Saturday, July 30, 2011

The big question - are Republicans serious?

So, Republicans decided they'd play their brinksmanship game again. "Let's hold the fate of the country hostage! Let's demand whatever we want, and count on the Democrats to cave!"

And they've been playing BOOGA BOOGA, DEFICIT'S GONNA KILL YOU IN YOUR SLEEP! for... well, how long has it been since they lost the White House? About that long, maybe a bit longer.

So, they say that they have this big, big, big problem, a huge, horrible serious problem, and they can't possibly raise the debt limit unless that huge, horrible, very bad, very serious problem was dealt with.

But! But but but!!!

But that problem isn't worth raising any revenue over. Not one penny. Nope. Rich people gotta get richer, and pay lower taxes, and poor people gotta stay poor, and have all of their support programs cut, and, by the way BOOGA BOOGA, DEFICIT'S GONNA KILL YOU IN YOUR SLEEP!

Here's a bit of math for you - a bit of tax accounting. Let's say you're a sole proprietor or a partner in a business. Your salary each year is the amount your company gains or loses, revenue minus expenses.

Employee salaries are expenses. Keep that in mind.

Let's say you've had a good year, and you have an extra hundred grand in cold, hard cash you can do something with. You can take it home as a bonus to yourself - it's your company, you did good, maybe you deserve a reward. Or, you can hire another person or two, expand your business a bit.

What happens to that cost - *to you* - if your tax rate goes up?

If tax rates are, say, 30%, then hiring some new people with that hundred grand costs you a net of $70,000. If you'd taken that money home as a bonus, you'd lose 30% to taxes, and only get to keep $70,000.

If your tax rates go up - to 35 or 40% - what happens?

Now those new employees cost you a net of $65,000 or $60,000. See, if you'd taken the money home, you'd have paid 35% or 40% tax on it. The cost has come *down*. Sure, taking home $60,000 is better than a boot to the head, but lower taxes still make the cost higher.

Are you starting to see why we had such good growth under higher tax rates, when the top marginal rate was 70% or even more? People hired more - the cost was lower - and more people had good paying jobs so they had more to spend.

So, let's not pretend to buy into the Republican line that higher taxes on the so-called "job creators" would be hideously bad.

And lets get back to the main point.

Are the Republicans serious?

They had deals for two trillion, three trillion, maybe even four trillion, in spending cuts, and all they had to do was maybe - maybe! - bump up the top marginal rate back to where it was under Clinton. Just a few percentage points.

Well, if they're serious about BOOGA BOOGA, DEFICIT'S GOING TO KILL YOU IN YOUR SLEEP!, then a modest tax increase is certainly justified.

Hell, if they were serious about getting the deficit under control, they'd have let the tax rates go through, and then whined about how the Evil Obamonster forced them to raise taxes (as if they themselves hadn't ginned up the whole debt ceiling crisis!). They have a very good noise machine, trying to shame people into feeling bad if the government actually helps them out a bit, and trying to protect the rich at all costs.

But what's their latest response? To pass a bill that they know can't become law. A tantrum, in other words. "I'm going to hold my breath until the country turns blue!" they scream. And you know what they'll do, next. "We passed a bill! The Senate has to agree, and so does the President because we passed a bill!"

And maybe they'll even get some people to agree with them, and pretend like they've been negotiating in good faith.

Or maybe... maybe people will remember that they passed up trillions in cuts, because the deficit which was going to kill us all in our sleep wasn't actually dangerous enough to allow a modest tax increase on the people who've made out like bandits while the rest of the nation searches for decent jobs.

Friday, July 29, 2011

Problems with the media...

One of the biggest problems we're facing in this country is the media. They're incompetent.

There's little enough real reporting, and soi disant "news" organizations are pleased to report "Democrats say this, Republicans say that, who can tell the truth?"

Any why wouldn't they? Like Rush Limbaugh, they're not trying to be honest or truthful (and I hope you realize those *are* separate issues); they're in it for the money.

Here's a prime example:

This is not just reporting conflicting views; it's making damnfoolish statements.

Here's one:
When first created in 1935, the earliest retirement age was 65, a year older than the average life expectancy. Today, with the average life expectancy at 79, beneficiaries can begin collecting at 62 and might well live for decades into retirement.

Anyone who doesn't understand that life expectancy has increased because more people survive to adulthood doesn't have any business discussing social security.

In 1935, there were a lot of people who died in early childhood. If you have ten people, and one dies as an infant - 1 year old - and the other 9 all live to 75, what's the life expectancy of that group?

9x75 = 675, + 1 = 676. That one person who died at the age of 1 changes the average from 75 down to 67.6.

Figuring that this is a possibility isn't hard; it's grade school math. And finding out that it's true isn't hard either... not if you care enough to learn the truth.

Let's look at the next one:

Meanwhile, the base of support from workers paying into the system has shrunk dramatically. In 1950, there were 16 active workers paying for every retiree.

Wow! That sounds like, in 1950, for everyone who was 65 or older, there were 16 other people who were working - from, say, 18 to 64. Uh... that doesn't sound right.

And it's not. There were 16 workers for each retiree because there were a lot of people who were eligible, but not nearly as many who'd reached retirement age. This is exactly what you'd expect when Social Security eligibility is expanding. The people who made estimates for social security knew this, and planned for it.

Finally, we come to the biggest bit of foolishness.

With more money flowing out and less money flowing in, and the baby boom generation hitting retirement age in force, the Social Security trust fund is expected begin shrinking by 2015. By 2037, the fund is projected to run out of cash, which means it could only pay out as much as it takes in. That would force immediate benefit cuts of about 25 percent if no changes were made before then.

Oh, noes! In 26 years - *26 years*! - the trust fund will be exhausted. Well, that's a crisis. Seriously. I mean, how much could the world change in a mere 26 years?

Let's see, 26 years ago was... 1985. The Apple Macintosh had come out a year earlier - remember that cute "one reason why 1984 won't be like 1984" commercial? I seem to recall it had 128 kilobytes of memory - *128*! That's *twice* the memory of the Commodore 64! And it had fancy new floppy disks that held *720 kilobytes* of data each!

And I think it cost about $2000. I don't know if it came with a modem, but if it did, it probably would have been a 300 bit per second modem... quite a speedy little devil for its day.

Now, that computers and computing have advanced by light years in 26 years doesn't mean that Social Security has no problems - but it does show that if we're facing a problem that's 26 years in the future, we don't have to run around like our hair is on fire! Things will change in 26 years - there will be technological advances we might not even be dreaming of yet.

So we have time to think. And so we can think about reasonable solutions.

So, for example, we can reject stupid ideas like increasing the retirement age. Sure, rich people are living longer after retirement age these days... but poorer people aren't. Increasing the retirement age would be a huge burden on the working poor, and it would force them to stay in the work force longer, increasing the labor pool, and thereby increasing unemployment. (More workers looking for the available jobs means more people unemployed.)

We should also probably reject any benefit cuts until it seems likely that we'll need them.

Finally, in the "Credit where credit is due" department, let's give a nod to Mr. Schoen for getting one right:
As recently as the 1980s, the Social Security payroll tax covered roughly 90 percent of wages, according the Simpson-Bowles commission. But as wages above that cap have grown faster than the cap, the proportion of overall wages has fallen. Today, only 86 percent of wages are collected; by 2020 that will fall to less than 83 percent.

Before we make any other changes, let's seriously consider raising the wage cap - the wages on which OASDI is collected - until it once again covers 90% of wages, the way it was planned to. Then we can figure out what our projected shortfalls are.

Saturday, July 23, 2011

Econ and trade...

I've been doing some Economics reading recently, and finding it surprisingly accessible. Of course, I've been reading mostly Paul Krugman who is not just a brilliant economist, but also a good writer. I've nevertheless noticed something.

Although economic arguments are frequently made, and the arguments used to try to drive policy, economics is inherently morally empty.

Economics is a study of people trading, getting goods and services in return for other goods and services, either directly or indirectly. And economics can tell you about things that will decrease overall levels of goods and services, and what will increase them. But it doesn't (and shouldn't!) include a moral component.

For example: trade. Every economist will agree that trade is good. Trade between nations is good, and, with free trade, you'll see more goods and services for less effort than you'll see without it - even if other countries aren't trading freely with you, trading freely with them will (almost surely) create some kind of advantage in production of goods and services.

Let me re-emphasize that: even if the other country is engaging in protectionist practices, engaging in free trade with them is nevertheless likely to be better - more goods and services at a better price - than not.

Krugman had a fine way of looking at it. Imagine someone said they had a magic factory that could produce certain goods or provide certain services cheaper than you could get here. You give this person money, and they provide those goods and services. Well, you don't understand how this all works, but clearly, if this person can provide nice things cheaper than others, there's no problem with rewarding that person, right?

Then, you learn that there's no factory at all - just a fleet of trucks, or boats, or planes. Hah! Gotcha! It's just international trade!

Let's all pretend that none of us saw that coming, and have a good laugh at ourselves. Of course, *something* will always be made a bit more cheaply, a bit more efficiently, somewhere else. Let's import that something, and export something that we make a bit more cheaply or efficiently.

Now, let's consider another possibility. Someone says that he can provide raw cotton more cheaply than other places can provide it. He has this "magic factory". We, thinking that, of course, it's just another fleet of trucks or boats or planes, buy the cotton and discover that, whoops - no, this time it's slave labor providing the advantage. Well, the cotton didn't actually become more expensive, did it? It might still be cheaper than one could get elsewhere, right? But that shows us the problem with this model of trade as a magic factory.

Economics is not concerned with how, or why, a country has a competitive advantage in trade. It's only concerned with noting that there will be such advantages.

The advantage might be workers who are slaves, or the next best thing to being slaves. The advantage might be a lack of workplace safety that results in the deaths of many workers. It could be lax environmental controls that poison people near the factory.

Economics won't consider these things. That's not its job.

What does scare me is that there are economists who won't consider those things either. Nations gotta grow, after all... if Country_A wants to let polluters pollute and treat its citizens likes slaves to get GNP higher, so be it.

But economic growth is not everything. Money isn't a moral principle. And a nation that has a competitive advantage at manufacturing widgets will either still have that when there are good worker and environmental protections - or, they won't, and they'll find something else to export.

Thursday, July 14, 2011

The debt ceiling debate

I'd like to talk to some of my liberal friends out there about what's really bugging me about the debt ceiling debate.

I've seen a lot of anger at Obama for not taking a stronger stand against the right-wing. Why is he giving in to their demands for steep cuts in spending?

Well, I don't know what the deal might entail at this time, but... the hard and fast truth is, the US does have an ungodly amount of debt, and it does need a plan to reduce it. Even if we could eliminate the deficit tomorrow, we'd be carrying a very heavy debt load compared to GNP.

Yes, the right-wing has lied about us being in dire financial straits before, and they're lying now about the effects (the deficit has nothing to do with our immediate problems with slow economic growth an unemployment), but we are in a serious bind, financially.

Now, either a moderate can try to formulate a good plan to try to fix that problem, and try to get the Republicans to buy into it, or, we can just let the Republicans scream about it, and kick up a fuss, and keep grabbing headlines, and keep driving the debate.

Now, there were two ways that this could have happened. There could have been a strong, politically active, energized left-wing to push some good ideas and get them a lot of press, and show that there was good political cover for pushing those ideas.

That didn't happen.

Or, someone like Obama could notice that the Republicans had telegraphed that they were going to take the country hostage over the debt ceiling, and see that there was an opportunity. If he offered a good plan, the country could see that he was offering a good plan, and the Republicans could either take the deal, or look like hostage takers.

He could, as Laurence O'Donnell put it, let them realize they were playing the hostage game with a President whose last reaction to hostage takers was to shoot them in the head.

Now, me, I don't like some of what I've heard about possible deals. I've heard of chained CPI for Social Security; I don't like that a bit. Right now, the payroll tax covers a smaller percentage of total salaries than it has historically; we ought to at least change that before considering reductions in benefits.

I've heard of cuts in Medicare, and... well. Folks, we pay more for medical care than any other nation; I've seen charts that suggest that the US government pays more per capita for medical care just in Medicare and Medicaid than other countries pay total, for all health care.

Think about that: just Medicare and Medicaid, alone, should have enough dollars being spent to cover everyone... not just Medicare and Medicaid recipients, but everyone in this country!If that's the case, we sure as heck have find cost savings in Medicare! We just need an intelligent plan to do so. We can't cut it by loading the cost on senior citizens (as the Ryan plan, passed by House Republicans, would do), and we can't cut it by reducing benefits; what we need is to find out how those other countries manage to provide benefits for so much less money than we do.

I've heard about a lot of cuts in other programs, and, yeah, I hate it. I really hate it.

But we do need to get indebtedness under control. And we know the Republicans aren't going to discuss a good idea in good faith with the President. Remember health care reform? He took a plan the Republicans used to propose, and they called it horrible, socialist, unconstitutional, and spread lies about death panels. (Yes, I know, not all Republicans spread death-panel lies - but they all let the lies be spread, favoring party loyalty over honesty.)

So what choice did Obama have? He had to let them spring their trap, to take their hostage, and make their demands... and find a way to turn their demands around to something sensible.

That was the only way. Why? Because, face it - for all the passion and concern on the left, the left is far too passive in trying to drive the news cycle. The Republicans can whip up front page headlines out of a couple of peace-loving Muslims who've helped the US fight terrorism, because those folks want to buy an old Burlington Coat Factory. Could the left-leaning folks do that?

Why would they want to? Okay, good question. But the fact is, they couldn't whip up that level headline-grabbing over something important either.

And that's the secret weapon of the Republicans these days. They do grab the news cycle, and keep it moving. And I don't mean their elected officials.

Liberal folks in the US just don't do this. And that's partly why we're in a situation in which the GOP can take hostages, and then we blame our potential allies for doing the best hostage negotiating they can.

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