THE ANTI-CONVENTIONAL WISDOM EDITION.

Perusing my usual news and opinion sources the past few days I have found several pieces where the writers offer their views that go counter to what conventional wisdom would want you to believe.

Leading off, the eminent Eliot Spitzer, one-time whoring governor of New York, advocates for…HORRORS… allowing illegal immigrants to obtain drivers’ licenses. http://www.slate.com/blogs/spitzer/2012/08/22/obama_immigration_and_driver_s_licenses_why_states_should_let_undocumented_immigrants_get_licenses_.html

In this article Spitzer notes that prior to 9/11, it was fairly common, in both red states and blue, to allow illegals to get a license. He pushed for this in New York before his downfall. Alas, some of the 9/11 murderers had drivers’ licenses so, to stop terrorism, we must prevent these mass killers from driving legally. Obviously they would obey this law and refrain from getting behind the wheel without legal authority to do so.

Too, the general hatred of illegals has reached almost farcical levels and there is an ample collection of voices wanting to deny them ANY rights.

However, this is one of those situations with unintended consequences.

Illegal immigrant Juan enters country. He secures employment, brings his family, and needs transportation for work/getting groceries, taking the kids to school activities, etc. Just striving to live the American dream, no?

But, just as native borns entitled to get licensed are wont to do, Juan gets in an accident where he is at fault. (Been there, done that). If he has a license, he can get insurance at least to cover liability. Without a license he is uninsured. Thus, there is no financial protection for any humans harmed in this accident nor do the victims have means to repair or replace a damaged vehicle.

In short, would you rather be hit by an insured driver, or one with no financial responsibility?

Our second example comes from the wonderful world of direct cash transfers from the government to poor people..

Matthew Yglesias, for one, believes this transfer is a wonderful idea. http://www.slate.com/blogs/moneybox/2012/08/23/eitc_works_higher_benefits_lead_to_better_outcomes_for_kids.html

Here he reviews some research on the Earned Income Tax Credit that finds that in families who receive at least $1000, the incidence of low birth weight is significantly reduced, thus producing healthier babies who would necessarily require less health care.

Yglesias posits that poorer people, when they have an influx of cash, tend to focus on spending it on necessities rather than extraneous goods. People who are much better off, have their basic needs readily fulfilled so tend to spend their extra cash on what many would consider luxuries.

(This assessment is not meant to demonize the well-off. It only highlights that spending priorities are different depending on income levels.)

Indeed this truism (if one accepts it as such) is borne out where, for instance, special rebates are given taxpayers or even when some states declare a sales tax holiday during the back to school season. The folks without much to start with will put that money into circulation, while someone of means may not be rushing out to spend their one time $300 rebate.

In the economy I think of this as the trickle UP theory. Give people more money to spend and they will do so boosting demand for goods and services that will enable businesses to glean more profits or even expand and create jobs. (Where’s my Nobel Prize?)

This is not to say cash handouts should be given freely without conditions. But as a hand up assisting people to make better lives for themselves and their families, they are more effective than commonly believed.

There is a constant drumbeat of folks saying government “does nothing but waste my money”. I, or private business could spend it more effectively. Sorry, Monica Potts disagrees. http://www.salon.com/2012/08/21/the_feds_do_it_better_salpart/

Here she presents five things government does better than you. These are:

  1. Social Security
  2. Health care
  3. Addressing poverty
  4. Disaster relief
  5. All the little things local governments do to make your life easier.

Her analysis in general can be boiled down to acting as a large group with risk spread out widely produces the desired protections that the money is intended for in the first place.

For instance, universal health care in other countries enables them to keep costs down compared to the U.S. In disasters, leaving the cleanup and rebuilding to the local community can be overwhelming but the federal government in effect pools all national resources together to aid those suffering catastrophes.

But Social Security occupies its own niche, too. Besides any collaborative or collective benefits attached, real life demonstrates that far too many Americans ill-prepare themselves for their retirement years even as investment vehicles to do so are created by the government (covering tax consequences) hand in hand with private investment opportunities.

In the recent recession I had close friends telling me how much the value of their 401K’s had dropped. Those are not risk free investments even if they potentially have a much larger payoff compared to the guaranteed, safe returns in the SS fund.

Too, surveys have shown that millions of workers do not take advantage of the opportunity to establish a 401K through their employer. Many who do, withdraw part or all of those funds for sometimes frivolous uses and forever lose whatever possible gains they would have realized.

So this cliche applies to the sector that wants to eliminate these important government services. Be careful what you wish for, you might just get it.

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