Daily Archives: August 4, 2010

James K. Galbraith Champions the Beast Manifesto 1

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On his 2 August 2010 blog in The Daily Beast, James K. Galbraith Champions the Beast Manifesto. Not only does he reiterate the frequently-made arguments for why “Jobs are Priority One,” but he also makes a strong case for expanding entitlement programs, now and in the future so that older Americans will not be forced to stay in jobs longer than they wish thereby making room for the younger unemployed to enter the work world. This will also ease the worries and financial burdens of children regarding the care of their elderly parents.

So what are the real effects of cutting Social Security and Medicare?

Medicare pays doctors’ bills for the old. It pays out at lower rates than does private insurance for working people. Cutting Medicare would mean two things: less health care for the elderly, and therefore more financial stress on their families. And more health care costs overall, as people substitute with private insurance for the public cuts. Both of these are very bad ideas.

Social Security pays to keep working people (and their dependents and survivors) out of poverty when they are old. It spreads its benefits to all who have worked, whether they have children who would otherwise support them or not. The payroll tax spreads the burden to all working people, whether they would otherwise be supporting elderly parents or not. Both of these transfers are fair, modest, and sustainable. Cutting Social Security would simply create more poor elderly—those who could not turn to their children—and more stressed working families—those with parents in need. Both of these are very also bad ideas.

In fact, the right response to the crisis is to expand, not cut, both Social Security and Medicare.

The reality is, we are never going to make up good new jobs for everyone who has been hit. (I’d love to be the next Harry-Hopkins-and-Harold-Ickes-combined, but I’m not going to get the job.) So let’s face reality, and make some tough decisions about who we want to be jobless: the relatively old or the very young. Seen this way, it’s an easy choice.

There are many older workers who’ve already worked hard jobs for many years. They would love to retire. But they don’t, because early retirement on Social Security is very costly: you lose benefits every month over your entire future life, unless you hang on to the regular retirement age. We should give these people a break, and lower, not raise, the full-benefit Social Security retirement age—say, to 62 for the next three years. This would give millions a chance to get out, if they want to.

Similarly for Medicare. There are many older workers who have health needs, and who work on only because they can’t afford to lose their employer-based insurance. Let them out! In the crisis, I proposed cutting the Medicare-eligibility age to 55 (and the Senate almost included this in the health care reform bill). It’s still a good idea, but something more moderate, such as opening a three-year window for early exits, would be better than nothing.

Encouraging early retirements would mean that young people—just out of school, with fresh skills, good health, and high energy—would get the jobs they need now. They would not be stuck waiting, or spinning their wheels in school, for years and years. Meanwhile, the retirees, supported by Social Security and Medicare, would provide a continuing stable support to total demand, creating jobs for others as they get older.

This is the way the economy should work. When we have older people, we must care for them, and the best way to do that is to give them the resources to support themselves. There is no “burden problem” as our economy is plenty productive for the working population to support the elderly in modest comfort, particularly if we include some of our truly wealthy in the tax base.

[Here is The Beast Manifesto but I think Galbraith’s blog post is more interesting.]

-RichardH

The Empty Chamber–Just how broken is the Senate? 1

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In the 9 August 2010 issue of The New Yorker Magazine, George Packer writes a very long, comprehensive, illuminating, and depressing portrait of the current state of the U.S. Senate. The Empty Chamber.

I hope you will take the time to read the whole article.

Please note that some articles in the New Yorker disappear behind a subscriber firewall after as little as one week.  If you intend to read the article but don’t have time right now, I suggest you download it for future, more leisurely perusal.

-RichardH

Corporate Greed or Plain Capitalism 2

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Bob Herbert’s column in The New York Tines is under the headline A Sin and a Shame.

The treatment of workers by American corporations has been worse — far more treacherous — than most of the population realizes. There was no need for so many men and women to be forced out of their jobs in the downturn known as the great recession.

Many of those workers were cashiered for no reason other than outright greed by corporate managers. And that cruel, irresponsible, shortsighted policy has resulted in widespread human suffering and is doing great harm to the economy.

He further goes on to say:

Productivity tells the story. Increases in the productivity of American workers are supposed to go hand in hand with improvements in their standard of living. That’s how capitalism is supposed to work. That’s how the economic pie expands, and we’re all supposed to have a fair share of that expansion.

What a way to misunderstand the world of capitalism.  Where is it written that the invisible hand will make capitalist private companies hire workers that they don’t need?

In no description of capitalism have I seen a rule that says it is good for companies to run inefficiently by employing people that they don’t need.  The whole point of competition is that it drives companies to become more efficient.

There used to be other factors that made it sensible for companies to pay decent wages to the workers that they needed. See the blog post Are the American people obsolete? Of course we used to have strong labor unions too.  Companies that were not unionized felt compelled to treat their workers well, lest they decide to form a union.  Now that the pressure of unions has diminished greatly, we see what unfettered capitalism can do.

If you cannot understand how a system works in a way that is consistent with its own internal driving forces, then you won’t ever be able to figure out what external forces to apply to fix it.  By trial and error you may be able to find something that seems to have a short term benefit, but why depend on luck?  Why not study capitalism and economics without a preconceived notion of “how it ought to work?”