Ceteris paribus -- other things equal -- is often a heroic assumption. In reality, other things always change.
"The most visible and costly economic problem in this country today is the large number of people who can't find jobs." -- CBO chief Doug Elmendorf
After due deliberation, the experts at the Congressional Budget Office have advised in their official report to Congress that there are two ways to deal with a budget deficit.:
A/ Increase revenue (raise taxes), or
B/ Reduce expenses (cut benefits).
Really? Who woulda thunk it! Of course, when dealing with the mental giants in Congress, sometimes it's necessary to put things in as simple a form as possible. Not to say simplistic.
The real issue, then, is not the verity of the analysis and recommendations, but getting the message understood by members of Congress. And in a wider sense, the problem is in getting Congress to act.
The federal budget deficit, regardless of whether it is considered a major problem or an easy way to cope with economic problems, is not an unsolvable problem. In fact, it is not even a looming catastrophe, as some proclaim.
We have ten years, at least, according to the CBO report, before the issue becomes even remotely serious. Even so, there are steps that can and should be taken soon to avert any issue that has even the potential to become serious.
"In coming decades," said the CBO, "the aging of the population, rising health care costs, and the expansion of federal subsidies for health insurance will put increasing pressure on the federal budget." All true, but ....
In just six years, by 2020, the CBO report added, assuming no change in current laws, federal spending "would drop to its smallest percentage of total output in more then 70 years," and revenue would be at its highest percentage, on average, over the past 40 years. Except, of course, outlays for Social Security and health care programs, the CBO noted. And if nothing is done, federal debt would rise from its present 72 percent of GDP to more than 100 percent 25 years from now, according to CBO projections.
So to meet the challenge, assuming the challenge must be met, of lowering the total debt by 2 percentage points by 2038, Congress can trim $2 trillion from spending deficits during the next decade, and keep it that way afterward. This trimming plan, however, "would require significant increases in taxes, significant cuts in federal benefits or services, or both," the CBO said.
The consequences, however, can be hazardous to the economy. Already, the nation is 5 million jobs short of where it could be, as well as "the most abrupt fiscal tightening that has occurred since the end of World War II," the CBO said, "as the federal deficit shrank from about 10 percent of Gross Domestic Product in fiscal year 2009 to about 4 percent in 2013."
So while this belt-tightening has slowed the rising of federal debt, "it also has slowed economic growth," said the CBO. Some tradeoff.
The economy has not yet fully recovered from the Great Recession, and millions of people are still out of work. Another 1.3 million have just lost their unemployment compensation benefits, and many more soon will join that group. And with no money coming in, a family cannot spend on necessities such as food, clothing and shelter. When families don't spend, stores have less revenue. When stores have less revenue, they trim costs by laying off workers, and pay less in taxes. When more people join the ranks of the unemployed, they too cut back on purchases. And when people and stores suffer from lower revenue and spending, less money goes to the government as tax revenue. When the government has less tax revenue, it can either trim expenses or practice deficit spending.
And around and down we go. That vicious cycle has happened repeatedly many times in the past, as fiscal conservatives insist on balanced federal budgets, with no deficits and no debt.
So there is a choice. The super-wealthy are to a large extent unaffected by government spending deficits -- except that lower taxes mean they have more to spend on luxuries -- but as government hacks away at assistance programs, the folks who depend on such programs for short-term survival until more jobs open up -- will suffer.
In summary, eliminating deficit spending and balancing the federal budget can be done, but the price would be high and the consequences great.
Those who say the price is reasonable are not those who would be paying it.
Tuesday, December 31, 2013
Hope for the Jobless
It may yet happen. An extension of the federal unemployment compensation assistance program, that is. The latest estimate by the Congressional Budget Office, out today, said a bill to extend the act for three months -- through March 31, 2014 -- would increase the nation's deficit by $6.5 billion for the year. The move, under Senate Bill S.1845, introduced December 17, would allow qualified states to provide up to 47 more weeks of federally funded unemployment compensation to out-of-work folks who have exhausted their regular benefits.
Those benefits ran out for some 1.3 million workers as 2013 ended. It's possible, then, that Congress -- when it returns to Washington after its holiday -- could yet act on the bill and reinstate jobless pay from the federal purse.
Those benefits ran out for some 1.3 million workers as 2013 ended. It's possible, then, that Congress -- when it returns to Washington after its holiday -- could yet act on the bill and reinstate jobless pay from the federal purse.
Sunday, December 29, 2013
Health Care Politics
Health care insurance is too important to be left solely to the private sector.
Insurance companies are locked in to bottom-line thinking, and must balance their accounting books every quarter -- even those carriers that are ostensibly nonprofit. Others must answer to shareholders and post positive earnings.
Basic to private enterprise thinking is to maximize income and minimize expenses. When applied to insurance companies, this means to collect more in premiums (income) and pay out as little in claims (expenses) as possible.
Basic to economic thinking, meanwhile, is that people respond to incentives -- that is, to make it worthwhile for them to do something, such as to sign up for health care insurance. To enact a negative incentive -- a penalty, for example, for not doing something -- too often causes a negative reaction. That is, people may resent being told they must do something, and thus they refuse to do something that they might otherwise do if there were positive reinforcement.
In the current issue of universal health care, one major key to success of the program is to persuade young, healthy people to sign up. However, as it is now, the Affordable Care Act is for many folks a mandate to buy health care insurance on the commercial market. But the reaction often is, "I'm young and healthy, and not likely to get sick or seriously ill, so I don't need insurance, and I object to government telling me to buy something I don't need."
So the program is a boon to private sector insurance companies, giving them a huge new customer base of people who are told they must participate. Of course, they are not told which plan to buy, but supposedly they have a range of options, along with government assistance if they can't afford an appropriate insurance plan.
To make things more complicated, the federal government assistance program flopped in its initial rollout.
No wonder people are angry.
A better plan would be to expand the Medicare and Medicaid programs to automatically enroll everyone, much as the Social Security program applies to everyone, with contributions deducted from paychecks.
Such a plan would not necessarily bypass insurance companies in the private sector, since they could be enlisted to administer the program under contract with the government, much as private sector firms do so now with Medicare.
In short, universal health care is too important to be left solely to the private sector. It works in other major developed countries. The major reason it's not working in America is political, coupled with incompetence in setting up the federal online marketplace -- effectively, this is little more than a government help program.
Moreover, various states are making better progress in offering universal health care, beginning with Massachusetts, which set up its program before the federal government tried to expand the concept nationwide.
Such a program stumbles mostly in regions where politicians fight over who gets credit for setting it up.
Insurance companies are locked in to bottom-line thinking, and must balance their accounting books every quarter -- even those carriers that are ostensibly nonprofit. Others must answer to shareholders and post positive earnings.
Basic to private enterprise thinking is to maximize income and minimize expenses. When applied to insurance companies, this means to collect more in premiums (income) and pay out as little in claims (expenses) as possible.
Basic to economic thinking, meanwhile, is that people respond to incentives -- that is, to make it worthwhile for them to do something, such as to sign up for health care insurance. To enact a negative incentive -- a penalty, for example, for not doing something -- too often causes a negative reaction. That is, people may resent being told they must do something, and thus they refuse to do something that they might otherwise do if there were positive reinforcement.
In the current issue of universal health care, one major key to success of the program is to persuade young, healthy people to sign up. However, as it is now, the Affordable Care Act is for many folks a mandate to buy health care insurance on the commercial market. But the reaction often is, "I'm young and healthy, and not likely to get sick or seriously ill, so I don't need insurance, and I object to government telling me to buy something I don't need."
So the program is a boon to private sector insurance companies, giving them a huge new customer base of people who are told they must participate. Of course, they are not told which plan to buy, but supposedly they have a range of options, along with government assistance if they can't afford an appropriate insurance plan.
To make things more complicated, the federal government assistance program flopped in its initial rollout.
No wonder people are angry.
A better plan would be to expand the Medicare and Medicaid programs to automatically enroll everyone, much as the Social Security program applies to everyone, with contributions deducted from paychecks.
Such a plan would not necessarily bypass insurance companies in the private sector, since they could be enlisted to administer the program under contract with the government, much as private sector firms do so now with Medicare.
In short, universal health care is too important to be left solely to the private sector. It works in other major developed countries. The major reason it's not working in America is political, coupled with incompetence in setting up the federal online marketplace -- effectively, this is little more than a government help program.
Moreover, various states are making better progress in offering universal health care, beginning with Massachusetts, which set up its program before the federal government tried to expand the concept nationwide.
Such a program stumbles mostly in regions where politicians fight over who gets credit for setting it up.
Saturday, December 28, 2013
The Economics of War
Economics and History are one.
How important is it that one nation dominate? Economists don't care; politicians do.
The history of a nation is the story of how its people struggled to use what they had or to acquire what they wanted. Sometimes, it's a story of how they earned or built it themselves, or took from others, adding to what they already had.
Mercantilist thinking specifies that there is a fixed amount of wealth in the world, and the way for one person, group or nation to increase wealth is to take from another. Put another way, mercantilism means that whoever has the most gold at the end, wins.
The problem with that, however, is this: When is the end? Is it when one side has all the wealth and the other players have none? In that case, what does the victor eat? Owning all the gold is useless if there are no farmers. One can't eat gold.
Several hundred years ago, the mighty nation of Spain set out to gather all the gold it could as the conquistadors roamed the New World. And so they did. Result: The excess supply of gold only caused inflation, raising the price of food even as fewer people under its dominion were producing food.
War, then, has an economic component. The given excuse may be political, moral or religious, but the real cause is economic. And to persuade citizens to support a war, politicians appeal to emotions such as patriotism or religion and try to ignite a fear of domination by "the other."
The power of nations, their rise and fall, depends in large part on the strength of their economies and the ability to support a military strong enough to establish and enforce the nation's political dominance as a supplement to its economic power.
It's all of a piece, an inter-related combination to powers, strength and abilities. Luck also plays a role, of course, as well as mistakes by others in the game of world dominance.
Politicians obsessed with competition and a need to win may care about such a thing as world dominance, but economists would not. It's also true, however, that politicians will use economic strategies in their quest to win. Business executives also, while they praise the worthiness of competition in the marketplace, actually don't want competition. Rather, they want to dominate a market, to monopolize the trade so they can maximize profits. Barring that, however, they will form a cartel, the better to control supply and fix prices, the better to enhance profits.
How important is it that one nation dominate? Economists don't care; politicians do.
The history of a nation is the story of how its people struggled to use what they had or to acquire what they wanted. Sometimes, it's a story of how they earned or built it themselves, or took from others, adding to what they already had.
Mercantilist thinking specifies that there is a fixed amount of wealth in the world, and the way for one person, group or nation to increase wealth is to take from another. Put another way, mercantilism means that whoever has the most gold at the end, wins.
The problem with that, however, is this: When is the end? Is it when one side has all the wealth and the other players have none? In that case, what does the victor eat? Owning all the gold is useless if there are no farmers. One can't eat gold.
Several hundred years ago, the mighty nation of Spain set out to gather all the gold it could as the conquistadors roamed the New World. And so they did. Result: The excess supply of gold only caused inflation, raising the price of food even as fewer people under its dominion were producing food.
War, then, has an economic component. The given excuse may be political, moral or religious, but the real cause is economic. And to persuade citizens to support a war, politicians appeal to emotions such as patriotism or religion and try to ignite a fear of domination by "the other."
The power of nations, their rise and fall, depends in large part on the strength of their economies and the ability to support a military strong enough to establish and enforce the nation's political dominance as a supplement to its economic power.
It's all of a piece, an inter-related combination to powers, strength and abilities. Luck also plays a role, of course, as well as mistakes by others in the game of world dominance.
Politicians obsessed with competition and a need to win may care about such a thing as world dominance, but economists would not. It's also true, however, that politicians will use economic strategies in their quest to win. Business executives also, while they praise the worthiness of competition in the marketplace, actually don't want competition. Rather, they want to dominate a market, to monopolize the trade so they can maximize profits. Barring that, however, they will form a cartel, the better to control supply and fix prices, the better to enhance profits.
Thursday, December 26, 2013
Fearmonger Fallacy
"Deficits don't matter." -- Dick Cheney
Third-quarter GDP grew by 4.1 percent, to $16.9 trillion annually. -- Commerce Department
In formal logic, the rhetorical strategy known as the Appeal to Fear is dismissed as a fallacy. Certainly, there are occasions when fear is a legitimate emotion, and when ignited it can save lives. But when debaters use an appeal to fear -- justifiable or not -- as a strategy, a device calculated to win, just for the sake of winning, then this appeal is a fallacy.
Consider the recent brouhaha over the national debt and deficit spending. To hear the fearmongers tell it, America is headed for hades in a handbasket, and unless spending is cut sharply and immediately, disaster looms.
Reality check: Take it from the arch leader of the GOP conservatives, Dick Cheney. (Yes, he is a leader, and yes, he is often arch.) "Deficits don't matter," Cheney noted.
In fact, when it comes to rebooting a lagging economy, deficit spending is essential, an investment in the future. Just as a family or a firm can periodically spend beyond its income, either for school tuition or for purchase of equipment, so also can a government spend on infrastructure projects, putting people to work so their salaries can provide the juice needed for economic health. Think of it as a circle of spending. When people have income, they spend on food, clothing and shelter, and pay taxes on their income and purchases, which in turn generates revenue for government and firms. And the cycle continues.
Does there come a point when deficit spending by government is too much, and the national debt is too high? Perhaps. But how much is too much, and how high is too high? Currently, the U.S. national debt as a percentage of its total production of goods and services -- Gross Domestic Product, or GDP -- is about 70 percent. Other nations have far higher ratios, some well over 100 percent, and still show little sign of collapsing. Moreover, most American government debt is in the form of government issued bonds, held by Americans themselves. And to cash in those bonds, holders can either redeem them -- sell them back to the government -- or sell them on the open market. So unless there is a run on a government, where everyone tries to redeem their bonds at the same time, there is little danger. Unless, of course, an overwhelming majority of bondholders lose their faith in the creditworthiness of the U.S. government and cannot cash in their bonds, either through the government or through the open market.
Possible? Yes, but not likely. Why? Because most of the bonds are owned by Americans themselves, and the bonds are negotiable -- available to be sold to others who still have faith in the creditworthiness of the U.S. government.
Moreover, many of the bonds -- issued by the U.S. Treasury -- are held by the Federal Reserve Board, another government agency. In recent months, the Fed has been active in the open market, buying up publicly held bonds and pumping more cash into the economic revenue stream to rejuvenate the economy.. Granted, this can cause inflation -- more money means higher prices -- but the Fed monitors both to achieve a balance and promote economic health. So, since the Fed has such a vast quantity of bonds and cash, failure to maintain such a balance would effectively destroy the nation's health.
Reality check: Not likely.
In any case, once the nation's economy resumes its growth pattern, government, through fiscal spending, and the Fed, through monetary policy, can and should step back.
So the critical issue now is, has the economy recovered enough so Washington can scale back its interventional policies?
Perhaps, and that's the tricky part. Cut back too much, too soon and too fast can put the national economy into another tailspin. Think 1937, when such a pullback extended the Great Depression. And doing so today would extend the Great Recession.
The U.S. economy bottomed out five years ago, and resumed its upward path. The most recent estimate by the Bureau of Economic Analysis in the Commerce Department, issued last week, said output rose again the third quarter of 2013, by 4.1 percent, to an annualized total of $16.9 trillion.
Deficit spending works. It worked in the mid-1930s, to pull out of the Great Depression, and it worked again to pull out of the Great Recession.
Caution: Scaling back too far, too fast and too soon can cause a relapse. The fear mongers who warn so much of the evils of government intervention should heed the lessons of history, both recent and otherwise.
Third-quarter GDP grew by 4.1 percent, to $16.9 trillion annually. -- Commerce Department
In formal logic, the rhetorical strategy known as the Appeal to Fear is dismissed as a fallacy. Certainly, there are occasions when fear is a legitimate emotion, and when ignited it can save lives. But when debaters use an appeal to fear -- justifiable or not -- as a strategy, a device calculated to win, just for the sake of winning, then this appeal is a fallacy.
Consider the recent brouhaha over the national debt and deficit spending. To hear the fearmongers tell it, America is headed for hades in a handbasket, and unless spending is cut sharply and immediately, disaster looms.
Reality check: Take it from the arch leader of the GOP conservatives, Dick Cheney. (Yes, he is a leader, and yes, he is often arch.) "Deficits don't matter," Cheney noted.
In fact, when it comes to rebooting a lagging economy, deficit spending is essential, an investment in the future. Just as a family or a firm can periodically spend beyond its income, either for school tuition or for purchase of equipment, so also can a government spend on infrastructure projects, putting people to work so their salaries can provide the juice needed for economic health. Think of it as a circle of spending. When people have income, they spend on food, clothing and shelter, and pay taxes on their income and purchases, which in turn generates revenue for government and firms. And the cycle continues.
Does there come a point when deficit spending by government is too much, and the national debt is too high? Perhaps. But how much is too much, and how high is too high? Currently, the U.S. national debt as a percentage of its total production of goods and services -- Gross Domestic Product, or GDP -- is about 70 percent. Other nations have far higher ratios, some well over 100 percent, and still show little sign of collapsing. Moreover, most American government debt is in the form of government issued bonds, held by Americans themselves. And to cash in those bonds, holders can either redeem them -- sell them back to the government -- or sell them on the open market. So unless there is a run on a government, where everyone tries to redeem their bonds at the same time, there is little danger. Unless, of course, an overwhelming majority of bondholders lose their faith in the creditworthiness of the U.S. government and cannot cash in their bonds, either through the government or through the open market.
Possible? Yes, but not likely. Why? Because most of the bonds are owned by Americans themselves, and the bonds are negotiable -- available to be sold to others who still have faith in the creditworthiness of the U.S. government.
Moreover, many of the bonds -- issued by the U.S. Treasury -- are held by the Federal Reserve Board, another government agency. In recent months, the Fed has been active in the open market, buying up publicly held bonds and pumping more cash into the economic revenue stream to rejuvenate the economy.. Granted, this can cause inflation -- more money means higher prices -- but the Fed monitors both to achieve a balance and promote economic health. So, since the Fed has such a vast quantity of bonds and cash, failure to maintain such a balance would effectively destroy the nation's health.
Reality check: Not likely.
In any case, once the nation's economy resumes its growth pattern, government, through fiscal spending, and the Fed, through monetary policy, can and should step back.
So the critical issue now is, has the economy recovered enough so Washington can scale back its interventional policies?
Perhaps, and that's the tricky part. Cut back too much, too soon and too fast can put the national economy into another tailspin. Think 1937, when such a pullback extended the Great Depression. And doing so today would extend the Great Recession.
The U.S. economy bottomed out five years ago, and resumed its upward path. The most recent estimate by the Bureau of Economic Analysis in the Commerce Department, issued last week, said output rose again the third quarter of 2013, by 4.1 percent, to an annualized total of $16.9 trillion.
Deficit spending works. It worked in the mid-1930s, to pull out of the Great Depression, and it worked again to pull out of the Great Recession.
Caution: Scaling back too far, too fast and too soon can cause a relapse. The fear mongers who warn so much of the evils of government intervention should heed the lessons of history, both recent and otherwise.
Monday, December 23, 2013
Rule Rally
When it comes to writing well, it's useful to follow some well-tested rules, all the while remembering that when it comes to grammar, rules are descriptions of most people actually do, rather than mandates of what one must do.
The advantage of following these patterns is that it helps in communicating. And that, fellow communicators, is the goal of writing. (Speaking, too, for that matter.)
There are, of course, dialects, each with its own set of rules that help to make for regularity -- hence the term regulation.
The prime directive from this editor's chair is to follow the Three C's of effective communication -- Clear, Concise and Complete. And to help enhance clarity, follow the practices established over many years of effective communication.
That said, where does one find these rules? There are many available. (Remember the manual of style and usage you bought for your Freshman Comp class but never used?) One of the best is Will Strunk's "little book," still in print as it has been for about a hundred years, and now known as Strunk & White's Manual of Style. It's only a bit more than 100 pages, and the best investment any writer can make.
There are variations and preferences, of course, and as a practical matter, a working writer follows the preferences of the editor he's working for. When it comes to style in things grammatical, the issue is no more than consistency of usage -- that is, use the same phrasings, spellings and punctuation throughout. For example, if the editor wants percent spelled out as one word, do it that way. Or use two words, if that's the editor's preference. Or the abbreviation. Or the symbol. Whatever. Be consistent.
For those who want an online reference, the Congressional Budget Office has just issued its newest edition of its "Guide to Style and Usage." It's available at the CBO web site.
Meanwhile, there are many other style manuals in print, with entries arranged alphabetically and/or by topic. But like any book, a style manual is useless until and unless someone looks into it now and then.
Don't wait until you have a question; odds are you already "know" the "right" phrasing and get bent out of shape when a reader disagrees with you. Avoid such disagreeable episodes by glancing through one or more style manuals now and then.
Just as a mechanic knows the difference between a spanner and a wrench, good writers know how differences in word usage can clarify a sentence or muddle the meaning.
The advantage of following these patterns is that it helps in communicating. And that, fellow communicators, is the goal of writing. (Speaking, too, for that matter.)
There are, of course, dialects, each with its own set of rules that help to make for regularity -- hence the term regulation.
The prime directive from this editor's chair is to follow the Three C's of effective communication -- Clear, Concise and Complete. And to help enhance clarity, follow the practices established over many years of effective communication.
That said, where does one find these rules? There are many available. (Remember the manual of style and usage you bought for your Freshman Comp class but never used?) One of the best is Will Strunk's "little book," still in print as it has been for about a hundred years, and now known as Strunk & White's Manual of Style. It's only a bit more than 100 pages, and the best investment any writer can make.
There are variations and preferences, of course, and as a practical matter, a working writer follows the preferences of the editor he's working for. When it comes to style in things grammatical, the issue is no more than consistency of usage -- that is, use the same phrasings, spellings and punctuation throughout. For example, if the editor wants percent spelled out as one word, do it that way. Or use two words, if that's the editor's preference. Or the abbreviation. Or the symbol. Whatever. Be consistent.
For those who want an online reference, the Congressional Budget Office has just issued its newest edition of its "Guide to Style and Usage." It's available at the CBO web site.
Meanwhile, there are many other style manuals in print, with entries arranged alphabetically and/or by topic. But like any book, a style manual is useless until and unless someone looks into it now and then.
Don't wait until you have a question; odds are you already "know" the "right" phrasing and get bent out of shape when a reader disagrees with you. Avoid such disagreeable episodes by glancing through one or more style manuals now and then.
Just as a mechanic knows the difference between a spanner and a wrench, good writers know how differences in word usage can clarify a sentence or muddle the meaning.
Friday, December 20, 2013
Are We There Yet?
GDP jumps again
We're making more money, but the increase is less
Coffee-shop chats with workers show more confidence, and official government survey data suggest that economic recovery is on the way.
The Federal Reserve Board has been saying for some months that things are improving, enough so that this week the Fed indicated it would stop its stimulus program. Today, the Census Bureau said total economic output grew by 4.1 percent in the third quarter, up from an annualized rate of 2.5 percent in the second three months of the year.
Separately, the government said personal income growth slowed slightly in the July-September quarter, to 1.1 percent from 1.2 percent in the second quarter of 2013.
So are Americans prospering? That depends on how you think of yourselves.
Of the 313 million or so people living in the U.S., the home ownership rate in the four-year survey period ended 2012 was 65.5 percent, and median household income was $54.046. The median value of owner-occupied housing units was $181,400 during the same period, according to a Census Bureau report.
Meanwhile, 14.9 percent of all Americans are living below the poverty level. And that percentage has not changed much in many years. Moreover, the federal minimum wage of $7.25 an hour, after adjusting for inflation, is more than 20 percent below what it was 45 years ago.
Are we there yet? When it comes to a prosperous society, a few are doing well, and those in the great middle are beginning to feel better. But there's still a danger that supportive policies will slack off and send the economic engine on a rocky detour.
We're making more money, but the increase is less
Coffee-shop chats with workers show more confidence, and official government survey data suggest that economic recovery is on the way.
The Federal Reserve Board has been saying for some months that things are improving, enough so that this week the Fed indicated it would stop its stimulus program. Today, the Census Bureau said total economic output grew by 4.1 percent in the third quarter, up from an annualized rate of 2.5 percent in the second three months of the year.
Separately, the government said personal income growth slowed slightly in the July-September quarter, to 1.1 percent from 1.2 percent in the second quarter of 2013.
So are Americans prospering? That depends on how you think of yourselves.
Of the 313 million or so people living in the U.S., the home ownership rate in the four-year survey period ended 2012 was 65.5 percent, and median household income was $54.046. The median value of owner-occupied housing units was $181,400 during the same period, according to a Census Bureau report.
Meanwhile, 14.9 percent of all Americans are living below the poverty level. And that percentage has not changed much in many years. Moreover, the federal minimum wage of $7.25 an hour, after adjusting for inflation, is more than 20 percent below what it was 45 years ago.
Are we there yet? When it comes to a prosperous society, a few are doing well, and those in the great middle are beginning to feel better. But there's still a danger that supportive policies will slack off and send the economic engine on a rocky detour.
Thursday, December 19, 2013
Social Insecurity
If it ain't broke, don't fix it.
Who said it's broke?
It ain't broke yet, but it will be in 20 years.
OK, let's fix it now.
There's been a big hue and cry about Social Security going broke. It is true that currently, payouts exceed income, and in 20 years -- if nothing changes -- the agency's trust fund, or money it has collected over the years, will be exhausted.
In the current fiscal year, the agency paid out benefits totaling $808 billion, on revenues of $745 billion, according to a report by the Congressional Budget Office. So to meet its obligations to retirees and others, the Social Security Administration had to tap into its backup trust funds to make up the difference. So as the Baby Boomers retire and pension benefit payouts increase -- even as revenues remain the same -- in 20 years there will be a problem. Again, on the assumption that the SSA revenue stream is unchanged.
Clearly, one answer is to increase the revenue stream. An alternate is to reduce the number of retiree and disability beneficiaries. Or cancel the program entirely. Ain't gonna happen.
The SSA has two main sources of revenue, payroll taxes and income taxes on benefits received. "Roughly 96 percent of those revenues derive from a payroll tax -- generally 12.4 percent of earnings -- that is split evenly between workers and their employers," the CBO said. The remaining 4 percent comes from income taxes that high-income beneficiaries pay on their benefits, the CBO reported.
Therefore, to close the gap between income and expenses, the Social Security Administration has the same options that any other family or firm has -- increase revenue or reduce expenses, or both.
Cutting pension benefits for those who rely on them for survival is politically disastrous. Eliminating the program is impossible. That leaves the option of increasing revenue.
Employees now contribute 6.2 percent of their taxable earnings to the fund, with the company paying in an equal amount. (Emphasis on taxable earnings, not on gross.) Another way is to boost the income tax rate on benefits. This would not affect those who have only Social Security pensions as income.
Yet another method would be to increase either the payroll tax rate of 12.4 percent, or to raise the earnings maximum. That ceiling is now $113,700, which means that only those earning more than that would see an increase in their contribution to the pension fund.
It's been three years since the gap appeared. In calendar year 2010, the CBO said, annual outlays for the program exceeded revenues for the first time. In 2012, the gap was 7 percent, and the CBO estimates that this shortfall will average about 12 percent of revenues over the next decade. Agency revenue estimates, by the way, did not include interest income, but only contributions.
If things don't change, the CBO said, the trust fund balance could fall to zero in 20 years, and revenues would not be enough to meet obligations.
So Congress has 20 years to fix something that isn't yet a problem, but even if the reserve trust funds are exhausted, the worst that could happen is that "the Social Security Administration would no longer have the legal authority to pay full benefits when they were due," the CBO report said.
Will Congress do something to help the pension and disability agency keep its books balanced, or will it do nothing, and let the millions of retirees and the disabled do without?
They've got 20 years to resolve the issue and prevent a real problem. Will they? Stay tuned.
Who said it's broke?
It ain't broke yet, but it will be in 20 years.
OK, let's fix it now.
There's been a big hue and cry about Social Security going broke. It is true that currently, payouts exceed income, and in 20 years -- if nothing changes -- the agency's trust fund, or money it has collected over the years, will be exhausted.
In the current fiscal year, the agency paid out benefits totaling $808 billion, on revenues of $745 billion, according to a report by the Congressional Budget Office. So to meet its obligations to retirees and others, the Social Security Administration had to tap into its backup trust funds to make up the difference. So as the Baby Boomers retire and pension benefit payouts increase -- even as revenues remain the same -- in 20 years there will be a problem. Again, on the assumption that the SSA revenue stream is unchanged.
Clearly, one answer is to increase the revenue stream. An alternate is to reduce the number of retiree and disability beneficiaries. Or cancel the program entirely. Ain't gonna happen.
The SSA has two main sources of revenue, payroll taxes and income taxes on benefits received. "Roughly 96 percent of those revenues derive from a payroll tax -- generally 12.4 percent of earnings -- that is split evenly between workers and their employers," the CBO said. The remaining 4 percent comes from income taxes that high-income beneficiaries pay on their benefits, the CBO reported.
Therefore, to close the gap between income and expenses, the Social Security Administration has the same options that any other family or firm has -- increase revenue or reduce expenses, or both.
Cutting pension benefits for those who rely on them for survival is politically disastrous. Eliminating the program is impossible. That leaves the option of increasing revenue.
Employees now contribute 6.2 percent of their taxable earnings to the fund, with the company paying in an equal amount. (Emphasis on taxable earnings, not on gross.) Another way is to boost the income tax rate on benefits. This would not affect those who have only Social Security pensions as income.
Yet another method would be to increase either the payroll tax rate of 12.4 percent, or to raise the earnings maximum. That ceiling is now $113,700, which means that only those earning more than that would see an increase in their contribution to the pension fund.
It's been three years since the gap appeared. In calendar year 2010, the CBO said, annual outlays for the program exceeded revenues for the first time. In 2012, the gap was 7 percent, and the CBO estimates that this shortfall will average about 12 percent of revenues over the next decade. Agency revenue estimates, by the way, did not include interest income, but only contributions.
If things don't change, the CBO said, the trust fund balance could fall to zero in 20 years, and revenues would not be enough to meet obligations.
So Congress has 20 years to fix something that isn't yet a problem, but even if the reserve trust funds are exhausted, the worst that could happen is that "the Social Security Administration would no longer have the legal authority to pay full benefits when they were due," the CBO report said.
Will Congress do something to help the pension and disability agency keep its books balanced, or will it do nothing, and let the millions of retirees and the disabled do without?
They've got 20 years to resolve the issue and prevent a real problem. Will they? Stay tuned.
Tuesday, December 17, 2013
GOP Smacked
In the spirit of the season (not), House Republicans blocked an effort to extend unemployment benefits in the latest budget maneuvers.
But at what cost? The Congressional Budget Office estimated that the cost of extending the Emergency Unemployment Extension Act for one year would be $27.5 billion. Failure to extend benefits to the unemployed will mean 1.3 million workers will lose this source of income in about 10 days, when the legislation expires.
In its report to Rep. Sander Levin of the Ways and Means Committee, the CBO said the added cost would be $19.7 billion in fiscal 2014, and another $6.5 billion in the 2015 fiscal year. Meanwhile, as those out-of-work families use their benefits for food, clothing and shelter expenses, revenues to the government would increase slightly, by $500 million over 10 years.
Granted, $27.5 billion is a hefty chunk of change, but in context of the total federal budget over two years, it's chump change. Spending on defense, meanwhile, would jump by $63 billion according to the deal now moving toward approval in the Senate, to more than $1 trillion. The budget as a whole is some $3.8 trillion, with defense spending accounting for nearly one-fifth of the total. The additional $19.7 billion in aid to the jobless for next year's budget comes to one-half of one percent of the total budget of $3.8 trillion.
So "Cut spending" is still the Republican song, except for defense contractors, who contribute to campaign funding. People without jobs have no income, so obviously can't kick in money to political campaigns.
But they can vote.
But at what cost? The Congressional Budget Office estimated that the cost of extending the Emergency Unemployment Extension Act for one year would be $27.5 billion. Failure to extend benefits to the unemployed will mean 1.3 million workers will lose this source of income in about 10 days, when the legislation expires.
In its report to Rep. Sander Levin of the Ways and Means Committee, the CBO said the added cost would be $19.7 billion in fiscal 2014, and another $6.5 billion in the 2015 fiscal year. Meanwhile, as those out-of-work families use their benefits for food, clothing and shelter expenses, revenues to the government would increase slightly, by $500 million over 10 years.
Granted, $27.5 billion is a hefty chunk of change, but in context of the total federal budget over two years, it's chump change. Spending on defense, meanwhile, would jump by $63 billion according to the deal now moving toward approval in the Senate, to more than $1 trillion. The budget as a whole is some $3.8 trillion, with defense spending accounting for nearly one-fifth of the total. The additional $19.7 billion in aid to the jobless for next year's budget comes to one-half of one percent of the total budget of $3.8 trillion.
So "Cut spending" is still the Republican song, except for defense contractors, who contribute to campaign funding. People without jobs have no income, so obviously can't kick in money to political campaigns.
But they can vote.
Monday, December 16, 2013
History Has No Gender
History is a set of stories people tell each other about their past, usually dealing with their own culture and society, and its victories over others. It describes society's past, as reflected in the interplay of politics and economics, as well as the interaction of various groups.
In that context, history is written by the winners. The losing society's story is included, but only to help justify the actions of the winners. And if the defeated group's story is deemed unimportant or irrelevant, that story is omitted from the standard history compiled by the winners.
It becomes the responsibility, then, of the defeated group to keep their stories alive, by maintaining the culture and values of the group, retelling them to each new generation. And it falls to the winners to acknowledge that the minority group's culture retains its own validity, regardless of its social status. This way, the culture, its language and values remain vibrant even as the minority group survives within the dominant society.
This principle applies to all, regardless of race, religion, culture, language or gender. Unfortunately, some activists forget this principle, and attach new meanings to old words in their zeal to change attitudes. One example was the effort by a few extremists in the feminist movement to change "history" to "herstory." The word "history" has no gender; it comes from the French "histoire," which means simply "story."
I know, the French word "histoire" has a masculine gender, but that's grammatical gender, and has nothing to do with sex.
In that context, history is written by the winners. The losing society's story is included, but only to help justify the actions of the winners. And if the defeated group's story is deemed unimportant or irrelevant, that story is omitted from the standard history compiled by the winners.
It becomes the responsibility, then, of the defeated group to keep their stories alive, by maintaining the culture and values of the group, retelling them to each new generation. And it falls to the winners to acknowledge that the minority group's culture retains its own validity, regardless of its social status. This way, the culture, its language and values remain vibrant even as the minority group survives within the dominant society.
This principle applies to all, regardless of race, religion, culture, language or gender. Unfortunately, some activists forget this principle, and attach new meanings to old words in their zeal to change attitudes. One example was the effort by a few extremists in the feminist movement to change "history" to "herstory." The word "history" has no gender; it comes from the French "histoire," which means simply "story."
I know, the French word "histoire" has a masculine gender, but that's grammatical gender, and has nothing to do with sex.
Friday, December 13, 2013
Whorf Speed, Mr. Chomsky!
Correlation is not causation
An academic study claims that 10 percent of people in English-speaking countries are functionally illiterate, which is to say that they can read (some degree of literacy), but not enough to adequately perform at a job. Moreover, the researchers maintain that part of the problem is because of the spelling system used in English. In addition, that same spelling system contributes to dyslexia, or difficulty in reading.
Unlike some other languages, there is often a disparity between a letter and the sound it represents. That is, a given letter in the English spelling system can represent three or more sounds. And this disparity, researchers claim, causes dyslexia.
Some hundred years ago, Benjamin Lee Whorf postulated that the language you speak dictates how you perceive the world. Taken to an extreme, the Whorfian Hypothesis says that those in a culture who do not measure activities in terms of hours and minutes, or have no words equivalent to "hour" or "minute," therefore have no concept of time.
Whorf picked up this idea during his travels among the Native Tribes of the American Southwest as an insurance salesman or adjuster with a side interest in linguistics.
The flaw in the Whorfian Hypothesis, however, is that when speakers of a language with few or no time words revert to English, they can and do measure activities in terms of hours and minutes.
So it's not that they have no concept of time, but that European notions of the importance of time had less value in their native culture.
They also had no writing system, but that is no obstacle to expressing valuable thoughts. Unfortunately, in Western culture the ability to read is considered so important that being "illiterate" is too often equated with a lack of intelligence.
In any case, literacy is crucial to success in society today. And anything that interferes with learning to read is an issue that needs to be studied and resolved.
But how to correlate literacy with dyslexia, if in fact there is a correlation? And the Psychology Department at the University of Dundee in Scotland is leading an effort to extend literacy research based on the English language and to establish a relationship, if any, to other European writing systems.
It seems the academics have compared the difficulty in learning to read with the relationship of sound to letter. In some written languages, such as Finnish or Spanish, a given letter almost always has the same sound. In English, however, a given letter may represent several sounds, for example, the "a" in "hat" is different from the "a" in "hate," and the word "can" as a verb is pronounced differently from the same word representing a container. Dialect, too, affects pronunciation.
Another issue is the number of letters available. The English language uses 26 letters, but the number of phonemes, or meaningful sounds, is larger -- and this can be 35 or 40, varying with dialect and individuals.
Italian, on the other hand, uses 22 letters, and has a closer relationship of sound to letter. And in Finnish, there is a 1:1 relationship. One letter represents one sound only.
English is an amalgam of several languages, and its spelling system more accurately represents Shakespearean era pronunciation than today's. However, we're stuck with it.
All of this has little to do with dyslexia, which is a neurological disorder in the brain. If in fact dyslexia is more widespread in English speaking countries than in others, I wonder if it is coincidence or some other cause. At the moment, it's a hypothesis, with a causal link yet to be proven.
Moreover, English is easier to learn (as a second language) than others, because there are fewer internal word changes in reference to gender or number, and the case system --- common in German and Russian, where a word changes form according to its function in a sentence -- no longer exists in English, except for one small set of words (pronouns).
Dyslexia, of course, refers to reading, not speaking. And some who have it compensate and become successful. Tom Kean, former governor of New Jersey, is dyslexic, as is Richard Branson, founder of Virgin Airlines. Also, those who have it compensate by becoming better listeners, with much better memories, since they cannot rely on written notes.
People with dyslexia have difficulty differentiating letters, such as misinterpreting the letters b and d, or p and q. Again, this is a neurological issue, not orthographic.
Language and culture are certainly inter-related, but now comes a theory that the spelling system a language uses may contribute to dyslexia, or difficulty in reading. Reading, of course, is a skill to be learned, and the spelling system is certainly confusing,
A study by the American Speech-Language-Hearing Association (ASHA) notes that "the United States has the highest number of functionally illiterate persons in the world." Worldwide, ASHA said, "there are 875 million people without access to literacy." But unlike spoken language, the ability to read requires instruction, and this means being able to "associate script symbols with speech sounds," the group said.
This association, of symbol, sound and meaning, differs widely. Most European writing systems use a type of alphabet, with each letter representing one or more sounds, including consonants and vowels. Others, however, such as Chinese, use symbols to represent a concept, which can be "read" by speakers of various languages and dialects that are mutually incomprehensible. An example for users of the European group of languages is a number, such as "46." Users of English, French, Spanish or German, for instance, would verbalize that "46" in four different ways.
So the question remains: Does the spelling system of a language contribute to dyslexia, and if so, how?
There may be many who come to America with limited ability to read in English, but that does not mean they are illiterate. They may be quite fluent in their native language using a phonic alphabet similar to that used in English, or in a phonic alphabet such as Russian or Greek that is not similar to English, or they may be fluent in a syllabic alphabet, or in a symbol writing system that is not an alphabet at all.
Bottom line: Dyslexia is a neurological learning disorder that may interfere with literacy, but it's not likely that a writing system causes dyslexia.
An academic study claims that 10 percent of people in English-speaking countries are functionally illiterate, which is to say that they can read (some degree of literacy), but not enough to adequately perform at a job. Moreover, the researchers maintain that part of the problem is because of the spelling system used in English. In addition, that same spelling system contributes to dyslexia, or difficulty in reading.
Unlike some other languages, there is often a disparity between a letter and the sound it represents. That is, a given letter in the English spelling system can represent three or more sounds. And this disparity, researchers claim, causes dyslexia.
Some hundred years ago, Benjamin Lee Whorf postulated that the language you speak dictates how you perceive the world. Taken to an extreme, the Whorfian Hypothesis says that those in a culture who do not measure activities in terms of hours and minutes, or have no words equivalent to "hour" or "minute," therefore have no concept of time.
Whorf picked up this idea during his travels among the Native Tribes of the American Southwest as an insurance salesman or adjuster with a side interest in linguistics.
The flaw in the Whorfian Hypothesis, however, is that when speakers of a language with few or no time words revert to English, they can and do measure activities in terms of hours and minutes.
So it's not that they have no concept of time, but that European notions of the importance of time had less value in their native culture.
They also had no writing system, but that is no obstacle to expressing valuable thoughts. Unfortunately, in Western culture the ability to read is considered so important that being "illiterate" is too often equated with a lack of intelligence.
In any case, literacy is crucial to success in society today. And anything that interferes with learning to read is an issue that needs to be studied and resolved.
But how to correlate literacy with dyslexia, if in fact there is a correlation? And the Psychology Department at the University of Dundee in Scotland is leading an effort to extend literacy research based on the English language and to establish a relationship, if any, to other European writing systems.
It seems the academics have compared the difficulty in learning to read with the relationship of sound to letter. In some written languages, such as Finnish or Spanish, a given letter almost always has the same sound. In English, however, a given letter may represent several sounds, for example, the "a" in "hat" is different from the "a" in "hate," and the word "can" as a verb is pronounced differently from the same word representing a container. Dialect, too, affects pronunciation.
Another issue is the number of letters available. The English language uses 26 letters, but the number of phonemes, or meaningful sounds, is larger -- and this can be 35 or 40, varying with dialect and individuals.
Italian, on the other hand, uses 22 letters, and has a closer relationship of sound to letter. And in Finnish, there is a 1:1 relationship. One letter represents one sound only.
English is an amalgam of several languages, and its spelling system more accurately represents Shakespearean era pronunciation than today's. However, we're stuck with it.
All of this has little to do with dyslexia, which is a neurological disorder in the brain. If in fact dyslexia is more widespread in English speaking countries than in others, I wonder if it is coincidence or some other cause. At the moment, it's a hypothesis, with a causal link yet to be proven.
Moreover, English is easier to learn (as a second language) than others, because there are fewer internal word changes in reference to gender or number, and the case system --- common in German and Russian, where a word changes form according to its function in a sentence -- no longer exists in English, except for one small set of words (pronouns).
Dyslexia, of course, refers to reading, not speaking. And some who have it compensate and become successful. Tom Kean, former governor of New Jersey, is dyslexic, as is Richard Branson, founder of Virgin Airlines. Also, those who have it compensate by becoming better listeners, with much better memories, since they cannot rely on written notes.
People with dyslexia have difficulty differentiating letters, such as misinterpreting the letters b and d, or p and q. Again, this is a neurological issue, not orthographic.
Language and culture are certainly inter-related, but now comes a theory that the spelling system a language uses may contribute to dyslexia, or difficulty in reading. Reading, of course, is a skill to be learned, and the spelling system is certainly confusing,
A study by the American Speech-Language-Hearing Association (ASHA) notes that "the United States has the highest number of functionally illiterate persons in the world." Worldwide, ASHA said, "there are 875 million people without access to literacy." But unlike spoken language, the ability to read requires instruction, and this means being able to "associate script symbols with speech sounds," the group said.
This association, of symbol, sound and meaning, differs widely. Most European writing systems use a type of alphabet, with each letter representing one or more sounds, including consonants and vowels. Others, however, such as Chinese, use symbols to represent a concept, which can be "read" by speakers of various languages and dialects that are mutually incomprehensible. An example for users of the European group of languages is a number, such as "46." Users of English, French, Spanish or German, for instance, would verbalize that "46" in four different ways.
So the question remains: Does the spelling system of a language contribute to dyslexia, and if so, how?
There may be many who come to America with limited ability to read in English, but that does not mean they are illiterate. They may be quite fluent in their native language using a phonic alphabet similar to that used in English, or in a phonic alphabet such as Russian or Greek that is not similar to English, or they may be fluent in a syllabic alphabet, or in a symbol writing system that is not an alphabet at all.
Bottom line: Dyslexia is a neurological learning disorder that may interfere with literacy, but it's not likely that a writing system causes dyslexia.
Monday, December 9, 2013
Believability Quotient
It must be true; I saw it on the Internet.
"The entire contents of this section supplied by the Advertising Department." -- Newspaper disclaimer.
"Native advertising" has nothing to do with the Cherokee.
Credibility is the only weapon journalism has.
Print information is more believable than back-fence gossip. Television is more believable than print, partly because it adds video to the mix. Every new information medium starts with a higher believability quotient than its predecessors because its very newness adds to its acceptance.
But is it reliable? That is an issue that journalists have been struggling with for many years. All things considered, that's all they have -- the willingness of the readers and views to trust the information as reliable, believable, and accurate. And with newspapers and TV news broadcasts, neutrality can be even more important.
All this, however, is being eroded by the trend to coordinate advertising with editorial efforts in providing information. Independent editors are being replaced by "content managers," who develop "sponsored content" -- advertising masquerading as news.
In truth, such practices have been going on for years, notably in Real Estate and Automobile section of daily newspapers. Rarely is any negative information found in such sections, which often are nothing more than press releases supplied by the advertisers to fill the space between ads. The more conscientious publishers specify at the top of each page that the entire contents of the section is supplied by the advertising department.
Television, too, identifies a program as paid for by the advertiser.
But when the lines blur, when readers and viewers are lulled into thinking that the information presented is a news item and not a commercial message, then there is a problem.
Journalists have fought for many decades to defend their reliability, their ability to pursue truth and pass it on to the public, knowing that their reputation endorses their credibility.
Web sites, however, erode that credibility when those with access to a computer can publish and disseminate their own propaganda without it being filtered by neutral reporters and editors.
Is this mass freedom to publish a good thing? Perhaps. It's true that many reporters and editors, as well as their publications and TV shows, are not neutral, much less objective. It falls to the public, therefore, to know the difference.
The bigger problem remains, however, that some media outlets blur the lines, coordinate the news and advertising with commercial material masquerading as editorial news information.
Public relations professionals know the difference between news and advertising, and operate separately from advertising agencies. Others, however, do not, and combine their marketing efforts with a client's PR needs, presenting a message for their clients as "hard news" when it is really little more than a marketing ploy. And in extreme case, the message goes beyond misleading and becomes flat out wrong.
That's where government regulation comes in, with Truth in Advertising laws.
Meanwhile, as new technology -- the Internet and promotional Web sites -- becomes more widespread and traditional media coordinate their news and advertising divisions to maintain readership and ad income, the government as protector of Constitutional First Amendment rights, is stepping in to monitor and regulate the activities of those who would abuse such rights.
"These days, it’s not always clear where news or entertainment ends and advertisements begin," said Bridget Small, consumer education specialist at the FTC. That's why the FTC sponsored a day-long workshop Dec. 4 dealing with the issue. The goal: To develop ways to help the public differentiate the two, whether the infomercials, sponsored content, infotainment, or any other blurred message appears on any of the new digital media devices.
Fool me once, shame on you. Fool me twice, shame on me.
"The entire contents of this section supplied by the Advertising Department." -- Newspaper disclaimer.
"Native advertising" has nothing to do with the Cherokee.
Credibility is the only weapon journalism has.
Print information is more believable than back-fence gossip. Television is more believable than print, partly because it adds video to the mix. Every new information medium starts with a higher believability quotient than its predecessors because its very newness adds to its acceptance.
But is it reliable? That is an issue that journalists have been struggling with for many years. All things considered, that's all they have -- the willingness of the readers and views to trust the information as reliable, believable, and accurate. And with newspapers and TV news broadcasts, neutrality can be even more important.
All this, however, is being eroded by the trend to coordinate advertising with editorial efforts in providing information. Independent editors are being replaced by "content managers," who develop "sponsored content" -- advertising masquerading as news.
In truth, such practices have been going on for years, notably in Real Estate and Automobile section of daily newspapers. Rarely is any negative information found in such sections, which often are nothing more than press releases supplied by the advertisers to fill the space between ads. The more conscientious publishers specify at the top of each page that the entire contents of the section is supplied by the advertising department.
Television, too, identifies a program as paid for by the advertiser.
But when the lines blur, when readers and viewers are lulled into thinking that the information presented is a news item and not a commercial message, then there is a problem.
Journalists have fought for many decades to defend their reliability, their ability to pursue truth and pass it on to the public, knowing that their reputation endorses their credibility.
Web sites, however, erode that credibility when those with access to a computer can publish and disseminate their own propaganda without it being filtered by neutral reporters and editors.
Is this mass freedom to publish a good thing? Perhaps. It's true that many reporters and editors, as well as their publications and TV shows, are not neutral, much less objective. It falls to the public, therefore, to know the difference.
The bigger problem remains, however, that some media outlets blur the lines, coordinate the news and advertising with commercial material masquerading as editorial news information.
Public relations professionals know the difference between news and advertising, and operate separately from advertising agencies. Others, however, do not, and combine their marketing efforts with a client's PR needs, presenting a message for their clients as "hard news" when it is really little more than a marketing ploy. And in extreme case, the message goes beyond misleading and becomes flat out wrong.
That's where government regulation comes in, with Truth in Advertising laws.
Meanwhile, as new technology -- the Internet and promotional Web sites -- becomes more widespread and traditional media coordinate their news and advertising divisions to maintain readership and ad income, the government as protector of Constitutional First Amendment rights, is stepping in to monitor and regulate the activities of those who would abuse such rights.
"These days, it’s not always clear where news or entertainment ends and advertisements begin," said Bridget Small, consumer education specialist at the FTC. That's why the FTC sponsored a day-long workshop Dec. 4 dealing with the issue. The goal: To develop ways to help the public differentiate the two, whether the infomercials, sponsored content, infotainment, or any other blurred message appears on any of the new digital media devices.
Fool me once, shame on you. Fool me twice, shame on me.
Sunday, December 8, 2013
Minimum Wages
A rising tide lifts all boats.
Higher wages mean prosperity all around.
Opponents of a higher minimum wage warn of job losses as customers go elsewhere and companies relocate. In theory, this is partly true, but since most people at minimum pay levels work at places such as fast-food chains, it's not likely that customers will travel to an adjacent state just for a burger and fries. And companies will not relocate to areas where there are no customers. In addition, many other companies would not be affected, because they already pay their workers above the minimum. The federal minimum is currently $7.25 an hour, and some states mandate an even higher floor.
Meanwhile, there are firms that pay their workers so little -- at or slightly above the legal minimum -- that cashiers are unable to buy the stuff that they ring up for customers at the very company they work for. In addition, when these same workers apply for government assistance programs, such as food stamps, it means that government is subsidizing the employers.
Henry Ford had the right idea when he paid his assembly line workers well above the going rate. When criticized by other automakers for such a policy, Ford replied that as the workers got more money, they were able to buy his cars.
Higher wages mean prosperity all around.
Opponents of a higher minimum wage warn of job losses as customers go elsewhere and companies relocate. In theory, this is partly true, but since most people at minimum pay levels work at places such as fast-food chains, it's not likely that customers will travel to an adjacent state just for a burger and fries. And companies will not relocate to areas where there are no customers. In addition, many other companies would not be affected, because they already pay their workers above the minimum. The federal minimum is currently $7.25 an hour, and some states mandate an even higher floor.
Meanwhile, there are firms that pay their workers so little -- at or slightly above the legal minimum -- that cashiers are unable to buy the stuff that they ring up for customers at the very company they work for. In addition, when these same workers apply for government assistance programs, such as food stamps, it means that government is subsidizing the employers.
Henry Ford had the right idea when he paid his assembly line workers well above the going rate. When criticized by other automakers for such a policy, Ford replied that as the workers got more money, they were able to buy his cars.
Saturday, December 7, 2013
Boomlet, Part 2
Recovery may be here, but robust it ain't.
It may be.
Then again, it may not.
Skeptics are looking at last week's economy numbers with caution, even as a first glance shows promise. A second look, however, yields evidence that we're not yet on the high road to economic recovery.
The unemployment rate may be down, but the total number of jobs is relatively steady. GDP is up, but that could be due to an increase in inventories ahead of the holiday shopping rush.
True, the budget deficit is declining. For the first two months of fiscal year 2014, the U.S. federal government ran a deficit of $231 billion, said the Congressional Budget Office, $61 billion less than the shortfall a year ago.
And the Labor Department on Friday said the jobless rate in America was the lowest in five years, at 7 percent, down from its peak of 10 percent in October 2009, but not much different from the 7.3 percent in December 2008, just before President Obama took office.
Meanwhile, output of goods and services (GDP) during the July-September period rose at an annual rate of 3.6 percent, compared to 2.5 percent in the second quarter. In its first estimate, the Census Bureau said output rose at an annual rate of 2.8 percent.
The October 2013 international trade deficit decreased 5.4 percent from September, to $40.6 billion. Exports increased 1.8 percent, to $192.7 billion, and imports rose 0.4 percent, to $233.3 billion.
What do those numbers say? Not sure. But it could be that shallow changes mean less spending, and less spending means a slowdown.
And while sales of new single-family houses in October rose to an annualized rate of 444,000, according a government estimate, compared to 354,000 in September, the Census Bureau acknowledged that, given its degree of confidence in the survey, the agency "does not have sufficient statistical evidence to conclude that the actual change is different from zero."
In other words, sales were flat.
Separately, the Federal Reserve Board, in its Beige Book summary of economic conditions, described a "modest to moderate" expansion pace from early October through mid-November.
As for retail sales, the Fed survey used such terms as "moderate ... hopeful but uncertain ... cautiously optimistic" among executives scattered around the country.
And for the weekend after Thanksgiving, including Black Friday, when retailers expect to see their account books post black ink for the year rather than the red ink that indicates losses, the National Retail Federation said shoppers spent $1.7 billion less than they did a year ago.
Can you say gloomy?
As noted here a month ago, beware the boomlet. Sudden sharp increases often cannot be maintained, and can lead to another drop as an economy moves to recovery.
It may be.
Then again, it may not.
Skeptics are looking at last week's economy numbers with caution, even as a first glance shows promise. A second look, however, yields evidence that we're not yet on the high road to economic recovery.
The unemployment rate may be down, but the total number of jobs is relatively steady. GDP is up, but that could be due to an increase in inventories ahead of the holiday shopping rush.
True, the budget deficit is declining. For the first two months of fiscal year 2014, the U.S. federal government ran a deficit of $231 billion, said the Congressional Budget Office, $61 billion less than the shortfall a year ago.
And the Labor Department on Friday said the jobless rate in America was the lowest in five years, at 7 percent, down from its peak of 10 percent in October 2009, but not much different from the 7.3 percent in December 2008, just before President Obama took office.
Meanwhile, output of goods and services (GDP) during the July-September period rose at an annual rate of 3.6 percent, compared to 2.5 percent in the second quarter. In its first estimate, the Census Bureau said output rose at an annual rate of 2.8 percent.
The October 2013 international trade deficit decreased 5.4 percent from September, to $40.6 billion. Exports increased 1.8 percent, to $192.7 billion, and imports rose 0.4 percent, to $233.3 billion.
What do those numbers say? Not sure. But it could be that shallow changes mean less spending, and less spending means a slowdown.
And while sales of new single-family houses in October rose to an annualized rate of 444,000, according a government estimate, compared to 354,000 in September, the Census Bureau acknowledged that, given its degree of confidence in the survey, the agency "does not have sufficient statistical evidence to conclude that the actual change is different from zero."
In other words, sales were flat.
Separately, the Federal Reserve Board, in its Beige Book summary of economic conditions, described a "modest to moderate" expansion pace from early October through mid-November.
As for retail sales, the Fed survey used such terms as "moderate ... hopeful but uncertain ... cautiously optimistic" among executives scattered around the country.
And for the weekend after Thanksgiving, including Black Friday, when retailers expect to see their account books post black ink for the year rather than the red ink that indicates losses, the National Retail Federation said shoppers spent $1.7 billion less than they did a year ago.
Can you say gloomy?
As noted here a month ago, beware the boomlet. Sudden sharp increases often cannot be maintained, and can lead to another drop as an economy moves to recovery.
Sunday, December 1, 2013
Losing Interest
Give them money, and they will spend.
If you make it, they will buy.
If lower prices mean more sales,
then lower interest rates mean more borrowing.
Maybe. But fear prevents action. If consumers, investors and producers are pessimistic, then they are less likely to spend, and more likely to stash their cash for a rainy day.
More money (supply) means lower interest rates (cost of borrowing). So if supply increases and price goes down, demand should rise.
Since demand for money means more firms invest in production, that should result in a more active economy and recovery from an economic downturn. And as more product becomes available at lower prices, this results in increased sales.
Or so goes the theory, leaning heavily on supply side economics. In the case of money supply, that means quantitative easing, which is what the Federal Reserve now calls increasing the money supply in an effort to keep interest rates down and thus encourage more investment and in turn economic recovery.
It's one thing to make money more available, but it's quite another to actually spend it. And that's where consumers come in, since 80 percent of GDP is related to consumption.
So to reboot a faltering economy, consumers must be enticed to increase spending. If they don't, government can step up, and through fiscal policy (government spending) it can put people to work so they have income to spend and the economy recovers. Then, when it does, government and the Federal Reserve, in its role as the nation's central bank that controls the supply of money, can step back as the economy rolls along on its own.
However, there are those who insist that government has no role in a nation's economic health; that government should not intervene in any way, ever. And if government is involved, as is true in America today, then government should pull out entirely, reducing its involvement, cutting its deficit and paying off debt.
Clearly, however, this only worsens an already dire problem.
Money fuels the economic engine. By not sustaining the fuel flow, the engine stalls. And if people -- consumers, investors and producers -- fear a stalled engine, they are less likely to buy tickets or get on the train.
If you make it, they will buy.
If lower prices mean more sales,
then lower interest rates mean more borrowing.
Maybe. But fear prevents action. If consumers, investors and producers are pessimistic, then they are less likely to spend, and more likely to stash their cash for a rainy day.
More money (supply) means lower interest rates (cost of borrowing). So if supply increases and price goes down, demand should rise.
Since demand for money means more firms invest in production, that should result in a more active economy and recovery from an economic downturn. And as more product becomes available at lower prices, this results in increased sales.
Or so goes the theory, leaning heavily on supply side economics. In the case of money supply, that means quantitative easing, which is what the Federal Reserve now calls increasing the money supply in an effort to keep interest rates down and thus encourage more investment and in turn economic recovery.
It's one thing to make money more available, but it's quite another to actually spend it. And that's where consumers come in, since 80 percent of GDP is related to consumption.
So to reboot a faltering economy, consumers must be enticed to increase spending. If they don't, government can step up, and through fiscal policy (government spending) it can put people to work so they have income to spend and the economy recovers. Then, when it does, government and the Federal Reserve, in its role as the nation's central bank that controls the supply of money, can step back as the economy rolls along on its own.
However, there are those who insist that government has no role in a nation's economic health; that government should not intervene in any way, ever. And if government is involved, as is true in America today, then government should pull out entirely, reducing its involvement, cutting its deficit and paying off debt.
Clearly, however, this only worsens an already dire problem.
Money fuels the economic engine. By not sustaining the fuel flow, the engine stalls. And if people -- consumers, investors and producers -- fear a stalled engine, they are less likely to buy tickets or get on the train.
Time
"In Search of Lost Time" -- Book title
"Til the end of time" -- Song title
The future differs from what we expect.
Looking forward is longer than looking backward.
When time arrives, will I be here?
Many folks think of time as a commodity, to be saved, squandered or invested, or as a measure of payment -- that is, their time is worth X amount and they expect to be paid that much for their time.
But it's not always time that is saved, squandered or invested; rather, it is skill. Skills can be acquired. Talents are gifts that must be developed and polished, and are useful only when given away. And those with skill and talent should be compensated, if not in cash, then in psychic compensation. However, psychic compensation is not always exchangeable for groceries.
Time is not a commodity, to be bought and sold. Workers do not sell their time; rather, they rent their skills. Professionals charge by the hour, but they are renting out their expertise.
Poets write of the beginning of time, and of the end of time, as if time were linear. But what if time is not linear, but circular?
Einstein showed that light does not travel in a straight line, but curves. And given enough time, the light will return to its source. In this context, time travel is theoretically possible.
Freedom, like time, is not an achievement; it is a process. We never really get there. We're always on the way.
There was a young woman named Bright
Whose speed was much faster than light.
She went out one day,
In a relative way,
And returned on the previous night.
"Til the end of time" -- Song title
The future differs from what we expect.
Looking forward is longer than looking backward.
When time arrives, will I be here?
Many folks think of time as a commodity, to be saved, squandered or invested, or as a measure of payment -- that is, their time is worth X amount and they expect to be paid that much for their time.
But it's not always time that is saved, squandered or invested; rather, it is skill. Skills can be acquired. Talents are gifts that must be developed and polished, and are useful only when given away. And those with skill and talent should be compensated, if not in cash, then in psychic compensation. However, psychic compensation is not always exchangeable for groceries.
Time is not a commodity, to be bought and sold. Workers do not sell their time; rather, they rent their skills. Professionals charge by the hour, but they are renting out their expertise.
Poets write of the beginning of time, and of the end of time, as if time were linear. But what if time is not linear, but circular?
Einstein showed that light does not travel in a straight line, but curves. And given enough time, the light will return to its source. In this context, time travel is theoretically possible.
Freedom, like time, is not an achievement; it is a process. We never really get there. We're always on the way.
There was a young woman named Bright
Whose speed was much faster than light.
She went out one day,
In a relative way,
And returned on the previous night.
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