Like the rest of New England, I'm moving South. And/or West.
Thoughts on human interaction over the next 25 years
Indeed, the mother of all cram downs is shaping up this decade in Washington. For the past four years, as Americans have gone to work, played by the rules, and paid their taxes, Republicans in the White House and Congress have engineered a fiscal disaster. Every year, they take money that was supposed to be used for planning for retirement and spend it on other things. That's one of the reasons we have a crisis in Social Security. But like some of the private-sector corporate pension crises, this crisis is entirely discretionary. It's not that Congress and President Bush can't adequately fund Social Security. It's that they just don't want to. Instead, they want to cram us down.This, of course, is exactly wrong. Social Security, and all pay-as-you-go pension plans, is a ponzi scheme and thus was a financial disaster from the very start. It may shock, shock Gross to learn that money going into social security was spent from the very start because social security is not a trust fund, has no trust fund, never had a trust fund, it's a pay-as-you-go system that taxes current workers to pay current retirees.
by late in this century the odds are that—at least for the upper middle class—the standard Social Security check would be zero. Social Security would no longer be a universal program: It would be a program in which the half of America that is richer and more powerful and more likely to vote sees large chunks of its money going in and nothing coming out.Of course, it's hard to see how to avoid this without cutting benefit for poor people or just taxing the bejeesus out of anyone who dares try to work for a living. Remember, the alternative plan of raising the social security tax cap also turns it into a program where the rich see themselves getting taxed a lot in return for practically nothing, unless their benefits also increase when the cap is lifted (pay more in, get more out) in which case there is no savings. A combination of dropping the cap but not raising the benefits leads to exactly the same problem Brad described--rich voters see their money being taken and not being given very much back.
The political logic of [US and EU] tariffs is clear; the reasons for pressuring China to revalue, less so. China’s currency peg, at around 8.28 to the dollar, is widely believed to be keeping the yuan undervalued by 15-40%, making Chinese exports artificially cheap. But it also subsidises a great deal of America’s profligate spending. In order to maintain the peg, China is forced to buy loads of dollars, which are then dumped into US Treasury bonds, financing America’s hefty deficits. A sudden decline in Chinese demand for Treasuries would raise America’s borrowing costs, curbing Congress’s ability to dole out pork to constituents. Some economists fear that this would push interest rates up sharply enough to cause a sharp contraction in the debt markets (including the mortgages that are fuelling America’s housing boom) and the economy.But the dollar is too strong, esp compared to the yuan. It should fall. Similarly, US interest rates should go up, and the real estate bubble should pop. All of these "negative adjustments" outlined by the Economist are neccessary adjustments that will happen sooner or later. If it happens sooner and more gradually, the negative shocks to the economy will be lower, but none of these consequences are negative in my book.
Either way, revaluation looks tricky for the Chinese government. It believes that for the sake of political and social stability, it needs 15m-20m new jobs a year. Increases at that level will be enough to absorb population growth, plus displaced workers from the agricultural sector and China’s ailing state-owned firms. And the export sector is seen as a crucial vehicle of job creation.Firstly, the article points out that the Chinese economy is too reliant on foriegn consumption. The cure to this is to increase domestic consumption, which requires less investment and less saving at home. Moreover, if the Chinese central bank has so many dollars that they fear a devaluation, pumping up the dollar is not going to meet that goal long term because the US is simply going to inflate its way out of the debt its piled up. The long term forecast for both inflation and interest rates is higher than either of those are today. Fundamentally, the Chinese banking system does a poor job of disciplining investment, consumption, and savings, which is the point of a bank.
But this is not the only reason that Chinese politicians are reluctant to revalue. By some estimates, as much as three-quarters of China’s foreign-currency reserves are held in dollars; if the central bank allows the yuan to rise against the dollar, it will also in effect be allowing the value of its reserves to depreciate. Moreover, if slowing the flood of dollars that China’s central bank is pouring into American debt markets causes those markets—and the American economy—to contract, China’s exporting firms will have worse problems than a more expensive yuan. And problems for those firms could translate into big trouble for China’s frail banking system.
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The EITC long predates Clinton. It dates back to 1975, and became permanent in 1978. It was introduced by Sen. Russell Long (D-LA), and has strong bipartisan support. It was substantially increased in 1986, 1990, and 1993. (Brief overview here: http://en.wikipedia.org/wiki/EITC ) You may be thinking of the last expansion when associating it with Clinton; it was also part of the 1986 and 1990 tax changes.Thanks!
It's much more popular with Republicans than other antipoverty because it gives money to people who are working, instead of to people who aren't, and thus encourages work.
Granny is too smart to think her checks will not be mailed. What makes granny upset is how the White House is flat out lying to her smart granddaughter who is working hard in college. Granny might even be smart enough to know that with no reforms, the kid’s Social Security checks will be only 80% of what is currently promised but that beats the 50% of what is currently promised that would come from the Pozen plan. Let’s also imagine that the kid’s parents are both 45 years sold working hard at jobs paying $45 a hour. The parents have paid a lot into the Trust Fund for 20 years and will continue to pay a lot into it over the next 20 years, but would receive a modest benefit cut relative to what is currently promised if the Pozen plan goes into effect.But this is true. Grandma is OK. Mom and Dad are less OK. Daughter is toast. Angry Bear also sounds incredulous when he says
So if I own a Treasury bond, that is a real asset but it is not a real asset when a Trust Fund owns a Treasury bond.But again, this is true. When you hold a treasury bond it is your money. When the government holds a treasury bond for you it is their money, and you may or may not get something depending on various political decisions.
1)Bush is badI like Clinton's economic team a lot, and was very impressed with Bob Rubin when I met him (certainly compared to that Bush joker who used to run Alcoa and when to Africa with Bono). But I will note that the US's long term budget situation is in jeapardy because of entitlement programs and it is Bush that wants to trim those entitlements by making them more progressive. Does Brad praise Bush for progress on this front?
2)Kerry is responsible about budget discipline
3)Kerry's team is really smart, just like Clinton's.