Category Archives: Economy

Tax Cuts Didn’t Work Last Time

Here we go again. The architect of the Recovery that was not a recovery is again advocating the exact same prescriptions as though something magical will happen this time:

Summers calls for new boost to economy | Reuters.

Our Stimulus Package that was originally slated to be $800bn in spending ended up being about $400bn in tax cuts and look where it got us. And the reason is simple: the amount of money the government gives up in revenue only amounts to a scant few dollars in the pockets of most Americans.

Oh, sure, “every little bit helps.” But if you’re wanting to stimulate the economy, an extra twenty bucks every two weeks is not going to compel the average worker to go buy a new TV. If anything, it will encourage saving, which while a good instinct, does nothing to stimulate the economy.

Summers’ suggestion of infrastructure spending seems like welcome news, until you remember that most of the Stimulus money still isn’t spent and what was spend didn’t happen nearly quickly enough. Maybe we aught to start spending on that job training we keep hearing so much about?

Sorry, Honey: Our Joint Bank Account is a “Pyramid Scheme.”

So saeth the Freshman Representative from the Great State of Plausible Deniablity:

via GOP Freshman Comes Full Circle On Whether Social Security Is A Pyramid Scheme | TPMDC.

Last week, the GOP freshman told a group of constituents, “when they first conceived Social Security, they didnt think they were going to be paying benefits for 13-15 years. Thats one of the reasons why this pyramid scheme isn’t working.”

So, here’s how it works: every pay period, my wife and I put a set amount of money into our joint bank account. At the same time, we’re writing checks against that joint bank account for things like our mortgage, phones, internet and the like.

Provided that the amount of money we’re putting into the bank is the equal to or greater than the amount of money we’re paying out, there’s no problem. In fact, if the amount we contribute every month is greater than our monthly bills, we actually build up a surplus of extra money. Score!

If on the other hand our bills start climbing (which of course they are) and they climb to a point greater than the amount we’re paying in, then we will start to eat away at that surplus until we eventually run into the negative. At that point, our joint bank account is “insolvent,” as they like to say.

This is what the Congressman says is a “Pyramid scheme,” though I suspect most people would call it a fairly simple system of paying our shared bills.

Social Security works in precisely the same fashion, with all of us contributing to a collective “joint bank account,” in this case a trust fund. Meanwhile, our seniors collect at a monthly rate on the other side (this would be us as a society paying our debt to the ones who raised us and did their best not to leave the country worse-off than they found it). The Congressman is correct in stating that the amount going in needs to be the same or greater than what’s going out, but that’s about as correct as he gets on the issue.

He is quite wrong, for example, in stating that Social Security will be insolvent in twenty years. Social Security will be paying out more than it takes in – if we do nothing to correct the issue – some time in the next twenty years. But we still have that surplus thing, don’t we? Yes, we do. And our bank account will be quite solvent for the next seventy years – again, presuming that we do nothing about it at all.

If the joint bank account shared between my wife and I ran into insolvency, we may presume that the Republican answer would be to scrap the whole affair and default on our debts. They seem to like the word “default” a lot more, these days, than I might have expected. Or, maybe the solution is to tell our debtors to take half the money and try playing the Stock Market for the rest.

An easier solution would be to increase the amount of money we’re putting into the system. If we’re short twenty bucks, a hundred bucks, whatever amount for the month, we just chip in a little more – maybe plus a bit to start building up our surplus again.

In the case of Social Security, one answer would be to raise the cap on SS payments: above $106,000 a year, any additional money you earn does not get calculated to figure your Social Security tax. You don’t pay on that extra cash now, but we could eliminate or significantly raise that cap and have a whole lot more money going toward paying for our senior’s continued existence.

Or we could raise everybody’s Social Security (FICA) tax rate. Gasp! That great bugaboo of American politics: raising taxes. The current rate is around 6.2% and its gotten us by for eighty years. We raise that rate to 7 and we can probably go another eighty.

Or we could raise the retirement age. This would probably give us the biggest bang for the buck, but would also be the least-responsible choice. As often as we hear about the life expectancy going up in this country, the truth is that infant mortality rates are a greater contributor to that fact than elder care: the life expectancy for retirees has not changed much at all. So, raising the retirement age is just a Promethian yanking of the chain on people who don’t deserve it. But its an option, isn’t it?

There are lots of options. But junking the system or taking the billions of contributed dollars in FICA taxes and handing it over to Wall Street, that paragon of fiduciary responsibility? Well, that really is calling for radical change, isn’t it?

New York State’s Population Archipelago

With Cornell University’s new New York State demographic factbook just recently released, I’m sure that we’ll find lots and lots of discussion on our changing population. Some new, some merely confirming long-held beliefs. But in my first pass at this document, the thing that has struck me the most is Figure 1.2 and its companion Figure 2.5, showing the population density and change of our counties:

Upstate New York in Profile.

It seems that, in addition to a more general egress of population to other states, there also appears to be a very specific egress of people from rural and semi-rural areas of New York. Some of those leaving rural counties are doubtless headed for another state, but at least two counties bordering major metros appear to have gained population.

The result is a sort of population archipelago, with major cities taking in more and more of the residents of the state, while rural areas become seas in between. That strikes me as important for a number of reasons, but one big one is that perhaps a deeper discussion of what charms of rural life are waning might lead to a better understanding of the overall “brain-drain” and how we might best mitigate against it.

Not that I have any ready answers, of course. But I wonder if someone more influential than me is seeing the same thing I am?

What’s So Bad About Debt?

I’m not saying there’s nothing wrong with having a lot of debt. I’m just wondering, on a Friday: if defaulting on debt isn’t so bad, then what exactly is the problem with debt? What is the worst-case scenario if it isn’t default? All these years, I thought I understood at least this much of the Republican platform, but color me shocked: I don’t.

How Republicans Are Convincing Themselves That A Debt Default Wouldnt Be So Bad — And Why Theyre Wrong | TPMDC.

Come on, @DandC: Get a Fracking Clue

I flagged this Marist poll earlier this morning. Now it appears that the Rochester @dandc has opted to guilelessly report on the same poll, showing that New Yorkers are “split” on the issue of hydrofracking:

State is split over use of fracking, poll finds | Democrat and Chronicle |

The trouble is: how many people actually know what hydrofracking is and how many does this issue actually affect? My guess is that many of the respondents live somewhere that fracking will almost certainly never occur. How can we expect them to have an informed opinion on an issue that doesn’t affect them? Their opinions matter as a matter of politics, perhaps. But as a matter of substance? Not so much.

Both the original Marist poll and the above-linked article concede that in Upstate, where the fracking plans are most prevalent, fracking appears to be much less popular. Yet they both choose to lead with the less-illuminating title. Why?

Intermodal in Rochester: We’re Giving Up a Big Audience

I think that, generally, most people in Rochester would be inclined to either fly or drive to a long-distance destination. That’s always been my impression, anyway, having spoken at some length with, you know, people and such. Shorter distances are almost certainly to be traveled in the comfort of your own car, or for want of a car, the Greyhound works just fine. But having only two days visiting the Rochester Amtrak station to base this on, my sense is that very few people are aware that there is a station in Downtown, and less actually use it for anything.

Out of a completely random sense of adventure, I took a trip to Kansas City, MO when I was 25. Just by myself, and only because I had a week of shut-down at my job as a machinist for Rochester Instrument Systems with nothing to do. Good times, lots of fun, but that’s probably for another article. What matters is: I discovered an entire ecosystem of passengers, porters and bartenders (loved the bartenders) that I’d never known existed.

And just how many of them there are might surprise you. According to the Department of Transportation website, the Empire Service which runs between New York City and Buffalo and is part of the Lakeshore Limited Amtrak service sees as many as 1.6 million passengers a year.

So, when we discuss intermodal passenger systems in Rochester, I think that the hardest sell is the most important one. While city fathers wring their hands, trying to come up with another festival to drag bored suburban residents into the city, we are turning our backs on a potential customer base for everything from garbage plates to jewelry to Rohrbach beer that is double the size of Monroe County. Can we really afford that?

Going to the Moon is Reasserting Our Leadership?!?

Don’t get me wrong: I think the idea of setting up permanent habitations in space is, in the words of Kenny Powers, “Cool as fuck.” But seriously, the Republican Congressman who penned this new bill running through Congress called it “the Reasserting American Leadership in Space Act,” and calls it REAL.

New Bill Directs NASA Back to the Moon By 2022, With Permanent Habitation In Mind | Popular Science.

Casting aside the fact that there’s no E in the above “anagram,” which should fairly be called RALS, how is going to the moon any way to “reassert” our leadership in space? A better bet would be to actually live up to our commitments to the International Space Station and concentrate on the long-term viability of a habitation on Mars or its moon, Deimos.

I would say that, based on the list of Congress-critters who’ve signed on to the bill, what this bill should probably be called is “The Reasserting the South’s Dependence on the Wasteful Space Program They So Revile Till They Lose Their Shit Act” (RSDWSPTSRTTLTS).

Doesn’t quite have the same ring to it, now does it?

The Justice Kagan Recusal Canard

Its always fun to spot these talking points in their nascent form. Way down towards the bottom of this article, the author notes that opponents of the Health Care Reform Law expect that Justice Elena Kagan must recuse herself of all Court proceedings having anything to do with the Obama Administration because she worked for the Administration. Plan on this being the battle cry for all HCR opponents for the next twenty or more years.

Supreme Court Denies Health Care Opponents Fast Track Request | TPMDC.

The NYT: Where, oh Where Has Our Little Bubble Gone?

You’ve really got to hand it to the New York Times this time: this is the most clueless headline ever:

Builders of New Homes Seeing No Sign of Recovery

Ok, let me refresh your memory: the thing that got us into this mess in the first place was loosely-given credit that allowed a glut of new home purchases over the course of a decade and a half. That includes an artificially-inflated demand for new home construction, as anyone who has ever driven through Mendon can tell you. We currently sit on a huge unsold stock level in the housing market and even existing home sales are down by 28 percent, per the same article.

I can appreciate the fact that new home construction is an industry like any other, with lots of individual tradesmen and professionals relying on that industry for employment. But the tone of the article suggests that, without a consonant recovery of pre-recession home building, there is no recovery. My suggestion to anyone relying on *new* home construction would be to find another niche within which to ply your trade, because we cannot sustain another “recovery” such as that.

#NYT Paywall, Three Weeks In: How’s it Doing?

The big news out in the tech world (apart from Amazon‘s entry into the tablet race and the Microsoft / Nokia deal) is that the New York Times’ paywall subscription service has garnered 100,000 subscribers in the first two months three weeks:

New York Times Sells 100,000+ Digital Subscriptions in First 3 Weeks.

That’s a pretty impressive start, though as the article notes, the introductory offer was for $.99 a month, whereas the actual subscription service is more like $15 to $35. That’s a big jump that may be hard to sustain come next month.

What will be required is for the New York Times to sell its readers on the necessity of their paywalled service, a feat which as I’ve noted in the past, the current model works directly against.

Assessing the Obama Deficit Plan

In a very lengthy speech, filled with impassioned rhetoric about American values, President Obama laid out what the White House’s plan for reducing the deficit is. The passion, while appreciated, leaves me a little cold: he’s said all this stuff before, but will he fight for it? For now, I’d prefer to concentrate on the actual policy changes as outlined in the speech.

President Obama’s first point is, honestly, a bit of jargon-laden nonsense. He says we will “make the tough cuts that are necessary,” but that we will invest in, “new roads and airports and broadband access… education and job training.” While I can agree with the sentiment expressed in these words, this first point is basically just that: sentiment. To the extent that this is a statement of beliefs and an opening bid for negotiating with Republican leaders, it lays down the marker on these specific investments. Maybe I just want more detail than he can really give before a negotiation of that type. But we know what happens when this White House “negotiates” with Republicans, so this does not fill me with confidence.

The second part of President Obama’s plan is equally noncommittal and definitely a missed opportunity: he simply says we have to find savings in military spending. Great. But when he says that he will simply “work with Secretary Gates and the Joint Chiefs,” that’s effectively saying, “don’t worry. We got this.”

Where are the required cuts to military spending that have to be made by Congress? You know: the people he’s “negotiating” with? Where is the challenge to reduce spending by defunding useless military spending? Why is he taking all the responsibility for himself when Congress holds the purse strings?

His third point is on health care reform and its where he lays down the biggest and most important marker: allowing Medicare to negotiate the price of prescriptions for its patients. This is, really, a shot across the bow of Republicans that should have been made much more loudly: it is precisely because the Medicare “reform” measures of the Bush era eliminated this ability that the cost of Medicare has skyrocketed, adding to our deficit.

So, while Republicans aim to kill the Health Care Reform Act, President Obama looks to undo the damage of the Medicare Reform Act. I won’t say which is more “likely” a success owing to the fact that I’m getting a bit cynical. But I will say that undoing HCR is going to be hugely unpopular, whereas the MRA was a loser from the get-go. Hard to see how Republicans argue against this, except to bald-face lie. And they wouldn’t do that, would they?

The fourth point in the plan is a bit of finesse: he’s actually talking about raising a lot of people’s taxes, but doing so in a way that makes it seem like he’s talking about rich people. He says that, in order to reform the tax code, we should eliminate a lot of the write-offs that are in the system. Ones which, it is true, certainly benefit the rich in larger sums than the middle class; ones that affect the poor not a whit.

But to be clear: we’re talking about increasing the tax liability for most upper-middle income families by a significant amount. This, as a middle-income DINK, strikes me as just fine: my tax burden and that of most middle-income families has decreased by half over the last fifty years. We can probably afford a little less in tax returns, which most of us are just going to spend on a new television anyway.

So, the entire speech could probably have been pared down to the last two points, though I realize that’s not now it works in Washington. The question now becomes: what parts of this is Obama going to cave on? If he can manage to get even a little bit of those last two points into the final package, he will have done the country a world of good, but at what price?

Population Migration by Block: Evidence of the Subprime Legacy?

Via @flowingdata, we have a very interesting map, indeed:

Growth Rings – Maps Of U.S. Population Change, 2000-2010.

As the author points out, there is some notion of the suburban flight present in these maps, except to say that this flight is normally a pretty cyclical thing: people move out of the city and into the ‘burbs while their kids move out of the ‘burbs and into the city. These maps seem to display a much larger and more prolonged trend. He also points out the following:

Ah, the classic flight to the suburbs, but with a twist! Click through and look closely, and at the very center of the biggest cities – within a stone’s throw of downtown – you’ll see a tiny, resurgent dot of blue. Apparently, at some point in recent history, a home address amongst the skyscrapers became desirable again.

So we have an increase in population in the suburbs and exburbs, accompanied by an equal population boom in centers of cities. There’s a pretty easy explanation for this: subprime lending schemes.

I recall the map of Monroe County from the hight of the Subprime fallout and it looked almost exactly like the maps I’m seeing here. The center of Rochester was deep red, as were Mendon and other southern exburbs, while the more stable neighborhoods of Rochester and Brighton seemed almost unfazed by foreclosures. And that should not be surprising: “subprime,” or “less than desirable credit” mortgages happen in two populations most often: the poor, and the upwardly-mobile who are overextended.

So, while the author of this blog post interprets the blue patches as revitalization projects in downtown areas – and he may even be right in some cases – the map serves as evidence of the long-term effects that ten years of bad loans have had on suburban sprawl. It will be interesting to see some other map similar to this in ten years time.