Thursday, January 27, 2011

Social Security is Falling, says Chicken Little

The press and politicians are trying to scare us about Social Security so we will accept silly things. It is like Chicken Little claiming the sky is falling. Sure the net outflow from the SS Trust Fund will drain it in 2037, but the Fund is just an accounting fiction. We don't have a special tax and fund for national defense. While it might be a good thing if the papers harped on the war fund being exhaustible, it would be practically meaningless. All taxes go in the Treasury and Congress decides how to spend it. It is not helpful to isolate one category of tax and spending from all the rest.

Monday, January 24, 2011

Culture and the Economy

It is not possible to understand the economy without understanding the culture that lies behind it. Below are some key facts:

1. The traditonal pension plan is disappearing. In 1980, 39 percent of private-sector workers had a guaranteed income for retirement. Today it is 15 percent.
2. Many retirees banked on their homes for retiremen funds. But, a decline of around one-third in housing prices has altered that. Around 20 percent of homeowners owe more on their mortgages than their home is worth.
3. The personal savings rate averaged around 10 percent in the 1970s-1980s. But, by 2007, the rate dropped to negative.
4. About three-quarters of people file for Social Security as soon as they are eligible at 62. Early retirement means that people after 62 have no work income out of which more savings could be set aside. Yet, these are the years when income is the greatest making savings easier.
We have a culture of living it up now, and the devel take the hindmost. No wonder that we have a lot of grouchy seniors who want to blame government taxes and spending for their troubles.

Sunday, January 23, 2011

Letter to State Governors

There is precious little State governors can do at the state level to create jobs. The problem is inadequate consumer demand for the products of business. Spend your time lobbying Congress to authorize the Federal Reserve Bank and the Treasury to put the unemployed to work making things we need like hospitals, roads, trains, and state and local services such as police and fire fighters. Cutting state and local budgets will only make things worse. The laid-off workers can't buy anything. Business needs customers, not simly tax cuts.

Wednesday, January 19, 2011

Jobs policy

We are ruled by myth and assertions. One of the most troublesome is the iidea that we must kow-tow to buiness because they create jobs. David Johnson of Campaign for America's Future sets us straight.
"A job is created when demand for goods or services is greater than the exisitng ability to provide them.... So demand creates jobs. Business want to kill jobs, not to create them. Many people wrongly think that busineses create jobs. They see that a job is usually at a business, so they think that therefore the business "created" the job. The thinking leads to wrongheaded ideas like the current one that giving tax cuts to businesses will create jobs, becauae businesses will have more money. But an efficiently-run business will already have the right number of employees."
The botom line is that businesses need customers first of all, not tax cuts. And, how do we get more customers with more money to spend? This is a theme of several of my previous posts, but the essence is for the government to be the meployer of last resort, make public goods and services, and with the income that the now unemployed would receive, consumer demand will increase. The Federal Reserve should be creating money for the Treasury to spend for hospistals, schools, roads, trains, etc.