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A Bad Idea Is a Bad Idea, No Matter Who Proposes It

1:26 pm in Social Security by dakine01

Let me state this right up front – Chained CPI is a bad idea. A very bad idea. Former Clinton Labor Secretary Robert Reich explains why here:

Even Social Security’s current inflation adjustment understates the true impact of inflation on the elderly. That’s because they spend 20 to 40 percent of their incomes on health care, and health-care costs have been rising faster than inflation. So why adopt a new inflation adjustment that’s even stingier than the current one?

Social Security benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.

Scrap the Cap on Social Security

Scrap the Cap on Social Security

Dean Baker also explains why here (from The Nation 12/18/2012):

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has constructed an experimental elderly index (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

CNN Money seems to be in favor of Chained CPI but they add a significant caveat near the end:

By contrast, other liberal economists do see chained CPI as a more accurate inflation measure but say adjustments should be made to protect the most vulnerable from any hardships caused by the smaller benefit increases under chained CPI.

Obama has indicated he would support such adjustments, although he hasn’t specified what they would be.

One option could be a one-time increase to Social Security benefits for seniors once they’re in their 80s, said Goldwein, senior policy director at the bipartisan Committee for a Responsible Federal Budget. Another option: Exempting Supplemental Security Income, which pays benefits to poor seniors and the disabled, from chained CPI.

My bold. Please note: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

I say again: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

The Center on Budget Policy and Priorities has a list of 10 basic facts about Social Security here. Facts #4, #6, and #7 are especially pertinent (though all are important):

Fact #4: Social Security benefits are modest.

Fact #6: Almost half of the elderly would be poor without Social Security. Social Security lifts 14 million elderly Americans out of poverty.

Fact #7: Most elderly beneficiaries rely on Social Security for the majority of their income.

This is a link to the Social Security Administration’s “Monthly Statistical Snapshot” (as of February 2013). As of February 2013, the average Social Security Retirement benefit is $1,264.88. This works out to be $15,221.28 per year. A mythical (non-existent) full-time minimum wage job ($7.25 x 40 hrs per week x 52 weeks) receives $15,080 per year. This is a blog post I wrote a couple of years ago showing how far the minimum wage goes these days. Short answer? Not very far at all. I tried to find the median Social Security benefit but was not able but given that the highest Social Security monthly benefit today is $2,513 for a person who retired at age 66 in 2012. In order to receive the highest monthly benefit, a person has to have earned maximum Social Security wages for their entire work life.

Once again, the people who will least need the use of Social Security are the ones most in favor of the cuts. For those who offer the cliche of “Everyone most have skin in the game” I will reply, “My skin in the game is all the years I have worked and earned Social Security and I will not see it destroyed so the 1% can avoid paying the bill that is now due from their “borrowing” of FICA wages to fund tax breaks.

I have not even mentioned the Veterans who will also be affected by Chained CPI. Their “skin” is the blank check they wrote when they signed their name and swore the oath of enlistment.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor
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The Vortex of Stupidity, also known as Washington, DC

4:47 pm in Economy, Government, Jobs by dakine01

A shot of the US Capitol

Just how stupid are they? (Photo: David Flores / Flickr)

I sometimes think that there has to be a crest to the levels of stoopid coming out of Washington, DC but obviously, I am wrong. Just the past two days, Dean Baker at his blog Beat the Press refuted three different pieces of so-called “conventional wisdom” by different members of the Beltway Village Idiots Pundits, Press, and Politicians in good standing.

First up was his having to counter a column from Steven Pearlstein of the Washington Post. Pearlstein says:

Europe is a different story. The bubble years allowed much of Europe to avoid making the kind of structural changes necessary to put its social welfare system on a sustainable fiscal path and reform its labor and product markets. The euro crisis — which is both a banking crisis and a sovereign debt crisis — has forced Europeans to begin addressing those issues.

Baker points out however:

Of course this is completely wrong. The countries with the well developed welfare states, Germany, Denmark, Sweden, the Netherlands are doing fine. The countries that are in crisis, Spain, Greece, Portugal, Ireland, have the least developed welfare states among the older EU countries.

Next up we have a WaPo opinion piece decrying the “looming short fall in public pensions.” Baker points out here:

The pensions are underfunded in part because policymakers would not take seriously those of us who warned that pensions were making overly optimistic assumptions about stock returns before the market crashed. Returns have been well below expectations in the dozen years since the peak of the stock bubble in 2000.

The other reason is that some politicians, like New Jersey Governor Chris Christie, think it is really cute to not make the state’s required contribution to the pension fund. Not surprisingly, if states get into the habit of not contributing to their pension fund, as has been the case in some states, then pension funds will be underfunded.

However, it is more than a bit bizarre that we should therefore ripoff the workers who are counting on these pensions. Suppose state and local governments contract with construction companies for road work or hospitals to treat poor people. If the governments don’t put aside the money to pay these contracts would we then think it makes sense to tell the contractors and hospitals to get lost?

Finally, today Baker goes after NPR and Nariman Behravesh, the chief economist of the forecasting firm IHS Global Insight, who thinks that the biggest problem we face is “the deficit”:

Wow, isn’t that impressive. So Europe, China and the rest of the world will be really impressed if the United States throws even more people out of work as long as it reduces its budget deficit! That’s interesting, had it not been for NPR I never would have known people in the rest of the world thought this way.

As one of the 25 Million plus long term un and underemployed Baker mentions in his post, I would like to quote the inimitable Mr Pierce, “Fck the deficit. People got no jobs. People got no money.

David Dayen at FDL News today (Monday, October 22) covered a survey on the wage gap between federal workers and their private industry counterparts. Not so surprisingly, the public sector workers are paid far less than private sector jobs requiring comparable levels of skills and education:

If you compare organized federal employees, many of whom have college degrees, to unorganized service-sector and retail workers, then yes, you will find higher wages in the public sector. But if you do an apples-to-apples comparison between public employees and their private-sector counterparts in related fields, you will find that the public sector is significantly undervalued.

…snip…

You cannot lump together those who clean up the National Mall and those who work on scientific breakthroughs at the National Institute of Health, compare them to the “average worker,” and come up with a legitimate pay scale for federal employees. You have to go sector by sector and find the appropriate comparison in the private sector. And when you do that work, you see that federal employees are underpaid. This has an impact on millions of hard-working Americans, who are forced to take less than their skills would bring them back in the open market, because of a foolish tendency toward austerity and the demonizing of public workers.

Over these past few years, we’ve all seen many articles decrying the “generous pensions and salaries” of public sector workers, whether teachers, fire fighters, EMTs, or police at local levels or scientists at the NIH, NASA, JPL, EPA, or any other federal agency you wish to name.

My question is why?

One of the themes to emerge from this year’s presidential race has been Mitt Romeny’s “infamous” speech at a private fund raiser last May, calling 47% of the US basically moochers and freeloaders because they don’t pay federal income taxes or they receive some level of federal benefits be it Social Security, VA or the Earned Income Tax Credit (EITC) among others.

But why is it so fashionable to trash people who have earned pensions, earned veterans benefits or Social Security or have used the EITC because of low wages? Shouldn’t we be asking why there are so many people earning such low wages that they don’t even pay a minimum federal income tax? I know for myself, I would dearly love to be earning a salary that would have me paying federal income taxes. Reuters offered this analysis on Friday (October 19):

The number of Americans not owing federal income taxes has been growing since the mid-1980s, and the increase largely stems from expansion of these two tax credits – championed by Republicans from conservative economist Milton Friedman to former President Ronald Reagan.

I want to work in my chosen field, earn a decent wage with benefits and pay my fair share of taxes. Instead, we see the “champions of industry” threatening employees with lay offs should President Obama be re-elected.

Right now, I’m a bit surprised we don’t see more news articles like this one from the AP last Sunday (October 14) about a man attempting to rob a bank of $1 so he could be sent to a Federal Prison. How bad must it be to want to rob a bank so that you can get sent to prison? My guess is the three hots and a cot and health care sounded mighty appealing if the option was starving on the street.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Sometimes You Just Have to Respond to the Stoopid

8:15 am in Economy, Government, Uncategorized by dakine01

Now, some folks may have noticed (ha!) that I have not been posting too much these last few months. Those who actually know me understand that I’ve had a very good reason for this. However, I have still continued to surf the news sites each day and keep up with various blogs as well. I figure Mr Pierce does such a fine job eviscerating the Zombie-eyed-granny-starver and so many other idiots, that there really isn’t much I can say and definitely can’t improve on. As well, Dean Baker continues to easily refute the gibberish of so many Beltway Village Idiots Pundits and Politicians, so there’s not much need for my rants.

So, I laugh when I see where someone has butt shot himself while thinking of all the “butt calls” I have received from family and friends. And I get a little sad when I see legislators in my home state embarrassing themselves with their diatribes against teaching evolution. (Note: Gravity is still considered a theory as well, maybe some of these folks complaining about teaching evolution “cuz it’s only a theory” should maybe be invited to test that gravitational theory from the top of the capital building – rhetorically speaking of course.)

But then, I wind up reading something that is so incredibly stupid and disingenuous, that I am moved to take a whack at it on my own. Today, I reached this point when I read this idiocy from Robert Samuelson at the Washington Post:

Judging by the political reaction, you’d think that Paul Ryan’s budget takes a meat ax to Medicare and threatens economic havoc for the elderly. Just the opposite is true: The Ryan budget spares older people from almost any change or sacrifice — and that’s the problem. We have (and, to be fair, this is mainly the doing of Democrats and their intellectual apologists) made those 65 and over into a politically protected class, of which nothing is expected and everything is given.

It is impossible to have an honest debate about the budget — and government’s size and role — unless this changes, because aiding the elderly is now the main thing the federal government does. If you remove that, fearing a backlash from the 50 million or so Social Security and Medicare recipients, you condemn yourself to bad choices: (a) you can’t deal with deficits, which may crowd out productive investment and risk a financial crisis; (b) you must dramatically squeeze the rest of government, including the social safety net, defense and research; or (c) you must raise taxes sharply, which may further slow the economy.

Now, I am admittedly not an economist (thank doG) but by my rough count those two paragraphs contain maybe two semi-factual statements and about ten misstatements, mis-directs, and outright lies.

My first response after reading Samuelson’s gibberish was to rush over to Beat The Press and see if Dean Baker had already taken Samuelson to task. Alas, Dean has been otherwise occupied with taking Casey Mulligan of the NY Times Economix blog and the Washington Post to task for their various misstatements and mis-directs. I imagine he can only deal with just so much stoopid and disingenuousness in one day before reaching his fill.

So if I may quickly:
The Zombie-eyed-granny-starver’s budget and Medicare ‘Plan’ does take a meat ax to Medicare and threatens economic havoc on the elderly (via Kaiser Health News).

Samuelson proclaims that the Ryan budget “…spares older people from almost any change or sacrifice…” (this seems to be an article of perceived Conventional Wisdom among the Villagers and TradMed if this and this are indicators. But the devil as always is in the details as this from Think Progress explains. I would like to add that the attempt at generational war by proclaiming loudly that “55 and above are exempt from the changes” presupposes that those of us older than 55 have no desire to see these programs available to our younger family and friends. Please note, not everyone has an “I’ve got mine, fuck you!” attitude, m’kay?)

I am going to close this without attacking the rest of Samuelson’s gibberish and try to re-store my blood pressure to a more manageable level. But I would like to say that Samuelson continues to act as if the social safety net spending, Social Security, and Medicare have been stand alone problems these last ten years while ignoring the destruction of the US and world economies by the Banksters and fraudsters on Wall St.

[/Harrumph harrumph rant]

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Economists try to explain why they were wrong on March jobs forecasts

10:49 am in Economy, Jobs by dakine01

Percent Job Losses in Post WWII Recessions, calculatedriskblog.com

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Once again, the economic community is scrambling to find the reasons why they were suprised by the March 2012 jobs report. The monthly report from ADP had private sector jobs at 209K increase for March 2012 which apparently led many economists to predict a similar number for the official report from the Bureau of Labor Statistics that was released on Friday.

Oops. Wrong again.

We have been seeing stories such as this from today’s NY Times about the “strong” jobs growth from earlier this year:

Although signs pointed to a strengthening economy earlier this year, the jobs report on Friday came with a message: don’t get ahead of yourself.

The country’s employers added a disappointing 120,000 jobs in March, about half the net gains posted in each of the preceding three months. The unemployment rate, which comes from a separate survey of households rather than employers, slipped to 8.2 percent, from 8.3 percent, as a smaller portion of the population looked for work.

120K jobs is not much more than is necessary to maintain the status quo of population growth (90K is the figure Dean Baker uses) and even 200K, while growing, does not appreciably put a dent in the long term un and underemployment rates. When there are 13M to 14M unemployed and 25M to 30M un and underemployed, 200K jobs is just not going to help all that much.

Surprisingly to me, the Benbernank may have been more realistic than many others (via Bloomberg.) Of course, the article goes on to quote Fed regional presidents as saying that the numbers, no matter how soft, probably won’t cause the Fed to actually, you know, do something to ease the un and underemployment problem. No matter that a primary part of the stated Federal Reserve Mission statement is to pursue “maximum” employment.

It does appear that the consensus being reported is to blame the warm weather from January and February for the lighter number for March. Here’s Dean Baker’s take: Read the rest of this entry →

Capitalists: Venture vs. Vulture

11:48 am in Economy, Government, Jobs by dakine01

Author’s Note: Please take a few minutes and Join the Firedoglake Membership Program today. FDL provides the tools that help me and others extend our reach with our rants so we need to support FDL when we can.

So there I was, surfing around the intertoobz this morning when I came across this headline at CNN:

Stop vilifying venture capitalists

I have to admit, I was a bit taken aback at the headline as it surely did not reflect anything I had read.

In reading the piece, it starts off in a fairly standard fashion:

From 1984 to 1999, Mitt Romney was in charge at Bain Capital, an investment firm that sought out small and sometimes troubled companies that, with careful management and Bain-provided cash, offered the chance for big profits. Bain, like many venture capital firms, invested in startups with the hope that the profits they made on the successes would outweigh the losses they incurred on the failures.

Venture capital markets are simple things. Two groups of people who want to create new businesses come together. Venture capitalists have money but lack ideas. Entrepreneurs have ideas but lack money. When they get together, they trade and new businesses are born.

Then I realized that the author was not really saying much I could disagree with – other than his implication that Bain Co. was this benign entity only helping entrepreneurs to find the needed funding to bring their ideas to market as wiki defines it.

Today’s Boston Globe addresses this in this article.

Mitt Romney has long called himself a venture capitalist, experience he says helps him understand the economy better than other candidates for president. But he spent much more of his career in leveraged buyouts than in the investments in start-up companies known as venture capital.

Romney’s one true venture deal was Staples Inc., the office supply superstore, two years after he started Bain Capital. He wasn’t the first to discover Staples; another Boston venture firm introduced him to Staples founder Tom Stemberg. But Romney did lead the deal in 1986 in classic fashion – at first investing $650,000 in the start-up, then becoming its chief cheerleader and assisting with strategy to expand the seller of paperclips and pens.

…snip…

With leveraged buyouts, the investment firm purchases a mature company, partially with its money and with debt it transfers to the company. The new owners then usually streamline the business and seek to resell it.

For example, in the same year that Romney invested in Staples, he led the firm in its $200 million acquisition of Accuride, a wheel rim maker that was part of Firestone. Bain put down only $5 million and borrowed the rest, using junk bonds from Drexel Burnham Lambert. Eighteen months later, Bain resold the company and reaped $121 million in its first taste of the big time in the go-go 1980s.

Soon after, Romney steered Bain Capital more toward debt-driven buyouts. There was more money at stake and less risk for Bain than betting on untested technology.

My bold. And there you have it. While maybe starting life as a “venture capital” firm, Bain Co under Romney quickly turned to being Vulture Capitalists using the leveraged buyout.

At this point, I guess I should queue cue the chorus of voices shouting “FREE MARKET! FREE MARKET!”

Point of fact – there is no such thing. The LBO gets to use the debt interest to write down their taxes. By “streamlining” the business, the methods have often included cutting wages and benefits, selling off assets, and dumping pensions onto the taxpayers through the Pension Benefit Guarantee Corp. Dean Baker explains it quite nicely here and here. From the first link:

If private equity firms were successful in making companies more efficient and lowering prices to consumers, then it could lead to more jobs in the economy, even if there were fewer workers directly employed in the firms under its control. (This does not really apply in the current economy, where inefficiency means more workers are employed. This is good in the context of a poorly managed macroeconomy with high unemployment.)

However private equity firms do not profit just by making firms more efficient. Private equity also profits by financial engineering. For example, it is standard practice for private equity firms to load their firms with debt. This means that interest payments, which are tax deductible, are substituted for dividend payments, which are not tax deductible.

Private equity companies also often force firms into bankruptcy to offload debt. This can often include pension obligations, which are then taken over by the Pension Benefit Guarantee Corporation. Insofar as private equity companies are drawing their profit from this sort of financial engineering, it is not providing a benefit to the economy. In fact, it is a direct drain on the productive economy.

So much for the nonexistent “free market.” If a firm has to offload their debts and pensions on the taxpayers, there ain’t a diddly damn thing free about it.

While I am still trying to figure out how it is possible for the LBO group to incur debt for an entity that they are acquiring (don’t you have to actually own something before you can mortgage it?), I’ll close this little rant with this article from today’s Cincinnati Enquirer headlined “Tax breaks for jobs: Half fall short.” A story for another day.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Mr Bernanke, Just What the Hell Are You Waiting For?

9:35 am in Uncategorized by dakine01

Ben Bernanke, Vampire Chairman

Ben Bernanke, Vampire Chairman by DonkeyHotey

Author’s Note: Please take a few minutes and Join the Firedoglake Membership Program today. FDL provides the tools that help me and others extend our reach with our rants so we need to support FDL when we can.

Yesterday (Wednesday July 13), Federal Reserve Chair Ben Bernanke was once again before Congress, testifying on the economy. Buried way down in the Reuters coverage of the hearing was this little nugget:

After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better. 

Bernanke held to the view that recent weakness was due in part to temporary factors like energy costs and the effects on global industry from Japan’s earthquake and tsunami.

But he acknowledged the labor market remains weaker than the Fed would like.

The labor market also remains weaker than the 14M unemployed and the 25M – 30M un and underemployed would like as well. While part of the stated Fed mission is “pursuit of maximum employment,” the actions of the Fed over these last few years seem to have been more along the lines of “we’ll pretend to do something and maybe the miracle will occur.” As far as Bernanke’s “…view that recent weakness was due in part to temporary factors…,” as I’ve stated before, there are always “temporary factors” that are going to have an effect on life. It is part of life and should be part of his work to be anticipating and dealing with those “temporary factors” as they occur rather than using them as an excuse.
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The Future Is Here and Now

10:42 am in Financial Crisis, Government by dakine01

Today’s (Thursday, December 23) NY Times has an article that tells me the future has arrived and it is not going to be pretty. The pundits and those who want to destroy all aspects of public service have been calling and complaining for years that public pensions are going to destroy the universe. Never mind that those public employees have often foregone higher salaries in order to have those pension plans. Never mind that it is the elected officials who failed to properly fund those public pension plans, it will be the retired police, trash collectors, fire department employees and all the other municipal and state employees in their greed that are going to be the end of civilization. (That’s snark for the snark deficient)

But regardless of all the calls for austerity, and all the calls and drum beating about things needing to be done to “rein in out of control pensions,” it is not civil servants that caused the meltdown to the world economy. Civil servants have not been the people who took tax cuts and placed the bets in the Wall St casino. They did not commit the fraud in mortgage processing.  . . . Read the rest of this entry →

Bernanke Pontificates for The Graduates

9:27 am in Uncategorized by dakine01

Cross-Posted from Just A Small Town Country Boy

So there I was doing my morning news surfing when I see this headline from the NY Times (AP content):

Fed Chief Tells Graduates: Don’t Worry, Be Happy

Now the headline is a bit of hyperbole but I found a Reuters article on this same speech.

Economic growth is not an end in itself, but policy makers pursue it because richer countries are better able to provide health, jobs and a clean environment for their people, Federal Reserve Chairman Ben Bernanke said on Saturday.

It seems that in some ways, Mr. Bernanke may actually understand a bit of reality. But then I remember how Mr. Bernanke has responded when he’s been reminded that job creation is one of the primary functions of the Federal Reserve. This from the Federal Reserve’s own website (PDF):

The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates. The challenge for policy makers is that tensions among the goals can arise in the short run and that information about the economy becomes available only with a lag and may be imperfect.

My bold. Now as I mentioned yesterday, (and has been noted by others such as Dean Baker), there is a long way to go for our economy to be considered even remotely "robust."

Maybe I just need to do some adjustments to my tin-foil hat, but when I see Mr. Bernanke using a college commencement speech to dampen down salary expectations and telling students they shouldn’t go for the dollar, what I’m hearing is an admission that "life sucks, get over it." (Although not in those exact words of course.) Of course, the idea of Mr. Bernanke lecturing on how "richer countries are better able to provide health, jobs and a clean environment for their people" is just one of the jokes we will be hearing from the annual commencement speech extravaganzas.

And because I can: