Friday, November 30, 2012

The 1983 Social Security retirement tax deal accomplished an all-critical benefit for one group of people: politicians

The 1983 Social Security retirement tax deal accomplished an all-critical benefit for one group of people: politicians.  By setting the payroll tax much higher than needed to meet current outgo they avoided cyclically facing the unpopular need to raise payroll taxes to keep up income with growing outgo -- indeed they postponed the (their) need for many decades.

The screwy unfortunate effect has been to pay for regular budget items (army, navy and USDA) with the (flat) payroll tax (with a cap to boot) in the beginning and, then, to pay retirees income in the out decades partially with (progressive) income tax -- then paying about 25% of the retirees needs.

The treasury sells the bonds and then uses the money to pay for regular budget items -- so you can take your choice about whether the trust fund is make-believe; the money is not put aside for later.

This was doubly dumb if we consider that growth in productivity means that the non-progressive flat tax as levied in a less productive era when payers could least afford it and the progressive tax will phase in when payers can most afford to cough up.

When the fund finally runs out the tax collection method would logically revert back to 100% payroll tax support of retirees (not 75/25).  Maybe they will start another (make-believe?) trust fund to avoid that (and avoid cyclical tax raises too :-]).

BTW, average income doubles about twice as fast as population size so there should be no fundamental problem paying for retirees -- even when workers to retirees ratio drops to 2 to  1 -- and never go lower -- after 2050.

Wednesday, November 28, 2012

TR and FDR and HT and LBJ would be bellowing from the rooftops

A Strategic Plan for Liberals  November 28, 2012   41 years after the Powell Memo inspired the rise of the conservative infrastructure, what’s the road map for a progressive future?

TR and FDR and HT and LBJ would instantly recognize what is sickest about 2012 America and would be bellowing it from the rooftops. If everyday Americans from 1968 could somehow have been informed that by 2007, LBJ's $10.64/hr minimum wage (adjusted, CPI-U *) would drop almost in half they would have asked whether earth was going to be hid by a comet or some equal disaster. (* )

The cratering of -- both -- the economic and political muscle of the average person can be explained in one word: deunionzation. Given naturally selfish human nature the all-in-one essential of economic or political justice in any society is fairly balanced power. No amount of corporate political muscle (indeed that is what corporations should be exercising in their own interest) is going to oppress an EFFECTIVELY unionized electorate.

Legally mandated, SECTOR-WIDE LABOR AGREEMENTS -- wherein everybody doing the same type of job, for instance retail clerk, in the same geographic locale work under one common contract with all firms -- is the only proven way (proven over half the century and around the world) to fairly balance both labor market AND political forum in an all-in-one stroke. 

Don't bother doing anything else to remedy so called "inequality" (the detached intellectual word for the Great Wage Depression/Post-Apocalyptic American Labor Market -- think Soylent Green) if you are not going to do sector-wide bargaining.

Twas post WWII European industrialists who first introduced sector-wide collective bargaining on country wide scales to prevent labor unions from going on a race with each other to the top -- so more resources could be invested into post war rebuilding. Europe's fabled welfare state (which everyone over here seems to think represents the big difference between us and them) was offered to labor as a compensation for the putting up with sector-wide. (England did not adopt sector-wide; why it fell behind the continent -- think I saw this in Barry Eichengreen's book The European Economy Since 1945.)

Conservatively (best as I can understand the figures) average income increased 80% (if not 100%) since 1968 while per capita income increased at most 25% and maybe fallen back. This means that 50% of the work force should be paid at least 50% more -- and ($7.25/hr) minimum wagers 100% more. That is a hell of a lot more all-important than whether 3-5% more of the workforce is unemployed than should be.

(Doubling the minimum wage to $15/hr would add only 4% direct inflation: )

A couple of years back Northwest Airlines flight crews gave back a billion dollars in pay -- presumably to stay competitive and viable in the face of competing airline pay cuts. The following year Northwest awarded a thousand managers a billion dollars in bonuses. Supermarket unions all over the county are agreeing to two-tier contracts, sharply reducing the pay of what was once a terrific middle class job (right in the neighborhood) for new entrants under pressure from nonunion big boxes.

Airline and supermarket employees would kill for legally mandated, sector-wide labor agreements (as exist in Germany, France, Argentina, Indonesia and, yes, right next store in French Canada). TR and FDR and HT and LBJ would be bellowing all this from the rooftops.

Angry Bear back-and-forth:
  1. coberly Nov 28, 2012 4:41:00 PM

    I agree. But where do you start?
  2. Denis Drew Nov 28, 2012 5:44:00 PM  

    Start with the doctors of economics talking to the patients instead of only to each other. What we have now is like doctors arguing over the cure for cancer among themselves but never informing the patients of the results.

    I made this comparison while overhearing a neurosurgeon go through drawn out explanations why a patient in the next room why he really needed to do a spinal operation now (true; if my relative in the office I was in had put off the ambulance for one day he probably would have had a paralyzed leg for life -- leg motor nerves cut off from the spinal cord wont regrow -- the nerve opening was slowly closing on the other patient). A doctor told my relative that cardiac and neurosurgeons don't even start to work until they are 35. Yet; such super-tech doctors spend their entire lives explaining what they know to the untrained.

    Don't know where else to start -- our supposedly progressive politicians? Guys like Clinton and Obama are super-smart managers who (very impressively) deal literally with a world full of problems -- AS PRESENTED TO THEM BY THE LATEST POLICY WONK NETWORKS. They remind me of Theodore H. White's telling how Nixon came off versus Kennedy during the televised debates: Nixon as a very able seaman who could keep all systems on the ship working; Kennedy as a navigator who had someplace he wanted to go, not all out domestically of course. (Republicans want to steer the ship of state to Davey Jones locker.)

    Bill and Barack are combine the missing parts of Ike and Adlai: Ike's missing the core problem of his era (segregation); Adlai (according to HT) not connecting with the man in the street. 

Monday, November 26, 2012

What would Gravedigger and Coffin Ed tell the New York stop stop-and-frisk jury?

What would Gravediggger and Coffin Ed tell the stop stop-and-frisk jury?