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When You Really Look, Financial Quicksand Turns Into Oligarchical BS

9:09 pm in Uncategorized by letsgetitdone

Why do you say that the Government will have a solvency problem?

Abby Huntsman’s first rant about entitlements soliciting generational warfare got a lot of pushback from defenders. I reviewed the main points made in defense of entitlements, and then added “the most important point of all” as well. Abby made a second try, however, this time singling out Michael Hiltzik’s reply to her to respond to and adding a few more points, while withdrawing a bit from her claim that life expectancy has changed very much for seniors since the New Deal period. Hiltzik took issue with that one too. Let’s review Huntsman’s reply to Hiltzik by analyzing the MSNBC transcript of her second rant against entitlements.

Abby Huntsman:

. . . the need for entitlement reform. there was a firestorm of reaction. an article in the ” l.a. times” went as far as to say i want to lead my generation into poverty. come on, man. this isn’t about me. it’s about the major problem.

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Envy or Honest Outrage?

10:01 pm in Uncategorized by letsgetitdone

(Updated)

Catherine Rampell offered a theory the other day, in a piece entitled: “Income inequality isn’t about the rich — it’s about the rest of us.” She says:

People don’t hate you because you’re beautiful. People hate you because they are getting uglier. . . .

Income Inequality
And then later, she says:

Yes, anti-inequality rhetoric has grown in recent years. But it’s not the growing wealth of the wealthy that Americans are angry about, at least not in isolation. It’s the growing wealth of the wealthy set against the stagnation or deterioration of living standards for everyone else. Polls show that Americans pretty much always want income to be distributed more equitably than it currently is, but they’re more willing to tolerate inequality if they are still plugging ahead. That is, they care less about Lloyd Blankfein’s gigantic bonus if they got even a tiny raise this year.

She proceeds to review polling data to show that this is so, and then advises the 0.1% that if they want to be left alone then “they should probably support policies that “promote the upward mobility of other Americans. . . “ such as Pell Grants, higher minimum wages, and early childhood education.

That’s not bad advice, of course, but I wonder what people will think of the 0.1 % when they understand more fully that their efforts to get ahead aren’t independent of the 0.1%’s efforts over the years to manipulate both the poitical and economic systems. And that further, the primary cause of the failure of poor people and the middle class to gain ground over the past 40 years is due to the deliberate efforts of the wealthy to structure both economics and politics in such a way that both nominal and real wealth would flow increasingly from the bottom to the top.

I suspect that the more people come to understand the increasing rigging of the game over a long period of time, the more likely it is that they will be bothered by increasing inequality all of the time, even when they themselves are living through a good year or two when they are making marginal gains. It is also more likely, that when they come to that understanding, the pitchforks and guillotines will come out, because people will blame the rich for the extremes of inequality and will replace any sense of fleeting envy they may have with a continuing sense of honest outrage at the Koch brothers, the Petersons, the Walmart family, and their compatriots, who have created the conditions that have made them periodically unemployed, ill-educated, financially insecure, subject to difficulties in getting medical care without going bankrupt, in staying in their homes, and to lack of opportunities and declining hopes for the future.

In short, I’m saying that:

People don’t hate you because you’re beautiful. People hate you because you are making yourself more beautiful AND are making them uglier.

So, even though the rich are periodically unpopular when the economy falls into bad times, it is nothing compared to what people are likely to direct at them, when they understand who is to blame for the plight of most of the population. That’s when the proverbial s__t will hit the fan.

My advice to the oligarchs is this. You aren’t involved in a low risk, predictable game, here. You’ve ruined people’s lives through your actions for many years now. Once the conditions for them are present, which will happen when people see your role in their plight clearly, mass movements can emerge at any time, and they can easily get out of control, as many seemingly unassailable oligarchs have found out in the past.

The wise thing to do is to give way to the inevitable thrust toward greater economic, social, and political democracy. Play the handmaiden to that transition, because then you may be able to keep most of your ill-gotten gains and have a place of honor besides.

(Cross-posted from New Economic Perspectives.)

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The Most Important Point of All Was Ignored

8:43 am in Uncategorized by letsgetitdone

On Abby Hunstman’s right wing Petersonian “Fix the Debt” rant

MSNBC’s right wing representative on The Cycle, Abby Huntsman, got a lot of pushback from Social Security defenders after her rant last week. They made points similar to the following in countering Huntsman:

– SS is not bankrupt now, it has $2.6 Trillion in Treasury IOUs in the SS “trust fund” accumulated because Treasury has used FICA collections to “pay for” other Federal spending since 1983, when the Government began to collect more from workers and employers than was paid out to beneficiaries. The accumulated IOUs, projected interest on them, and future FICA collections are projected as being enough to “cover” 100% of SS benefits until 2033, and then 75% of benefits thereafter. 100% of benefits could be “covered” from 2033 on, if the payroll tax cap on Social Security were to be removed.

– Huntsman’s claim that seniors have longer life expectancies than when SS first was enacted is greatly exaggerated, because life expectancies at birth have improved due to improvements in infant mortality rates. But they haven’t improved nearly as much at age 65 and older, and apart from that, the improvement that exists after age 65 is reached is primarily concentrated among certain social groups, and that the poorest and most needy groups in our population, who need SS the most, have either seen little improvement in life expectancy, or even a decline in life expectancy in recent years.

– Savings of seniors now average very little more than is needed for them to cover Medical expenses due to aging and there is precious little left over for living expenses beyond what SS spending will cover.

– Huntsman is conflating the SS “Trust Fund” running out of money in 2033, with SS running out of money. The first is happening as it was always planned to happen when the Reagan Administration and Congress agreed to raise FICA payments to almost double the amount previously paid, for the boomer generation to cover its retirement benefits; but the second depends on what Congress will do in the future to close the gap between current projected FICA revenues and projected benefits.

These two are different because the Government can do various things to close that gap. Huntsman mentions only cutting benefits or moving the SS retirement age to either 70 or even 75, so that enough will be left in the fund to close the revenue/benefits gap. But there are other ways of doing this easily; most notably removing the payroll tax cap so that the well-off, or those who are prospering, will pay the same share of their income into Social Security as most of the rest of us, and/or there can also be gradual small increases in the employee and employer contributions that will close the projected gaps indefinitely.Other points of less importance, and moral arguments, which from my point of view are among the most important, about the right to a decent secure retirement for the elderly are made, as well.

But, there is one point, the most important one of all, which is not made in all these “progressive” push back arguments against Abby Hunstman’s right wing Petersonian “Fix the Debt” rant. That is the point that there is no entitlement crisis and no emergency, and neither an increase in payroll taxes, nor robbing from “future generations” is necessary to close the projected gap after 2033 because Congress can pass legislation providing for annual automatic funding of expected costs for all SS and Medicare trust funds.

That’s done now for Supplementary Medical Insurance (Medicare Part B), and Prescription Drug Benefits (Medicare Part D), and the same practice using similar legislative language can be extended to the SS Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds. End of story. Once that is done, no gaps between SS revenue and benefits can be projected by institutions, such as CBO, under current law.

You may doubt this solution by pointing out that legislation like this just pushes off Huntsman’s Social Security solvency problem to the Treasury at large, rather than its being SS’s problem, but it doesn’t solve the real insolvency problem. Only it does, because the Government as a whole has no fiscal solvency problem, since it can always use its authority to create the reserves in the Treasury spending accounts to pay all its bills including all those exceeding its revenues.

The customary way of creating such reserves is to sell Treasury debt instruments, destroying reserves in the private sector, and getting the Fed to place an equal amount of reserves in its accounts. But, there is another way it can be done under current law, and still other ways open to Congress, if they want to pay all the SS benefits they would have guaranteed by the proposed change in the law that would solve this faux problem.

The way any gap appropriated by Congress can be closed under current law, is to use Platinum Coin Seigniorage (PCS) to do it. As many of my readers know, I’ve explained how this would work in my e-book. But, the basic idea is that coin seigniorage can be used by the Treasury to require the Fed to use its reserve creation authority to place reserves in Treasury accounts, without Treasury engaging in any additional taxing or borrowing.

So, this capability coupled with Congress providing for annual automatic funding would end the Huntsman, Peterson, Bowles, Simpson, Ryan, and Obama revenue gap problems with Social Security and all other entitlements, for that matter, without these poor folks having to worry about taxing the rich, like them. And, if Congress doesn’t like that alternative way of placing reserves in Treasury’s accounts so it can spend Congressional appropriations, then it can always just go ahead and place the Fed within the Treasury Department, giving the Secretary the direct authority to order the Fed to fill its accounts with enough reserves to cover any revenue shortfalls, without either raising taxes or issuing more debt instruments.

So, these are the easy ways to end the faux crisis which won’t befall us anyway until 2033. Why won’t the “progressives” pushing back against Abby Huntsman mention solutions like these? Why do they, instead, always propose solutions that will raise taxes on the wealthy? Are they afraid to let the people know that the Government isn’t like a household and doesn’t have the same financial problems they have, just written large? Are they so insistent on solutions that will tax higher income and wealthy people, because they must kill the two birds of full employment and greater equality through taxing with a single stone?

Moving toward greater economic equality is a focus we ought to prioritize very highly, but getting that done is a separate issue from defeating deficit terrorism by taking the deficit reduction and faux entitlement crises off the table so full resources can be devoted to strengthening the safety net and legislating programs essential for getting millions of Americans on their feet again and contemplating the future with hope. That, in itself, will lessen inequality.

And after that is done, we can then turn our attention to programs primarily focused on creating greater economic equality. But until it is done, let us focus on stopping the bleeding of working and middle class Americans and restoring them to the economic health and sense of economic opportunity, that we’ve always thought was so important to American life.

(Cross-posted from New Economic Perspectives.)

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