The U.S. is not Greece

  • tokugawa

    Posts: 945

    May 14, 2010 7:28 PM GMT
    http://www.nytimes.com/2010/05/14/opinion/14krugman.html
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    May 14, 2010 7:46 PM GMT
    southbeach1500 saidThere is no need to dismantle Social Security. The politicians of both parties in Washington DC are doing a good job of killing it off without any additional assistance needed.

    Please explain further. How are Democrats killings Social Security? It was only Democrat opposition that prevented Social Security from being privatized and tied to the stock market during the Bush Administration, which would have resulted in disastrous cuts in payments for recipients when stocks plummeted during Bush's second term.

    So please expand on your statement. I only know about Republicans wanting to end Social Security, and all social programs like Medicare and Medicaid. Are there some Democrats, too? Who are they?
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    May 14, 2010 8:09 PM GMT
    southbeach1500 said
    Red_Vespa saidPlease explain further. How are Democrats killings Social Security? It was only Democrat opposition that prevented Social Security from being privatized and tied to the stock market during the Bush Administration, which would have resulted in disastrous cuts in payments for recipients when the stocks plummeted during Bush's second term.

    So please expand on your statement. I only know about Republicans wanting to end Social Security, and all social programs like Medicare and Medicaid. Are there some Democrats, too? Who are they?

    Social Security will be insolvent in about 25 years, i.e. the ship will be sunk in 25 years.

    Nobody is doing anything to fix it. That is the fault of both parties. This is not a D vs R issue.

    Just google: social security insolvency date

    Social Security has been at potential risk for decades, depending on what budget projections you use, and what projections for the US economy, and Congress has always made sure that Social Security won't go bankrupt. So are you saying in 25 years time from now Congress will have done nothing to preserve Social Security? You have that on good authority?

    You do know Republicans officially want to end the current Social Security system, and to privatize it? Tie payments to the ups & downs of the stock market? And siphon off billions of dollars that would have gone to recipients, to cover the operating costs and profits of the (Republican-friendly) corporations that will operate the new privatized Social Security?

    With no guarantee of how much a retiree will receive, it changing with the swings of the stock market? We all get put into a kind of 401(k), and you see where those things went.

    That is the Republican vision for Social Security. So you can take your 25-year-out predictions for Social Security and shove them, because they aren't gonna happen, at least not as as long as Democrats can influence the issue.
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    May 14, 2010 8:33 PM GMT
    Southbeach- it's an opinion piece from a highly respected, Nobel winning economist. It's like a mechanic writing an opinion piece as to why body on frame structure is bad for fuel economy. The guy forgets more about economics than you and I will ever know.
  • BlackBeltGuy

    Posts: 2609

    May 14, 2010 9:36 PM GMT
    the us is not greece. NOT AT ALL. the US will be in worse shape sooner rather than later
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    May 14, 2010 10:30 PM GMT
    The U.S. is not Greece. The latitude and longitude are all wrong. icon_lol.gif
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    May 14, 2010 11:24 PM GMT
    Southbeach, my point is that the opinion is coming from someone with authority to speak on the subject. His "opinion" is respected among economists left and right... if his opinion isn't qualified, whose is?
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    May 15, 2010 2:22 AM GMT
    jmnyc1177 saidSouthbeach, my point is that the opinion is coming from someone with authority to speak on the subject. His "opinion" is respected among economists left and right... if his opinion isn't qualified, whose is?


    OBVIOUSLY SOUTHBEACH is the only living person anywhere with the authority to speak on anything and everything except maybe pattison and that annoying dude from Canada
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    May 15, 2010 2:25 AM GMT
    Sure it is. Greece is a preview of the US.
  • BlackBeltGuy

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    May 15, 2010 3:42 AM GMT
    tomk7 saidSure it is. Greece is a preview of the US.


    exactly what tomk said. my people run their country very lazy the past 20 years
  • tokugawa

    Posts: 945

    May 15, 2010 6:10 AM GMT
    southbeach1500 said
    Red_Vespa said So are you saying in 25 years time from now Congress will have done nothing to preserve Social Security?

    If we have the same type of schmucks that we've had over the past 30 years for the next 25 years, then yes. They have been unwilling to stop the sinking ship of Social Security so far and they don't have the competence to fix it.


    The following table lists the INCREASES IN THE SOCIAL SECURITY TAX RATE which passed during the Reagan administration, LESS THAN 30 YEARS AGO.

    Social Security Payroll Taxes
    Contribution (%)
    Year Employee Combined
    1970 4.80 9.60
    1980 6.13 12.26
    1983 6.70 13.40
    1984 6.70 13.40
    1985 7.05 14.10
    1986 7.15 14.30
    1987 7.15 14.30
    1988 7.51 15.02
    1989 7.51 15.02
    Source: American Almanac, excerpts from Table 571, page 360 (1993 ed.)
  • tokugawa

    Posts: 945

    May 15, 2010 6:30 AM GMT
    KARATE1974 saidthe us is not greece. NOT AT ALL. the US will be in worse shape sooner rather than later


    The U.S. economy is in recovery mode. Total employment has increased for the last several months. Last month's gain was over 200,000 jobs. How do these numbers translate into the US being in worse shape? They don't.

    Greece is straight jacketed by the Euro. If its economy was not tied to the Euro, Greece could devalue its currency, which would then lead to Greek economic recovery. Greece may well switch back from the Euro to its previous currency and regain control of its economic destiny.

    Europe prematurely adopted the Euro without the necessary political framework to deal with the kind of economic problems Greece is experiencing. The United States does have the tools to deal with its economic problems. Obama's stimulus package was enacted fast enough to stop the job losses and turn the economy back into the plus column.

    Greece's situation is similar to Argentina's pegging its currency to the U.S. dollar in the 1990's, which led to economic disaster: its defaulting on its national debt, and the resulting economic depression there. Argentina's economy has since recovered, after its currency was effectively devalued by about 2/3rds, that is, by about 67%.
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    May 15, 2010 6:36 AM GMT
    The problem, as you'll note in the increase in contributions to social security over the timespan described, is that the contributions almost double over a short time. This isn't even looking at the impact of baby boomers retiring, and the relatively small workforce of productive, young people that would putatively be covering their tab for two decades of life expectancy.

    It is untenable assuming we don't start paying truly absurd taxes, which will itself have a feedback effect on investment/the economy, thus reducing our spending power and impacting social security, hence driving higher taxes, etc. You get the drift.

    Krugman is technically correct on certain points, but when he compares the US to Greece, he is surreptitiously engaged in several cheats. First off, I assume he is using public debt as defined by the Fed, which excludes (importantly) out intragovernment debt (i.e. - our borrowings from social security, medicare, etc.). If you include those, you get to a figure along the lines of 82.9% debt-to-GDP. Furthermore, you need also to consider state and municipal level debt in aggregate with Federal debt to arrive at actual debt-to-GDP. Then you should also examine private indebtedness to see exactly how stretched a country is, in concert with other factors such as the personal savings rate. Our savings rate for a brief time was actually - get this - negative. And while there has been a relative spike upwards as a result of the recession, it is plummeting again, and even at its peak never approached what we typically saved in the 1970s. As such, when measuring the taxation capacity of the Federal government in the interest of repaying loans, you find the American taxpayer is unsurprisingly very, very tightly strapped for cash as is. We are, as many liberal observers here will constantly complain, personally leveraged to the hilt (and our public entities aren't that far off). So Krugman's analysis is pretty incomplete in this article, and selectively cherry picks facts that are quite limited in scope.

    The US does have several factors operating in its favor for the meantime, such as a more robust economic recovery due to it not being quite as confiscatory as the EU, but that does not imply it is safe. In fact, I would imagine that in the next decade or so we'll experience significant financial decline. The demography and national balance sheet demands it. Krugman, you will note, essentially decides to punt and claim that he believes that savings from government healthcare programs/reforms will help significantly mitigate these factors in the future. I do not share his optimism in that regard.

    Krugman would also likely point to things such as historically low treasury yields, but again I would call that bluff. Treasury yields are low due to safe haven flows from Euro sovereign default risk/world macroeconomic exposure. That does not speak to the inherent fortitude of the bonds as strongly as the raw numbers might suggest, and does not admit that in fact those yields are subject to swift movement depending upon the mood of the market.

    This article, in my opinion, is deeply flawed, even considering the brief space allowed to Dr. Krugman.
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    May 15, 2010 3:33 PM GMT
    southbeach1500 said
    abelian0 saidThe problem,
    This article, in my opinion, is deeply flawed, even considering the brief space allowed to Dr. Krugman.

    Another great post, though I fear it's over the heads of most on here... icon_sad.gif


    well you never know man. It's realjock.com not dumbjock.com icon_wink.gif
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    May 15, 2010 4:22 PM GMT
    Here's the columnist's conclusion:

    "So here’s the reality: America’s fiscal outlook over the next few years isn’t bad. We do have a serious long-run budget problem, which will have to be resolved with a combination of health care reform and other measures, probably including a moderate rise in taxes. But we should ignore those who pretend to be concerned with fiscal responsibility, but whose real goal is to dismantle the welfare state — and are trying to use crises elsewhere to frighten us into giving them what they want."

    Wow, sounds a little pollyanna-ish to me. Especially the part about relying on health care reform to contribute to the solution. The jury will be out on that for years to come!

    Most middle-of-the-road economists agree that a combination of tax increases ... AND ... spending cuts eventually will be necessary to address our "serious long-run budget problem," as Krugman puts it.

    Someone asked Wayne Gretzky what made him such a great hockey player. His response: I skate to where the puck is gonna be not where it is."

    Our best bet is to increase tax revenue, not by perpetually raising taxes ... but by investing aggressively in tomorrow's jobs. Let's face it, a lot of folks out of work today will not be able to go back to their old jobs or earn the type of money they made. Many of those jobs are gone forever. So:

    1. Spur yet more R&D into energy development, nanotechnology and so on ... the industries of tomorrow (Friedman's book, "Hot, Flat & Crowded," is a good read)
    2. Align our educational system to supply the labor necessary for those jobs (many of today's grads will be employed in 5 years in jobs that haven't even been invented yet!)
    3. Accelerate job retraining where possible for younger people to fill some of these jobs
    4. Align immigration laws to enable workers to fill jobs that our labor force cannot fill, at least in the short term

    Wow, if we start now, perhaps in 25 years we'll get there lol. Actually, some of this is happening, of course, it's just that business and government are not collaborating well enough to accelerate progress.
  • tokugawa

    Posts: 945

    May 15, 2010 8:16 PM GMT
    abelian0 saidThe problem, as you'll note in the increase in contributions to social security over the timespan described, is that the contributions almost double over a short time. This isn't even looking at the impact of baby boomers retiring, and the relatively small workforce of productive, young people that would putatively be covering their tab for two decades of life expectancy.


    Actually, the impact of baby boomers retiring was one of the major motivations for the increase. Your analysis ignores any productivity gains which would allow fewer workers to pay for the social security and medicare benefits due to their parents and other retired relatives.

    Surely you know that CURRENT social security taxes far exceed payments to retirees and that the surplus is used to help finance the budget deficit. A budget deficit due, in part, to the failure of the federal government to pay for the war in Iraq and the war in Afghanistan with a tax increase. In fact, this is the first time in U.S. history which higher taxes were not enacted by the American people to pay for a current war.

    If you feed that several decades in the future, taxes at the current rate will not be adequate to pay for social security benefits, what solution do you propose?

    I suspect that you would like to allow some individuals to invest some of their social security taxes in private securities, since you say you work as an analyst at a securities broker/financial advisory firm. Since the current system of social security is set up on a pay as you go basis, how would you cover the resulting short fall in social security taxes to pay for current retirees? Would you cut benefits or increase social security taxes or both?

    Would there be bailouts to new retirees whose investment choices dropped in value, if there was a sharp drop in the securities market just when they planned on retirement?

    I also notice that you advance a Malthusian argument when you say, "I would imagine that in the next decade or so we'll experience significant financial decline. The demography and national balance sheet demands it." Why hasn't Malthusianism already done what you say it will do? Why is it only now that Malthusianism will create significant financial decline due to population growth? Why is the U.S. economy currently expanding? Could it be that Obama's stimulus package is working as intended?
  • rnch

    Posts: 11524

    May 15, 2010 8:27 PM GMT
    [quote][cite]southbeach1500 said..opinion piece (note: it is NOT a news article)...[/quote] what's your point? YOU never had any problem quoting a right wing internet opinion as fact.... icon_lol.gif
  • rnch

    Posts: 11524

    May 15, 2010 8:36 PM GMT
    tomk7 said
    southbeach1500 said
    abelian0 saidThe problem,
    This article, in my opinion, is deeply flawed, even considering the brief space allowed to Dr. Krugman.

    Another great post, though I fear it's over the heads of most on here... icon_sad.gif


    well you never know man. It's realjock.com not dumbjock.com icon_wink.gif
    well, well....who ya gonna believe?

    a nobel prize winning economist with a long standing collumn in a well respected newspaper that is read 'round the world... OR ...some skinny, pretty boi from an internet website? icon_lol.gificon_wink.gificon_lol.gif