Open thread Jan.1 2016 Dan Crawford | January 1, 2016 12:12 pm Tags: open thread Comments (40) | Digg Facebook Twitter |
Happy New Year!!
Bernie Sanders was talking about SS the other day. He said:
“Republicans are misrepresenting Social Security by saying it’s going broke,” Sanders said. “It’s not going broke. There’s $2.7 trillion in the Social Security Trust Fund. It’s good for another 90 years.”
Because Social Security is taxpayer-funded, “it doesn’t add a nickel to the deficit,” he said.
90 years? No impact on deficit?
I don’t believe that Bernie is telling the truth. Any Bernie supporters want to contribute??
You are really one to critique whether someone is telling the truth or not. You stopped right after the 90 years (cherry picking as usual). What else did he say?
My SS answer has always been that per capita income (economic growth, whatever) doubles at twice the rate population doubles. Only SS catch is that among the people from whom SS collects (FICA) — the bottom 90% — the economic growth (income growth) long since barely registers, not in sufficient proportion anyway.
SS is supposedly progressive because though it collects regressively, it is scheduled to pay out progressively: much higher pay out per pay in at lower income levels; gradually leveling off. So the genuine SS pay out problem is the genuine core of almost every other American economic and social problem: it’s the labor market, stupid (all of us)!
Quick fix, of course: raise or (better) remove the FICA cap to reflect that all growth has been going to the people who earn above the cap. Then, it’s time to listen to Elizabeth Warren and make the minimum SS at least enough to live on.
* * * * * *
I’ve been thinking of having some fun launching a national challenge to minimum wage opposition researchers (e.g., Richard Neumark) — daring them to admit that minimum wage hikes very well may (actually) cost job losses in the middle income range.
As I theorize, some money spent on (diverted to) higher prices for low income produced products would have been spent on middle income produced products — had not the minimum wage risen. This is based on the assumption that people in different income ranges tend to spend somewhat disproportionately for products produced by employees in their own income range.
Allow me to cite: from a 1/ll/14, NYT article “The Vicious Circle of Income Inequality” by Professor Robert H. Frank of Cornell:
“… higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners. … as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.”
The fun is: if we can get minimum wage “opo researchers” to admit that min wage increases very possibly mean money and jobs are lost to middle income earners, they are forced to admit min wage increase must help low income earners. My position is unassailable (in public debate credibility) because it admits (is based upon!) admitted job loses caused by higher min wage.
What a hell for “opos”?! :-0
Run – What else does Bernie say about SS? He added this:
“We have to expand Social Security benefits,” Sanders said.
“How do we do it? We lift the cap on the taxable income
(of the wealthiest in the nation) to $250,000 to extend
Social Security an additional 50 years and
I don’t think this is accurate. Both CBO and SSA have reported that eliminating the cap covers 40% of the existing SS shortfall. There is no room for expansion with just the elimination of the cap.
I already know the rest of the story on the later topic.
Capturing 90% of the income to be taxed by payroll taxes is only a partial solution; but it returns to what had happened in 83 with the Greenspan commission. Also fix the issue with the productivity gains being skewed to Capital over Labor . . . tax capital gains income if need be as they are doing this to avoid taxes. Put in place the NW plan and increase PR Taxes to make up the difference. 70% of the shortfall is covered with the first two and the balance made up by the last proposal. I mentioned this earlier (except for the last) in a comment to Bruce.
Looking at 50 year and 90 year windows is somewhat of a guess anyway. Why would we consider things only to worsen?
Bkrasting — With economic growth over whatever span CBO and SSA are talking about (I have no idea) we should be able to raise SS tax rate without much pain or opposition. Simple fact as population ages, fewer will have to support more — even if there were no economic growth. Eventually, it will be youth’s turn to collect. But, with growth, virtually painless (disclosure: I am 71 years old :-]).
“[Minimum] wage hikes very well may (actually) cost job losses….”
What does it mean to “cost job losses”?
“[It’s] time to listen to Elizabeth Warren and make the minimum SS at least enough to live on.”
Why? Social Security is meant to be a supplement, nothing more. If you did not save enough, move in with your kids.
“[Fix] the issue with the productivity gains being skewed to Capital over Labor….”
Capital is primarily responsible for productivity gains.
No, it is not.
Is that why they named it Social Supplement? I was wondering about that.
Warren — it means “cause” job losses. That is, cause middle income job losses in this case as a “lump of demand” is diverted from products and services produced by middle income employees to the same produced by lower income employees.
This is reinforced by the tendency of consumers to spend proportionately more on products supplied by employees in their own wage range — so the lump of demand will tend to circulate within lower wage firms, possibly increasing low wage employment.
Won’t be that low anymore though — possibly squeezing some of that lump back up (whatever).
The idea is to embarrass minimum wage hike “opo researchers” into admitting middle income job losses — how can they not admit any kind of job loss caused by min wage hikes; it’s their raise d’etre? — which will automatically make everybody else understand that lower income employees must be making out better — the money must be going somewhere. It’s a rhetorical trap — it’s an advertising trap. It’s even true. :-0
No worry that I can see about losing mid income support for wage hike Nobody is going to think they are going to lose their job because Walmart has to charge a little bit more (3% more for a $15 minimum) or McDonald’s has to charge a lot more (25% — people got to eat). People just don’t think like that.
Warren — I moved in with my mother.
Warren – WMT 2015 US sales were $288B. 3% of that is 8.8B.
But WMT only made $7B, So you would put the company into a loss? What would that do to employment at Walmart?
McDees has sales of $25B, a 25% increase in cost means $6B. That is more than Mcdee makes in a year.
McDees is already in a multi year slump. You want to step on them?
What do you want? Less jobs at higher wages? That is what you’re getting, More of that will not solve any problems.
No it doesn’t mean $6 billion as an increase in Direct Labor Cost. The cost of the product is not 100% Direct Labor. It is a combination of costs of which Labor is a portion.
No Social Security thread that has both BK and Warren participating and going against each other can stand on its own without a word or three from the Social Security Defender (my nym de e-mail). So:
“Happy New Year!!”
The Social Security program needs only to have workers earning a fair share of the income produced by workers’ labor. Fix the income distribution distortion and you are likely to completely fix any funding issues related to the Social Security program.
If the general budget is having trouble paying its debt to the Social Security Trust Fund don’t blame the Trust Fund or the program. Blame the controllers who have used Trust Fund income to avoid raising general taxes on their very wealthy benefactors. Paying off a debt is the responsibility of the debtor not the holder of the debt instrument. This clearly relates to the issue of income distribution distortion/inequality. Those with the greatest amounts of income seem to believe that supporting the general budget of the government is not their responsibility. Given that they are the ones who benefit most from the structure of the economy, as determined by their government, it seems quite reasonable that they pay for the maintenance of that government.
As far as Warren’s concern regarding whether Social Security is a supplement or otherwise, the program was put into place to avoid destitution in old age after a life time of toil. From about the 1940s through the 1980s a worker could count on a life time of employment with a firm that had a defined benefit retirement benefit. So for most workers Social Security was a supplement to that benefit. That’s no longer the case in our “great” country. Corporate America saw an opportunity to reduce its responsibility to the benefit of its workers, other than its executive corps, and close down those retirement benefits. “Get an IRA/401k and a piece of the capitalist pie. Invest your retirement in America.” Nice idea, if it were attached to reality. More likely pay some fund management outfit 1.5%-2.5% to lose your retirement nest egg. Welcome to America in the era of rampant greed among the investment banking community. Alexander Hamilton warned us way back when not to trust the bankers. Some how he became the darling of the conservative movement and every good idea he had had has been lost.
“The idea is to embarrass minimum wage hike ‘opo researchers’ into admitting middle income job losses — how can they not admit any kind of job loss caused by min wage hikes; it’s their raise d’etre? — which will automatically make everybody else understand that lower income employees must be making out better — the money must be going somewhere. It’s a rhetorical trap — it’s an advertising trap.”
OK, Dennis, I am getting confused again, so let me try to parse things out.
“Minimum Wage opposition researchers” are those who OPPOSE a Minimum Wage hike?
It seems that they would be the first to “admit” (scream loudly) that a Minimum Wage hike will cause middle-income job losses.
“The cost of the product is not 100% Direct Labor.”
I would be interesting to figure out the US labor component. (Obviously, foreign labor is not affected by a Minimum Wage hike.) Not just Direct Labor, of course, by the cost of ALL the labor that goes into the process of procuring the raw materials, transporting them, transforming them into finished products, transporting the finished products, and selling them.
Traveling today. I will talk about this later. For now, Material and Overhead have a far greater impact on the cost of manufacturing than Direct Labor.
“The Social Security program needs only to have workers earning a fair share of the income produced by workers’ labor.”
Please define FAIR, then use that definition to come up with the percentage you think matches that definition.
Warren how about the same share of productivity workers got in the 50s and 60s.
Starting in the 70s management fetishized the idea that because Corporate Directors had a primary fiduciary responsiblity to shareholders under law that they had no other responsibility to anyone whatsoever. This may have been right by a simplistic reading of the law of corporations but was legal and historical nonsense, ‘corporations’ are historically State created and give limited liability to officers and shareholders in exchange for benefits to the State. To the extent that “Corporations are people my friend” they are expected to be good citizens and not sociopaths.
But the idea that corporations owe ANYTHING to the institution that granted them their charter has been lost. Instead the fact of being a corporation has allowed officers and directors to take all the advantage of unlimited personal liability while insisting that they have a right to extract maximum rents and returns. Which is why Trump is a billionaire despite having guided four name branded corporations into bankruptcy.
If Corporations want an even playing field let them give up their STATE CHARTERED CORPORATION and become flat out Partnerships with all personal assets exposed to legal liability. But no they want to have it both ways: strictly limited liability and unlimited pricing power over wages and no responsiblity to the State at all. (See ‘double taxation of profits’ in any Business 1 textbook’.
Time was that corporations had an active understanding of the quid pro quo granted by their State Charter and operated under management principles made most famous and overt by business guru Peter Drucker.. Until they decided that becoming vampire squid sucking ‘Gordon Gecko’ ‘greed is good’ ‘maximize shareholder return at all cost to every externality’ that things went to shit.
America grew great in the 50’s and 60s. At least for the white middle class. Because they were granted a FAIR share of productivity. Then the sociopaths of the Chicago School/Randite ‘Virtue of Selfishness’ group took control of discourse and then distribution of the gains from productivity.
And it doesn’t come down to some God Damn percentage. Are you even aware of the basics of business, economic and/or labor history? Because trust me it doesn’t show. The world didn’t start when Uncle Miltie wrote “Capitalism and Freedom” and still less when Our Blessed Sister Ayn wrote “Atlas Shrugged”. Or encapsualted her ‘philosophy’ in “The Virtue of Selfishness”.
Take a good long look in any mirror in your house. You should be seeing a reasonable facsimile of the Washington Monument. It’s only since the construction of that monument that G.W. became known as the father of our country. Think of it literally.
“How about the same share of productivity workers got in the 50s and 60s.”
Why is that more “fair” than now? Are people actually working harder now? Are people working longer hours? Are they doing more PHYSICAL labor (the Force-times-Distance meaning of WORK)?
“It doesn’t come down to some God Damn percentage….”
I entirely agree. I didn’t bring up the percentage thing.
There is no need for Bruce or anyone to explain. It was your term: “Please define FAIR, then use that definition to come up with the percentage you think matches that definition.” Your term and comment, you should be explaining to us.
Income has stagnated and PR has decreased both of which lends itself to an argument of productivity gains being skewed heavily to Capital.
This: “Why is that more “fair” than now? Are people actually working harder now? Are people working longer hours? Are they doing more PHYSICAL labor (the Force-times-Distance meaning of WORK)? tells me you do not know what you are talking about and you are trolling again. Indeed, Labor should be working fewer hours at the same or better wages.
“Please define FAIR, then use that definition to come up with the percentage you think matches that definition.”
“I entirely agree. I didn’t bring up the percentage thing.”
Warren I don’t expect a great deal of historical knowledge from you or even basic reading comprehension of the points I am making but Christ man at least you can own your own words.
“Also fix the issue with the productivity gains being skewed to Capital over Labor….”
What’s that, if not complaining about not getting a “fair” percentage?
“Income has stagnated and PR has decreased both of which lends itself to an argument of productivity gains being skewed heavily to Capital.”
But is such a skew to capital not warranted? Primarily, productivity gains have come from investment (capital) in equipment and automation. So why expect that Labor will reap what it did not sow?
This is pretty basic stuff and now I am wondering if you ever took Econ in college.
“Material and Overhead have a far greater impact on the cost of manufacturing than Direct Labor.”
I will take that as given. But the material required labor to mine, harvest, refine, transport, etc. The overhead — software, cleared land, buildings, HVAC, etc. — also requires labor to create and maintain.
The assertion is that labor costs are not so great a percentage of total cost. That is true if only DIRECT labor is considered. But labor costs go into all of the other inputs to manufacturing and to getting those products to customers.
You are conflating it. Think through it.
“So why expect that Labor will reap what it did not sow?” Warren
It sounds as though you’ve answered your own question. “But the material required labor to mine, harvest, refine, transport, etc. The overhead — software, cleared land, buildings, HVAC, etc. — also requires labor to create and maintain.”
“The assertion is that labor costs are not so great a percentage of total cost. That is true if only DIRECT labor is considered. But labor costs go into all of the other inputs to manufacturing and to getting those products to customers.”
And add to that that labor is performed by the eventual economic consumer. if capital takes all the economic gains brought on by technology and labor, how is consumption to be maintained? if the bulk of income from production isn’t returned to the economy how is demand to keep pace with production?
“[If] capital takes all the economic gains brought on by technology and labor, how is consumption to be maintained?”
By consumption by those who get the capital gains and dividends.
“If the bulk of income from production isn’t returned to the economy how is demand to keep pace with production?”
Just because it does not go to laborers does not mean it does not go back into the economy. Those who own the land pay for their food, clothing, housing etc. out of the rent they collect. Those who own the companies pay for their food, clothing, housing, etc. out of their dividends and capital gains. And some they re-invest — buying more equipment to expand their companies, hiring more people, etc.
>> So why expect that Labor will reap what it did not sow?
> This is pretty basic stuff….
Then please provide a pretty basic answer.
Wake up and smell the coffee. You’re arguing that all gains going to one small sector will be expended and returned to the economy though recent history tells us quite a different story. The wealth and income distribution skews are closely coordinated with the drag on economic growth. It’s been on going for at least two decades.
And let’s go back to your basic assumption that all productivity gains have been the result of capital investment and technology. How is it that technological advancement takes place if labor isn’t part of that equation? Who is it that implements advances in technology? Who is it that provides the labor that allows the capital investment to increase productivity? Production and labor are tied together in a knot that can’t be undone regardless of the amount of investment or technological advancement takes place.
“You’re arguing that all gains going to one small sector will be expended and returned to the economy though recent history tells us quite a different story.”
No, I am not. Capital receives about 36% of income; labor receives about 64%. Capital is not “one small sector.”
“The wealth and income distribution skews are closely coordinated with the drag on economic growth. It’s been on going for at least two decades.”
Yes, GDP growth is not what it was prior to Reagan, but the volatility has decreased considerably.
I submit that the increased regulation, meant to tamp down that volatility, has also restrained growth. International trade has also contributed significantly to reducing both our GDP growth and our Labor Share. Fewer regulations and cheaper labor in developing countries has undermined both our manufacturing and Labor’s negotiating power. Form a union, and your plant goes to Mexico.
“[Let’s] go back to your basic assumption that all productivity gains have been the result of capital investment and technology. How is it that technological advancement takes place if labor isn’t part of that equation? Who is it that implements advances in technology? Who is it that provides the labor that allows the capital investment to increase productivity?”
Most, not all.
The thing is, labor is paid for it’s contribution in wages and benefits. But if that labor is compensated with stock options or grants, it is no longer considered Labor Share, but Capital Share.
The thing about increased productivity is that LESS labor is required. That’s the whole point of self checkout lines at the grocery store and Automated Teller Machines. Our manufacturing output has doubled since the 1980’s, but manufacturing employment has fallen by a third.
Why would you expect the remaining employees to get a 200% raise (output per worker has tripled) when there are more people competing for fewer jobs?
“The thing is, labor is paid for it’s contribution in wages and benefits. But if that labor is compensated with stock options or grants, it is no longer considered Labor Share, but Capital Share.”
No one is arguing for labor to receive “stock options or grants.” Labor needs wages and benefits, which labor will plow back into the economy,
as their share of the increased income created by increased productivity. And no, less labor isn’t the result of more productivity, as you claim. Less labor is a local phenomenon brought about by capital moving the location of production to geographic arenas where labor is more easily exploited.
“Labor needs wages and benefits, which labor will plow back into the economy, as their share of the increased income created by increased productivity.”
Capital also plows money back into the economy — but at a slower turnover rate.
“Less labor is a local phenomenon brought about by capital moving the location of production to geographic arenas where labor is more easily exploited.”
That assertion is not supported by either our agricultural or our manufacturing output. Both have increased tremendously in this geographic arena (the United States), but because of productivity increases, the labor employed in agriculture and manufacturing has declined considerably.
That is not to say that some job loss is from production leaving the country, but certainly not all of it. We are exporting more agricultural produce than we are importing, so obviously we have not moved the location of our agricultural production.
We have a trade deficit with Canada. Does that mean that U.S. capital moved the location of production to Canada to exploit the labor force there?
“No one is arguing for labor to receive ‘stock options or grants.'”
Actually, many people are. Employee-owned companies are a very popular business model.