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SOCIAL SECURITY TRUSTEES REPORT OUT TODAY… or was it yesterday?

by Dale Coberly

SOCIAL SECURITY TRUSTEES REPORT OUT TODAYor was it yesterday?

Ho Hum.  The 2019 Social Security Trustees Report was released yesterday.

The Committee for a Responsible Federal Budget published its usual half truths (also known as “lies”):. “We are all going to die!”

The Reporters and Columnists Who Cover Them ™ reported the half truths as the whole story:  “We are all going to die!”

The “Progressives”  demanded the “rich pay their fair share”  and “expand Social Security” to pay for everything

Angry Bear ignored the whole thing.

 

The whole truth would have pointed out that while there is a funding problem projected for sixteen years in the future,  it’s a small problem and the Trust  Fund is NOT the problem.

If the future arrives as expected, Social Security will not be collecting enough “taxes” to pay the “promised”  benefits at that time. (The payroll tax is not really a tax.  It’s an insurance contribution… a way for workers to save for their own retirement.  They get the money back with interest when they need it most.)

Social Security WILL be able to pay benefits that are about 80% of promised.  That will be more in real value than benefits are today.

Those benefits COULD be redistributed so they continued to provide enough help to the poorest retirees (and widows and orphans) at the expense of the richest.

But it would be better to just raise the payroll “tax” about 2% for each the worker and his employer and continue to pay the benefits as promised.

No one would miss the 2% out of his paycheck,  and he would get the money back in the form of a more comfortable retirement, which he will need and want MUCH more than whatever he would have spent that 2% on today.  The 2% is not lost to some government black hole:  the workers get their money back plus “interest” when they retire.

It would be still better to raise the “tax” gradually… about one tenth of one percent per year.
(This is about a dollar per week per year.) This would not only not be missed, it would not even be noticed.  And it would create a full Trust Fund which would provide enough interest to lower the needed “tax” by about one percent.  It would also avoid the government having to pay back the money it has borrowed FROM Social Security.  That money would become just a paper debt acting as a reserve to smooth over periods of recession.

The importance of this approach is that it would preserve Social Security as worker paid insurance for workers…  something Roosevelt insisted upon so that SS would not become “the dole” just another welfare program subject to the political manipulations of the rich and influential (“we have the will but not the wallet”).

Under Social Security as designed the rich do pay their fair share.  They pay exactly what the insurance is worth to them,  and their “excess” payments are what provide the money to supplement the benefits received by the poor. (“Excess” in the sense that if you don’t have a fire, your insurance payments were “excess.”)

The Trustees Report this year was actually “better” than it was last year if you take the date of the “death of the Trust Fund” seriously, which you shouldn’t. 

Sadly,  this is not a ho hum moment.  The opportunity to pay for the needed raise in the “tax” gradually will begin to expire next year.

And while it would still be possible to pay, say, an extra one percent now and the other one percent later,  or even to pay the whole two percent in about 15 years,  it would be much better to go for the gradual increase and avoid all the hysteria that will come when “Social Security is Broke!” ™

but you won’t.

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Sales rebound from government shutdown-induced “mini-recession;” March housing lays an egg

by New Deal democrat

Sales rebound from government shutdown-induced “mini-recession;” March housing lays an egg

While March retail sales rose strongly, total business sales for February – also released yesterday – which includes manufacturers’ and wholesalers’ sales in addition to retail sales, continued to languish. This adds to the evidence that there was a “mini-recession” for several months likely brought about by the lengthy government shutdown, and there has been a rebound since (including blockbuster new lows in jobless claims).

This post is  up at Seeking Alpha.

But I’ve been reluctant to conclude that the slowdown this year is off. This morning’s housing permits and starts for March were solid evidence in support of that position, showing that the recent decline in mortgage rates hasn’t filtered through to new housing construction yet. Housing may be bottoming, but it’s at near-recessionary levels.

I have a post in the queue at Seeking Alpha on that as well. Once it is posted, I’ll put up a link.

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Searching for Stimulus

by Joseph Joyce

Searching for Stimulus

The global economy seems headed for a slowdown. The IMF now expects global growth this year of 3.3%, a drop of 0.2 of a percentage point from its previous forecast. Growth in the advanced economies is projected to be particularly feeble, with expected U.S. economic growth of 2.2%, growth of 1.3% predicted for the Eurozone , and Japan’s growth anticipated to be 1%. Of course, a breakdown of U.S.-China trade talks, the imposition of new U.S. tariffs on European cars or a disorderly Brexit could disrupt the forecasts. Can government policymakers improve these conditions?

Central banks have limited policy space. In the U.S., the Federal Reserve has made clear that it does not expect to raise the Federal Funds rate this year, and retains the option of lowering it if conditions deteriorate. Some–including one of President Trump’s anticipated nominees to the Board, Stephen Moore–are already calling for lower rates. But the current Federal Funds rate of 2.5% does not give the central bank much scope for lowering it.  Japan’s central bank already has negative nominal rate targets, while the European Central Bank’s policy rates include a lending rate of zero percent and a negative deposit facility return.

If monetary policy is constrained, what else can policymakers do? Adair Turner, former chair of the United Kingdom’s Financial Services Authority, believes that zero interest rates means that the time has come for “massive fiscal expansion” financed by central banks. He acknowledges that excessive monetary growth can be harmful. But, he argues, when faced with “slow growth, political discontent and large inherited debt burdens…”, policy measures that in other times would be seen as radical need to be considered.

 

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The three best arguments against an economic slowdown

by New Deal democrat

The three best arguments against an economic slowdown

I still think I’m right that there will be a worsening economic slowdown that shows up by about summertime and continues towards the end of the year.But there is one long leading indicator and two important short leading indicators that are going the other way. Rather than ignore them, I accept them and explain why I don’t think they negate my forecast. This article is up at Seeking Alpha.

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On a more somber note, Today We Are All Parisians.

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The economy in 2019: a look at the “big picture”

by New Deal democrat

The economy in 2019: a look at the “big picture”

Although I have a bunch of nerdy forecasting models, I view my primary mission as trying to explain what is going on in the economy for ordinary middle and working class American workers and consumers.I’ve been meaning to do a “30,000 foot perspective” on the economy for awhile, to draw together all the information into a Big Picture narrative. Well, I finally got around to it, and it is up at Seeking Alpha. This is something that should be of particular interest to those who have followed me all the way back from my Daily Kos days.

The most overlooked feature of the economy in the past five years has been the way low gas prices have allowed room for the economy – and real wages – to grow without being strangled by high interest rates.

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Weekly Indicators for April 8 – 12 at Seeking Alpha

by New Deal democrat

Weekly Indicators for April 8 – 12 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

Lower interest rates have to some extent been offset by weaker real money supply. In any event, they haven’t fed through into other, shorter term indicators just yet.

As always, clicking over and reading should bring you up to date on the economy, and reward me a little for my efforts.

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