Relevant and even prescient commentary on news, politics and the economy.

California Pays Off Arnie’s $15 billion 2004 Loan from Wall Street

California Pays off $14 Billion in Costly Debt From 2004

Promoting the borrowing in Proposition 57 was one of Schwarzenegger’s first acts in office, and he pitched the measure as a way to avoid public service cuts and tax increases. The state had the lowest credit rating among all 50 states in the nation at the time, which added to the interest costs.

Critics, including then-state Treasurer Phil Angelides, warned that it was a mistake to shoulder long-term debt to solve short-term problems and could put the state in a more perilous financial position.

But thank God they were able to recall Governor Davis because he imposed a car tax . Which would have doomed California to —–.

Thanks Arnie! And who is laughing at Governor “Moonbeam” Jerry Brown now?

RNC/Soccer League Debate: Relegation and Promotion

People who follow British Association Football (Soccer, Football, Footie) know that it consists of a number of tiered Leagues which have annual processes of relegation and promotion as the bottom performing teams move down a tier while the top performing ones in the lower tier move up.

I suggest we might have something like this going on with the first few Republican debates. For example while it certainly sucks for Perry and Graham to be relegated to the kiddy table at 5PM, somebody is going to emerge as the apparent winner of that group. While it is likely that one or two or three of those in the lucky top ten will flame out. For example Christie might have fared better had he been nosed out and not be faced with having to out shout and out bluster The Donald at the main event. Similarly whatever tiny chances Graham and Jindal have for clinging into the race probably would have evaporated if they had snagged a 9 or 10 spot. In contrast Perry is not in a bad spot at no 11 and even Santorum might have a chance to move up. But I am thinking this maybe a one time event with the two or three relegated out of the top ten not likely to ever crawl back in.

All this is speculative but I can easily see the bottom four or five of that bottom seven be flushed out of the race along with the bottom two of the top ten with maybe Perry and Santorum replacing Christie and Huckabee. So the questions are “How many tickets out of Thursday?” and “Can anyone leverage the Kiddy Table to get asked to the Grownup one for the next debate?”

Or you can consider all this silly and just call it a Politics and Debates Open Thread.

Social Security Defender Archive: Including Northwest Plan Docs/Spreadsheets

I have been working off and on, well mostly off because of ‘life’ and ‘laziness’, since 2010 on a project I modestly called the Social Security Defender. It is all built around a Google account and so has a Google+ page, a blog, an e-mail address and a Google Drive.

Today I am going live with a Public Folder in its Google Drive called the Social Security Defender Archive. In this folder are a series of other folders including ones devoted to The Northwest Plan for a Real Social Security Fix and to Social Security Reports and to CBO & OMB Documents and Reports. Plus others. In all cases the documents should be viewable, linkable, and downloadable even as there is no ‘write’ capacity.

So this is an open invitation to try out the Archive, to see what works, what doesn’t, what is useless and could be deleted and what is missing that should be added. I expect to be actively curating the Archive over the next week or so, in particular adding in a lot of material relating to the 2015 Social Security Report, including broken out Figures and Tables, as well as updated versions of the Northwest Plan with 2015 Report data included.

The e-mail address for this account, which is also my e-mail for Angry Bear related matters is:
socsec dot defender at Comments there or left her are more than welcome. Thanx.

Dean Baker on the 2015 SocSec Report and Real Wage

CEPR’s Dean Baker: Wage Growth Continues to be the Key to Social Security Solvency

Dean Baker and colleague Mark Weisbrot have been making a steady case since their publication of the aptly named Social Security: the Phony Crisis back in 1999. In short Social Security does not face a structural demographic problem, instead it has encountered a contingent economic one, marked mostly by a failure of wages to grow with productivity in the ways it did in past decades. The ‘Phony Crisis’ link goes to the Introduction to the book, if you haven’t read it you should. And equally worth reading is the Press Release linked above published last Wednesday. I just want to isolate and emphasize two paragraphs from the Press Release.

Wage growth is the key to the program’s solvency for two reasons. The first is that the upward redistribution of wage income over the last three decades has played a large role in the projected shortfall. As income has been transferred from ordinary workers to those at the top of the wage distribution, a larger share of wage income has escaped taxation. When the Greenspan Commission set the cap for taxable wages in 1983, it covered 90 percent of wage income. Currently the cap only covers around 82 percent of wage income. If the cap had continued to cover 90 percent of wage income, the projected shortfall would be roughly 40 percent less than it is now.

“The other reason why broadly based wage growth is key to the program’s continuing solvency is that the burden of possible future tax increases would be much less consequential if most workers will share in the gains of economic growth. The Social Security trustees project that real wages will rise by more than 34 percent over the next two decades. (They are projected to rise by another 30 percent over the following two decades.) Even if the payroll tax is increased by three percentage points, it would take back less than one-tenth of the projected rise in before-tax wages if wage growth is evenly shared. On the other hand, if most of the gains from growth continue to go to those at the top end of the distribution, any tax increase will be a major burden.

On my reading Dean is calling for a dual approach: one that emphasizes wage growth in increasing revenue to Social Security but which also envisions accompanying tax increases. Whose affordability is that much more eased by the wage boosts. It doesn’t have to be either or, it can be MJ.ABW and NW.

More Jobs. At Better Wages. plus the Northwest Plan.

Is Jeremy Corbyn the Bernie Sanders of Britain?

Who is Jeremy Corbyn? Well it turns out that the British Labour Party is two weeks out from a leadership election after their shellacking in the last election. And the contest very much mirrors that of Sanders vs Clinton, with Corbyn representing Old Labour (Democratic Socialism) and the other candidates represent New Labour (Blairite Neo-Liberalism). And also the races are similar because the VSPs in the Labour Establishment and the media are simply dismissing Corbyn as the voice of the past not to be taken seriously by sensible people.

Well I don’t follow British politics that closely, but Corbyn doesn’t seem to be meekly following the script here. And like Sanders is getting support that makes the Establishment nervous. So hopefully some Angry Bear readers who DO know something can chime in here. I find the whole thing fascinating and perhaps illustrative of a broader movement away from Neo-Liberalism worldwide.

Jeremy for Labour website

establishment freakout:
Labour donor: Jeremy Corbyn win could cause SDP-style split

The election of Jeremy Corbyn as Labour leader could trigger an SDP-style split in the party, one of the party’s biggest donors has said. John Mills also said victory for the leftwinger could lead to donations from wealthy supporters drying up, although he conceded that funding from the trade unions could increase if Labour morphed into a party of the far left.

Horrors! A party organized by and for the working class might not retain the support of the 1%! Might have to sink to getting support from labor unions!

The prospect of Corbyn winning had been largely dismissed as a fantasy until a YouGov poll of Labour members and supporters on Tuesday night showed him easily ahead of his three rivals on first preferences and on course to beat Andy Burnham in the final round by 53% to 47%, following the elimination of Liz Kendall and Yvette Cooper.

I for one will be following this with attention. Because the main difference between Jeremy and Bernie is that Corbyn seems to know a barber.

Tale of Two Charts: Medicare 2009 and 2015

Update: some guy named Krugman suggests that I am not totally off base here. The Disappearing Entitlements Crisis I hear he has an audience.

Update two: Social; Security Defender Archive docs and spreadsheets

Update(From main Angry Bear page you may need to click ‘Read More’ to see Charts)

2009 GDP

2015 GDP

2009: Medicare Unsustainable. From less than 4% of GDP heading straight for 11%.
2015: Medicare You Decide. Still less than 4% of GDP heading for 6%

Why is JEB still having the same conversation about viability of the program?

Ten years ago I would have earnestly told you that we didn’t have an ‘Entitlements Crisis’, we had a ‘Health Care Crisis’ that was reflected in the Medicare numbers. Today? I am not seeing ‘Crisis’ at all. And certainly no ‘Crowding Out’, no ‘Intergenerational Warfare’. The Social Security and Medicare population are projected to increase from around 16% of the population now to 25% in the next few decades. And the amount of GDP we will need to devote to their income and medical care will go up proportionally. What’s the alternative? Starving gramma and denying her pills?

Update: some guy named Krugman suggests that I am not totally off base here. The Disappearing Entitlements Crisis I hear he has an audience.

Table IV.B5: Social Security OAS and DI Actuarial Balances by 25 Year Subperiod

Table IV.B5.—Components of Summarized Income Rates and Cost Rates,
Calendar Years 2015-89
[As a percentage of taxable payroll]

Lots of numbers here but the only ones want to focus on are those in the last column, those which show actuarial balances for each of the OAS and DI Trust Funds for for the next 25, 50 and 75 years for each of the Low, Intermediate and High Cost Alternatives.

The first thing I want to note is how front loaded the crisis is for DI. Under current projections its Trust Fund will go dry in the 4th quarter of 2016. On the other hand the total fix for the period 2015-2040 is only 0.30% of payroll. Which is almost identical to the cost of the fix for the whole 75 year window or 2015-2090. Meaning this isn’t a case of a patch that needs to be revisited a couple decades out. We could if we wished fix DI for 2016 and 2040 and 2090 right now for a very modest cost. Moreover such a standalone fix would meet the requirement the Congress stuck into the budget rule, that any fix for DI would have to positively effect the overall prospect for combined OASDI. While this requirement was inserted in hopes of Obama and the Dems being forced to open up the entire program for discussion and ‘reform’ there is actually no reason NOT to piece-meal it. Fix Social Security DI by a one time increase in FICA of 0.31% of payroll and we have bought more than a decade of space to address OAS.

Another way to look at this is as a down-payment on the Northwest Plan. Once people see how cheap and easy a DI fix was making them understand that a series of increases even smaller than that starting 3 or 5 years down the road might be the optimal choice. Or at least as the opening point for negotiations on the right mix of revenue enhancements.

In the meantime: DI Fixed. Done. For as Far As the Eye Can See. Let’s get started?

2015 Social Security Report: Infinite Future Fun

Hmmm. I think I’ll just let people have fun figuring out what this all means. Hover over the image or double click and you should get legible version.
Hint the meanings of ‘past’ ‘current’ and so ‘future participants’ might not mean exactly what they seem at first encounter. You can scroll to the text from this attached link to the Figure.
Table VI.F2.—Present Values of OASDI Cost Less Non-interest Income
and Unfunded Obligations for Program Participants,
Based on Intermediate Assumptions

Social Security Report: What is the “Low Cost Alternative”

Well one answer it line I in the above figure from the 2015 Social Security Report.

Figure II.D7.—Long-Range OASI and DI Combined Trust Fund Ratios Under Alternative Scenarios
[Asset reserves as a percentage of annual cost]

Under the definitions used by the Social Security Actuary and Trustees the program is ‘Solvent’ over the short term if it never gets within 10 years of dipping under the 100% line in this figure, ‘Solvent’ over the long term if it never hits that 100% line in the 75 year actuarial window and ‘Sustainably solvent’ if the line is trending upwards as it leaves that window. Under this year’s Low Cost Alternative it would meet all those tests.

Now there are two ways to look at “Low Cost”. One is as a combination of economic and demographic numbers that are together riding the outer edge of the probability band. Which is to say a combination that if current policy remains unchanged will have maybe a 5% chance of occurring. From that perspective it is just Pie in the Sky optimism. The second though is to see its OUTCOME as a target and to use the various components of Low Cost to show us where to focus our attentions. For example if we hold demography steady would improvements in Real Wage Differential and Productivity move us closer to Solvency? Well we just need to inspect the relevant Table.

In this case Table V.B1.—Principal Economic Assumptions

And the first order answer is “Yes, improvements in those two metrics improve solvency, move us closer to the desired outcome”. Now the second order answer might be “But the specific projections are still too optimistic, maybe we can move in the direction of Low Cost, but not get all the way there”. Which doesn’t mean just dismissing Low Cost, instead accepting that it gives us policy guideposts “Go THAT way!”. And why not? So what if the realm of the possible puts limits on our reach? If getting halfway to the goal via this path does good things for Social Security and good things for the economy at large why shouldn’t we use them as deliberate targets for active policy?

In future posts I will put us some specific projections of Low Cost and ask why they are out of reach. Note I will not be asking why the entire combination of projections is feasible. Because Low Cost is an artificial model that assumes that a lot of things break in a positive way, not all of which may be realistic. Which doesn’t subtract from the reality that if we can move 6 of 10 variable in that positive direction then positive effects are seen.

2015 Social Security Report Release Day (w/updates)

At 1:30 EDT the Trustees of Social Security will hold a media availability at which they will release the 2015 Social Security and Medicare Reports. If past practice holds the Reports will be released on line at or before that time in both a web (HTML) format and in PDF. Assuming past file name conventions hold the two URLs will be: and

Once the Report is released this post will be updated with key numbers, dates and talking points. I will also be working with the text of the Report to transform it into more readily accessible form as an Excel Workbook with associated .jpgs and .pngs of the more important Tables and Figures. More on that as we go along.

Note the above links will be dead until Report release. The actual launch page for current and past Reports is here: Reports From The Board of Trustees

Right now that current Report shows as the 2014. This should update to 2015 immediately on release and so this is probably the best link to be clicking on in the meantime. At least it will get you somewhere other than dreaded Room 404.

Back with more when there is more.

Update 1 Report not out online but Treasury Press release has Trust Fund Depletion in 2034 and 75 year actuarial gap at 2.68 or down from 2.88. Reasonably good news but the devil is in the details which are still forthcoming.

Update 2 HTML version online under first URL cited above.