Category Archives: Economy

Little Big Things

Posted on by
Reply

There was a bit of kickback on the Aljazeera article that was harsh in its opinion of Hillary. The mariner is not espousing any candidate over another; none induce the mariner’s advocacy. He may reference something that, although unpopular, is intellectually unique in some way. The joining of Hillary to Donald was unusual and written by an Iranian-American professor at Columbia University. It seems more logical to compare Donald to Bernie. Certainly another perspective for the liberal arts mind. Readers must admit that the media offers little intellectual fodder.

  • – – –

A new analysis published in Nature – Climate Change magazine warns that 4 million people may be displaced in the US by rising seas during the next 100 years – half of them in Florida. The increase will be between 3 feet and 6 feet. The study says that sea levels are rising at the fastest rate in the last 28 centuries. Data already shows increasing sea levels have caused greater damage each year by flooding and heavy storms. It was estimated that a 6 foot increase would cost $14 trillion in relocation costs. See:

http://www.nature.com/articles/nclimate2961.epdf?referrer_access_token=GP821Wogcu_Rmb5dVHcQvNRgN0jAjWel9jnR3ZoTv0NW5dzPCV1LQTM2JMQvXgeV5kcoIiVItcAo6QabUR9-178DTC5AmyL7sqoUXtYx2FydBJB3NZXi69rwMlAJSFnb4PbI1CrMlUnNDDLj1lRtE1FdsgdlaP7hfzAT8rce5yP_2UibeTtvtA4ujTyZbUPB_FVbsjW3DucGr5UgNyZCSSS7w1mBahLCuyC4ACswWAXMxUMoh0aWWSuLDAeQY8JD&tracking_referrer=www.nytimes.com

  • – – –

GPS, the television show hosted by Fareed Zacharia, had Larry Summers as a guest. Larry was Bill Clinton’s Secretary of the Treasury. Mariner was confused more than informed. Fareed’s opening remarks touted the success of the US economy compared to all other countries with major economic profiles. His positive tone seemed to ignore the dissatisfaction of the followers of Donald and Bernie.

Donald espouses, more or less, a nationalist dissatisfaction and Bernie espouses dissatisfaction with an oligarchic economy. Needless to say, there are millions of followers between the two who feel put upon by government and do not feel that progress has been made in the economy. Fareed defended NAFTA, saying it had created a stable neighbor in Mexico whose government is rapidly becoming more democratic. Meanwhile, millions contend the US government is becoming less democratic.

While Mexico’s politics may be true in principle, the image of large corporations still moving out of the US on a regular basis is not one the working class appreciates. Mariner sees a disconnection between economic perspective and voter perspective. Further, to confuse the mariner more, Larry comes on and says US citizens have to spend more – even go into debt now at really inexpensive interest rates and not save so much. This is hard advice to millions of voters who are still hurting from the 2008 recession, student debt, and decreasing income as manufacturing continues to shrink in terms of good paying jobs.

  • . . . .

Don’t tell Donald (or his followers) about the following story from Chicago reported in the American Journal of Transportation:

“Chicago’s transport authorities handed a $1.3 billion rail cars contract for the city’s “L” urban rail system to a unit of China’s CRRC Corp., the company’s second deal in the U.S. in 18 months.

The order is for 846 7000-series rail cars from CSR Sifang America JV, which submitted the lowest bid, Chicago Transport Authority said in a statement on its website Thursday. Prototypes for an initial order for 400 train cars are due in 2019 and expected to go into a service a year later after tests. As part of its winning bid, CSR Sifang will also invest $40 million to build a rail assembly facility in Chicago.

The deal is China’s second in the U.S., following the one China CNR Corp. won in October 2014 worth $567 million to supply trains for Boston’s subway system.

CNR and CSR Corp. subsequently merged last year to form CRRC Corp. in a bid to achieve greater economies of scale and compete more effectively in the global market. China Premier Li Keqiang is leading an overseas push by Chinese train equipment makers as part of a broader strategy to turn China into an advanced industrialized nation.”

It is certainly true that chaos reigns when there is a major culture shift in progress.

Ancient Mariner

Coal

Posted on by
Reply

From US Energy Information Administration:

“In 2012, 91 percent of coal consumed in the U.S. was used for 37 percent of total U.S. electric power generation. The remaining 8 percent was consumed for industrial purposes, including steel and cement manufacturing. Worldwide, electric power generation was also the largest consumer of coal. In 2011, the electricity sector consumed 62 percent, while global industrial coal consumption was approximately 33 percent. The remaining 5 percent was used in the commercial and residential sectors.”

Scientists have been putting the numbers together regarding industries that burn coal, especially electric power plants. The coal industry has promoted carbon capture and sequestration (CCS) solutions to reduce the release of Carbon into the atmosphere. This method uses Carbon extractors in the chimneys, compresses the Carbon and stores it deep underground. The coal industry has performed studies that suggest CCS can meet the 80% reduction by 2050 agreed to at the International Conference on Climate Change in 2015. However, recent independent research projects suggest the cost of CCS will be prohibitive – especially compared to the cost of replacing coal with renewable energy solutions.

Steve Skerlos, University of Michigan professor of mechanical, civil and environmental engineering, said “Policymakers need to stop wasting time hoping for technological silver bullets to sustain the status quo in the electric sector and quickly accelerate the transition from coal to renewables, or possibly, natural gas power plants with CCS.” Recent cost analysis indicated that current, flawed projections peg the fuel costs of a CCS-equipped coal plant at $29 million per year more than a conventional plant. The new University of Michigan research calculates the additional fuel cost at closer to $126 million per year.

Shifting gears from cost analysis to Federal policy makers, mariner suspects that replacing coal altogether will languish in Congressional committees until 2050. The new cost analysis not only makes cap and trade moot, it makes coal moot as well. The current Congress, bought and paid for by the coal industry and every other fossil fuel corporation, will never touch converting coal power plants to renewable energy solutions. The reader must put this issue on the stack of reasons why the nation needs a new, contemporary Congress.

From USA TODAY:

“Alison Lundergan Grimes and Natalie Tennant, two Democrats from coal-producing states running for the U.S. Senate, vow they’ll fight the Obama administration’s proposal to cut carbon dioxide emissions.

Grimes, the Kentucky secretary of State, issued a statement saying the new Environmental Protection Agency rule to cut emissions from existing power plants by 30% by 2030 “is more proof that Washington isn’t working for Kentucky.”

“Coal keeps the lights on in the Commonwealth, providing a way for thousands of Kentuckians to put food on their tables,” Grimes said. “When I’m in the U.S. Senate, I will fiercely oppose the president’s attack on Kentucky’s coal industry because protecting our jobs will be my No. 1 priority.”

It seems that rebalancing the power structure of the US in order to put global issues ahead of parochial issues will be a long, bitter and expensive battle. It is true that coal is a major cog in America’s economy. Many jobs will be affected. The national infrastructure will undergo massive reorganization reverberating across power grids, transportation, manufacturing, and renewable energy. Significant change will reach into homes as the coal power grid shrinks and renewable energy emerges.

The US economy and the workers can’t afford to lose coal jobs for any length of time. How will the workers of an entire industry be reallocated in the nation’s workforce? Logistically, how will immense sums of money be available?

Taking care of Mother Earth turns out to be more expensive and troublesome than expected. A new natural gas power plant with CCS just opened near Houston. We will know soon how cleanly and how expensively this power plant provides electricity.

  • – – –

Turning to the campaign for President, an odd article about Trump versus Clinton is in the Aljazeera newsletter. The article is worth a read for perspective. See:

http://www.aljazeera.com//indepth/opinion/2016/03/salesman-politicians-donald-trump-hillary-clinton-160306120204257.html?utm_source=Al+Jazeera+English+Newsletter+%7C+Weekly&utm_campaign=fdab870200-weekly_newsletter&utm_medium=email&utm_term=0_e427298a68-fdab870200-224505437

Another perspective is from Bill Moyers’ website. See:

http://billmoyers.com/story/blowing-the-biggest-political-story-of-the-last-fifty-years/

Ancient Mariner

Reassurance

Posted on by
Reply

The mariner gave his alter egos the day off today. He is free to walk on the sunny side of the street.

In the current Atlantic magazine, James Fallows has an article about “the real America.” Fallows and his wife took a nationwide tour of cities in their two-seat airplane; they flew at an altitude of 2,500 feet. Starting with a flight to Sioux Falls, South Dakota, in 2013, through a trip to Mississippi last fall, James and Deborah Fallows made extended visits to two dozen cities, and shorter stops in another two dozen, covering a total of 54,000 miles in their single-engine propeller airplane. The longest swing was from November 2014, when they left Washington for the West Coast—with stops in West Virginia, Kentucky, Arkansas, Oklahoma, and Arizona—until the following July, when they returned via Montana, Colorado, Nebraska, and Ohio.

The Fallows discovered a layer of American ingenuity that is never reported in the news media. In fact, James is serious when he recommends that citizens stop following the news. Some excerpts:

“For instance: Last spring we met a group of San Bernardinians in their 20s and early 30s who called themselves Generation Now—San Bernardino. They were white, black, and Latino. (The city is about 60 percent Latino, 20 percent white, the rest black or Asian.) Some had finished college, some were still studying, some had not gone to college. They worked as artists or accountants or in part-time jobs. But all were involved in what you could call a raveling-up of the town’s tattered social fabric….

“I was just pissed off,” an artist in his 20s named Michael Segura told us. “By the time I was old enough to vote, everything was in such terrible shape in San Bernardino. We just heard all the time that it’s a city of losers. We’d had enough.” In early 2013, just after the city declared bankruptcy and appeared to be at the depth of its hopelessness, he and a handful of friends began efforts to engage the city’s generally disaffected residents in improving their collective future….

“Through my working life, as a California patriot I have waited for the time when the news-media base would shift to the West Coast. I am waiting still. But nearly everywhere we went we were surprised by evidence of a different flow: of people with first-rate talents and ambitions who decided that someplace other than the biggest cities offered the best overall opportunities. We saw and documented examples in South Carolina, and South Dakota, and Vermont, and the central valley of California, and central Oregon.” [end quote] See:

http://www.theatlantic.com/magazine/archive/2016/03/how-america-is-putting-itself-back-together/426882/

Primarily, labor lost its political dominance in the US because of rapid technical advancement in the computer industry; Capitalists, those who bought the computers, have become more important – the demand for labor has dropped steadily. Given Fallows’ extensive, on-the-street comments, it is a good sign that, from the bottom up, Americans already have started Bernie’s revolution.

Good reading if the reader wants a sunny day.

(But you can’t watch or read about the news)

Ancient Mariner

Anyone seen any Good Economic News?

Posted on by
Reply

The mariner searches continuously for good economic news. Good news is hard to find. It was C.S. Lewis who said, “If you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth…” In the opinion of many top drawer economists – especially international economists – Growth in national economies will be sparse if even possible. Generally, the opinion of economists is that the US is in better shape since the 2008 recession than the rest of the world. But, as Satyajit Das says in his book, The Age of Stagnation; Why Perpetual Growth is Unattainable, the US is in bad shape, too.

Almost universally, economists warn that the US is still fooling itself, that is, our leaders, banks and citizens still hold out for some unknown event that will sustain our current standard of living. Statistically, we already know our children will not have as good a life as their parents have had; the ‘fringe benefits’ of the older generation, such as pensions, comfortable salaries, union benefits, and the idea that retirement is an automatic reward for life’s labors, may be meager if these benefits exist at all.

The big bank situation still remains an issue; banks still gamble in hedge funds and other questionable investments to compensate for slowing growth in the US economy. Our nation sits at a point similar to Japan and Iceland which were hard hit by the recession. Japan still has not recovered and suffers a flat GNP today; Iceland actually went bankrupt trying to hold up an empty economy. Both nations have begun a slow recovery only after government, business and the citizenry realized their coffers were empty and took painfully austere steps to pay back the national debt (and personal lifestyle debt) used to prop up failed economies, reduce the standard of living for everyone, and suffer inflation (which has the effect of cheapening the currency therefore making debt dollars less expensive).

There is a possible light at the end of the US tunnel: many economists believe that the US has enough wealth, especially through taxation reform, to have a bit of cash to invest in a massive upgrade of the nation’s infrastructure and also open new growth markets associated with renewable energy and, through scientific and technological resources most nations do not have, reduce energy practices that destroy the environment.

As if copying the French Revolution handbook, GOP presidential candidates struggle to own the prestige of the Christian Church and undercut secular entitlements at the same time. Definitely an ethical oxymoron; where is Joan when you need her? The democrat candidates support the idea that the unknown event may occur, bringing peace and harmony back to the middle class. At least there is a possible event suggested by the economists, that is, tax reform, infrastructure, and renewable energy, but readers must not forget the words of C.S. Lewis. The truth we will find is that the US and its citizens have been borrowing for years to sustain an unsustainable standard of living. The standard of living for everyone will take a hit while that debt is paid off.

Ancient Mariner

A Government of the People….

Posted on by
2

The mariner is concerned that some readers passed on the post about oligarchy. Philosophically and pragmatically, oligarchy is a nemesis to democracy. The extreme separation of financial class is a dangerous indicator that Americans are losing the right to govern themselves. One need only read the causes of the French Revolution[1] to have an eerie sense of the same thing all over again.

It is not an accident that the republican party is conflicted between Donald Trump and Ted Cruz; it is not an accident that Bernie Sanders has awakened such large numbers of democrats. As the American population moves left,[2] American governments are run by ninety percent incumbent officials – more or less elected for life and representative of a culture long gone from today’s social awareness. Already, the concept of electing representatives of ourselves has disappeared. The major reason is that too many elected officials are tied to bribery by those who can afford to bribe, namely the wealthy class and corporations. That the Supreme Court could envision that money is free speech is a significant indicator that oligarchy is alive and well.

Imagine a government where our representatives could not receive financial support except from the Federal Election Commission. That one change would require those who campaign for office to be more attentive toward their jurisdictions. Turnover may happen often enough that we may not need term limits.

In any case, the next President will be a different kind of leader. The next job for citizens is to elect fresh representatives in Congress – wholesale!

Ancient Mariner

 

[1] See: https://en.wikipedia.org/wiki/Causes_of_the_French_Revolution

[2] See: http://www.theatlantic.com/magazine/archive/2016/01/why-america-is-moving-left/419112/

 

What is Oligarchy?

Posted on by
2

Oligarchy is a philosophical word like democracy, authoritarian, and monarchy. Philosophical words are hard to illustrate in every day, what-does-it-do terms. However, thanks to the New York Times, an article appeared in the November 29, 2015 edition that captured oligarchy as a political operation that can be compared to political behavior readers are more familiar with from news coverage, elections, and economic headlines.

It is a must read for all readers. The article illustrates how very wealthy individuals band together, using immense amounts of cash and influence to interrupt what otherwise would be normal democratic elections. In the State of Illinois, backed by a group of billionaires primarily from banking and investment firms, Bruce Rauner was elected Governor.

“Unprecedented political spending helped
         elect a fresh-faced financier. But his ideological
         vision has unsettled many in the state.”

“….The richest man in Illinois does not often give speeches. But on a warm spring day two years ago, Kenneth C. Griffin, the billionaire founder of one of the world’s largest hedge funds, rose before a black-tie dinner of the Economic Club of Chicago to deliver an urgent plea to the city’s elite….

Their response came quickly. In the months since, Mr. Griffin and a small group of rich supporters — not just from Chicago, but also from New York City and Los Angeles, southern Florida and Texas — have poured tens of millions of dollars into the state, a concentration of political money without precedent in Illinois history.

….Their wealth has forcefully shifted the state’s balance of power. Last year, the families helped elect as governor Bruce Rauner, a Griffin friend and former private equity executive from the Chicago suburbs, who estimates his own fortune at more than $500 million. Now they are rallying behind Mr. Rauner’s agenda: to cut spending and overhaul the state’s pension system, impose term limits and weaken public employee unions…..”

This revealing article continues with charts, background interviews of the top 1%, and side articles expanding the subject of political influence by the extremely wealthy. As a movement, the super-wealthy are taking increasing interest in American politics. The reader – and any common citizen – will be alarmed at the brutality of their public policies on the American people.

The behavior of Oligarchy is clearly defined. Yes, a must read article. See:

http://www.nytimes.com/2015/11/30/us/politics/illinois-campaign-money-bruce-rauner.html?ribbon-ad-idx=3&rref=politics&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Politics&pgtype=article&_r=1

Ancient Mariner

Two Phenomena that will force Change in Our Economy

Posted on by
Reply

The mariner mentioned recently that he was investigating the rapidity of change in marketplace products. The research on this subject has uncovered a wide ranging impact on culture and economy; the mariner still researches this subject. So far, two themes prevail throughout: Replacing current products with new products at an ever increasing pace is not a substitute for growth in an economy. The second theme is more volatile – global economy in 2020 will be in a state of worldwide depression – or not. Economists’ opinions are divided by predictions of what markets may emerge.

In this post, mariner examines whether new products are a substitute for growth in the US economy.

Since the late eighties, technical age nations have been exposed to a continuous revolution of new products displacing old ones before the old ones are old or culturally displaced. The obvious leader in this phenomenon is the 4G cell phone; Apple is the prominent example with its iPhone devices. Rapid replacement has affected marketing psychology across many sectors primarily as a spinoff of the iPhone; for example, virtually every marketplace can now be reached by an APplication promoted as an upgrade in service – and cost. The question arises, is this activity progress or is it disruption?

On a larger scale, communication providers and content providers are merging to reconfigure the business model for television/Internet viewing. Further, many companies, especially technology companies, are leveraging “cloud storage” as a new source of income from the same customer base that already exists. Again, the question is asked, is this activity progress or is it disruption? Is this activity a new market or is it simply reshuffling the deck of the same market, that is, is the new “profit” really a boost to the Gross National Product?

Yes, this is boring stuff. All this “product” development is laid over a saturated market. It is comparable to raising the rent on the same house; it is a hidden inflation factor more than it is new product income. The citizenry experiences a lot of activity and feels more secure about the future because gasoline prices are down and there is more discretionary cash in the household budget. This attitude may be unwarranted.

The technology industry is on hold at the moment waiting for the next product disruption to occur. Economists sense, however, that the next wave of products will be affordable only to a smaller market of higher income folks. This may cause tech company layoffs. Matched with continuously smaller job market opportunities, less than viable oil prices, and Federal/state debt, economists fear another recession no matter who is elected President.

Add to the pile of worries the terrible condition of US infrastructure – not only light rail, bridges and roads but new distribution technology for energy grids, water, and high speed communications, speculation about a downturn cannot be ignored. The US is not out of the forest, yet. We’ll have to wait for the next President and Congress to have a chance at avoiding a downturn.

REFERENCE SECTION

The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril by Das, Satyajit.

A good website to add to the reader’s regular review of business trends is:

http://www.economywatch.com/news/Recession-Signs-Growing-Employers-Cut-Jobs-Factory-Orders-Fall0205.html

Clayton M. Christianson published The Innovator’s Dilemma in 1997. Christianson is the author who penned the word “disruption.” The book deals with the manner in which new, young companies disrupt older companies by producing cheaper products that have more demand. His primary example is the laptop computer displacing the market of larger mainframe computer companies.

Ancient Mariner

Democratic Debate in New Hampshire

Posted on by
3

The mariner is pleased with the debate between Bernie and Hillary. For the first time in any 2016 presidential debate, republican or democrat, the voter was given a clear view of the personality and talents each candidate will bring to the office of President in 2016.

The heart of each candidate, that is, their desire to deliver to the electorate what is most needed by that electorate, is identical. Both are champions of human need, economic reform, and what’s best for the forgotten majority.

For the first time, the agenda of each candidate became clear. Bernie intends to fix the systemic issues that have led to oligarchy. Banks, Corporations, tax reform, bribery and collusion in the election process, and a plan to attack gerrymandering, are at the top of Bernie’s list. By fixing the political abuses, proper legislation and discretionary funding will right themselves and deliver programs to the people. However, Bernie will be prone to compromise when it comes to program specifics.

Hillary intends to develop programs first. She will attack current legislation that defeats the spirit of discretionary funding. Hillary will prioritize human rights, expand education funding, and reduce medical costs – but not through single payer. By fixing specific programs, the Ship of State trims its sails more in line with public interest. However, Hillary will be prone to compromise when it comes to fixing the oligarchy.

If the voter is interested in the programs of government, then Hillary sounds more appealing. If the voter is interested in the policies of governance, then Bernie sounds more appealing. The mariner is reminded of one of his father’s pop psychology tools: Bernie is a why-how person while Hillary is a how-what person1. That being the case, there are far more how-what folks in the population than why-how. For no other reason than the difference between their personalities, Hillary may fare better once the primaries leave liberal states and head into the prairie.

On such subliminal attributes, political success rises and falls.

REFERENCE SECTION

1For more detail on Pop’s Psychology, see post from December 21, 2015.

The Congress has ninety days to vote for or against a fast track of the TPP trade agreement. Mariner is firmly opposed to fast track and prefers that the TPP be examined by Congress – that’s as close as citizen review is possible. Note that the majority of presidential candidates, including both democrats, are opposed to the trade agreement. For a good, clear, and easy read about the TPP, see:

http://www.nytimes.com/2015/05/12/business/unpacking-the-trans-pacific-partnership-trade-deal.html?_r=0

President Obama is in favor of the TPP because, in his opinion, the TPP makes the United States a central player in future Asian economics, dampening the future influence of China. All well and good – but at what price to the common citizen? Corporations will have unfettered control of profits, taxes, human rights, and the future wellbeing of nine nations.

Ancient Mariner

 

A last piece about The House that Tom Built

Posted on by
Reply

It was mentioned that Tom never misses an opportunity to visit closeouts and auctions. Below is a collection of products provided by Tom’s ingenious skill with what most would pass up as useless items.

0015AA

Figure 1 Balusters are old bed frames.

0016AA

Figure 2 Recognize an antique hay rake?

0017AA

Figure 3 These connection brackets took some thought.

0019AA

Figure 4 Some things one can’t build by one’s self.

REFERENCE SECTION

Reporting on the monkey head transplant, mariner can understand that many readers considered this story as something out of the fringe crazy folks. From all efforts to confirm the story, mariner is confident the head transfer was made. A similar transplant occurred as early as the 1970’s. However, in a BBC article, a rational (if judgmental) evaluation is made by a mainstream neurosurgeon. See: http://news.bbc.co.uk/2/hi/health/1263758.stm

Cybernetics

Here and there, page six articles are appearing that suggest a contraction in DotCom investment. Hyperbolic headlines predict another ‘bubble’ collapse similar to that in 2000. Indicators are that the big old giants (IBM, Oracle, etc.) have eroding markets; further, there are only so many incremental improvements in Apple products and only so many market-worthy apps before app integration emerges. The mariner’s career was in the era of system integration at the customer level – that is taking discombobulated subsystems and developing new integration efficiencies primarily through the development of super databases. Today, that solution has evolved into cloud solutions; the era of customer-based data centers is over. The big IBM operation in the basement of a corporation is on its way out – just plug into a cloud.

The same is true of home-based processing. New 4G devices press subscribers to store data on proprietary clouds rather than on independent, home-based hardware. Very soon, as individuals upgrade their home operating systems, they will discover that owning operating system disks is no longer possible. The home user will have to rent operating systems and integrated programs like MS Office, Photoshop, and utility software like Norton and Firefox from the owners of the clouds – a marketplace more akin to Amazon.com than to an independent retailer. It is similar in function to the mariner developing new integration efficiencies in 1990-2010.

As any technology ages market pressures require that investment cash flow remain high. This is accomplished by functional integration. It happens in every industry. At the moment, there is a pause as automated information industries look for the next integration. Many prognosticators suggest that 3-D will be the next innovation: the TV screen will become your room – not just a screen – dress decently before you answer your deviseless voice from somewhere phone; a 3-D pad will float in front of you so you can punch emoticons; are you a gamer? Prepare to be your own warrior – electronic champions will be passé.

The mariner postulates simplistic examples that require huge processing capabilities – beyond even the latest in memory processing technology. To the chagrin of the mariner, privacy and security may be a memory as each of us becomes an amalgamated function to create integrated information.

Today, perhaps it is not a bubble collapse but just a gathering of the troops for the next invasion.

Ancient Mariner

IMF Says Poor Economic Outlook

Posted on by
Reply

The International Monetary Fund chair, Christine Lagarde, says global economy will be poor in 2016 citing among other things that the West has an ageing population. That, coupled with very low oil prices affecting oil producing nations and China struggling with its own economy, Lagarde suggests growth will be spotty at best.
Western nations, including the USA, should be willing to receive as many immigrants as possible from any source to balance their populations. Already, extremely conservative economists are predicting total economic failure in the US and predict that next year is the last year for Social Security (SS). This is not likely, of course, but we all know that the fund is in trouble for a variety of reasons including an ageing population.
Many financial structures within the nation’s discretionary spending group, most of which is SS followed by health, are in need of restructuring and refunding. Al Gore campaigned for President saying he would put SS funds in a black box not to be transferrable to other uses; this should have been done from FDR’s time! The issue with opening Pandora ’s Box of restructuring SS is that the republican party wants to throw it to the wolves of Wall Street or do away with it altogether. Democrats, on the other hand, want to reinvest in SS by throwing borrowed money at SS without fixing its issues.
Restructuring SS requires a number of things:
Put a cap on coverage. Wealthier folks and retirees who have other supplemental income, do not need SS. Require payroll deductions for employers and employees for all hours worked, not just for full time. Remove some of the expanded coverage that belongs in other programs, for example, disability. A difficult but culturally necessary task is to develop new employment regulations, job descriptions and programs that keep older employees in their jobs as primary contributors to production; today, it is common for employees in their fifties and older to be pushed out before retirement age while SS qualification is raised to older and older ages. Business should return to its role of offering some form of retirement which funds can’t be used for other purposes – a barrier removed by the Reagan administration. Finally, the tax relationship between SS and earned income should be modified to treat both as earned income, thereby refunding SS as retirees increase earned income. Even better would be to add a graduated SS tax on investment income.
Across the board every discretionary program is long overdue for a restructuring of the tax code. Income and business taxes are grotesquely skewed to favor the wealthier end of the spectrum. Part of this issue is to disassemble the oligarchy and give governments back to voters – which is a subject of its own.
Further, returning to Lagarde’s prediction for a spotty economic future and assuming SS is not rescued, our next generation will not have SS. Further, do not be drawn into consumer debt regardless of what banks say. If the reader is young enough, use the 401k or SEP to its fullest extent. Establish a savings and investment budget matching no less than 10% of gross income; establish a ROTH IRA and pay in your limit each year. Chances are SS will be trimmed back in one way or another for all of us.
Ancient Mariner