Thomas Friedman Gets Entitlements Wrong


English: In the United States, Social Security...
English: In the United States, Social Security benefits for married workers with stay-at-home spouses. According to author Joseph Fried, this graphic uses information from: C. Eugene Steuerle and Adam Carasso, “The USA Today Lifetime Social Security and Medicare Benefits Calculator,” (Urban Institute, October 1, 2004), from: http://www.urban.org/publications/900746.html. Note: The calculator does not include the value or cost of the Social Security disability program. (Photo credit: Wikipedia)

 

 

 

Thomas Friedman Gets Entitlements Wrong

 

Sorry Kids, Thomas Friedman Is Not Very Good at Economics

 

http://www.cepr.net/index.php/blogs/beat-the-press/sorry-kids-thomas-friedman-is-not-very-good-at-economics

 

Many young people may have been mislead by Thomas Friedman’s column, titled “Sorry Kids: We Ate It All,” which implied that our children might somehow suffer because we are paying so much to seniors for Social Security and Medicare. The reality of course is that if our children and grandchildren do not enjoy much higher standards of living than do current workers and retirees then it will be because the rich have rigged the deck so that they can accrue most of the gains from economic growth.

 

This is easy to show. For example, if we look at the Social Security trustees report we see that average annual wages are projected to grow at more than a 1.3 percent annual rate between now and 2050. As a result, the average before tax wage will be more than 60 percent higher in 2060 than it is today. If our children and grandchildren get to share equally in these gains then they will be far richer than we are today.

 

It’s true that we will have a higher ratio of retirees to workers in 2050, just as we have a higher ratio of retirees to workers than we did in 1970. Just as the increase in the ratio of retirees to workers over the last 4 decades did not prevent an increase in average living standards over this period, there is no reason to think it will prevent an increase in average living standards over the next four decades.

 

I heartily agree with Dean Baker of the Center for Economic and Policy Research. The generational theft storyline has been running around for a while and it is both wrong and unconvincing. Let’s take me for instance, I have my form in the mail from the Social Security Administration telling me what to expect. If I wait all the way until I’m 70, I will receive, $1,440 a month. I’m a little curious? When did that become a princely sum? Is this the kind of money that will enable me to go the sand and surf of Hawaii or does it more look like I’m going to have trouble paying for a place to live and basic groceries. I’m leaning toward the latter conclusion. Even in Arkansas, 1,440 dollars a month is not going to pay for a mansion. I might add that I have been paying in on that all of my working life, so it’s not free as far as I am concerned.

 

Well, what about Medicare? Well, it’s obvious to me although not to Friedman, that medical patents are being abused, that not allowing prescription drugs to either be bargained for by the federal government or purchased overseas is creating dramatically high medical costs and there are a bundles of other good choices we have to reduce out medical costs instead of telling seniors, “It’s just too bad, you got old while Thomas Friedman was considered an expert.”

 

Where do these people get the gall to tell the great middle class to go without pensions and health care when they have expressed no willingness to fix the nation’s problems? Why do we have a system where capital gains is taxed at less than wages? Why do we have no financial transaction tax to discourage the speculation which has wrought havoc all over this nation and the world?

 

 

 

James Pilant

 

From around the web.

 

From the web site, Okieprogressive.

 

http://okieblog.wordpress.com/2013/05/29/social-security-and-medicare/

 

Social Security and Medicare are programs that are needed relevant and necessary!

 

The economy is slowing repairing itself but we still have those on the right who want to deep-six any social safety net that would protect our seniors, the poor and disadvantaged, the sick, the halt and the lame. These are very people whom even Jesus Christ said should always be protected and aided. People like Tom Coburn don’t agree with Jesus on that, even though Coburn professes to be a follower of that Jewish Rabbi from Nazareth he had publicly stated that Social Security and Medicare are programs that we really don’t need to continue. Tom must have read a different Bible from all the ones I have read.

 

But, that is the current mantra for a lot of neo-cons and they are influencing a lot of neo-newbies who are coming and have come into the workforce over the past decade. These are people most of whom have never known any toil or strife in their lives because of safety nets like Social Security and Medicare were there for their parents and grandparents. They are the very ones buying to the neo-cons who claim most of the people who are poor don’t try hard enough or don’t or are lazy and shiftless and don’t really want to work. It’s a completely asinine idea, but they are buying hook line and sinker. When you have never known what is to be hungry or out of work I guess it is difficult to understand that, that is something that doesn’t necessarily mean you caused it.

 

 

Chained CPI


Seal of the United States Social Security Admi...
Seal of the United States Social Security Administration. It appears on Social Security cards. (Photo credit: Wikipedia)

006cFrom the Huffington Post, authored by Sabrina Siddiqui and Mike McAuliff.

The chained CPI works by assuming that when the price of a product, such as beef, gets too high, consumers don’t keep paying the higher prices. Instead, the model predicts they will switch to something cheaper, such as chicken, keeping their cost of living lower and leading to a lower rate of inflation, as measured by the chained CPI. The lower rate of inflation would mean a downward adjustment in cost of living, and thus stingier benefits.

The cuts would start small, but wind up costing beneficiaries thousands of dollars over time, which is why Democrats have traditionally fought the idea.

But Pelosi wrapped both her arms around it Wednesday, insisting she does not regard it as a “cut.”

“No, I don’t,” she told reporters. “I consider it a strengthening of Social Security, but that’s neither here nor there.”

Later in the article, there is this quote:

That logic, however, is only ever applied to entitlement programs that have their own revenue streams. Nobody would attempt to argue that the military was strengthened by cutting its budget, or that education was strengthened by slashing funding for it.

Social Security was created in the 1930s to combat elderly poverty. It worked: Giving money to older Americans made them less poor. Shrinking benefits would correspondingly lower their standards of living.

“Strengthen the Program?” Since Social Security has the resources to be fully paid up until 2038 if the American economy grows at about a 2% rate I don’t understand why there is a crisis. Why are we penalizing the elderly by reducing already budgeted and paid for benefits? Is it ethical?

No, it’s not. Those people on benefits and people who have paid into the system deserve what they have paid for. This is a form of theft. If the program were in fiscal trouble, this would be a different matter but it is not.

What’s going on here? The federal government pays out more money than it takes in on taxes on every program but social security. So by what logic, is social security a legitimate target for budget cuts?

James Pilant

Here are other comment from the web –

From the Huffington Post:

Democratic Rep. Keith Ellison (Minn.) said Tuesday that one part of a potential deal to avoid the so-called “fiscal cliff” is actually “a stealth way to give people less” and that he and other members of the House Progressive Caucus won’t vote for any plan that includes it.

“It’s a bad idea and it’s a stealth way to give people less,” Ellison told HuffPost Live host Alyona Minkovski. “And, so we’re saying we’re not gonna do it. It is a benefit cut — and here’s the real problem with it being a benefit cut: It would be absolutely horrible if it were a benefit cut but the cut was designed to extend the life of Social Security and to make the program more solvent. But that’s not why they’re doing it. They’re doing it so that they can preserve somebody else to have a tax cut and to not raise taxes on the top 2 percent.”

From the web site, aluation – (This is a strong comment, and I would like you to go to the site and read it in full.)

Commenter extraordinaire anne at Economist’s View posted a very helpful brief from Alan Barber and Nicole Woo of the CEPR on the disaster that a switch to the chained CPI poses for those dependent on Social Security, and less obviously, on the middle class in general.

Here’s a nice one from the web site, Poverty and Policy by Kathryn Baer.

The chained CPI attempts to reflect consumers’ behavior in response to prices as well as prices themselves — specifically the fact that people change their buying habits when prices rise. When beef prices increase, they buy less steak and more chicken, etc.

A switch to this CPI would thus slow benefits growth. But would it accurately reflect retirees’ living costs? Apparently not.

The Bureau of Labor Statistics has been maintaining an experimental CPI for elderly Americans for about 30 years now. It’s found that the index rises somewhat faster than the CPI-W, mainly because seniors spend a greater share of their budgets on health care, housing and, to a lesser extent, heating oil.

The average gap between the indexes isn’t great for any one year, but it mounts up over time. Switch to an index that rises more slowly than the CPI-W and the gap between living costs and benefits increases.

This is from Universal Values Advisors Market Insights: (This is a more in-depth analysis.)

The reality is that, like much of what comes out of Washington, the “Chained-CPI” concept is neither new nor more accurate. This chain-weighted concept is just another step in a series of steps that began in 1980 aimed at changing the CPI concept from one that measures the cost of maintaining “a constant standard of living” to measuring, really, not much at all, as I will explain later. The real purpose of altering the methodology is twofold: 1. To reduce the reported increase in inflation for political reasons; and 2. To lower future federal budget costs of Social Security, Medicare and government pensions by lowering the COLA adjustments without having to haveCongress vote for those or the administration sign it into law. Just note, however, what class bears the biggest burden of this – seniors and retirees.

 

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Four Impossible Budget Plans, Four Candidates


Four Fiscal Phonies – NYTimes.com

Of course, Mr. Romney isn’t alone in his hypocrisy. In fact, all four significant Republican presidential candidates still standing are fiscal phonies. They issue apocalyptic warnings about the dangers of government debt and, in the name of deficit reduction, demand savage cuts in programs that protect the middle class and the poor. But then they propose squandering all the money thereby saved — and much, much more — on tax cuts for the rich.

And nobody should be surprised. It has been obvious all along, to anyone paying attention, that the politicians shouting loudest about deficits are actually using deficit hysteria as a cover story for their real agenda, which is top-down class warfare. To put it in Romneyesque terms, it’s all about finding an excuse to slash programs that help people who like to watch Nascar events, even while lavishing tax cuts on people who like to own Nascar teams.

Four Fiscal Phonies – NYTimes.com

I never know whether I should write leading into the article quote or comment down here after it. I guess I’ll just hit or miss until I figure something out.

Well, the meat of the matter is that we have four president candidates for one party. Everyone of them is worried sick about the deficit and believes it will destroy the nation and do it quick. (I can provide you with quotes running down the page in an almost infinite pattern.) Everyone of them has a budget plan. And everyone of these budget plans would make the deficit worse. All of them insanely propose dropping taxes on the 1/10 of 1/% who have done so much to make the United States the envy of every ruthless malefactor of great wealth on the globe.

So, let me get this, the deficit is a serious problem but not serious enough to raise taxes, in fact, it’s not bad enough to make cutting taxes a problem.

Our political speech seems to have arrived at a high level of incoherence.

We’ve got to do better than this. We have to have people with some grasp of facts or, just at least, be able to count.

James Pilant

I’m adding a little note here defending Social Security from the deficit hawks who also want to cut taxes. JP

Social Security Didn’t Create the Deficit

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David Brooks: To Hell With the Polls! | Video Cafe


We all know that David Brooks is one of those “very serious people” (I owe Paul Krugman for the phrase.) who believe in Centrism. That is a very pretty word that indicates that if we all play nice we will live wonderful lives. We will also have to give up social security, medicare and a host of other programs because unlike the 1%, we less significant people are the ones supposed to compromise and be nice.

I’m not nice. I believe in conflict. I believe that until we make politicians suffer and lose office over their willingness to compromise on social security that the program will be in danger from the “centrists.”

The centrists believe in politicians governing without the influence of the unlettered masses – that would be us. You, when your social security benefits are taken away from you (the ones you’ve already paid for) that is shared sacrifice when the rich get tax cuts that is a spur to the economy and a reward for the “productive” classes.

You see, centrism is a fancy word for elitists and a top down ethos of enlightened philosopher kings keeping the craven, greedy masses (yeah, that would be you) in line.

It’s a precious belief in the virtue of oligarchies. It’s royalism without the royal family just the next enlightened figure to ignore popular opinion and do what is “necessary.”

This is contemptuous of democracy and the hard working, honest American people.

And this is what passes for intelligent comment at the New York Times.

James Pilant

David Brooks: To Hell With the Polls! President Obama Should Not Campaign on Raising Taxes on the Rich | Video Cafe

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Jayaraman Rajah Iyer Comments on My Post – The Ethics Sage Wants the Politicians Gone!


Jayaraman Rajah Iyer is a buddy of mine. He comments on economic issues and always has something interesting to say and often controversial as well.

Here are his comments in full.

James Pilant

Jayaraman Rajah Iyer

I quote from my bookmark of Washington Post by Jim DeMint “On Sept. 12, 2009, millions of citizens rallied across the country. They gathered in the nation’s capital and other cities to convey a clear message: You work for us; we don’t work for you. Stop the bailouts, the takeovers, the debt and dependence”

In response to the first amendment Freedom of Speech, ‘Government for the People’ maintains stoic silence and conveys ‘yell as you like. Always, it is Government for a few people’.

In India we do have to go a long way in bringing the Government tuned to the people. Those who are trying, struggle but no comparison to the struggle of the masses who exist below poverty line, a 550 million of them. However, there are some initiatives from the government that were put through some years back, would be of considerable interest to the people of United States. It was in 1965 that the government of India brought out a compulsory Cost Audit for manufacturers of vegetable oils as an essential commodity for the masses. Every fortnight companies like Unilever had to go to the government for permission to increase the price of a tin of vegetable oil justifying in detail the cost escalation the company in question had gone through the period of 15 days. [Dr. Kaplan’s ABC that came in 1983, was in full use in 1966 by every such company providing the government with cost data analysis.] The cost audit system was successful and subsequently it was extended to very many commodities including medicine and petroleum that are in vogue even today.

Had not the Indian government introduced the cost audit we would have rich companies, poorer government and higher inflation. In US it is unthinkable that the government would intervene in the running of the companies. Today US is full of companies that are very rich, like Apple is said to have more money than the government, but government is running at loss. The US Senators and Congressmen do not realize that ‘Government for the people’ is no longer with them, it is with a few with ‘massive private gains at public loss’. Corporate Social Responsibility in US is an illusion.

Why is the Debt Ceiling Crisis a Business Ethics Crisis?


Because there are several serious business ethical questions involved.

We simply be in this mess without astroturfing by corporate interests. That is immoral. Creating apparently grass roots public groups with corporate money and then launching it at opponents as if it weren’t the financing corporation is blatant deception.

The hard right wing candidates would have had a great deal more difficulty getting elected without last minute infusions of corporate cash made possible by the Supreme Court’s Citizen’s United decision. The idea that a corporation is the equivalent of a person in terms of political and free speech activity is more political comedy than rational thinking. The concept that a corporation with forty billion dollars it can allocate to a political campaign should be on the same footing as a actual human being who on the average makes about 34,000 dollars a year in this country is a concept whose only value is a massive shift in political power and that is what is happening. American citizens are increasingly insignificant in the political realm. The decision was immoral. It placed the interests of powerful corporations above that of humanity.

The current economic crisis was caused by financial profiteering. Without this current depression, there would have been a great deal more tax revenue. Besides the practice of “disaster” conservatism, where any economic disaster can be exploited to impose financial hardship on the middle class, would not have been possible. Financial profiteering is immoral. It is also illegal but you couldn’t tell it by the actions of “our” government.

I can go on – blatant manipulation of our laws to directly divert public money into corporate coffers – outsourcing – avoidance of taxes – and on and on. All of these and more created our current impasse and are destroying the ability of middle class Americans to own homes, provide for their children, have stable retirements or too survive financially day to day.

We have a crisis in this government but the moral and ethical crisis of the businesses of this nation are root and branch of the problem.

We would not be in this situation without rampant ethical and moral failings in the business world. And the corruption has afflicted our government and there seems little hope of a cure.

James Pilant

Paul Krugman Says to the House of Representatives – Vote NO


Best line –

Third, the idea that a temporary disruption would permanently damage faith in US institutions now seems moot; if you haven’t already lost faith in US institutions, you’re not paying attention. 

Paul Krugman

This is from Krugman’s post – If I Were In The House

Here’s his essay –

I guess I have to be explicit at this point: yes, I would vote no.

What about the catastrophe that would result? Several thoughts.

First, what I keep hearing from people who should know is that Treasury won’t actually run out of cash tomorrow, that it still has a few more days.

Second, the people who claim that terrible things would immediately happen in the markets also claimed that there would be a big relief rally once a deal was struck. Not so much: the Dow is down 121 right now.

Third, the idea that a temporary disruption would permanently damage faith in US institutions now seems moot; if you haven’t already lost faith in US institutions, you’re not paying attention.

Fourth, those legal options are still there. Obama can move now; and even if he eventually loses in the courts, that gives him time.

Sure, it’s risky. But the whole situation is immensely risky, thanks to the extremism and bloody-mindedness of the right. There are no safe options, and trying to play it safe when there is no safety lands you, well, where Obama is right now.

I fully agree. No deal and default is better than submitting to blackmail and creating a new forth branch of the government.

James Pilant

Bulldoze: The New Way To Foreclose (via Time Magazine)


Let me try and understand this. The banking industry seized these homes, these precious homes, often the most valuable single thing that a family had, and having seized the home and cast away the occupants like so much chaff, they bulldoze it?

The banks do the deals because once the properties are donated they no longer have to pay taxes or for upkeep. Tax experts say the banks may also be able to get a write off for the donation. That appears to be a better deal than trying to repair some of these homes, which according to a BofA spokesperson are more economical to demolish than fix up. The local governments like these deals because they get free land to develop or use for open space. Cleveland-based Cuyahoga County Land Reuntilization Corp., which inked the deal with BofA, has been one of the most aggressive local government organizations in striking these deals. Housing economists like these deals because they remove homes from the market that would otherwise sell for a low price or not at all, dragging down home prices in general. An oversupply of homes on the market has been once of the big problems plaguing real estate. At the end of June, it would take nine and a half months for the current number of homes on the market to sell. The housing market is considered healthy when supply equals six months of sales. So taking some of these homes off the market for good could remove some of the inventory drag.

Thank God, Time Magazine is on the story. They’ll give these banks a talking to. They’ll call down the righteous ire of the oppressed down upon these home destroyers.  But wait … !!! –

The question is whether the banks will ever put up enough housing for demolition to make a difference. The Obama administration says it is working on its own plan to revamp its loan modification program in order to help keep more people in foreclosure in their homes, reducing the number of foreclosed properties on the market. Some areas of the country are looking at how to speed up foreclosures in an effort to return some normality to the market. It’s not clear that any of this will work. Certainly, the idea that we are at the point where banks would be better off knocking down houses that reselling them shows there is still something very wrong with the housing market. But what is clear is that banks and others are at the point where they are ready to try something new to boost the housing market. And that is a good sign for the future.

Time Magazine says we’re not bulldozing enough homes. That’s right. We live in a nation where the weekly press has discovered that if only the banks had the guts to bulldoze a lot more homes, things would be better.

This is the wisdom of the beltway, a never never land generally located near Washington but often and more simply a state of mind. In the beltway, the concerns of people for jobs, homes and economic security are the cries of the weak and whiny. Really important people are concerned about “who is winning” in Washington. Really important people constantly read articles about where it’s most profitable to live, where the taxes are lowest and where to invest their money. Really important people sit up and take notice of every move on the stock market and if a man has made a fortune his lack of gentlemanly qualities, overt greed, and often actual crimes means he is quoted as an authority.

Go read the magazine if you can stomach it. They simply don’t live in a middle class world. And they don’t care.

James Pilant

Rogue Columnists Blasts Debt Deal (via Rogue Columnist)


Rogue Columnist!

As always, Jon Talton writes with a acid pen but this budget deal calls for nothing less. Here’s what he has to say

As expected, President Hoover and the corrupt/enervated Democratic Party gave away any tax increases in the debt-ceiling stand-off. The results of this “balanced approach” will be years, if not decades, of economic and social destruction. The Republicans have a partner in their cherished ambition to dismantle Social Security, the Great Society and the New Deal in the party of Franklin Delano Roosevelt. As with the 24 million un- or underemployed Americans in a nation of 301 million, the damage will begin at the margins and not be fully felt for years.

That’s about right. This horrifying spectacle of political blackmail and presidential failure will damage this country for decades. The agreement calls for the creation of a Super Congress which will not be subject to the will of the people, essentially a politburo designed to do the unpopular things because in their minds the desire of the American people for job security, a stable retirement and help with medical costs brand them as irresponsible.

James Pilant