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March 29, 2005
Workers of the World Unite!!!
A friend of mine, with whom I often debate the merits of private accounts within Social Security, was recently offended by this portion of a Gregory Mankiw article in The New Republic:
The second reason the left hates personal accounts is that, over the long term, they could destroy one of its favorite battle cries: the alleged conflict between evil capitalists and oppressed workers. (“Workers of the world unite; you have nothing to lose but your chains.”) No ambitious political figure today would be stupid enough to quote Marx, but let’s face it, much of the left’s rhetoric is a less elegant paraphrase of his worldview.
Social Security reform could put a stake through the heart of this populism once and for all. After workers develop an equity stake in corporate America, they will start watching CNBC and the “Nightly Business Report.” Their view of how they relate to the economy will fundamentally change. Bush understands this, and it is one reason he talks about an “ownership society.” Democratic leaders understand it as well.Their biggest fear is that a nation of stockholders could easily morph into a nation of Republicans.
The association between Marx and the modern-day left he felt was a cheap shot, and in many ways I agree. It was an easy way for Mankiw to label the opponents of partial privatization, making them guilty by association before any facts were presented.
While I do agree with Mankiw that the flawed ideas of Marx (and Adam Smith for that matter) have had a profound effect on current political philosophies, I believe the case for voluntary personal accounts can stand on its own two feet. Let's keep the debate to the facts (ala the second paragraph quoted above and the many more good points in the article) and I have no doubt that Americans will be convinced of the benefits of PSAs.
But given the context of the discussion above, I had to laugh when I saw the cover of The Nation as I passed an airport newsstand this weekend:
Do you think The Nation, like Mankiw, would be taken more seriously if they stopped the references to Marx?
Posted by Peter Mork at 7:56 AM | Comments | TrackBack
March 28, 2005
Advertising on Blogs
There was an interesting article in the WSJ last Friday on blog advertising:
At their best, blogs are an advertiser's dream: the diary-style Web sites that feature running commentary and reactions are tightly targeted niche markets where avant-garde enthusiasts regularly return to read, post and send in tips. Well-placed blog ads can boost a company's image as cutting-edge. Plus, they're inexpensive: $350 a week, for instance, for premium positioning on Mr. Denton's high-profile inside-Washington blog, Wonkette, which got 2.2 million "page views" last month, a measure of how many times a single visitor looks at one Web site page.
But many companies are wary of putting their brand on such a new and unpredictable medium. Most blogs are written by a lone author. They are typically unedited and include spirited responses from readers who can post comments at will. Some marketers fear blogs will criticize their products or ad campaigns. And, like all new blog readers, companies are just learning how to track what's being said on blogs and which ones might make a good fit for their ads.
Posted by Peter Mork at 10:01 AM | Comments | TrackBack
March 25, 2005
Questions for Susan Davis
Tomorrow, Susan Davis, my representative in Congress, will be hosting a local Social Security Forum at the University of San Diego. Unfortunately, I will be out of town this weekend but I thought I'd post some questions that I hope get asked at the event. While Congresswoman Davis doesn't have much in the way of information regarding her opinion of if or how Social Security should be reformed, she does link to a calculator showing how much individuals would lose under a Bush proposal for private accounts. As such, I'll assume she is in agreement with the majority of her party who has been more vocal on the issue, and phrase my questions accordingly:
Questions:
1) No one disputes that Social Security, in it's current form, has promised to pay out trillions more in benefits than it will take in from payroll taxes. Much has been made of the "transition costs" to private accounts, but these "costs" are not new, they already exist within the current system in the form of unfunded liabilities. Wouldn't dealing with these costs now in the form of treasury debt be a better option than waiting for decades when much more debt would need to be issued to fund the system?
2) When Bill Clinton proposed private accounts as a way to help shore up the Social Security system in 2002, there was no uproar of opposition from the Democratic Party. In fact, many Democrats still support some sort of voluntary investment accounts within Social Security. Given these facts, is the current debate more of a battle over political power than honestly evaluating the best options for reform?
3) Much has been made of the White House's Commission on Social Security Reform's recommendations for fixing the system. Specifically, the calculator on your own website estimates the benefit cuts under the commission's "Model 2" plan, which would slow the rate of growth of current benefits by indexing them to prices instead of wages. But your calculator ignores a key aspect for lowincome workers. As the report states the plan:
"would enhance the existing Social Security system’s progressivity by significantly increasing benefits for low-income workers above what the system currently pays. This provision will raise even more of our lowincome elderly – most of whom are women – out of poverty."
Given that benefits cannot continue to be paid at their current levels indefinitely, would this not be a fair solution? Keeping benefits, in real terms, at their current levels for higher income workers, while at the same time increasing the benefits for those on the lower end of the income scale, seems like something Democrats should support. Why then are they attacking this aspect of the plan?
4) Do you agree that the Social Security system in it's current form is a Ponzi scheme where older workers' retirement is funded by a larger number of younger workers? Wouldn't it be beneficial to move towards a system where workers have the ability to rely on their own savings for retirement, instead of the tax dollars of their children and grandchildren?
5) It is often stated that Social Security will be able to pay full benefits up until 2041, at which time it will still be able to pay 75% of promised benefits. But according to Dr. John Cogan at Stanford, if in 2041 we decided to keep benefits unchanged for those in or near retirement (above age 55), this would mean cutting benefits by 2/3 for everyone else in the system. Is this an acceptable solution?
More questions can be found here. I'm looking forward to hear how the event turns out and, again, regret that I will be unable to attend.
Posted by Peter Mork at 12:19 PM | Comments | TrackBack
March 24, 2005
Competition Within Europe
The formation of the European Union allowed citizens of the member countries to legally live and work in any country within the EU. This policy of open immigration has had far reaching implication. Governments, in a sense, must now compete to keep citizens and businesses within their borders.
For example, in 2001, after Denmark's Brian Nielsen fought Mike Tyson, he promptly moved to Spain to collect his big payday. Why? It wasn't only to enjoy the Mediterranean lifestyle with his newfound wealth, but because taxes were lower in the Iberian Peninsula than in his native country. It follows that countries have quickly realized that a larger percent of nothing is much less than a smaller percent of something. Tax competition has ensued.
This table from a recent Wall Street Journal editorial speaks for itself with regards to the above. It should come as no surprise Ireland's economy is booming with an unemployment rate below 5%.
But the casualties of a mobile labor force have not been limited to high tax rates. Earlier this week France abandon their compulsory 35-hour work week. Originally, this policy was implemented with the flawed logic that shortening the work week for those already employed, would create jobs for the more than 13% of the population that found itself without work. The actually results were to make an already unfriendly business environment worse, and a system where government officials would routinely search the briefcases of businessmen/women as they left their places of employment to make sure they were not illegally bringing work to their homes to complete.
One question that remains is if Europe continues to move in this direction, how long will it be before the United States itself starts feeling the heat of economic competition from across the Atlantic?
Hat Tip: Hispanic Pundit
Posted by Peter Mork at 10:53 AM | Comments | TrackBack
March 23, 2005
Interest Rates and Economic Growth
There is an interesting op-ed by Jeremy Siegel in today's Wall Street Journal. Entitled "The Next Great Wave of Growth," I specifically enjoyed his closing paragraphs:
Today the developing countries, despite comprising 87% of the world's population, produce less than one-quarter of the world's output measured in dollars. It is likely that by the middle of this century, they will produce over half the world's GDP. Indeed, the growth of these economies will become the dominating factor in the world's capital markets.
Investors should not succumb to the pessimistic forecasts of government agencies and others who bemoan the aging of the U.S. population. Chairman Greenspan is finally showing the markets that our historically low interest rates are unjustified. Those pessimists currently buying bonds to protect themselves against the widely predicted economic downturn will soon be sorry that they bet against growth.
My only comments would be that Greenspan does not control the long-end of the yield curve. Witness that since the Fed started targeting a higher Fed Funds rate in mid-2004, the yield on the 10-Year Treasury Note has not moved up:
In a similar vein, are these interest rates "historically low" and "unjustified"? If inflation remains low (unlike the 70's), then who is to say that interest rates are not just getting back to where they should be? This graph of the yields on Moody's Aaa bonds since 1919 makes a case for that argument:
Posted by Peter Mork at 9:05 AM | Comments | TrackBack
March 21, 2005
Quote of the Day
Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil minded rulers. The greatest dangers to liberty lurk in the insidious encroachment by men of zeal, well meaning but without understanding.
-Louis Brandeis
Posted by Peter Mork at 10:45 PM | Comments | TrackBack
March 18, 2005
Surpluses, Deficits and Government Accounting
How can Social Security be running surpluses every year and yet have unfunded liabilities in the trillions? And how can New Zealand turn a $7 billion surplus into a $1 billion surplus without spending a dollar? Both come down to a question of accounting.
Jim Glass over at his blog has a great summary of the difference between cash and accrual-basis accounting and how they can lead to vastly different pictures of the financial shape of corporations or the government. I'll quote him at length:
The government computes its $412 billion deficit number using cash-basis accounting.
Cash-basis accounting is what individuals use. "Cash in" measures income, "cash out" measures expense, and the difference is net income or loss, nothing or little else counts.
But cash-basis accounting is illegal for all publicly owned corporations, and even for private businesses that have inventory or which accrue in any significant amount either liabilities or rights-to-income that stretch over more than one year.
Accrual-basis accounting recognizes the full current value of all future income that one obtains a legal right to receive, and of all liabilities one becomes legally obligated to pay. So if one receives $1,000 cash in exchange for committing to pay $10,000 in the future, a $9,000 net cost is recognized, rather than $1,000 of income.
As noted, the government requires that GAAP rules be used by all public corporations and all but the very smallest of other entities that have inventories or accruals -- except itself. The government reserves for itself the right to use cash basis accounting.
And it is such cash-basis accounting, cash in minus cash out, that produces the government's reported deficit figure of $412 billion. (And a rather dubious version of cash-basis accounting at that -- as the Financial Report itself notes, a better measure is $615 billion.)
But what about the government's accruals? What about the currently accrued future cost of the already promised benefits of Medicare, Social Security, military pensions, government employee pensions, and so on, all measured net against the accrued value of the future income taxes, Social Security taxes, Medicare taxes, and so on that have been established to pay them?
Well, for the last few years, as per a legal requirement pushed through Congress by fiscal reformers, the Treasury has published within its financial report, for informational purposes, an annual Asset and Liability Statement for the government that does follow GAAP rules, using accrual accounting. And this statement shows the government's net liability increasing in 2004 by $11.087 trillion -- a good 27 times more than the official budget deficit.
Scary stuff isn't it? Hold the government to the same accounting standards that they require business to comply with and the country is drowning in red ink.
Bizarrely, as Rodney Hide points out on his blog and in this article in The New Zealand Herald, New Zealand has the exact opposite problem. Their government wants to switch it's accounting practices to cash-basis from accrual-basis. Why? To make the government's surpluses look smaller, making it easier for the government to resist calls for a tax cut. As Hide writes:
To [Finance Minister Dr. Michael Cullen], decades of accrual accounting and public sector financial reform were all misguided. The generally accepted accounting practice edicts, while legally required, are apparently misguiding in that they give people the wrong impression of the amount of money the Government has to play with.
Much easier to go back to cash, says Dr Cullen. That way he can deduct from the operating surplus all the capital items, all the student loans advanced, all the super fund contributions and spending on construction of new hospitals, schools, prisons and police stations.
This way, a $7 billion surplus can easily be transformed into a $1 billion surplus or even a deficit.
Just two examples of how governments will put politics ahead of sound accounting principles. That is not too surprising, but it's all the more reason that the public needs to educate itself about at least the basics of accounting.
Posted by Peter Mork at 1:38 PM | Comments | TrackBack
March 16, 2005
Progressive Indexing and a $3.7 Trillion Shortfall
Robert Pozen had an interesting op-ed in the WSJ yesterday. Entitled "A 'Progressive' Solution for Social Security," it detailed one proposal to eliminate the unfunded liabilities of Social Security by combining PSAs with "progressive indexing." The way it would work is that benefits would continue to be tied to wage growth for those workers who had an average income below $25,000. On the other end, benefits would now be indexed to the slower growth rate of the CPI for workers who averaged above a $113,000 annual income. If your average income was between these two figures, then a portion of your benefit growth would be tied to prices and a portion to wages.
Hopefully that is the kind of solution that will lead political parties to find some common ground on the issue of reform and help up move towards a system where the majority of individuals can rely on their own savings for retirement, and not the tax dollars of their children and grandchildren.
However Pozen has one error in his piece. He states that:
In order to finance the currently scheduled level of Social Security benefits, the federal government must borrow $3.7 trillion over the next 75 years -- the standard period for measuring the solvency of Social Security.
But his figure $3.7 trillion is far too low. $3.7 trillion is the present value of the unfunded liabilities over the next 75 years, not the amount we're going to have to borrow (which is actually in excess of $24 trillion). An easier way to think about it is that if the government found an extra $3.7 lying around last year, it could have put this money in a bank and Social Security would have been able to remain as we know it for the next 75 years.
For an excellent critique of the confusion surrounding all these numbers see here.
Posted by Peter Mork at 4:03 PM | Comments | TrackBack
March 15, 2005
Ignoring Social Security's Unfunded Liabilities
Someone needs to explain to Jonathan Chait, guest blogging over at Talking Points Memo, the difference between debt that is on the government's balance sheet (bonds in the Social Security Trust Fund) and debt that is not (unfunded liabilities in the trillions estimated by the Social Security Trustees).
Chait states that:
Private accounts by themselves make the deficit larger.
with the caveat that:
...Bush now proposes to have those who open private accounts accept in return cuts in their guaranteed benefit when they retire years later. Fiscally, this is better than proposing private accounts without explaining how you would pay for them. Yet it would still lead to huge increases in the national debt.
What's missing from this analysis is that the only way this adds to the national debt is if Chait ignores the trillions of unfunded liabilities Social Security has currently built up. Private accounts don't add to this debt, they bring it forward and make it visible for all to see.
For example, if a portion of your payroll taxes is put in a private account, and you invest this money in government bonds, you would receive the same exact amount of benefits as promised under the current system. But what the private accounts do is give you property rights over this portion of your retirement. You own the bonds today and a future Congress can't just take them away by a majority vote.
Chait states "All in all, the most optimistic thing you can say about Bush is that his plan would do no harm," but the exact opposite is true. Under the most pessimistic forecasts of stocks only yielding 3% annually over a 40 year plus time frame, the worst that happens is that benefits remain unchanged. Clearly, we're going to need to do more than just private accounts to shore up a system which would need an additional $3.7 trillion invested today to make it whole over the next 75 years. Means testing benefits or indexing their growth to inflation are some possibilities, but Chait is silent on that matter.
When you look at the post as a whole, which also likens private accounts to "building immense gold statues" of President Bush, it's shocking that this passes as serious analysis from a senior editor from the respected magazine The New Republic. Hopefully the host of Talking Points Memo, Josh Marshall, brings more than the above to his debate tonight with Paul Krugman of the NYT and Michael Tanner of The Cato Institute.
Posted by Peter Mork at 1:28 PM | Comments | TrackBack
Better in Color?
Save Raging Bull, I'm really not a big fan of black and white movies (and even this Scorsese masterpiece cuts to color for part of the movie). And while I do love black and white photographs, I think this collection of color photographs from World War I gives a truer sense of the reality of the time period. Note that these are not B&W photos that have been colored in with a computer program. They are actual color photos developed using Auguste and Louis Lumière's autochrome process invented in 1903.
I previously wasn't aware that such pictures even existed. Head over and take a look at the collection. For those (like me) who don't speak French, just click on the city names in the upper right hand corner to view some of the galleries.
Hat Tip: Thanks to Jim Glass for the link.
Posted by Peter Mork at 11:48 AM | Comments | TrackBack
March 11, 2005
Values and Ends in the Social Security Debate
Josh Marshall over at Talking Points Memo makes the following argument with regards to Social Security reform and private accounts:
The real point, though, is that when you set aside all the practical matters of debt and transition costs, this is an ideological debate -- or to put it less antiseptically, a debate over different sets of values.
The idea behind private accounts is that people should rely on themselves alone and bear the consequences of their successes and their failures and random chance on their own shoulders. If things don't pan out for you in retirement, that's something to take up with your children.
The concept behind Social Security is fundamentally different. The first premise is that if you put in a lifetime's work there is simply a level of destitution below which society will not let you fall. Maybe you made so little during your working years that there wasn't enough to save. Or maybe you just didn't plan ahead well enough. Or maybe you suffered some misfortune. Whatever. If you worked you won't be destitute when you retire. People who made big bucks through their lives don't get a particularly good 'deal' from Social Security, if you insist on seeing it in investment terms. But that's a distorting prism, sort of like thinking you got a rotten deal on your medical insurance if you never have a catastrophic illness.
To which Tim Lee responds:
This is just a flat-out misrepresentation of what the various privatization advocates have proposed. Cato's plan, for example, includes a minimum guaranteed annuity of 120% of the poverty line, subsidized from general revenues for those whose personal accounts are too small to cover the amount. The Johnson bill, which is based on Cato's plan, guarantees a minimum annuity of 100% of the poverty line. The Sununu-Ryan bill guarantees workers the current promised level of Social Security benefits.
Tim continues his post with a detailed critique. But I want to stress a few points. Why should someone who has "made big bucks through their lives" get any sort of "deal" from Social Security at all? To put it in more personal terms, every year I contribute the max to my Roth IRA account. Now, if this account grows to $1,000,000 plus by the time I'm 65 (very feasible), why should I be collecting a Social Security check in the first place?
A related claim you will hear over and over again is that Social Security is an insurance program that guarantees everyone a certain level of income at retirement. But Social Security does not only go to those who fall through the cracks so to speak, it is paid to everyone once they hit the age of 65, even Warren Buffett. This distorts the definition of insurance, which should be used to cover rare and unexpected events.
I pay a $45 monthly medical insurance premium along with hundreds of thousands of others in California. Now if I break my leg tomorrow, I have the security of knowing that Blue Shield will cover all my expenses above a certain level. But this works because everyone paying into the system doesn't break their leg each and every month. Our $45 payments are pooled to cover unforeseen and rare emergencies for the unlucky few who do need to collect.
Now, Social Security works in the way that everyone who reaches the age of 65 collects a check paid for by the payroll taxes of the younger generation. This isn't insurance for those who would be "destitute" without their Social Security check. It's a redistribution of payroll taxes from everyone that is working, to everyone that is retired, regardless of their financial circumstances.
But Josh implies that we're ultimately dealing with two sets of values here. There is one group who wants to preserve Social Security as is in order to ensure "a level of destitution below which society will not let you fall," while the other group wants individuals to "rely on themselves alone" and if things go wrong, and they don't have kids to support them, well… looks like you starve homeless.
Tim calls this a "flat-out misrepresentation," but I'll take it a step further and call it flat-out offensive. The reason I support private accounts is not to feed the impoverished to the wolves, but because due to the power of compounding, everyone is going to have the opportunity to accumulate real wealth. I see a world where future retirees have the security of relying on their own savings which has grown to extraordinary levels, instead of relying on the tax dollars of their children and grandchildren for their retirement. That's a powerful concept as less people will need to rely on a social safety net in the first place.
It's always easy for partisans to assume when debating these issues that because their parties are opposite, so are the ends that they are trying to achieve. While that's an easy intellectual route to confirm your own beliefs, I believe it rarely, if ever, holds true. More often than not much of the debate is really about struggles for political power. If we would all wake up to that fact it would be easier to tackle this problem head-on instead of pushing it off for another generation of politicians to deal with.
Update: Reader Gerald Hanner writes in that we've ignored other components of the safety net Social Security provides that are separate from Old Age benefits. While they too face financial difficulties ahead, plans to reform the system leave these benefits unchanged:
Josh Marshall seems to be under informed in his comments on Social Security. Like most commentators, he ignores all the components of the Social Security System other than Old Age benefits. As a reminder, the other components are Disability, Survivorship, and Medicare. A worker who becomes totally disabled qualifies for Social Security benefits, provided that worker meets participation requirements; the surviving spouse and young children of a covered worker who dies also receive Social Security benefits. Medicare is in a class by itself. In fact, my sister-in-law, who is disabled by Parkinson's Disease, is on Social Security even though she is more than a decade short of age 65. She has been on Social Security for a few years now; because of her illness she may never see age 65.
Hanner and I also got to discussing the insurance aspects of Social Security's Old Age benefits. He correctly points out that they involve the pooling of risk, broad participation, and in a sense indemnification for a loss (in this case the ability to earn a living).
With that in mind, I stand corrected as the Old Age benefits could in fact resemble "whole" life insurance (above, what I refute is the claim Social Security resembles what is called "term" life insurance). But there is still a key difference. Companies that offer whole life insurance invest the premiums in real assets. They do not spend the premiums they collect and in place of saving write IOUs to themselves. Unfortunately, this is exactly what the government is doing.
Posted by Peter Mork at 9:57 AM | Comments | TrackBack
March 8, 2005
A Liberal in Latin America
Tom Palmer, in a post today, encourages everyone to read a recent speech by novelist Mario Vargas Llosa. Entitled “Confessions of a Liberal,” the speech covers a discussion of what it means to be a liberal, as well as the impact of liberal ideas throughout Latin America. Here is an excerpt:
Thus, the liberal I aspire to be considers freedom a core value. Thanks to this freedom, humanity has been able to journey from the primitive cave to the stars and the information revolution, to progress from forms of collectivist and despotic association to representative democracy. The foundations of liberty are private property and the rule of law; this system guarantees the fewest possible forms of injustice, produces the greatest material and cultural progress, most effectively stems violence and provides the greatest respect for human rights. According to this concept of liberalism, freedom is a single, unified concept. Political and economic liberties are as inseparable as the two sides of a medal. Because freedom has not been understood as such in Latin America, the region has had many failed attempts at democratic rule. Either because the democracies that began emerging after the dictatorships respected political freedom but rejected economic liberty, which inevitably produced more poverty, inefficiency and corruption, or because they installed authoritarian governments convinced that only a firm hand and a repressive regime could guarantee the functioning of the free market. This is a dangerous fallacy. It has never been so. This explains why all the so-called “free market” Latin American dictatorships have failed. No free economy functions without an independent, efficient justice system and no reforms are successful if they are implemented without control and the criticism that only democracy permits. Those who believed that General Pinochet was the exception to the rule because his regime enjoyed economic success have now discovered, with the revelations of murder and torture, secret accounts and millions of dollars abroad, that the Chilean dictator, like all of his Latin American counterparts, was a murderer and a thief.
There is obviously much more to the speech. Head over and give it a read it you have the time.
Posted by Peter Mork at 9:57 AM | Comments | TrackBack
March 4, 2005
Help the Poor... Become a Target of Terrorists
A World Connected has an interesting piece up on Peruvian economist Hernando De Soto. De Soto is famous for his books The Other Path and The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, which brought his economic research on property rights in third world countries to the public. The article summarizes this point well, explaining that the reason the underground Peruvian economy was so large was that the government had made it nearly impossible for most people to register their property and businesses legally:
In the early 1980s, De Soto discovered that 90 percent of all small industrial enterprises, 85 percent of urban transport, 60 percent of Peru's fishing fleet (one of the largest in the world), and 60 percent of its food stores operated outside of the law.
Contrary to the views of the government and Peruvian elites who thought of the poor as lazy, many of Lima's poor were in fact carrying the economy on their backs.
The more people the ILD researchers talked to in the shantytowns and rural byways of Peru, the more they realized that it was not so much that the poor were breaking the law as that the law was breaking them.
Even those who had tried to get into the system by applying for titles to their houses and other real estate or licenses to legalize their businesses complained that it was impossible to succeed; wending their way through the bureaucratic obstacles simply took too much time and cost too much money.
De Soto went public with his findings in 1984, attracting attention from Peruvians of all political viewpoints.
Unfortunately, the idea of defining property rights was not a compatible solution with the ideology of radical socialists. The Maoist "Shining Path" declared that the De Soto's ideas were vicious. The group's leader, Abimael Guzman, stated: "It is clear that the objective of The Other Path is to deceive and mislead the masses… It directly targets young people, who are the driving force of society… It leads the young away from the popular war."
De Soto and those at his group Instituto Libertad y Democracia were then declared targets for assassination.
Recognizing that the ILD was the primary intellectual influence behind the restructuring and modernization of the Peruvian economy, Guzman called for an all-out offensive to destroy it.
De Soto and the ILD became the prime target not only of The Shining Path's underground press but also its assassination squads. Terrorists bombed the ILD headquarters in Lima and strafed Institute vehicles.
Guzman was captured in September, 1992, and the following year the 17 terrorists who had bombed the ILD's headquarters were also apprehended.
Today, the ILD staff is able to travel throughout all of Peru without danger and is one of the premier policy organizations dedicated to helping the developing world's poor enter the global economy.
Goes to show, it's a bizarre world we live in.
Posted by Peter Mork at 9:36 AM | Comments | TrackBack
March 2, 2005
Rep. Paul Ryan on Social Security
In my opinion one of the best Social Security reform bills on the floor of Congress was put forth by Rep. Paul Ryan of Wisconsin. His bill front loads the contributions to private accounts, which ensures that low-income workers can set aside a substantial amount for retirement even if they make less than $10,000 a year. Specifically:
Workers will be able to shift to their personal accounts 10 percentage points of the current 12.4% Social Security payroll tax on the first $10,000 of wages each year, and 5 percentage points on all taxable wages above that. This creates a progressive structure with an average account contribution among all workers of 6.4 percentage points.
His bill has been scored by the Office of the Actuary of the Social Security Administration, which concluded that the legislation by 2047 would completely eliminate the current $10.4 trillion of unfunded liabilities within the current system. Sounds like a good plan to me. You would think with the progressive aspects of the plan some Democrats in Congress would be jumping aboard... but not so.
At a recent Cato conference, Ryan pointed out it's not his plan that those on the other side of the isle are opposing, there are other factors involved:
"'I have been floating it to Democrats,' said Ryan. 'Each of them replied to me, "I like what you're doing, I like this bill, I think it's the right way to go, but my party leadership will break my back. The retribution they are promising against us is as great as I've ever seen, and I can't do it."'
It's a good idea, but... I've got my next election to think about. Aren't politics great?
Posted by Peter Mork at 9:51 PM | Comments | TrackBack
March 1, 2005
Are Beliefs in Free Trade Guided by Faith?
Don Boudreaux throws down the gauntlet. Do you think Thomas Franks will take him up on this challenge?
Tuesday, March 1, 2005This was a letter to the editor of the New York Times Book Review.
Dear Editor:
Thomas Frank besmirches the case for free trade (“American Psyche,” Nov. 28th). First, he assumes that free trade is largely and only pro-business and, hence, that it is forced on us by “corporate power” and “industry lobbyists." Not so. Show me a tariff and I’ll show you corporations lobbying for it. Show me a tariff cut and I’ll show you corporations that fought the cut as well as consumers paying lower prices and workers in jobs that would have been otherwise impossible.
Second, he smears free traders as being devotees of a “false religion” guided by “faith.” So charged, this free trader challenges Frank to a public debate – face to face, or in writing – on the merits of free trade versus protectionism. I promise to use, not faith, but only reasoned arguments and abundant empirical evidence. Contrary to Frank’s assertion, the preachers of false religion are the protectionists who, lacking evidence and coherent arguments, faithfully proclaim that protecting domestic suppliers from foreign competition is key to economic salvation.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Peter Mork at 9:45 AM | Comments | TrackBack
Quote of the Day
The position which entrepreneurs and capitalists occupy in the market economy is of a different character. A "chocolate king" has no power over the consumers, his patrons. He provides them with chocolate of the best possible quality and at the cheapest price. He does not rule the consumers, he serves them. The consumers are not tied to him. They are free to stop patronizing his shops. He loses his "kingdom" if the consumers prefer to spend their pennies elsewhere. Nor does he "rule" his workers. He hires their services by paying them precisely the amount which the consumers are ready to restore to him in buying the product.Ludwig von Mises, Human Action