My bet would be on “then”, because in a moment of exquisite candidness, Paul Krugman – the man who has said “What? Me worry?” about the deficit and the debt, who claimed ObamaCare would do what Obama promised, – has apparently been drugged and finally told the truth:
Eventually we do have a problem. That the population is getting older, health care costs are rising…there is this question of how we’re going to pay for the programs. The year 2025, the year 2030, something is going to have to give…. …. We’re going to need more revenue…Surely it will require some sort of middle class taxes as well.. We won’t be able to pay for the kind of government the society will want without some increase in taxes… on the middle class, maybe a value added tax…And we’re also going to have to make decisions about health care, doc pay for health care that has no demonstrated medical benefits . So the snarky version…which I shouldn’t even say because it will get me in trouble is death panels and sales taxes is how we do this.
Gee … everything everyone who has paid attention has been saying all along. Middle class taxes (you have to shake your head at his “oh well” approach to a middle class tax. A sales tax. Perhaps the most regressive tax going). Death panels. Etc.
But it’s safe now … selling his credibility and being a hack has landed Obama another 4 years.
Apparently he’s on a “resurrect Paul Krugman’s professional reputation” tour.
Not that it’s working.
You don’t have to be a rocket scientist, brain surgeon, or even particularly smart to figure out that this trend means entitlements, as structured, will fail:
Last week, the Commerce Department announced that the gross domestic product shrank by 0.1 percent in the fourth quarter of 2012. And the Census Bureau reported that the U.S. birthrate in 2011 was 63.2 per 1,000 women ages 15 to 44, the lowest ever recorded.
Slow economic growth and low population growth threaten to undermine entitlement programs like Social Security and Medicare. Despite contrary rhetoric, they are programs in which working-age people pay for pensions and medical care for the elderly.
When Medicare was established in 1965 and when Social Security was vastly expanded in 1972, America was accustomed to the high birthrates of the post-World War II baby boom. It was widely assumed that the baby boom generation would soon produce a baby boom of its own.
Oops. The birthrate fell from the peak of 122.7 in 1957 to 68.8 in 1973 and hovered around that level until 2007. The baby boom, it turns out, was an exception to a general rule that people tend to have fewer babies as their societies become more affluent and urbanized.
So, when will our so-called “leaders” finally figure this out? My guess, in fact it really isn’t a guess, is they know but haven’t intestinal fortitude, politically speaking, to do what is necessary. That is cut them, privatize them or any of a host of other options they won’t even consider.
What they will consider, of course, is raising taxes and borrowing.
The fact of the matter is that both Social Security and Medicare are based in flawed models. The original models saw the base of the those paying into the system remaining constant, despite the “general rule that people tend to have fewer babies as their societies become more affluent and urbanized.”
The numbers don’t lie. Fewer and fewer workers are available to pay into these systems and continue to pay out at the rate at which they’re paying out now. This is no mystery. This is plain old everyday economics. It’s as plain as the nose on your face. Yet our so-called “leaders” seem unwilling and unable to face the facts. The facts are not going to change. We’re not going to suddenly have a baby boom again.
These are the sorts of problems elected leaders are supposed to face head-on. That’s why they’re elected, supposedly. Yet we continue to let our elected officials get away with malfeasance. So while it is easy to point at them and say they’ve failed, in fact we’ve failed. We have failed to gin up the courage to do what is necessary to fix these problems. To force our “leaders” to do the right thing. We continue to claim in poll after poll that entitlements must be fixed. Yet we continue to put in office, time after time, the same people who haven’t yet mustered the courage to do that (nor fund themselves held accountable for not doing it).
Whose fault is that?
UPDATE: Here’s a perfect and timely example of part of the point:
John Kasich, the fiercely conservative governor of Ohio, announced Monday that he’s going to expand Medicaid dramatically using federal money — a 180-degree turn from what conservative groups swore their allies in governors’ mansions would do when the Supreme Court gave them an out last year.
This makes John Kasich a big, fat liar.
Republicans should be the ones circulating recall petitions. He should be drummed out of office, out of politics and never again hold any office higher than dog catcher. But they won’t, because despite this, he’s “one of ours”.
Electricity prices are rising in Germany – and citizen with a low-income are suffering particularly. They are at risk of fuel poverty. 10 to 15 percent of Germans are now struggling to pay their energy bills. 600,000 households have the electricity turned off every year.
Remember, Germany ran scared after the Fukushima disaster and dumped nuclear power (because, you know, German has so many earthquakes and tsunamis). They then went “green”. Result? See above?
The CEOs of manufacturing industries are warning that production in Germany is at risk because of low energy prices in the United States. The energy prices there are now only a third of those in Germany. “Many industrial companies are planning to build new factories in the U.S. and not in Europe because of low energy prices there,” said Gisbert Rühl, chief of steel trader Kloeckner. “We are now reacting to this development and plan new business units in the United States.” To move production to the U.S. is especially attractive for companies in energy-intensive industries such as steel and aluminium or chemistry.
That would seem to be good news for us, no?
Well, it should be … except for the Democrats plan to raise taxes on the oil companies. And Obama’s new wave of regulations. Oh, and the Obama desire to see fuel prices “skyrocket”, ably aided by his Secretaries of Energy and the Interior. And the EPA.
Remember, this “tax fairness” was something which was going to solve our fiscal problems, if you listened to the left’s claim that is. However, reality is fairly brutal and usually doesn’t much pay attention to rhetoric based in lies and stupidity. Case in point:
Congress is poised to clear the final $50 billion chunk of emergency aid for Superstorm Sandy relief Monday — and in one vote, it will have used up all the new tax money President Obama won by raising rates on the wealthy in the “fiscal cliff” deal.
The “cliff” … well they’re busily engaged in trying to see if they can kick the can nearer the edge and, by the way, make the “cliff” a little higher while they do that by raising the debt limit … again.
Meanwhile, let’s talk about immigration, gun bans and whatever else our “leaders” can think of to distract us from this pending disaster.
One of the more frustrating things I observe is our apparent unwillingness, as a country, to learn from the mistakes of other countries. For instance, we’ve watched the effects of the welfare state in Europe and its fiscal impact, yet we continue down the same road toward the same cliff they’re now getting ready to go over.
More specifically, we’ve watched other countries raise taxes higher and higher and subsequently watched them lose their native talent. France is in the process of doing that now. And Britain? Well, they’ve been suffering from it for a while:
Nick de Bois, secretary of the 1922 Committee of backbench MPs, said that Britain needs a “culture change” to stem the flow of talented emigrants by encouraging success.
“Our most economically active are leaving to apply their talents elsewhere,” the MP said, warning that talented Britons are being lured away to “growth economies” elsewhere in the world.
Office for National Statistics figures obtained by Mr de Bois show that in the ten years to 2011, a total of 3,599,000 people permanently left the UK.
Contrary to the perception of the typical emigrants being older people retiring to a life in the sun, the figures show that 1,963,000 of those who left were aged between 25 and 44.
By contrast, only 125,000 people of retirement age emigrated.
Note what is “luring” them away? “Growth economies“. And what does one usually find is anything labeled a “growth economy”? Economic opportunity. A chance to better your own situation without being punished and vilified for doing so. You’d think that might be something our “leaders” would understand and appreciate.
But it’s about culture, isn’t it? About the culture our leadership fosters. And that culture in this country is “class warfare”:
“Government must help lead a culture change in this country that competes with the new economies, one where competitiveness and success are valued and personal achievement and personal wealth are respected, not pilloried,” he said.
That’s not at all where this particular government is headed, is it?
And the result? Human Nature 101. See Britain.
What if people could easily function with much less sleep?
Jon M at Sociological Speculation asked that question after observing that “new drugs such as Modafinil appear to vastly reduce the need for sleep without significant side effects (at least so far).” At extremes, as Jon M noted in a follow-up post, modafinil allows a reduction to 2.5 hours a night, but “the more common experiences seem to be people who reduce their sleep by a few hours habitually and people who use the drugs to stay up for extended periods once in a while without suffering the drastic cognitive declines insomnia normally entails.” In fact, alertness is not the only reported cognitive benefit of the drug.
The US brand of modafinil, Provigil, did over $1.1 billion in US sales last year, but for the moment let’s dispense with the question of whether modafinil is everything it’s cracked up to be. We’re speculating about the consequences of cheaply reducing or even eliminating the need for sleep for the masses.
If I can add to what’s already been said by several fine bloggers – Garett Jones at EconLog on the likely effect on wages, then Matt Yglesias at Slate sounding somewhat dour about the prospect, and Megan McArdle at the Daily Beast having fun with the speculation – the bottom line is that widely reducing the need for sleep would be a revolutionary good, as artificial light was.
For a sense of scale, there are about 252 million Americans age 15+, and on average they’re each awake about 5,585 hours a year. Giving them each two extra hours a night for a year would be equivalent to adding the activity of 33 million people, without having to shelter, clothe, and feed 33 million more people.
Whatever objections critics have, sleeping less will be popular to the extent that people think the costs are low. For all the billions of dollars spent trying to add years to their older lives, obviously people would spend more to add life to their younger years. Who ever said, “If only I’d had less time!”?
Consider that the average employed parent usually sleeps 7.6 hours each workday. He spends 8.8 of his remaining hours on work and related activities, 1.2 hours caring for others, and 2.5 hours on leisure and sports.
If he spends more time working productively (i.e. serving others), that’s good for both him and society. The time and effort invested in birthing, educating, and sorting people for jobs is tremendous, so getting more out of people who are already born, educated, and sorted is just multiplying the return on sunk costs.
That’s a godsend for any society undergoing a demographic transition after the typical fall in birthrates, because aside from hoping for faster productivity growth, the specific ways to address having fewer workers per retiree – higher taxes, lower benefits, more immigration, or somehow spurring more people to invest in babies for decades – are unpleasant or difficult or both.
And if he uses extra hours to pursue happiness in other ways, that’s generally fine too. A lot of people may simply get more out of their cable subscription. Others will finally have time for building and maintaining their families, reading, exercising, or learning a skill.
Yes, once a substantial number of people are enhancing their performance, others will likely have to follow suit if they want to compete. But then, that’s also true of artificial light and many other technologies. If people naturally slept only four hours a night and felt rested and alert, who would support a law forcing everyone to sleep twice as long, cutting a fifth of their waking hours so that everyone would slow down to the speed that some people prefer to live their lives?
I don’t think most people have such a strong presumption in favor of sleep. We like feeling rested, or dreaming, but not sleeping as such; a substantial minority of Americans sleep less than advised despite the known costs, and so reveal their preference for waking life over oblivion.
I continue to be stunned by the apparent willingness of all involved on the left to whistle past the graveyard when it comes to understanding what our fiscal governmental problem is and how to fix it. Here … let’s try a picture:
Oh, look … it’s spending. Specifically, spending on entitlements and interest on the money we’ve borrowed to do so. And what are we talking about cutting? The military, of course. Because, you know, it is in the blue slice of the pie. Make sense?
Pac Man’s revenge. By 2050, he will have swallowed all of the blue.
But, hey, it’s “absurd” to argue about raising the debt limit. By the way, does anyone remember when Sen. Obama declared that raising the debt limit signaled a failure in leadership?
I hate to say “I told you so”, but it isn’t just the rich who will be paying increased taxes. And what should be clear to anyone with the I Q of a turnip, is that this will cost people their jobs.
The compromise called for taxes to rise to 39.6% from 35% on personal income above $400,000. In a 2011 study, the Treasury Department found that raising taxes on incomes over $500,000 would affect roughly 750,000 small businesses organized as S-Corps, partnerships and other small entities.
Of course, you remember the Democrats claiming that this wouldn’t affect small businesses. Well, that was a flat out lie. But then we live in an era of lies which, if there political apparently, we’re willing to overlook. While most of us are. I just had to be one of those who isn’t. Not that Democrats are the only political liars, but they seem to be the most prolific and the most blatant. Especially when it comes to budget, deficit, and financial matters. They are the quintessential “snake oil” salesman.
And they have sold us are huge bottle of snake oil.
Couple these tax increases with the Obamacare taxes that kicked in on the 1st, and you have two reasons for 750,000 small businesses not to hire. And you can bet none of them will go over 50 employees, and some may even reduce staff to get under that number.
These are your “rich”. They happen to be the “rich” would generate jobs, or what have, if they hadn’t been hit by two new taxes this year.
Your government at work.
So tell me again why the government can’t seem to get along with what it already gets?
Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.
And yet the prevailing political attitude seems to be that of France’s “leadership”, i.e. government, has first claim on all your earnings and if you protest you’re “greedy”.
Speaking of France, California seems bound to duplicate its latest tax scheme:
Consider California, which just enacted higher rates of income and sales tax. The top California income-tax rate will be 13.3%, and the top sales-tax rate in some areas may rise as high as 10%. Combine these state taxes with a top combined federal rate of 44%, plus federal excise taxes, and the combined marginal tax rate for the highest California earners is likely to be around 60%—as high as in France, Germany and Italy.
Yet they wonder why people are fleeing the state.
Impact and implications?
Higher labor-income and consumption taxes also have consequences for entrepreneurship and risk-taking. A key factor driving U.S. economic growth has been the remarkable impact of entrepreneurs such as Bill Gates of Microsoft, Steve Jobs of Apple, Fred Smith of FedEx and others who took substantial risk to implement new ideas, directly and indirectly creating new economic sectors and millions of new jobs.
Entrepreneurship is much lower in Europe, suggesting that high tax rates and poorly designed regulation discourage new business creation. The Economist reports that between 1976 and 2007 only one continental European startup, Norway’s Renewable Energy Corporation, achieved a level of success comparable to that of Microsoft, Apple and other U.S. giants making the Financial Times Index of the world’s 500 largest companies.
Yet we continue to try to recreate Europe’s debacle here.
The economy now faces two serious risks: the risk of higher marginal tax rates that will depress the number of hours of work, and the risk of continuing policies such as Dodd-Frank, bailouts, and subsidies to specific industries and technologies that depress productivity growth by protecting inefficient producers and restricting the flow of resources to the most productive users.
If these two risks are realized, the U.S. will face a much more serious problem than a 2013 recession. It will face a permanent and growing decline in relative living standards.
These risks loom as the level of U.S. economic activity gradually moves closer to that of the 1930s, when for a decade during the Great Depression output per working-age person declined by nearly 25% relative to trend. The last two quarters of GDP growth—1.3% and 2.7%—have been below trend, which means the U.S. economy is continuing to sink relative to its historical trend.
But your political and financial lords and masters know best, don’t they? Just ask them. They continue down this road despite the fact the destination is in plain sight in Europe and it isn’t pretty.
Occam’s Razor states “entities should not be multiplied unnecessarily.” Said another way, the simplest explanation is usually the most likely explanation. In this case the simplest explanation is incompetence. But is it really incompetence? With the European example staring them right in the face it’s hard to believe anyone is that incompetent. The conclusion to their policies have already been proven to be a disaster.
So one has to being to consider other possibilities when those who are pushing the policies seem oblivious to the obvious.
You have to begin to wonder if it is a problem of hubris. I.e. “the only reason it hasn’t worked before is we weren’t in charge”. We’ve seen that in any number of instances throughout history where discredited or obviously illogical ideological ideas were tried and they again failed.
Or you have to consider the words “by design”. But then you’re stuck with trying to come up with a valid reason “why”. Recreating Europe’s debacle, or Japans’s or, for heaven sake, our’s in the ’30s would seem to be something smart politicians would attempt to avoid.
But here we are.
Economic growth requires new ideas and new businesses, which in turn require a large group of talented young workers who are willing to take on the considerable risk of starting a business. This requires undoing the impediments that stand in the way of creating new economic activity—and increasing the after-tax returns to succeeding.
And yet, we see a government bent on erecting even more impediments via increased taxation, costly new laws and onerous regulation.
Isn’t it about time we demanded to know “why?” More importantly, maybe we should ask whose side they’re on.
France’s prime minister, Jean-Marc Ayrault, is hopping mad. In response to the French socialist government’s plan to significantly increase taxes on "the rich"—including a proposed 75% tax on incomes above €1 million—rich people are moving out of the country. This is intolerable to Mr. Ayrault.
"Those who are seeking exile abroad are not those who are scared of becoming poor," the prime minister declared after unveiling sweeping anti-poverty measures to help those hit by the economic crisis.
These individuals are leaving "because they want to get even richer," he said. "We cannot fight poverty if those with the most, and sometimes with a lot, do not show solidarity and a bit of generosity," he added.
It could be a scene right out of "Atlas Shrugged".
Mr. Ayrault is angry because rich Frenchmen are fleeing the country to keep their money, instead of handing it over to him. And he is joined by the baying of the other hounds in France’s left wing. Case in point, French actor Gerard Depardieu, whose announcement that he was moving to Belgium provoked responses such as:
Socialist MP Yann Galut called for the actor to be "stripped of his nationality" if he failed to pay his dues in his mother country, saying the law should be changed to enable such a punishment.
Benoît Hamon, the consumption minister, said the move amounted to giving France "the finger" and was "anti-patriotic".
In a stinging editorial, Libération, the left-leaning daily, called him a "drunken, obese petit-bourgeois reactionary".
They are owed this money, by God, and how dare you try and steal it away from them!
This is always the implicit argument of the Left: They have the first claim to your income, and you have a duty to honor that claim. No matter how you earned that money, they have the right to take as much of it as they please away from you, and if you dispute that right, you’re unpatriotic, and should be punished.
This is Leftism in a nutshell. You are not a free individual, but rather a serf of the state or some other politically-defined "larger community" that has an absolute claim on your property and income that you may not defy. This is no different in concept, or in practice, than the idea of ancient Babylon or Akkad that every subject is a slave of the king.
You can dress it up in high-sounding phrases like "solidarity" or "social justice", "helping the poor" all you want, and it still amounts to nothing but the simple declaration that the state owns you.
The people who believe in this idea are the enemies of freedom, and should be treated as such.