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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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Just how bad must wages and benefits be for most people?

9:15 am in Economy by dakine01

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In my post from a couple of days ago, I linked to and quoted from this from Yahoo quoting former Labor Secretary Robert Reich:

In addition, while the economy has been expanding for nearly three years and hiring is picking up, Reich notes, “we also see some major declines in terms of median wage. And that’s particularly true for the bottom 90 percent.”

In the past, economists argued that wage growth lagged in part because employers were spending more on benefits like health care and pensions. But that hasn’t been the case in the past few years. A recently released study from the National Institute for Health Care Reform shows that in 2010, the percentage of Americans with insurance who got insurance from employers fell to 53.5 percent, down sharply from 63.6 percent in 2007. “At the top of the talent chain, employers are providing very generous health insurance, deferred compensation, and everything you can imagine,” notes Reich. “But as you go down the job ladder, particularly to people who are doing routine jobs, they’re getting less and less. There has been a substantial erosion of health care benefits for the bottom 90 percent.

As I surfed the various news sites this morning though, I did find a couple of articles pointing out that some groups are still seeing their salaries and benefits go up, so all is not lost.

In the “No CEOs Left Behind” category, we have this article from today’s (April 4) USA Today, “CEO pay soars while workers’ pay stalls”:

At a time most employees can barely remember their last substantial raise, median CEO pay jumped 27% in 2010 as the executives’ compensation started working its way back to prerecession levels, a USA TODAY analysis of data from GovernanceMetrics International found. Workers in private industry, meanwhile, saw their compensation grow just 2.1% in the 12 months ended December 2010, says the Bureau of Labor Statistics.

Two years of scaling back amid tough economic times proved temporary as three-quarters of CEOs got raises in 2010 — and, in many cases, the increases were substantial.

This blog post from Reuters written by a corporate board member points out a few of the problems with executive pay:

There are several factors at play as the remunerations committee and the board as a whole try to weave together pay packages.

Compensation consultants.
…snip…
Personal feelings.
…snip…
A disconnect from today’s reality.
…snip…
A lack of direct accountability.

I especially like that third point. A disconnect from today’s reality indeed. And speaking of disconnects from today’s reality, we have this from Bloomberg today on rising Wall Street salaries for most:

Most Wall Street (S5FINL) employees got higher salaries in 2011, with the biggest bumps going to those at boutique banks and alternative asset managers, according to a survey by eFinancialCareers.com.

The online survey of 2,860 financial professionals found that 54 percent received salary increases — excluding bonus — and 40 percent reported no change from 2010, according to an e- mailed description of the survey’s findings. Workers at so- called bulge-bracket banks got an average increase of 3 percent, compared with a 14 percent gain for people at boutique banks and a 13 percent raise for those at fund managers.

When year-end bonuses were included, average pay last year fell for workers at companies including Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM)’s investment bank amid declining revenue. As year-end bonuses dropped, some banks raised base salaries that in past years contributed just a fraction of pay for senior employees.

But no matter what happens, we can be assured that Jamie Dimon will find something to whine about. Why just this morning, the Commodities Futures Trading Commission has fined JPMorgan the astronomical sum of $20M to settle charges related to the Lehman Brothers bankruptcy. TWENTY MILLION DOLLARS! (/Dr Evil voice) Why based on JPMorgan’s reported profit from 2011 of $19B, that’s a whopping .1%. By my rough math, that is less than a half day’s worth of profits.

And because I can:

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

Austan Goolsbee Is Almost Correct, Just Not in the Fashion He Thinks

11:03 am in Uncategorized 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.

Austan Goolsbee, head of President Obama’s Council of Economic Advisers was making the rounds of various political shows this past weekend. HuffPo quotes him telling Christianne Amanpour of ABC:

“It’s not a jobless recovery. That is an incorrect phrase,” he told Amanpour.

Goolsbee is correct in one fashion. It can’t be a recovery if it is jobless. But he is way wrong on a couple of points (also from the HuffPo link):

Austan Goolsbee, who heads the president’s Council of Economic Advisers, says the addition of a million new jobs over the past six months shows “we have improved a long way from when the economy was in rescue mode.”

My bold. Now a million new jobs over the last six months sounds good, right? Not so fast there Bucky. In an economy that needs to add roughly 125K jobs every month just to maintain status quo (that would be 750K jobs for a six month period), then a million jobs in six months doesn’t begin to put a dent in the 14 or so millions of unemployed, much less the un and underemployed numbers sitting somewhere between 25M and 30M.

But wait, it gets worse for Mr Goolsbee and his figures. Being the somewhat anal retentive person that I am, I went back and looked at the blog posts I had done starting in December 2010 based on the BLS report on the first Friday of each month for the month just past. Other than the report for February 2011, I have a post that covers the jobs number for each month going back to November 2010′s figures and for February 2011, I found a link to a site that includes a PDF with the appropriate numbers:

1. November 2010 39K
2. December 2010 103K
3. January 2011 36K
4. February 2011 192K
5. March 2011 216K
6. April 2011 244K
7. May 2011 54K

Now I actually went back seven months rather than six months and using information gleaned from the monthly BLS press release for jobs created, I still only come up with 784K jobs. And I haven’t accounted for the little nugget in this past Friday’s report that the March and April numbers were revised down 39K, placing the seven month total at 745K jobs created. 745K jobs created instead of the 875K jobs needed just to maintain the status quo, still leaving the 14M unemployed and the 25M to 30M un and underemployed. No wonder McDonald’s had over a million applicants for their summer hiring binge. And made up the bulk of the “new jobs” for May.
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