Sandwich Man’s post on political correctness sort of ties in with this on social trust, I think. I hadn’t thought about it (trust) specifically in terms purely of economics, but I’m sure many of you have.
…….For economists, social trust works like a lubricant that can lower transaction costs and facilitate trading activities. Its aggregate benefit can be huge for a large economy, favoring the emergence and growth of large firms and boosting GDP with lower levels of inflation for a nation and higher levels of trade between nations. In America, according to Steve Knack, a World Bank senior economist, trust (broadly defined) was worth 12.4 trillion dollars a year, or 99.5% of the income in the mid-2000s. It “would explain basically all the difference between the per capita income of the United States and Somalia,” he remarked.
In a low-trust market, everybody has to pay more for transaction. Constantly guessing others’ intentions and looking out for cheaters, people are unwilling to invest in business and participate in financial markets, especially for the long term. (The Shanghai Composite Index, for example, could shoot up by 153% and then dive 43% in just 14 months from July 2014 to August 2015.) As a result, firms, as political economist Francis Fukuyama has observed, tend to be small, and mostly remain family businesses. This, in turn, can lead to lower rates of employment and higher rates of poverty…….
Seems a corpus of DNC documents are likely to be hitting Wikileaks soon, allegedly containing a lot of the same material pulled by the Russians: Donor lists, Trump background, DNC push strategy for Clinton (dated May last year, so before Sanders announced his candidacy).
One might imagine that such a leak could have came out of the security company investigating the breach…it’s like politicians have never heard of air-gapping or email encryption.
A truly bizarre story from Austin where police finally have a suspect in custody after months of rock throwing incidents where someone was throwing large rocks from the window of a vehicle at oncoming traffic in a heavily used section of I-35 downtown.
It turns out the guy was actually into contacting the victims, showing concern for them and even calling 911 to report the crimes.
He also had some kind of long held public grudge against towing companies, appearing multiple times to complain about them at city council sessions. There appear to have also been some copycats involved with other incidents.
I missed the Coberly, Warren, Webb discussion of SS but I recently saw a proposal: raise the cap to $240,000, increase the payroll tax by 2% (1% for employee, 1% employer), reduce the growth of benefits for the top 20% of income earners who are receiving benefits and narrow the definition of disability. Supposedly this proposal gained support from 65% of those surveyed.
The 1+1% would most certainly fix the issue. Inflationary increases happen when there is inflation and they lift the salary limits. Reducing benefits for those who are in the upper 20% is over kill. Normally the upper 20% in income is $85 -$90,000. At that level they too suffered from stagnant income. Coberly does have a point that such a described increase puts SS on a welfare plain.
by coincidence I saw that report too. I worry about it because it seems to be a semi official report from SSA (the plan, not the survey).
It’s a bad idea, however well it polls. People answering polls don’t have time to think and certainly don’t know the details or the probably consequences.
The plan is too complex… a rube goldberg product of committe to satisfy political powers and conceal the fact that it is at the same time a “tax on the rich” and a “cut in benefits.”
we don’t need a tax on the rich, and we can’t afford a cut in benefits.
a one tenth of one percent per year increase in the payroll tax… which is not a tax but a forced savings and insurance plan.. the workers get their money back plus an effective interest of about 6% (nominal) absolutely guaranteed against inflation and market losses, etc.
maybe you can’t fight city hall, but it really depresses me that we are not even trying.
it seems to be that the United States may be entering that “low trust” regime. bank fraud seems to be the standard business model.
not only does fraud take money away from mostly the poorer half of the population but it leaves them less inclined to use their money to invest or even buy since they are afraid of being cheated.
the ssa report “raises benefits” to the poorest while lowering benefits to the “middle” and of course the “high” earners.
this is just a way of appealing to the “common sense” and compassion of workers (benefit the poor) while undermining and eventually destroying the only program that protects them.
“this is just a way of appealing to the “common sense” and compassion of workers ”
There are people who need welfare. There are countries that combine taking care of your own future and taking care of people who cannot take care of themselves. I think that with the incoherent attitude about welfare in the US, we are smart not to try to include it in Social Security. Those who want to understand SS should realize it is a compromise that makes it work.
there are people who need welfare. best to keep that separate from Social Security which works because it is NOT welfare but simply a way for workers to save part of their own money and insure it against most of the bad things that can happen: inflation, bad days on the market, theft, improvidence, and even a lifetime of low wages
“combine taking care of your own future and taking care of people who cannot take care of themselves. ”
is exactly what insurance does.
“welfare” could be thought of as doing the same thing.. and to some extent it does… but the difference is in premium structure, the way “the rich” (and powerful) think about it, and the way the workers feel about it.
I will say again I am at least as grateful for the security in SS as I am for the significant savings I’ve managed to put away in my 401K. The MF Global scandal in 2012 demonstrated pretty clearly that nothing in a private account can really be considered “safe” by my definitions anyway.
The well connected Democratic former Senator Jon Corzine who was CEO at the time $1.2B went missing testified before a House committee that “I simply do not know where the money is or why the accounts have not been reconciled to date”. He drew a $12.1M severance package upon his resignation.
IIRC it was about that time I somewhat naively inquired of my “investment advisor” at Wells Fargo about what I could do to segregate part of my 401K balance into something that provided FDIC insurance. And was surprised to learn it is prohibited by statute to invest 401K balances that way. So we’ll see what those savings amount to. If anything in this negative yield “New Capitalism”.
Yeah I’ve always been very sympathetic to Coberly (and others) argument about turning SS into a transfer program. That’s why I don’t like the raising the cap suggestion. However I haven’t seen any math on what slowing the COLA on the top 20% would do for the program overall. I guess I’ll wait til the 22nd to see how DI is faring.
I also want to mention something in response to cactus’ comments about liberal friends supporting Trump. I have a number of Republican friends who hate Trump. They aren’t voting for him.
when i had some money to invest they prepared a plan that amounted to more than a numbers game: a bet on the way some numbers would come out, but not an actual investment in anything real.
when a friend fell behind on his mortgage, they gamed him so he could never catch up. “oh we can’t find that paper.” “oh the people you talked to before don’t work here any more.” and much else. In the end I bought my friends mortgage from Wells Fargo after paying an extra twenty thousand in “legal fees” and penalties.
i have heard this is standard behavior at Wells Fargo.
actually it would eventually be 2% for worker and 2% for employer. If the extra 1% scares you , it shouldn’t. It’s still a dollar a week per year for an extra ten years while wages are going up another ten percent. In other words, you pay if you are that young.. an extra 2% while earning an extra 20% (that is extra compared to today’s) and you will get that extra 2% back in the form of a bigger pension that will last through your longer life without requiring you to work when you are too old.
That would fix DI at the same time. DI could be fixed right away with a one time only increase of about two tenths of a percent (each), but it’s better to fold it in with OASI and take the increase gradually.
The reduction in COLA has been scored. Take me some search to find it, but it doesn’t amount to beans. in terms of the tax. But in terms of what you have to live on when you get very old… well it’s the difference between beans and turnips.
Wells Fargo took my condo. And in the end had to pay me $3000 cash to vacate. Because I happened to be home the day they sent people out to change the locks. Which was total illegal bullshit, at that point they still had just a security interest and not ownership. But what the hell would I have done if I came home after a day of job hunting or whatever and found myself locked out of my own house with all my possessions inside?
That was how Wells Fargo operated in 2010 and probably today.
Maybe since so many of the very rich are banking off-shore, and so many of the ‘average’ citizens continue to get screwed without any lovin’ by the financial industry, GS has decided there’s money to be made – correction – MORE money to be made on the backs of the little people? I guess they decided to give pay-day lenders some competition.
BTW, Bank of America was about as bad as Wells Fargo in their underhandedness on foreclosures. Several friends lost it all, thanks to BOA and their crooked business model.
For those out there that think the big banks are your friend go see WallStreetonParade.com. Read and get yourself educated about big banks. Who they are what they do and have done criminally and how much power they have in Washington.
I love turnips, with butter or gravy or both. Beans good with spices and rice, too.
I took SS at 62 this year is 66. I have worked part time and had some months in a couple of years where SS check stopped. That is what Nancy Ortiz suggested.
I am betting nuclear winter hits (for all the Clinton/Kagan fans) before I regret the fewer SS bucks each month.
For background on how we ended up with 401ks instead of defined benefit pensions, and how Congress sold us out, once again, I highly recommend this book
A.S., that is a very interesting article. Even the well-to-do are not saving as much as I would expect.
The one thing that disappoints me with the article is that it does not normalize by income when looking at racial disparities. If people of different races but similar income contribute similarly and have similar account balances, then the problem is simply one of income disparity, not one of willingness to sacrifice, risk-aversion, etc.
Sandwich Man’s post on political correctness sort of ties in with this on social trust, I think. I hadn’t thought about it (trust) specifically in terms purely of economics, but I’m sure many of you have.
http://evonomics.com/america-hates-socialism-without-knowing/
…….For economists, social trust works like a lubricant that can lower transaction costs and facilitate trading activities. Its aggregate benefit can be huge for a large economy, favoring the emergence and growth of large firms and boosting GDP with lower levels of inflation for a nation and higher levels of trade between nations. In America, according to Steve Knack, a World Bank senior economist, trust (broadly defined) was worth 12.4 trillion dollars a year, or 99.5% of the income in the mid-2000s. It “would explain basically all the difference between the per capita income of the United States and Somalia,” he remarked.
In a low-trust market, everybody has to pay more for transaction. Constantly guessing others’ intentions and looking out for cheaters, people are unwilling to invest in business and participate in financial markets, especially for the long term. (The Shanghai Composite Index, for example, could shoot up by 153% and then dive 43% in just 14 months from July 2014 to August 2015.) As a result, firms, as political economist Francis Fukuyama has observed, tend to be small, and mostly remain family businesses. This, in turn, can lead to lower rates of employment and higher rates of poverty…….
Seems a corpus of DNC documents are likely to be hitting Wikileaks soon, allegedly containing a lot of the same material pulled by the Russians: Donor lists, Trump background, DNC push strategy for Clinton (dated May last year, so before Sanders announced his candidacy).
One might imagine that such a leak could have came out of the security company investigating the breach…it’s like politicians have never heard of air-gapping or email encryption.
A truly bizarre story from Austin where police finally have a suspect in custody after months of rock throwing incidents where someone was throwing large rocks from the window of a vehicle at oncoming traffic in a heavily used section of I-35 downtown.
http://www.statesman.com/news/news/crime-law/acevedo-confirms-new-arrest-in-rock-throwing-cases/nrhPw/
It turns out the guy was actually into contacting the victims, showing concern for them and even calling 911 to report the crimes.
He also had some kind of long held public grudge against towing companies, appearing multiple times to complain about them at city council sessions. There appear to have also been some copycats involved with other incidents.
I missed the Coberly, Warren, Webb discussion of SS but I recently saw a proposal: raise the cap to $240,000, increase the payroll tax by 2% (1% for employee, 1% employer), reduce the growth of benefits for the top 20% of income earners who are receiving benefits and narrow the definition of disability. Supposedly this proposal gained support from 65% of those surveyed.
John:
The 1+1% would most certainly fix the issue. Inflationary increases happen when there is inflation and they lift the salary limits. Reducing benefits for those who are in the upper 20% is over kill. Normally the upper 20% in income is $85 -$90,000. At that level they too suffered from stagnant income. Coberly does have a point that such a described increase puts SS on a welfare plain.
Little John
by coincidence I saw that report too. I worry about it because it seems to be a semi official report from SSA (the plan, not the survey).
It’s a bad idea, however well it polls. People answering polls don’t have time to think and certainly don’t know the details or the probably consequences.
The plan is too complex… a rube goldberg product of committe to satisfy political powers and conceal the fact that it is at the same time a “tax on the rich” and a “cut in benefits.”
we don’t need a tax on the rich, and we can’t afford a cut in benefits.
a one tenth of one percent per year increase in the payroll tax… which is not a tax but a forced savings and insurance plan.. the workers get their money back plus an effective interest of about 6% (nominal) absolutely guaranteed against inflation and market losses, etc.
maybe you can’t fight city hall, but it really depresses me that we are not even trying.
it’s dated from 2010 and seems to be called ‘NRCNAPA20100113″
Sandi
it seems to be that the United States may be entering that “low trust” regime. bank fraud seems to be the standard business model.
not only does fraud take money away from mostly the poorer half of the population but it leaves them less inclined to use their money to invest or even buy since they are afraid of being cheated.
speaking of damned lies:
the ssa report “raises benefits” to the poorest while lowering benefits to the “middle” and of course the “high” earners.
this is just a way of appealing to the “common sense” and compassion of workers (benefit the poor) while undermining and eventually destroying the only program that protects them.
2016 Social Security Report to be released on Jun 22.
Just say’in.
“this is just a way of appealing to the “common sense” and compassion of workers ”
There are people who need welfare. There are countries that combine taking care of your own future and taking care of people who cannot take care of themselves. I think that with the incoherent attitude about welfare in the US, we are smart not to try to include it in Social Security. Those who want to understand SS should realize it is a compromise that makes it work.
Arne
yes.
let me say it a bit differently:
there are people who need welfare. best to keep that separate from Social Security which works because it is NOT welfare but simply a way for workers to save part of their own money and insure it against most of the bad things that can happen: inflation, bad days on the market, theft, improvidence, and even a lifetime of low wages
oh,
“combine taking care of your own future and taking care of people who cannot take care of themselves. ”
is exactly what insurance does.
“welfare” could be thought of as doing the same thing.. and to some extent it does… but the difference is in premium structure, the way “the rich” (and powerful) think about it, and the way the workers feel about it.
I will say again I am at least as grateful for the security in SS as I am for the significant savings I’ve managed to put away in my 401K. The MF Global scandal in 2012 demonstrated pretty clearly that nothing in a private account can really be considered “safe” by my definitions anyway.
The well connected Democratic former Senator Jon Corzine who was CEO at the time $1.2B went missing testified before a House committee that “I simply do not know where the money is or why the accounts have not been reconciled to date”. He drew a $12.1M severance package upon his resignation.
IIRC it was about that time I somewhat naively inquired of my “investment advisor” at Wells Fargo about what I could do to segregate part of my 401K balance into something that provided FDIC insurance. And was surprised to learn it is prohibited by statute to invest 401K balances that way. So we’ll see what those savings amount to. If anything in this negative yield “New Capitalism”.
Yeah I’ve always been very sympathetic to Coberly (and others) argument about turning SS into a transfer program. That’s why I don’t like the raising the cap suggestion. However I haven’t seen any math on what slowing the COLA on the top 20% would do for the program overall. I guess I’ll wait til the 22nd to see how DI is faring.
I also want to mention something in response to cactus’ comments about liberal friends supporting Trump. I have a number of Republican friends who hate Trump. They aren’t voting for him.
Am Soc
Wells Fargo are very bad people.
when i had some money to invest they prepared a plan that amounted to more than a numbers game: a bet on the way some numbers would come out, but not an actual investment in anything real.
when a friend fell behind on his mortgage, they gamed him so he could never catch up. “oh we can’t find that paper.” “oh the people you talked to before don’t work here any more.” and much else. In the end I bought my friends mortgage from Wells Fargo after paying an extra twenty thousand in “legal fees” and penalties.
i have heard this is standard behavior at Wells Fargo.
Little John
actually it would eventually be 2% for worker and 2% for employer. If the extra 1% scares you , it shouldn’t. It’s still a dollar a week per year for an extra ten years while wages are going up another ten percent. In other words, you pay if you are that young.. an extra 2% while earning an extra 20% (that is extra compared to today’s) and you will get that extra 2% back in the form of a bigger pension that will last through your longer life without requiring you to work when you are too old.
That would fix DI at the same time. DI could be fixed right away with a one time only increase of about two tenths of a percent (each), but it’s better to fold it in with OASI and take the increase gradually.
The reduction in COLA has been scored. Take me some search to find it, but it doesn’t amount to beans. in terms of the tax. But in terms of what you have to live on when you get very old… well it’s the difference between beans and turnips.
I hate turnips. Just say’in.
Also planning to take early SocSec in two years and six months. Ain’t none of this theoretical to me.
Wells Fargo took my condo. And in the end had to pay me $3000 cash to vacate. Because I happened to be home the day they sent people out to change the locks. Which was total illegal bullshit, at that point they still had just a security interest and not ownership. But what the hell would I have done if I came home after a day of job hunting or whatever and found myself locked out of my own house with all my possessions inside?
That was how Wells Fargo operated in 2010 and probably today.
“Wells Fargo are very bad people” Boy howdy.
And speaking of hated banks…………….
Goldman Sachs is opening an old fashioned bank aimed at ‘the little people’?
http://www.nytimes.com/2016/06/19/business/dealbook/after-147-years-goldman-sachs-hangs-a-shingle-on-main-street.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below
Maybe since so many of the very rich are banking off-shore, and so many of the ‘average’ citizens continue to get screwed without any lovin’ by the financial industry, GS has decided there’s money to be made – correction – MORE money to be made on the backs of the little people? I guess they decided to give pay-day lenders some competition.
BTW, Bank of America was about as bad as Wells Fargo in their underhandedness on foreclosures. Several friends lost it all, thanks to BOA and their crooked business model.
For those out there that think the big banks are your friend go see WallStreetonParade.com. Read and get yourself educated about big banks. Who they are what they do and have done criminally and how much power they have in Washington.
Navy Federal Credit Union
Bruce,
I love turnips, with butter or gravy or both. Beans good with spices and rice, too.
I took SS at 62 this year is 66. I have worked part time and had some months in a couple of years where SS check stopped. That is what Nancy Ortiz suggested.
I am betting nuclear winter hits (for all the Clinton/Kagan fans) before I regret the fewer SS bucks each month.
Here’s a long and detaiedl piece with a lot of charts showing the current state of the 401K experiment: http://www.epi.org/publication/retirement-in-america/
Short version: It’s not working. Unless you’re already fairly well off.
For background on how we ended up with 401ks instead of defined benefit pensions, and how Congress sold us out, once again, I highly recommend this book
A.S., that is a very interesting article. Even the well-to-do are not saving as much as I would expect.
The one thing that disappoints me with the article is that it does not normalize by income when looking at racial disparities. If people of different races but similar income contribute similarly and have similar account balances, then the problem is simply one of income disparity, not one of willingness to sacrifice, risk-aversion, etc.