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Forbes and the "Self-Made" Label

by cactus

Forbes and the “Self-Made” Label

I’m kinda busy these days, but this topic is small pet peeve of mine: what the heck is up with Forbes and the “self-made” label? On occasion, I’ve gone through the Forbes 400 list of richest Americans and marveled at who Forbes manages to decide qualifies as self-made.

Case in point. Take Aubrey McClendon, head of Chesapeake Energy, the largest independent gas producer in the US. His great-uncle was a governor and a three-time senator, and also co-founded a large oil company. His father worked for the company for 35 years, and one imagines he wasn’t a janitor or nightwatchman.

McClenond himself will tell you:

I had some early financial advantages in life that probably let me take a chance or two that I wouldn’t have been able to

But to Forbes, McClendon is a self-made man.

A few spots up from McClendon is another self-made dude (according to Forbes), Paul Tudor Jones II. The “II” is not an automatic marker of wealth, but it should have been a tip-off to Forbes that perhaps it was worth visiting “teh google”, which would have been kind enough to guide them toward this interview:

I already had an appreciation for trading because my uncle, Billy Dunavant, was a very successful cotton trader. In 1976, after I finished college, I went to my uncle and asked him if he could help me get started as a trader. he sent me to Eli Tullis, a famous cotton trader, who lived in New Orleans. Eli is the best trader I know, he told me. I went down to see Eli and he offered me a job on the floor of the New York Cotton Exchange.

And the name “Dunavant” should have rung a bell to Forbes – after all, Forbes ranks Dunavant Enerprises as one of the 400 largest private firms in the US. Another thirty seconds of “research” would have told the folks at Forbes this:

His paternal grandfather, Colonel William P. Dunavant, was in the railroad business and created one of the main cotton transporting railroads of the time, a railroad that grew into the southern leg of the famous Frisco Railroad. Billy’s father, William Dunavant, began working for T. J. White and Company at the age of twenty-one. After White retired, the company was passed to William Dunavant; however, because of the untimely death of his father in 1961, Billy Dunavant took over the company at the age of twenty-nine.

I’ll concede that a stream of events where all this is true and Tudor Jones was none-the-less a penniless guy who pulled himself up by his bootstraps in a way that the rest of us were just too lazy to accomplish. It does seem unlikely, though. A more reasonable description of events is that this is another example (I’ve had a post or two on this in the past) that Forbes simply has a tendency label some very unlikely individuals as being self-made. And from what I can tell, this is a Forbes thing; most of the folks Forbes gives this label to that the rest of us might not don’t go around insisting they’re self-made. (I believe I recall one counter-example.) So what’s up with Forbes and the use of this label?
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by cactus

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Same labels, same old stuff

One Salient Oversight sends some thoughts from down under on recycling labels:

Think of the common labels thrown out against political opponents these
days. What sort of political thinking would be labelled in the following
way?

* The propagation of ideas like Darwinism, Marxism, the teachings of
Nietzche, Liberalism, Socialism, Communism and Anarchism.
* A focus on Utopianism that is actually unattainable because of the
underlying conspiracy within the group.
* A movement towards materialism.
* Supporting supranational entities notions such as World Government.
* A control of the media to promote these evil ideas, under the
guise of a “free press” (which is actually controlled by the conspiracy).
* Sexual licence.
* An opposition to Christianity and a promotion of secularism and
atheism – but with an actual evil religion under girding it.

All those descriptions can quite easily be seen as being directed by
conservatives against progressives. Consider the following:

* Conservatives often use progressive ideas as a pejorative, and
will quite easily label a progressive by a general term. Labelling them
as “communists”, for example, even though they don’t espouse Communism.
* An argument that progressive ideas are based upon a vision of a
“false utopia”.
* An argument that progressives cannot tolerate faith and are
inherently materialist.
* Complete opposition to any notion that supranational entities like
the United Nations and the European Union are useful. Such entities are
either threats to freedom or full of incompetents. Those who support
such entities are thus evil.
* That the “Mainstream Media” is inherently “liberal” and has an
agenda to promote a particular point of view under the guise of the
“free press”.
* That sexual licence promoted by progressives will end up leading
to the destruction of traditional marriage and enforced sexual
perversions (like paedophilia and bestiality).
* That a conspiracy of progressives is trying to destroy
Christianity and replace it with atheism, and that such a conspiracy
has, at its base, Satanic and pagan influences.

Sounds terrible doesn’t it? Or maybe it sounds true. Or maybe, just
maybe, someone came up with the same sort of thing during the late
nineteenth century (Protocols of the Elders of Zion) and directed it towards a societal group that they
thought was destroying the world?

In the case of the late nineteenth century, these beliefs were outright
lies that were fabricated with the intention of creating ill-will and
hatred towards their “enemy”. It therefore gives you an idea of how
these people – even those today – think.
——————–
This one by reader One Salient Oversight

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Mike sends a response to rdan on off-label drugs

It is evident that this will lead to less pressure on the Drug Companies
to get their drugs approved by the FDA. I would suggest that we consider
letting the market help. i.e.

1) If a drug is prescribed off-label, then the patient be permitted
to return it to the drug store for a full refund, no questions asked. —
Obviously many people might be helped, and others would not bother to try to
get a refund, but it would encourage the Drug Company to test the drug to be
able to sell it without the possibility of having ineffective drugs being
returned.

2) If a drug is being prescribed off-label, with the cooperation of
the Drug Company, then the patient can go to court and have a presumption
that the drug is the cause of any reasonable harm to the patient. Obviously
one would want a judge to eliminate unreasonable cases, but if it is
reasonable that the off-label use of the drug might have caused the damage,
then the encouraged off-label use would lead to an assumption of guilt until
proven by the preponderance of evidence otherwise.

Obviously the details of these can be adjusted to make them more
reasonable, but their purpose is to let the Drug Company have some reasons
for testing their drugs and for not encouraging their off-label use unless
they feel they are safe and effective.

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Off label drug pushers

FDA doesn’t just approve drugs, it approves drugs for specific uses. However, doctors can prescribe drugs for unapproved, or “off-label,” uses.

Under a law that expired in 2006, pharmaceutical reps were legally able to distribute journal articles touting the benefits of off-label uses. But, according to the Associated Press, FDA maintained some regulatory oversight: “Under the expired law, companies had to submit reprints of articles to the FDA before sending them to doctors. That way, the articles’ accuracy could be reviewed.”

If FDA chooses to finalize this policy, which it published today as “proposed guidance,” drug companies would be able to use journal articles to market off-label uses willy-nilly. The AP article continues, “Under the new proposal, drug companies don’t have to submit articles.”

Off-label use of drugs is big business. According to The Wall Street Journal, “[FDA] is stepping into a high-stakes business issue, because off-label uses of prescription drugs are a mainstay of the industry — an estimated 21% of drug use overall, according to a 2006 analysis published in the Archives of Internal Medicine.”

According to Merrill Goozner at the GoozNews blog, the pharmaceutical lobby pushed for FDA to go forward with the policy which will be a boon for the industry:

So what was in today’s proposed guidance? It pretty much gives industry everything it was looking for. It would allow drug salespersons to drop off article reprints as long as they came from a peer-reviewed journal that had a conflict-of-interest disclosure policy. Articles from industry-funded supplements would not be allowed…

Note what isn’t in the policy: It doesn’t say that the studies of unapproved uses must be from randomized controlled clinical trials, which is the gold standard of medical research.

Rep. Henry Waxman(D-CA) caught wind of this policy last November and asked FDA to refrain from going forward.

We probably will get exactly what we wish for, and then get blamed for the result. I call it sneered at..”Suckers!!”

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Thoughts on the War on Terror as a Label

I have a vague recollection of GW saying something to the effect that if we change our behavior or lifestyle, the terrorists have won. (Anyone have the quote?) As I was waiting, barefoot, for my carry-on, my flip-flops (the easiest thing to travel in these days), my laptop and my cell-phone to clear the X-ray machine, I looked over at the octogenarian lady standing next to me waiting for her belongings. Then I reflected on the fact that GW has not flown commercially since at least the year 2000.

Calling it a “War on Terror” means one day, when we win, we’ll be able to go back to the days when we weren’t fighting. Put another way… one day we’ll be able to go back to the days before our carry-on items were scrutinized this carefully. That day will never come, even if every last islamofascist is rounded up and GW has Osama’s testicles in a jar of formaldehyde sitting on the mantle. Calling it a “War on Terror” is just silly.

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NY Times Calculator Mislabels Salaries as Wealth

Dean Baker has a lot of praise for this calculator:

The NYT has a very nice feature in today’s paper, a calculator that allows you to see how wages have grown over the last four decades. You can make comparisons for a wide variety of demographic characteristics, occupations, and industries. You can even plus your own info in and see how you’re doing compared to your peers. This is nice, it’s giving people real information. That’s what newspapers are supposed to do.

I agree but I have one nitpick with the title which talks about “wealth” whereas the calculator graphs real salaries. Their instructions continue the error in terminology by calling this salary calculator a “wealth calculator”. Could someone let the New York Times know that stocks and flows are different concepts.

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Pork Barrel Spending Labeled “Fiscal Responsibility”

An AP story carried by CNN shows that the White House was paid many visits by “Republican activists Grover Norquist and Ralph Reed” over the past 6 years. White House spokeswoman Dana Perino had an odd way of excusing the visits by Mr. Norquist:

He is one of a number of individuals who worked to advance fiscal responsibility, which is one of the key aspects of the president’s agenda

I seriously doubt Mr. Norquist asked Karl Rove if the pork barrel spending for his clients could be reduced.

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Polarized Politics Led To Cantor’s Defeat– and Cochran’s Victory. Why the “Uncommitted Center” Is So Important (Cantor part 2)

Part 1; Cantor’s Defeat and What It Does Not Mean

When House Majority leader Eric Cantor lost his seat to ultra-conservative David Brat, the Washington Post’s Ruth Marcus summed up the majority view among political pundits: “The episode offers a disturbing commentary about the poisonous, polarized state of American politics.” 

I cannot agree. I don’t think “polarization” is toxic.  To the contrary, as the poet William Blake once wrote “Without Contraries, No Progress.”  Conflict can clarify issues, and help us move forward.  Indeed, the clash of opinions is a time-honored way of testing their validity.

Do you remember the 1990s, a decade when it became difficult to tell the difference between Democrats and Republicans? While Republicans headed toward the far right, Democrats moved right of center. During his second term, Bill Clinton started to sound all too much like Ronald Reagan, as he set out to “reform welfare,” forcing single mothers to go to work, even though we weren’t offering them affordable day care. After leaving the White House, Clinton reclaimed his position as a stand-up liberal, but at the time, the distinction between Democrats and Republicans was badly blurred.

Today, the difference between the two parties is clear.  I wouldn’t say that Democrats are ultra-liberal, but conservatives have moved so far to the right that Democrats had no choice but to take a stand on critical issues including: global warming, gun control, the need to raise the minimum wage, and universal access to health care.

By contrast, in the 1990s, Congressional Democrats were “lukewarm” on health care reform. As Paul Starr reports in his newest book, Remedy and Reaction, Senate Finance Committee chairman, Daniel Patrick Moynihan, Democrat of New York, actually stood up to say, “We don’t have a health care crisis.”

But by  2010,  the crisis was obvious, and Democrats came together. Pelosi and Harry Reid marshaled the votes, and Congress passed legislation which, while far from perfect, is solidly progressive: Low-income and middle-income Americans receive the subsidies they need; insurers can no longer discriminate against people suffering from pre-existing conditions, and preventive care–including contraception–is free.There is much more work to be done, but at last, we have begun.

Since then, Congressional Democrats have not had the votes to pass much-needed legislation in other areas.

But at least President Obama is no longer the compulsive compromiser that he appeared to be during his first term in office. I see this as progress. As I have argued in the past, on some issues compromise is not an option.  Too much is at stake.

On the ground,voters are as divided as their elected representatives.  Politically active Democrats have begun to move  left of center while Republican voters have become more conservative. The Pew Research report that I discussed in the first part of this post reveals that a decade ago, only 10% of politically engaged Republicans took a conservative stance on almost all issues. Today, 33% express consistently conservative views. At the other end of the political spectrum, almost forty  percent of committed Democrats are consistent liberals, up from just 8% in 1994. The overall share of Americans who express consistently conservative or constantly liberal opinions has doubled over the past two decades from 10% to 21%. .

“As a result,” Pew reports, “ideological overlap between the two parties has diminished. “Today, 92% of Republicans are to the right of the median Democrat, and 94% of Democrats are to the left of the median Republican.”.

“Republicans and Democrats are more divided along ideological lines – and partisan antipathy is deeper and more extensive – than at any point in the last two decades. And a new survey of 10,000 adults nationwide finds that these divisions are greatest among those who are the most engaged and active in the political process.”

Is Polarization A Threat to the Nation?

Most pundits are appalled.
“It’s a poisonous potion,” writes Bloomberg’s Mark Silva:

“Increasing Ideological Uniformity.

“Partisan Animosity.

“Stir it up:  and what you have is ‘Political Polarization.’

“The antipathy cuts both ways” Silva adds.

On that last point he is right.  As Pew points out, the share of Republicans who have very unfavorable opinions of the Democratic Party has more than doubled over the past 20 years – from 17 percent to 43 percent. Similarly, the share of Democrats with very negative opinions of the GOP also has more than doubled – from 16 percent to 38 percent. . .

“There are actually people who view the other political party as a ‘threat to the nation’s well-being’” Pew notes, “with 27 percent of Democrats saying this of the Republican Party, and 36 percent of Republicans saying this of the Democrats. Those numbers, too, have essentially doubled during the past two decades.”

“Pew calls it ‘a rising tide of mutual antipathy,’” Silva observes.

Let me be clear: l Like Silva, I too, abhor the extremes where sheer anger replaces reason.. (I cringe whenever I hear a good friend say that Dick Cheney should be “put up against a wall and shot.” He says this quite often.)

But I would point out that arch-conservatives seem much angrier than liberal Democrats. This is why Republicans come out to vote, particularly in mid-term elections, in much larger numbers. Rage sends them to the polls.

What I find most disturbing is that these conservatives seem to loathe, not just liberals, but anyone who they view as “Other”:  People who are dark-skinned, poor, foreign, gay, or a feminist who stands up for a women’s rights is  deemed “Not Us.”  This mixture of xenophobia, racism, homophobia and misogyny is what I find truly frightening.

The Disengaged Center – Nearly 40% Of All Americans

Most importantly, what  Silva ignores is that while committed Republicans have headed further right, and committed Democrats have shifted to the left, only 61% of Americans are committed to either party.

The Pew poll reveals that fully 39% belong to an uncommitted center: “Many of those in the center remain on the edges of the political playing field, relatively distant and disengaged, while the most ideologically oriented and politically rancorous Americans make their voices heard.

Those in the center are quieter, less likely to vote, and less likely to make political contributions. These are the people who say “I just don’t pay much attention to politics.” Or, “I’ve given up on politics and politicians.”

But according to Pew, while many in the center do not vote, they do have opinions. “These centrists are not moderates. Those in the center hold strong views on various issues,” the Pew report explains. “The difference is that they are not consistently liberal or conservative.” An over-riding ideology does not determine all of their decisions.

For example, some favor gun control, but are opposed to health care reform. On immigration, their views are mixed. Pew’s research reveals that “all told, 37% of non-ideological Americans support drastic changes in America’s immigration policies.”  Some favor deportation of all unauthorized immigrants while others support immediate citizenship if certain conditions are met.”

Because they are not blinded by a single ideology, their minds are open to listening to rational arguments on various issues. This is why we need them at the polls.

On this point, I am hopeful. As conservatives move further and further to the extreme right, more and more Americans are becoming alarmed. As a result, we may well see more disengaged, disaffected, and discouraged citizens beginning to pay attention to politics.

Mississippi

This is exactly what happened Tuesday, in Mississippi, where veteran Republican Senator Thad Cochran beat back a challenge by State Senator Chris McDaniel, a Tea Party favorite.

On June 3, Cochran, an establishment Republican who has served in the Senate for 24 years, lost the Republican Senate primary to Chris McDaniel, a former talk radio host and Tea Party–backed state senator,

Because neither won 50 percent of the vote. the race went into a runoff. At that point, most observers assumed that Cochran would lose.  With his intense support from passionate Republicans, combined with wide backing from national Tea Party groups, McDaniel was the favorite.

But in the last three weeks of the race, Cochran began to reach out to black voters. He was betting that African-American Democrats might well come out to vote against McDaniel, who is  well known for his New Confederate views. (A Southern reactionary, McDaniel laments how the country has changed, since the days before civil rights legislation passed. He misses the “Old South”.) On his radio talk show, he also had made     racist and sexist remarks that I find too offensive to repeat.

Cochran’s strategy proved shrewd. In the run-off, African-American turnout in the 24 counties with a black population of 50 percent or more was up almost 40 percent from the primary.

Make no mistake: Cochran is a conservative Mississippi Republican. Black Democrats know this. But as one voter said: “One of the other white men is going to get in there. We need to choose.”  By turning out for Cochran these liberals made sure that a rabid, racist conservative would not have a vote in Congress.

You might wonder: How could Democrats vote in a Republican runoff? In Mississippi, which does not register by party affiliation, any registered voter can vote in the Republican runoff election as long they did not vote in the Democratic primary during the first round of balloting on June 3.

Most African-Americans didn’t bother to vote for Travis Childers, the winner of the Democratic primary.  They didn’t think he stood a chance. Thus, they were free to cast a ballot for Cochran.

At Cochran’s satellite office in Hattiesburg, Stacy Ahua, 25, a black field organizer, managing a get-out-the-vote operation explained Cochran’s strategy to the Washington Post: “Some of our people forgot to come out for that first vote and we’ve really tried to get things moving. I think everybody now understands the stakes, whether you’re Democrat or Republican, Catholic or Baptist.”

Exactly. This is what right-wing extremists are now doing nationwide: defining what is at  stake. I thank them.

No surprise, McDaniel’s supporters are livid that African Americans sealed their candidate’s defeat. Already, they are talking about a write-in campaign on his behalf. This  could split the Republican vote.

At the same time, success may persuade African Americans and other Mississippi liberals  to turn out for the mid-term elections. And,  if there is no write-in campaign,  right wingers who are furious at Cochran may refuse to vote. In other words,  Travis Childers might stand a chance. He  is a conservative Democrat, but still the GOP would have one less seat in the Senate.

Convincing Americans That It’s Worth Taking the Time to Vote: The Argument for Partisanship

Writing in the American Prospect, Paul Starr recently made the argument that “if Democrats are going to convince their supporters it is worth the trouble to vote . . . . they need to advocate policies that make as loud and stark a contrast as possible with those of the Republicans. Obama’s belated emphasis on raising the minimum wage and increasing overtime pay are good examples of the approach. Taxing the 1 percent to finance broadly distributed benefits also fits this description. . .

“Such policies will predictably be described as class warfare,” Starr acknowledges. “But . . . the objective is actually to get back to an income distribution more like the level that prevailed in the Eisenhower administration. The entire political and legal spectrum has been moved so far to the right that what used to be centrist only seems populist.”

But in recent years, the zeitgeist has turned. .Both the issues and the candidates are more sharply defined than in the past. As a result, Starr notes, “voter turnout in the 2004 and 2008 elections returned to levels America hadn’t seen in 40 years. Fox News and MSNBC stir up the emotions not just of their devoted viewers, but of those who abhor them; liberals and conservatives alike may be more inclined to vote.

In an earlier piece Star argued: “Democracy needs passion and partisanship provides passion.” Yes.

In Some Cases Compromise Is Not Possible

But do we really want “passionate” partisan representatives in Congress? Don’t’ we want to elect politicians who will compromise with each other?

Not necessarily.

On the face of it “compromise” sounds eminently reasonable, and very often, it is appropriate. When it comes to negotiating tax rates, we may be able to “split the difference’—at least in some cases.

For example: until very recently, the Federal government taxed estates over $1 million. Now the IRS collects a tax only if the estate exceeds $5 million. (In 2013 this change cost us roughly $13 billion in government revenues.) Some conservatives would like to abolish the tax altogether; liberals would be inclined to go back to taxing amounts over $1 million. I could see both sides reaching middle ground by agreeing to tax estates over, say, $2.5 million.

But sometimes we can’t meet in the middle. Some values just are not negotiable.

Below, a short list of issues where Republicans and Democrats disagree, and I would argue, compromise is not possible.

Gun control:  When as are talking about the slaughter of innocents, we cannot “split the difference” with the NRA. There is no reason for civilians to own automatic and semi-automatic weapons. And no one should be able to buy a firearm of any kind without a thorough background check.

Medicaid Expansion: The right to healthcare is a universal right, not a matter of states’ rights. The notion that poor adults should have access to medical care in some states, but not in others, is untenable. Once again, what is at issue here is not money, but blood.

Immigration reform: Do we really want to send Honduran 15-year-olds back to a homeland where they are likely to be maimed, killed, or enslaved by a gang?  (See part 2 of this post)  We must offer asylum to those who are at risk, just as, over the years, we offered protection to at least some European Jews (far too few), as well as some Russian dissidents. Skin color or ethnicity should not affect that decision.

As for children who were brought here by undocumented parents years ago, the idea of sending them back to a country that they don’t know is impossibly cruel. Finally children who grew up here should not be barred from attending college because they are labeled “illegals.” We need more educated workers.

Raising the Minimum Wage:  We know that children in the U.S. go to bed hungry because a parent cannot earn enough to feed them. Food stamps run out before the end of the month. And, if we  lift the minimum wage, we can assuage union fears that more immigrants will depress the average American’s paycheck.

Global warming: On this topic right-wingers are not only a threat to the nation, they’re a threat to the globe. Two-thirds of Americans (67%) say there is solid evidence that the earth has been getting warmer over the last few decades, a figure that has changed little in the past few years. Yet conservatives have managed to block action.

Nevertheless we should thank right-wingers for highlighting the issues. Voters are no longer simply talking about candidates’ personalities. We are facing basic differences in what we think is “right” and “wrong.”

A Pew Research Center survey of “American Values” reveals that when it comes to rock-bottom moral questions, liberals and conservatives simply don’t agree. In particular, Pew reports, when Republicans are asked about government regulation and involvement in our lives, they are more adamant than ever before: Individual rights should be paramount; the government should not interfere.

By contrast, progressives tend to believe that government has a responsibility to regulate with an eye to the “common good”–and to tax and spend with the goal of creating a fairer, more egalitarian society.

Ultimately, their positions illustrate the tension between two political goals: freedom and equality. Conservatives favor freedom; liberals are more concerned about equality.  The reason we have two parties is so that voters can choose.

Can’t we have both freedom and equality? Of course–but in some cases there is a conflict between individual rights and what is best for society as a whole. Then, voters must decide.

On such critical questions, I would argue that we are not looking for a mid-point between “right” and “wrong.”  Either we expand Medicaid for everyone—including childless adults–or we don’t.

In a democracy, our elected representatives should reflect what the majority of Americans think is truly just—including the 40% who are not card-carrying conservatives or liberals.

And in fact, recent polls suggest that most U.S. citizens do have clear views on these issues. The majority favor stricter gun control laws;  think that illegal immigrants should be allowed to stay in this country and eventually apply for citizenship; support a proposal requiring companies to cut greenhouse gas emissions that cause global warming even if it means higher utility bills; believe that we should raise the minimum wage  from $7.25 to $10.10–or higher and support Medicaid expansion

Why then is Congress gridlocked on these questions? Because only a minority of Americans vote , particularly in midterm elections that decide the fate of so many Senators and Representatives.  Thus Congress reflects the beliefs of some Democrats and Republicans at each end of the political spectrum, but not the will of the majority.

Originated at Health Beat Blog

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Privatisation and government debt

Simon-Wren Lewis at Mainly Macro is on target with the term ‘privatization’ as a way to ‘save’ money and add ‘efficiency’.  Of course no slogan making the claim can begin with ‘it depends…’:

Privatisation and government debt

Possibly the worst argument for privatizing part of the public sector is a supposed ‘need’ to reduce public sector debt. I think the problem with this argument is obvious to most economists, but as it is repeatedly ignored by politicians, it is worth spelling it out.

As I argued in a previous post, decisions to privatise or contract out should be based on considering the microeconomic pros and cons, which will vary from case to case. This analysis should include political economy considerations, like the extent of public sector corruption, or the ability of firms to extract rents from the public sector.

If we start out with public debt above its long run target, why not use privatisation to help get us towards that target? To see why that is nonsense, consider the two reasons for reducing debt given above. The first was to reduce the need to raise taxes to pay interest on that debt. While privatization might reduce debt, it will also reduce future revenues or increase future public sector payments. Privatisation will either mean that the public sector loses the revenue that the privatised activity produced, or the private sector will have to be paid to undertake the outsourced activity. So the net impact on taxes will be zero.

What about the point that public debt may crowd out private investment? Once again privatization does nothing to encourage private sector investment. All that happens is that existing capital and any investment that goes with it are relabelled private rather than public. No additional savings are released to encourage new private sector activity.

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Northwest Plan 2013 – Extracts by Webb

2013Northwest-Bruce Sum 1
Click to embiggen. And then do some magnifying. Because even a selected file covering the whole 75 year projection period yields small type.

Anyway this is my first take from Dale Coberly’s numbers for 2013 Northwest Plan with three calculated columns added by me. Those are the three with “Cost-Non Interest Income” as part or all of their label. Which should actually be “Cost-New Non Interest Income”. In any event what this extract shows is that even after the series of FICA increases seen in “New Payroll Tax Rate” there would be a shortfall between FICA and Tax on Benefits on the one hand and Cost on the other, which difference would need to be made up from interest on the existing Trust Fund. The very last column shows this shortfall as a percentage of that year’s Trust Fund and so closely approximates the interest rates needed to have the Trust Fund break even, with any excess being devoted to building up the TF balance to maintain actuarial balance.

‘Approximates’ because there is a missing data point here in that calculated Trust Fund balances depend on a (here) hidden return based on assumed interest rates. So to really evaluate the last two columns you would need to view the entire spreadsheet (coming soon to a forum near you).

Which might have us turn to the column third from the right. This shows the non-interest cash deficiency before and after the series of FICA increases start in 2018. In this scenario the deficiency stabilizes at about 5% of Cost over the 30 years of maximum Boomer impact and then goes to a closer approximation of true Pay-Go after mid-century. The effect of this roughly 5% medium term cash shortfall would be to reduce the Trust Fund Ratio from its current level of nearly 4 times cost to a target level of around 1.25 times cost, a small cushion over the 1.00 requirement under current law for ‘actuarial balance’. The result is that the Trust Fund shrinks in relation to all of Cost, GDP and probably Total Public Debt even as its nominal principal value nevers goes negative. That is the NW Plan is designed to put Social Security on a glide path towards Pay-Go having taken care of the Boomer Bulge along the way. Which is to say providing the piece missing (and by some Commissioners by design) from the 1983 Greenspan Commission inspired Social Security legislative deal.

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