You’ll note that in my Sunday column, I said I found it somewhat reassuring that both John McCain and Barack Obama seemed humbled by the scope of the looming national crisis on Wall Street. It was sort of the point of the column (hence my headline, "Beware excessive certainty about Wall Street crisis").
But I also said, at the end:
At some point we’re going to need some FDR-like self-assurance
mixed with pragmatic solutions. And in this election that is suddenly
about the economy, it’s unclear which candidate will pass that part of
the audition.
That remains unclear. I mean, the only person on either ticket who has a cocky grin anywhere approaching that one is maybe Joe Biden.
And we need that kind of optimistic confidence in a leader at this time.
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The only reason the American economy is not racing with prosperity is the poison in its system going back to FDR.
We are still dealing with agencies and regulations that never were good, and make no sense today.
We are saddled with a welfare program, Social Security, which skims off 15.8% of the working man’s income which could go to savings in a real retirement system.
By the year 2030, keeping Social Security checks in the mail will require a 52% payroll tax.
You know, I should have wired Vegas with a big bet on what Lee would say in response to this post.
Talk about financial security, baby!
Lee,
Define real retirement? You mean that 401k that just lost 1000 points this month or the money market accounts that are on the verge of collapse? Or are you on the socialist state penion plan where the state pays you to not work?
Really, you’ve got to stop listening to Rush as he’s failed you on math again. If there are no changes to Social Security, (NONE) there will be plenty to pay out all claims of benefits until the years 2043 -2050, depending on interest variables.
So you go ahead and pay 53% as Rushbo wants you to believe, and while you’re at it, I have a nice bridge over Broad River I’d like to sell you. Cheap.
Social Security is not a retirement program.
The Supreme Court has ruled that.
* It is a welfare program.
* No one has a right to receive one cent from it.
* It can be changed or abolished by Congress, for anyone, or everyone, at any time.
* There is no trust fund, or trust accounts.
* Currently, the taxes are 14%, and it takes 9% to pay out current recipients. The other 5% is used to finance deficit spending.
* By the year 2014, the system will consume all the revenues.
* By 2030, if unchanged, the system will require a 52% tax rate to pay the recipients.
I get my information from the Social Security Trustees Report.
Vegas would break you in a skinny, Brad.
Lee hit you right between the eyes with buckshot.
Lee, you are so miserable here. have you, and b.m. and a few others, ever thought of leaving?
As a standalone fund Social Security asset sheet looks clean and sufficient out to 2050 or so. All would be as hunky dory as the AARP asserts were it not for the fact that the SS fund’s assets are promissory notes from the US Treasury.
Payroll taxes — the FICA amount in your paycheck — arriving at the US Treasury go into the SS fund for distribution to those who qualify for SS payments. Excess receipts — cash collections less cash payments — are loaned back to the Treasury to be tapped by the federal general fund to pay cash for whatever always-worthy programs the US Congress has authorized and appropriated cash for.
This has been fine and dandy and will continue to be so until about 2017 when annual SS cash collections will be less than what the SS fund has to pay out in cash. No problemo, says AARP, because SS can simply cash in a bit of the promissory notes each month to pay SS recipients. What AARP does not disclose is that the Treasury has to have a source of cash to give to the SS fund, and where will it get that cash? From the general fund, and that means cash that would otherwise go to one of the always-worthy programs the US Congress has authorized and appropriated cash for. If Congress wants — I emphasize “wants” because SS is, as Lee hinted, somewhat discretionary – to pay SS recipients and simultaneously maintain the same level of general fund spending, it will need more cash, and that means taxes.
So, all things being equal — we know they are not — taxes will have to increase a bit in 2017, a bit more in 2018, a bit more year by year until our offspring grab their muskets and inform their elected representatives that they’d like to keep a bit more of their cash. That Congress could choose to lower SS payments immediately and would do so depending upon who shows up to cast a ballot. It could get down to who’s the better shot.
The scenario above does not include Medicaid / Medicare spending, a bug (or feature, depending upon one’s viewpoint) that will accelerate popular dissatisfaction with things as they have turned out to be.
In a perfect world Congress would have magnanimously established an asset fund into which excess SS payments would have been funneled. With the benefit of hindsight, something like an oil reserve might have been a good idea, if we only had one. Heck, if we drilled offshore and dedicated the federal portion of any royalties to the SS fund, we might have a chance too.
It’s really too bad that our elected representatives have replaced a solemn fiduciary responsibility with an eagerness to get reelected by spreading the wealth around, because the wealth was really the future of the old folks, and the young too. We all have a stake in the solution. I guess we’ll just wait a bit longer.
martin –
Lee may aggressively state his points, but in his comments above his facts are correct.
I’ll go a step further and state that provisions like Smoot-Hawley, which became law before FDR was elected, but which he did not seek to overturn, prolonged the depression. Many of FDR’s efforts were also counterproductive — some folks knew that at the time, but FDR was deaf to their pleas — and it took World War II to lift the country out of the depression. Thereafter we pushed free trade and benefitted from it.
It can also be argued that FDR’s programs like Social Security represented a modest safety net, but that Congress and the courts later expanded them beyond what was originally intended.
Here’s a pretty good essay that talks about the pressures FDR faced, pressures we see in the financial mess that’s taken over the news. It offers some insight on what FDR could have done and what principles we should follow today.
Our problems started with FDR? That implies that the country was in sound financial shape when he took office. In October of 1929 was he president? Hmmmmm. Even John McCain, depending on the day of the week, believes the lack of regulation is the catalyst for this Guys Gone Wild on Wall Street fiasco.
Of course, he also believes the fundamentals of the economy are strong so why are Lee and Cak complaining? All we need to do is fire the FEC chairman as McCain suggests and all is well.
I am also amused at how Big Government is bad when it comes to FDR but bailing out McCain’s top donors with tax payer dollars is acceptable. Perhaps Cak can cite an essay on how giving Paulson full authority over $700B is a good idea.
That’s “p.m.”, martin, as in “penultimo mcfarland”. Part of my email address is “gourdboy”. Thus you should perhaps be thanking me for having a place to live.
As to staying around here, wouldn’t your name indicate you’re pretty much a seasonal creature yourself?
Those who separate subject and verb with a comma usuallly are.
Heck, if we drilled offshore and dedicated the federal portion of any royalties to the SS fund, we might have a chance too.
-Mike C
Mike you had me going until you threw in this red herring. Fact is, we’re ALREADY drilling like crazy offshore.
The problem with SS is pretty simple really. We’ll need some combination of tax increases and benefit cuts to keep it solvent. The 52% rate that Lee cites is, of course, ridiculous. But 20% may be necessary. That’s still too high but at least it’s manageble.
Social Security has been the GOP boogeyman for 75 years now and despite all the gloom and doom it continues to pay benefits to millions of folks every month. Unlike the company retirement programs in companies like Enron SS is money we can all count on; it’s been as reliable as the sun coming up in the morning.
In the meantime the good ole private sector 401 and 457ks flounder as the stock market trades in approxmiately the same range it did in the year 2000. These are subject to the financial errors of whoever is running the government. Bill Clinton’s expert stewardship of our economy brought us great prosperity along with increasing values in our retirement portfolios. But the disasterous Bush years show just how fragile that money is if an incompetent administration takes control.
So go ahead all you FDR bashers and whine on about Social Security. As for me, I look forward to a long retirement with the peace of mind that SS will be there for me. Just so long as we block any misguided tampering from the right-wing fear mongers.
Mike, I think this whole analysis of FDR’s policies is more complicated than can be summarized in a few short sentences. It needs a more thorough analysis than what you’ve given.
At the same time, I wonder if some aspects of recovery are not primarily economic, but a recovery of confidence in leadership. My Dad was a life-long Democrat, though my brother asked him once who the last Democrat was that he voted for, and he said, “FDR.” Why he called himself a Democrat was simply his confidence that returned as a result of FDR’s policies, regardless of the actual economic complexities.
I rather think that a large part of today’s problem is not primarily an economic one as much as it is a loss of confidence in leadership.
What leadership?
Fannie Mae and Freddie Mac were staffed with political cronies like Jamie Gorelick, Louis Freeh, and Rahm Emmanuel who had no knowledge of the business, but received bonuses of $10,000,000 to $50,000,000 for promoting bad loans to unqualified minority borrowers.
In his first term, FDR actually implemented a lot of the platform of Herbert Hoover, which FDR had ridiculed during the election.
There have been several good books on how counterproductive and destructive the programs of FDR were to recovery, especially from the second term forward. Some were contemporary, like Hayek, or John T. Flynn. Others came later, like Murray Rothbard, Milton Friedman and Percy Greaves, and new ones continue to come out.
Being an economist, I enjoy reading them. More people need to study them and overcome the false history taught them by worshipful but ignorant, liberal professors in college, and the mythology repeated on television.