data to guide his or her decision—reliably pick the “right” politician? And by “right,” I don’t mean a politician who votes the “right” way on important bills. I mean a politician who won’t be ground down or corrupted by the inherent flaws of government and who actually does something to mitigate them. I say those odds are very low. And our national debt of $21 trillion—a glaring example of chronic voter impotence, if there ever was one—says I’m right.
More Government Bad
When I hear about a CEO making over $100 million in a single year or about the cost of a prescription drug skyrocketing overnight from $5 a pill to $1,000 a pill, I sympathize with the supporters of big government. They see the profit motive of the private sector, and the greed and avarice it seemingly engenders, as a major drag on affordability. Remove the profit motive by moving a private sector function to the government and that function should theoretically become more affordable. Or will it?
The notion that government can do things cheaper than the private sector is misguided for two reasons. First, the excesses in the private sector that make the news and piss everyone off are largely the result of the government bestowing favors. If the government didn’t thwart competition and stifle innovation, it would be a lot harder for corporate boards to lavish CEOs with $100 million windfalls and for drug companies to charge $1,000 for a pill that costs less than $5 to produce. So when you see these outrages, you’re more than likely not seeing the worst of free market capitalism. You’re more than likely seeing the worst of crony capitalism. To honestly compare the efficiency of government to the efficiency of the private sector, then, you have to compare government, not to crony capitalist firms, but to non-crony capitalist firms.
In a fair contest measuring efficiency, non-crony capitalist firms would wipe the floor with the government. And this brings me to the second reason why faith in government as a low-cost provider of goods and services is misguided. It has to do with anatomy.
In the private sector, the profit motive acts as an invisible hand. It forces non-crony businessowners to serve their interests by serving the customer’s interests. Improved product or service + lower price for said product or service = more customers and more profits. In government, however, the inherent flaws we discussed above act as invisible feet. They force politicians and public administrators to serve their interests by serving the interests of the politically strong, not the interests of the taxpayers in general. Higher taxes for the politically weak + strategic favors for the politically strong = a greater chance of being re-elected and maintaining power.
If one can argue that profits in the private sector are a drag on affordability, one can equally argue that the inherent flaws of government in the public sector are a drag on affordability as well. And here’s the crucial distinction, the drag of government’s inherent flaws is way more burdensome than the drag of profits. To illustrate this sad reality, I’ve conjured up an imaginary company, the Acme Sex Toy Company, and looked at the hypothetical costs of producing 100,000 units of its latest sex toy, El Senor Dinero Bigote (SDB for short).
The Acme Sex Toy Company is a pretty lean operation. In order to produce 100,000 SDBs and bring in a million dollars worth of revenue, it spends $550,000 on labor, $200,000 on materials, and $150,000 on overhead. Its profit of $100,000 amounts to ten percent of SDB revenue.
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Since the Acme Sex Toy Company produced 100,000 SDBs for a million dollars in revenue, the per unit cost of an SDB, including the cost of profits, is ten dollars. If we took away the profits, and expected the owners of the Acme Sex Toy Company to help cure retirement blahs for nothing, an SDB would cost nine dollars.
Let’s now see how much it would cost the government to produce 100,000 SDBs.
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Even with one less cost of production—profits—the government isn’t nearly as lean as the Acme Sex Toy Company. Its labor costs are triple and come to $1,650,000. And the reason for this is because its union employees must have “livable wages.” And each of its union employees must also have annual PTO of twenty-five vacation days, five personal days, eleven holidays, and thirteen sick days. And let’s not forget healthcare and pensions. How could union employees have any dignity without gold-plated health insurance and generous pensions guaranteed by the state constitution? Finally, and this is a biggie, we can’t forget all the phony-baloney jobs that need to be created for all the misfit relatives and friends of the politicians who oversee the production of SDBs. Government has to hire fifty percent more workers than the Acme Sex Toy Company to produce the same number of SDBs. Politicians have a lot of misfit relatives and friends.
Material costs are likewise triple what they are for the Acme Sex Toy Company. The government can’t outsource mustache bristles for the SBD to China. In fact, it can’t outsource any of the SBD components to China. It has to get all of its materials from American companies. And any American company it uses must pay its workers, as per the law, “livable wages” as well. Also, any American company it uses must have—per the law again—the right number of women and minorities in the right number of positions. Companies that can fulfill the government’s exacting contract standards aren’t common and their wares don’t come cheap.
Overhead costs? Yeah, they’re triple too. The warehouse where the government’s sex toys are stored is owned by a very influential politician’s brother, and oddly enough, the contract that saddles the government with very high storage rates was awarded on a no-bid basis. Imagine that.
In order to produce 100,000 SBDs, the government spent $2,700,000. That comes to a per unit cost of $27. If the government wanted to sell SBDs to the consumers at the Acme Sex Toy Company’s no-profit per unit cost of $9, it would need to borrow $1,800,000 or increase taxes by $1,800,000 to cover the shortfall. Either way though, the government would only appear to be a low-cost producer of SBDs. In actuality, of course, society would be poorer if SBD production were shifted to the government.
So this is why I’m a limited-government nutter. The larger the government footprint becomes, the more areas of life become subject to the inherent flaws of government. Not good. The government, because of its inherent flaws, is a very clumsy tool. Whenever you use it, incompetency, inefficiency, and stagnation follow in its wake. You end up paying 3x or 4x for a good or service of a given quality rather than x. And the only reason most people fail to appreciate this is because the government’s inherent flaws aren’t as easily documented as profits. Right after you read this awesome post, for instance, you could bring up Apple’s latest 10-K SEC filing with a simple Google search and see how much before-tax profit Apple made. If you brought up your local city or county’s latest budget, however, I doubt you’d find a section detailing what politician’s brother won what no-bid contract.
What, Me Worry?
Up until very recently, I worried a great deal about taxation. The march of government—because of immigration and a socialist-loving school system—is unstoppable. Taxation, therefore, will only grow more ominous by the year. (This is especially true when you consider that deficit spending is nothing but deferred taxation.) But then I had a change of heart. Maybe the Democratic Republic of the United States won’t be so bad.
One reason for this change of heart is my fellow bloggers. There are several bloggers who I deeply respect—hello Vicki, Matt, Angela, and Penny—and their knowledge of government is just as intimate as mine, and they aren’t nearly as repulsed by government as I am. In fact, they welcome greater government involvement in our lives. They want “free” healthcare, “free” daycare, and “free” college. So it’s entirely possible my firsthand experience with government was an outlier—that is, it’s entirely possible my fear of government is overwrought and my notion of the government having inherent flaws is a bunch of alt-FI flapdoodle.
Since people smarter than I welcome bigger government, I have reason to be cautiously optimistic. But here’s the real reason I’ve had a change of heart about our growing Leviathan: I’m not paying for it. That’s right. It suddenly dawned on me that I legally don’t pay taxes. So what do I care if our government adds healthcare, daycare, and college to our basket of unalienable rights? Sure, if my inherent flaw theory turns out to be correct, and more government means more incompetency, inefficiency, and stagnation, taxes will eventually be gushing out of many a wazoo. But only from the wazoos attached to people who pay taxes. My wazoo will be perfectly safe.
I’m not particularly proud of my Alfred E Neuman epiphany. To be indifferent to the harm of excessive taxes just because I don’t pay them is pretty scummy. But that’s the subject of another post. For now, though, I just want to show you how you too can legally pay zero taxes. And as an added twist, I want to show you how to do this with aplomb. You could legally avoid paying taxes of course by being unemployed and living in a van down by the river. But how much fun is that? No, if you’re going to be a world-class moocher, you might as well do it in style. Here’s how.
The Glories of Being Poor, Rich, and Financially Independent in a Low-Cost State
If you legally don’t want to pay taxes, and have plenty of money to live a fabulous life, you need to do three things. First, you need to have a household income that is just shy of two times the federal poverty rate. Second, you need to be financially independent—that is, you need to have at least 25 times your annual living expenses sitting in the bank or various investment accounts. And finally, third, you need to live in a low-cost state, particularly as it relates to taxes. Hit this trifecta and you won’t be obligated to pay taxes. Here’s the concrete evidence.
Household Income Just Shy of Two Times the Federal Poverty Rate
Check. My household income for 2018 will be $30,000. Since the federal poverty rate for a family of two is $16,460 in 2018, that puts my household income at 1.82 times the federal poverty rate.
Financially Independent
Check. Mrs. Groovy and I—thanks to luck, discipline, and a ravenous thirst for FIRE-spiked Kool-Aid—achieved financial independence by early 2014. We didn’t say goodbye to our crummy jobs until October of 2016, though, because we’re wussies and we wanted to enter retirement with a fat-FIRE portfolio rather than a normal-FIRE portfolio.
Live in a Low-Cost State
Check. North Carolina still has enough “don’t tread on me” citizens to keep taxes low by national standards.
Pay No Taxes
Because of the magic of tax-loss harvesting, my AGI for 2018 will be $27,000. Let’s now calculate the income taxes I’ll owe on that amount.
I file a joint tax return with Mrs. Groovy. The standard federal deduction for a married couple in 2018 is $24,000. Subtract $24,000 from $27,000 and you get a taxable income of $3,000. That amount of income puts Mrs. Groovy and me in the 10 percent tax bracket. Three thousand times 10 percent comes to $300. My federal income tax bill for 2018 will be $300.
The standard deduction for a married couple in North Carolina in 2018 is $17,500. Subtract $17,500 from $27,000 and you get a taxable income of $9,500. North Carolina has a flat-rate income tax of 5.499 percent. Times $9,500 by 5.499 percent and you get $522. My state income tax bill for 2018 will be $522.
My combined state and federal income tax bill for 2018 will be $822. Sweet. But we still have two more taxes to consider: property taxes and sales taxes.
My property tax bill for 2018 is less than half of what it normally is. We sold our Charlotte house in May and have been living with my parents ever since. The property tax bill for five months of homeownership, a 2004 Camry, and 3.4 acres of undeveloped land comes to $1,001.17.
Thus far in 2018, I’ve paid $739.22 in sales taxes. But we still have another month to go and it’s impossible to record every sales tax you pay (I’m not going to hold up the McDonald’s drive-thru because the harried person at the first window failed to give me a receipt). So let’s pad my sales tax bill by a comfortable margin and say my sales tax bill for 2018 will be an even $1,000.
Okay, my total tax bill for all levels of government will come to $2,823.17. Divide that amount by $30,000, and you get an effective tax rate of 9.4 percent for 2018.
Obamacare to the Rescue
“But wait just a cotton-picking minute,” I hear you screaming. “I thought you said you don’t legally pay any taxes. That $2,823.17 you’ll be paying in various taxes ain’t nothing.”
Right you are, groovy freedomist. But you’re forgetting about my Obamacare subsidy. Because my household income is only eighty-two percent above the federal poverty level, the federal government considers me rather pathetic and worthy of a lot of help. My Obamacare subsidy for 2018 comes to $23,640 (94% of my annual healthcare premium). That makes me a gigantic teat-sucking layabout. I’m consuming far more tax dollars than I’m contributing. The paltry $2,823.17 I contribute to the national bill for missiles, welfare, and roads is completely wiped out—many times over—by the $23,640 Obamacare gift the taxpayers are lovingly throwing my way.
Subtract $23,640 from $2,823.17 and you get -20,816.83. This in turn will give me an effective tax rate of -69 percent for 2018. So, yes, my claim that I legally don’t pay taxes is perfectly valid.
To paraphrase the immortal Chico Esquela, “big government is being berry, berry good to me.”
Live a Fabulous Life
I legally don’t pay taxes. That’s fine and dandy. But am I beating the system with aplomb? Am I being a world-class moocher with style?
In a word, “yes.” And I came to this conclusion because 1) I own 100 percent of my time, and 2) I have enough discretionary income to do what truly makes me happy. Here’s a nice bulleted list to show you what I mean.
- Mrs. Groovy and I spend roughly $36K a year.
- Dividends from our portfolio and a small pension from New York State easily cover our annual living expenses. Because of this we’re retired and own 100 percent of our time.
- Of the $36K in annual spending, a little more than $10K is discretionary. That’s the money we use to enjoy life—to travel, visit family and friends, tinker on home improvement projects, take long walks, and write inane blog posts.
- Because we have a fat-FIRE portfolio, we could comfortably double or triple our discretionary spending. We haven’t pushed the hedonistic envelope thus far in retirement because Groovy Ranch has been a rather time-consuming endeavor. But watch out in 2019, 2020, and 2021. Australia, Ecuador, Thailand, and Vietnam—here we come.
There you have it, groovy freedomist. It’s hard not to be zip-a-dee-freakin’-doo-dah happy when you don’t have to work and you have $20K-$30K of fun money to spend every year.
Bottom line: income poor-asset rich financial independence is the greatest tax loophole ever devised by man. Achieve it and you’ll have plenty of time and money to do what you truly love, and, as an added bonus, the government will refuse to tax you. How freakin’ groovy is that!
Groovy Ranch Update
Okay, enough of my twisted views on government, taxation, and the greatest tax loophole ever devised by man. What’s up with Groovy Ranch?
Last week we got our CO and wrote our final check to Terry. Groovy Ranch is officially open for business. We don’t have any furniture, and we’re sleeping on air mattresses, but the build process is finally over and we’re now proud residents of Louisburg, North Carolina (population 3,502). In my next post, I plan to do a deep dive on our adventures in building from scratch—the good, the bad, and the ugly. In the meantime, though, I want to share our numbers. Here is what Groovy Ranch cost us.
| Item | Contract Price | Actual Price | Over/Under Amount |
|---|---|---|---|
| 3.4 Acres of Cleared Farmland | $34,000 | $34,000 | $0.00 |
| House - 1,528 Square Foot Farmhouse | $228,750 | $230,897 | $2,147 |
| Garage - 24 x 28 | $24,750 | $27,889 | $3,139 |
| Totals | $287,500 | $292,786 | $5,286 |
At first glance, the cost of our house does seem a little high. The final price per square foot came to $151.11 ($230,897 ÷ 1,528). But Raleigh and Wake Forest are super popular right now on the real estate front and they’re sucking up a lot of construction material and construction talent. So everything’s just more expensive. The days of getting a quality home at $100-$110 per square foot are long gone. On the bright side, though, even at $140-$150 per square foot, North Carolina is still a bargain. My architect cousin was in town from New York this past Thanksgiving, and he said new construction prices on Long Island are over $400 per square foot. Plop my home in a nice town on Long Island and it would have cost over $600K to build. Ouch!
Final Thoughts
Okay, groovy freedomist. That’s all I got. What say you? Do you think my fears about growing government are reasonable? Or do you think I’m being a soy boy? And what do you think about using the principles of FIRE to skirt the cost of civilization and become a world-class moocher? Is that a moral or ethical strategy to pursue? Let me know what you think when you get a chance. Peace.
Great post, Mr. G! Now that we are sort of settled for awhile I’ve got some time to read.
El Senior Dinero Bigote? Brilliant! (I assume it was a good-natured jab at he who is arguably the godfather of the FIRE movement). 😀 Not sure if he’s ever thought of himself in that way……
Cheers, and congrats to you and Mrs. G on Groovy Ranch. It looks great.
I was hoping someone would comment on El Senior Dinero Bigote! Made my day, my friend. And I love the Mr. Grumby avatar. Very breaking badish. Is it new? Or have I been missing it for a long, long time?
My father was a union employee of both a major fortune 100 company in NY and the city government. Both places had their issue, but the city job was horrendously wasteful. It’s clear to me why the NYC subway is so expensive to maintain. I’ll simply say too many people doing too little work. He too retired to the Carolinas, and everyone is better for that. He actually found living in the development he lives in someone that went to high school with him in Brooklyn, a long, long time ago. Consider me well in your camp on the government
Thanks, GenX. I really appreciate your kind words and your recounting of your dad’s experience with government. Your dad strikes me as one righteous dude. Give him my regards when you get a chance. Cheers.
Nice blog! I started a blog 6 months ago at 67 and am looking for blogs that I can learn from. I know it is hard work and often frustrating. I will give a good try even though I know I don’t have as much ‘time’.
Hey, Trippe. Welcome aboard. Blogging is equal parts hard work and enjoyment. It takes a special breed to appreciate that dichotomy and accept for the long haul. I wish you well, my friend. Cheers.
My first impression reading this was, “Groovy must have seen the Phil Donohue/Milton Friedman interview on YouTube” wherein Mr. Donohue complains of the greed of business and Dr. Friedman points out the greed of government. The climax is when Dr. Friedman asks where will we find angels to run government?
I have an answer. Who can justly redistribute to each according to their needs from each according to their means? Me. Happily, I am willing to do the redistributing for a small fee.
Haha! Yes, Steve, I have seen Friedman’s lively exchange with Donohue on YouTube. Great stuff. Mr. Friedman’s the first academic that introduced me to the notion that men don’t suddenly become angels when they’re employed by government. Thomas Sowell and James Q. Wilson were the second and third academics who “woke” me to this sad and tragic reality. And, yes, if it isn’t someone chosen randomly from the Boston phone book, I would love to grant you ultimate control of the powers wielded by government. Cheers, my friend.
When contemplating the powers wielded by government I’m reminded of the Lord of the Rings. The point is not to put the ring of power into the hands of the “right” people, but to unmake the ring of power.
What a wonderful post and honestly I share my views on the government much like you (I have never worked in government but all your experiences mentioned mesh exactly with I perceived to be going on behind the scenes).
I for one do not want to get government more involved with our affairs. Everything the government touches seems to create waste, deficit, unbelievable hoops to jump through (in my field of medicine it has made doctors more like clerical people that actual healers), etc.
I also find it amazing that the Healthcare system they force on the public is not one they have to be subjected to. Members of congress for example have quite a loaded Healthcare system available to them so they have no worries at all about the one in shambles they are leaving for the majority of the public. I say get rid of this private Healthcare for them and force them to be participants in the one for the public and you will see how quickly they will be interested in making changes to improve it (self preservation/self beneficial is a highly motivating factor).
I’m glad you used free in quotes when describing free Healthcare, education etc being favored by the other bloggers you mention. Nothing is free. There is always someone paying for it so in essence they are asking for programs to be available for all as long as someone else can pay for it (and history shows that this will be the wealthy). I’m sure everyone’s tune would change if it equally effected the bottom line of every individual in the United States. But as long as it is not me then sure let’s provide everything for free.
At one point the rich/wealthy will flee (it is already happening in states like California where docs are leaving to practice in Lower cost of living places like Texas). Keep taxing the wealthy and soon there will be no one left to tax but the 99%. Then there will be real public outcry.
Xrayvsn recently posted…How Unhealthy Relationships Can Trigger Monetary Problems
Amen, Xrayvsn. If talent and capital is not treated fairly, it will leave. The goo-goo types never seem to understand this. My biggest fears about “Medicare for all” are cost, quality, and innovation. The first will go up, and the second and third will go down. Not good. And if the government tries to “fix” the inevitable problems caused by “Medicare for all” by squeezing the doctors, will really find ourselves in a lamentable situation. Sigh. Thanks for stopping by, my friend. Awesome comment.
Wow… Lots to think about here, which is exactly why I love coming to this blog.
And while I agree that there are egregious inefficiencies in the government, or the private sector for that matter, we do have a disagreement on some portions of it.
My firm belief is that the government should provide what is considered a “public good” (https://en.wikipedia.org/wiki/Public_good).
I guess I agree that we should be able to spend money as we see fit. Which begs the interesting question, who would actually pay for roads, or the military by choice? Or better yet… the police & fire department? Would they come to your house and watch it burn because you didn’t pay to support it?
(https://www.theatlantic.com/technology/archive/2018/11/kim-kardashian-kanye-west-history-private-firefighting/575887/)
So I guess the question then becomes, how you define a “public good”. Because just allowing private companies to run rampant has it’s own issues IE the mortgage debacle, etc.
Maybe we’ll have to hop on another podcast/discussion method to engage in a lively discussion.
As always, thanks for making my brain work.
MrWow recently posted…A Tale of Two Races
Hey, Mr. WoW. Sorry for the really late reply. Excellent point about public goods. And I totally agree about roads, firefighters, and the military. But here’s my beef. I believe that all levels of government should be able to take a 20 percent combined bite out of everyone’s income. In 2017, total US income was roughly $16.5 trillion. Twenty percent of that comes $3.3 trillion. That amount of money, if managed wisely, would pay for a shitload of roads, cops, aircraft carriers, teachers, and welfare. Limiting government (and the political majority) to a 20 percent diet wouldn’t produce anywhere near the misery you see in most of the world. Do we really need over 800 military bases scattered all over the world? Do we really need to pay $100,000 for BAs that won’t even be used by half of those who receive them? Now consider the following:
According to the Left, the federal government is run by an oligarchy. That’s over $4 trillion annually controlled by a few.
According to the Right, the $1 trillion we spend annually on “education” is used mostly for indoctrination rather than education.
For the longest time, I thought both the Left and Right were being hyperbolic at best and nutso-cuckoo paranoia at worst on these positions. Now I’m not so sure. I think the Left and Right are onto something. And for me, that’s the finally nail in the coffin. We should be very stingy when it comes to sharing our money with the government. It is simply not a good steward of our wealth.
And, yes, perhaps we can set up one of our illustrious round tables with Mr. and Mrs. CTF to discuss the matter. But I don’t know how entertaining that would be. In a battle of wits with you, I’m severely unarmed. In other words, you’d wipe the floor with me. In a kind way, of course. You’re the best, my friend. Talk to you soon. Cheers.
While there is much to be agreed within your sentiments about big government and much to disagree with (I always enjoy your posts), I can’t help but be reminded that you benefited well from those “livable wages, pensions, and healthcare” that unions fight for while you collected a public funded paycheck to reach early retirement ;D
Spot on, Kate. I no doubt benefit from a lot of things that I complain about. But here’s my dilemma. If I come to believe that one of my government benefits or perks is actually unfair to the taxpayers, what do I do? Say nothing? Defend my benefit or perk at all costs? For instance, over a 21 year career, I contributed less than $10,000 to my pension system. If I live to 85, I will get over $600,000 in pension benefits. How does that math work? I’m not saying government employees shouldn’t get retirement benefits. I’m just saying that a lot of public pensions are taking advantage of the taxpayer and it would be more just if all governments shifted to a 401(k) with a government match. But your point is well taking. I do feel a pang of hypocrisy every time my pension check is deposited into my bank account.
I’m stuck on this part:
“If you wanted to get ahead, you did so not by doing your job extremely well, but by contributing a lot of money to the Republican Party.”
Gobsmacked.
Yeah, my municipality was run by the Republicans. When I started working for this municipality in 1986, you could rise to middle-management without having to kiss Republican ass. By the time I left in 2006, the Republicans monetized every conceivable perk, bonus, or promotion in sight. It was really pathetic. And a tremendous morale killer.
As a citizen of another “democratic” country with an equally “effective” government, I can only agree with your points. Oh and did I mentioned that we have all those “freebies”. We have free education (primary, secondary, and even some tertiary programs), free healthcare (works perfectly while you have no health issues), free childcare (almost, our daughter is in kindergarten, we pay around $35 a month for 6-8 hours of accommodation and two meals). While these are nice to have, I have to admit that the system works painfully inefficient and the behaviors of the folks operating these facilities are determined only by inner motivation. There are good folks and even some success stories here and there but the slothy behavior is more common according to my experience. The private sector is not the ultimate solution for everything IMO and I honestly think that some roles should be filled by the government but they should really really try to make things work better and more efficiently. This is probably a mission impossible situation, but there are some examples in western Europe which we could learn from. Thanks for the interesting read Mr.G!
[HCF] recently posted…Deadly Finance
Sorry for the super late reply, Mr. HCF. I total agree with your comment. We need government because so many people are screwed up culturally and financially. If we were culturally and financially stronger, we could get by with much less government.
Healthcare, daycare, and education (along with cable internet or bananas) are not and cannot be rights. If they were, then those rights would require the interference with someone else’s rights. Is this sentiment under the assumption that the funding of these potential big government programs will not interfere with your inalienable rights?
Agreed. Our expanding notion of unalienable rights is actually inimical to freedom. But many of our fellow citizens think otherwise. And these mistaken souls are growing in number. Sigh. I’m afraid we’ve reached the tipping point and the American experiment–the last bastion of freedom on earth–will slowly perish.
Hello!
And I actually agree with a lot of what you’ve said about big government. We struggle with dealing with certain gov employees who make things SO much harder (be it laziness or rigidity) but they make things take forever. And thanks to labor unions and state mandated pay for public projects, an entry level laborer (think shovel in hand) on a city project makes more than an associate professor. Something is definitely wrong there.
HOWEVER, those inefficiencies do not mean I’m not a fan of bigger government in some instances – like you mentioned, healthcare, childcare, environmental protections, and maternity leave, to name a few. How we get there, I’m not sure. But no backstops or support for some of our biggest challenges isn’t a solution either.
Angela @ Tread Lightly Retire Early recently posted…Women’s Personal Finance Wednesdays: Roundup Week 11
Hey, Angela. Excellent points, my friend. I do believe, however, that government backstops must stop at some point. A compassion state with a blank check is just another name for tyranny. Here’s an analogy–not the best analogy–but one that immediately came into my head. Many people argue that women can’t be completely free without reproductive freedom. And there’s a lot of merit to this argument. Well, similarly, I don’t think one can be completely free without paycheck freedom. After all, if the compassion state (and the security state, for that matter) has an unlimited right to your paycheck, how are you anything but a comfortable slave? So this is why I’m against big government. Even if it’s doing noble things with the tax dollars it confiscates, it’s still the enemy of freedom. And here’s the real kicker. The only reason we need more government backstops is because we’re becoming culturally weaker and weaker. Think about it. How many able-bodied adults who work, procreate responsibly, shun drugs, shun crime, and manage their finances well need government help? We have too many f-ups in this country, and I contend that government “help” is making matters worse. It’s subsidizing stupidity and locking people into damaging habits. Well, that’s my pathetic two cents. Thanks for a great reply. I don’t know if my response adequately addressed your legitimate concerns, but I gave it the ol’ blogger try. You’re the best, Angela. Peace.
Wow, Mr G. You are magical on that keyboard. Too bad I’m responding w my thumbs, so I’ll keep it short. Big government is a very legitimate concerned. The spreading inefficiencies are almost impossible to stop, and will cost all of us more $$ in the end. Enjoy your teat sucking while it lasts, that milk supply won’t last long. I love your description of deficits as simply deferred taxes, and your explanation of govt vs private sector production is brilliant. Ok, thumbs are done. Great post!!
Haha! Thank you, sir. I think Americans love bigger government because they love to shake their heads in disbelief and complain. And bigger government will give them plenty of opportunity for those two avocations. I don’t know when the collapse will occur, but it will occur in our lifetime. Not going to be fun, of course. But I think FIRE enthusiasts and those who have their financial houses in order will weather the fall the best. I will be praying for those leaving paycheck to paycheck or worse. Thanks for stopping by, my friend. Always a pleasure hearing from you.
I feel like this deserves a nuanced response with facts and figures that doesn’t really work with a comment. I’m planning on 2019 on the blog being longer articles published less frequently, so maybe one will be a defense of the government bureaucrat.
As usual, I agree with some of your points and disagree with others. A few points in response:
– Your example for comparing production costs between the private sector and the government seems to make the most generous assumptions for the private sector and the least generous for the government. Even correcting for that, the private sector is probably the better venue for producing goods (although not to as extreme an extent as your example). There are some things that the private sector is better for and some that the government is better for. Americans generally need to do a better job of trying to figure those things out rather than just picking a side between “Government is the Best!” and “Government is the Worst!”
– The flaws you point out in government workers are also present in a lot of private sector workers. I’ve known public sector and private sector workers that work their asses off and are great at their jobs. I’ve known public sector and private sector workers that slack off and do just enough not to lose their job. If you view work as just a paycheck, then you’re going to be unmotivated regardless of who is paying you.
– On government employees being overpaid. As a whole, low wage workers are paid more in the public sector than the private sector. Highly educated workers are paid far more in the private sector than in the public sector. I’d be interested in seeing the specific numbers, but on the whole I’d imagine this probably evens out so that the government is paying its employees roughly on par with the private sector.
Thanks for the shoutout as one of the good government people. I always appreciate sparring with you and respect your approach and open mind.
Matt @ Optimize Your Life recently posted…Where’s All That Money Coming From (Universal Basic Income Part 4)
Awesome counterpoints, my friend. And you’re absolutely right. Even though my corner of government was very dysfunctional, I must admit that we did heroic work during emergencies (e.g., snowstorms, hurricanes, floods, etc.). So government ain’t all bad. And from working in the private sector for ten years, I can attest to the fact that private sector workers ain’t perfect either. I’ve seen a lot dumb decisions in my brief time in the private sector. I like where you’re going with your comment, my friend. Government is suited for some jobs and not for others. We need to do a better job of setting the government up for success. We also have to do a better job of incentivizing government workers to do their jobs better. I have some ideas and would love your input. Yes, I’m working on my second opus, The Groovy Guide to Political Independence. The plot thickens, my friend. As always, thank you for a great comment and for making me think. You’re a gentleman and a scholar. Cheers.
You’re making me rethink my distaste of government, and that’s saying a lot, as we are also the recipients of upwards of 20K in Obamacare subsidies. I’ve never considered how much the taxes we actually pay here in California are offset by that huge chunk of change.
It’s a ticking time bomb in my opinion. With a lot of money tied up in IRAs, we are not doing any Roth conversions so that we don’t mess up those health care tax credits. We are thinking when we hit 70.5, we will leave California for a no state tax location. But it remains to be seen what the tax picture is going to be by then. With the huge deficits growing without bound, it seems inevitable that tax rates will be higher and higher in the years to come. My gut tells me that putting off the Roth conversions might not be such a good idea. But since our California state tax would be very high, and we’d have to still pay for a Health Share Ministry, it just doesn’t make sense to do it any other way. But hey, you’ve given me a different perspective now. I too can stop worrying and learn to love “the bomb”.
Congratulations on the completion of Groovy Ranch. The kitchen looks fantastic.
Susan @ FI Ideas recently posted…To RE or not to RE, That is the Question
You’ll be eligible for Medicare at age 65 so you can start doing the conversions then.
I’ve maintained all along that this “gift” subsidy is actually a gift to the insurance companies. We’re supposed to be thankful for the government’s generosity but they’ve set up a structure that allows for inflated policy prices. The insurance companies are getting the subsidy whether we use medial services or not. In a free market there’s no way the policy we have would cost over $20K. But health insurance is no longer part of a free market system.
I hear ya about Obamacare subsidies and how they screw up Roth conversions. If it weren’t for Obamacare, we would have started converting our traditional IRAs to Roths. But those subsidies are tough to walk away from. I think when I accounted for the reduction in subsidy due to a higher income, the Roth conversion would have been hit with a 50 percent tax. Not good. So we’ll just have to wait until we’re on Medicare to start the conversions. That will give us a window of a few years. Thanks for stopping by, Susan. Great comment.
Excellent post G. I land on your side of things here and I also love the Groovy Kitchen. Happy mooching!
Haha! I always thought of myself as a stand up guy. But when you really examine my situation, you can’t help but conclude that I’m one of the biggest moochers in the republic. I don’t like that the government’s wasting taxpayer money on me. But I’m certainly not refusing the gift. What that ultimately says about me isn’t something I care to address right now. I’m sitting in Groovy Ranch, drinking green tea, and watching Jeopardy with Mrs. Groovy. Life is good and I don’t want to ruin the mood. Thanks for stopping by, my friend. May your mooching days come soon and be plentiful. Cheers.
i just hope they never figure out to look at assets for some of this stuff. we want to ride the gravy train with biscuit wheels – groovy style. hell, we paid long enough. once we lost one full income in ’17 i looked at the tax brackets and realized the setup truly does favor middle income earners.
the place looks great.
freddy smidlap recently posted…Get Your Money Straight and Say NO to Crappy Offers
“…the setup truly does favor middle income earners.”
Brilliant observation, my friend. The government isn’t just Santa Claus to the rich and the poor, it’s also Santa Claus to the working class and the middle class. And that’s why income poor/asset rich financial independence is the ultimate sweet spot when it comes to life and tax optimization. You get the best of both worlds. If you own your home outright and live in a low-tax state, your cost of living is very modest. And, if you’re financially independent, you’ll have enough money to avoid gainful employment and pursue your passions, and the government will tax you so gingerly, you’ll wind up with a negative effective tax rate. Thanks for stopping by, my friend. Your comment made my day. Peace.
Wow…. That was a long one. You’ve convinced me that big government is bad. But what’s the alternative? Less government isn’t great either. I think you’re in the sweet spot now. Hopefully, we’ll get there at some point. Paying taxes is painful.
The kitchen looks perfect. It’s cozy and just big enough. Everyone did a great job there. Congrats on moving in. Happy holidays!
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Right you are, my friend. The best way to mitigate the inherent flaws of government is to limit the scope and footprint of government. But the limited government horse has been let out of the barn a long time ago. And now, because Americans in general are culturally very weak, cutting back the scope and footprint of government would cause a lot of pain and deprivation. I’m afraid the status quo is the only politically viable path, and that means we will continue pursuing full-blown socialism until we finally collapse like the Soviet Union. Haha! Ain’t I a font of good cheer. But you pointed out a critical paradox that can’t be resolved. That which will one day destroy us is currently sustaining us. Thanks for stopping by, my friend. Love the way your mind works.
Well said. This topic is extremely complex and politically charged, but I think you did a great job breaking down the innate flaws of a big government. I’ve worked in the private sector in my career, which works closely with the government and I can confirm just about everything from your experience I’ve seen as well. I don’t have the answers to fix it all, but I do know that becoming FI is the ticket to not have to worry about it at all!
Young FIRE Knight recently posted…Net Worth Update: November 2018
Thank you, YFK. The great challenge before us is how to craft a system that incentivizes government workers with average morals and drive to pursue excellence on a regular basis. I have some ideas and will include them in my next opus. But some blogging schmoe from North Carolina shouldn’t be leading this discussion. It would be nice if our elected officials lead this discussion and did so at great length during the campaign season. But I suppose that is asking for too much. Thanks for stopping by, my friend.
Congrats on completing the house.
Elections every other November year are better than nothing for letting us common folk keep Uncle Sam in check. But, it’s only as good as the candidates running.
But, I had the fortune to get a jump in a low-tax state a decade ago and haven’t looked back. It’s the best way I can help my wallet.
P.S. Can’t what to see Dr. Groovylove tamper the inner workings of the War Room when nobody’s looking.
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Thanks, Josh. My favorite line in the movie was this.
“You can’t fight in here, this is the war room!”
Classic. I’ll have to watch Dr. Strangelove again one of these days, perhaps before the new year. Enjoy low-tax Tennessee while you can my friend. Cheers.
Congrats on the house! The kitchen looks great. As for the rest of the post, let’s just say I had a run in with big government for my latest gig and the employees were not helpful. I specifically asked one person who was accountable for the mistakes and delays in my processing and she just said…wait for it…NOTHING. She did not even answer me. Quite frustrating and may delay my start date, but that is the way things go.
Hey, DDD. Sorry to hear about the red tape delaying your start date. It’s not fun when you’re ready to go and the wheels of bureaucracy just chug along at their own pace with no sense of urgency. I know that dismal state of affairs well. And it’s so frustrating, especially when you know there are a lot of competent and decent people on the government payroll. The trick is to set things up so excellence is the routine not the exception. I got some ideas on that front. I’ll be sure to include them in my next opus, The Groovy Guide to Political Independence. Cheers, my friend.
I agree with all you have to say about government. Zero motivation due to the lack of carrots being dangled in front of the workers faces. The weakest link the the chain sets the bar height and that’s mighty low.
I dig that no tax math. Hope we can pull something off like that. Franklin county is quickly being run over by people moving out of Wake for cheaper housing prices like you’ve discovered. Looks like y’all did good on budgeting the ranch.
LOL! You nailed it regarding Wake Forest. There are so many people there now compared to ten years ago, it’s reminding me of Long Island. The traffic during rush hour is crazy. Glad we’re out in Louisburg. I figure we got a least ten years before things get crazy out here.
Well, 44% of people will pay no federal income tax so you’re in good company. Coming from someone in the 56% who is paying federal tax, I say enjoy your “free” loot!
Dave @ Accidental FIRE recently posted…I Miss The Power Of Teamwork
Thanks, Dave. But paying zero in federal taxes is only half the battle. The real trick is paying zero in federal and state and local taxes. I hit that trifecta because of my Obamacare gift. I can’t imagine it lasting too much longer. Or I hope it doesn’t last too much longer for the sake of the productive in this country.