January 31, 2006

State of the Union Address and Entitlement Spending:
Time is on Their Side

Filed under: Economy,Soc. Sec. & Retirement,Taxes & Government — Tom @ 3:30 pm

(Moved to the top for the rest of today
because of tonight’s State of the Union speech)

In the midst of a few days of enthusiasm about the current economy, I indicated at this post in late December that there were things to worry about. I would explain why in January.

Well it’s January 31, so I’d better get to it.

The simple explanation is that I have serious doubts about whether this country is up to the task of fixing Medicare and Social Security. Both of these programs, however well-intentioned, have created future obligations of nightmarish proportions that have been pushed onto future generations, and they get worse with each passing day — which, unfortunately, is just fine with the people defending the status quo.

A Christian Science Monitor article last week that received way too little notice explains why, and echoes what I have said previously about these runaway programs, except that writer Patrick Chisholm thinks we’re too far gone:

Triumph of the redistributionist left
Even with Republicans in control, trends are decidedly in favor of massive redistribution of wealth.

The political left in America is emerging victorious.

….. It’s about something much deeper; namely, that the era of big government is far from over. Trends are decidedly in favor of that quintessential leftist goal: massive redistribution of wealth.

….. While the left did not get its way on tax cuts, this may be only a temporary defeat: Freewheeling spending has made future tax cuts politically a lot harder.

….. Discretionary spending is dwarfed by mandatory spending – spending that cannot be changed without changing the laws. Shifting demographics combined with an inability to change those laws virtually ensures that, through programs such as Social Security and Medicare, America’s workers will be forced to redistribute a larger and larger portion of their income to other Americans in the coming decades.

….. Time is on the side of the left. As politically difficult as it is now to reform Social Security or Medicare, as the years pass it will get even more difficult. The swelling number of retirees will further strengthen the senior lobby. And as Social Security’s surplus evaporates, there will be less money available with which to establish personal savings accounts.

The prescription drug benefit was another victory for the redistributionists. While it is true that the left wants even more spent on that program, Republican efforts have netted an additional $1.2 trillion being redistributed over the next 10 years.

….. The left has a powerful institutional force on its side: “public choice” economics. Our system of government is highly responsive to vocal groups that lobby for subsidies, government programs, and other special favors. Since the costs are spread out among all taxpayers while the benefits are concentrated among smaller segments of the population (such as retirees, in the case of Social Security and Medicare), the taxpayers have much less of an incentive to lobby against the measure while the beneficiaries have a huge incentive to lobby for it. Whenever those subsidies are threatened, the lobbies launch their barrages of politically effective complaints.

Forces favoring the left are virtually locked in. Even with Republicans in control, big government is destined to get a lot bigger.

This all sounds like something I said back in August about Social Security, but I had a little more hope:

Those who oppose individual accounts know that if they run out the clock for something like 5-10 years, it will become very difficult financially to pull off the transition. It’s sad but true: These people would rather have the elderly depend on the ability and willingness of future generations to finance part or all of their retirement than give them full control over their financial destiny.

I get the sense now that the window of opportunity is closer to 5 years.

Individually controlled Social Security investment accounts and comprehensive Medicare reforms can stop the bleeding and return financial control to the generations that follow us. Stick with the current systems, and in less than 10 years we’ll become the upside-down place that Germany is today, with pension and healthcare obligations so overwhelming that the economy our children and grandchildren have to live in will be stuck in the mud.

I believe that part of the reason the financial markets have not performed as expected during the prosperity of the past 3 years is a sense that we are not going to get a grip on these twin monsters. After last year’s not-serious-enough attempt to sell Social Security reform, where the administration did not even produce a plan of its own, I can see why pessimism abounds.

This brings us to the State of the Union address tonight. Mr. Bush has many critical issues to cover, but after the War on Terror, controlling entitlement spending for the long-term has to be second in importance.

One of the main reasons I started this blog almost a year ago was my belief that 2005 was going to be the year Social Security reform would become a reality; in fact, my very first official post was on Social Security. Was I ever wrong.

Now Mr. Bush is down to two remaining chances to fix Social Security and Medicare on his watch, namely this year and next (2008? Dream on). He can either nibble at the edges this year, show tangible progress, use it as a springboard for 2006 midterm election success, and pass major reforms in 2007, or go for the home run this year.

Which is better? It’s up to him to decide, and then to convince us why his choice is right. Saying little and merely “seizing a political opportunity” if it comes in the next two years, as Fred Barnes suggests Mr. Bush will do in today’s OpinionJournal.com column (requires free registration), is not a viable option — not when time is NOT on your side.

Poll: Chinese Believe in Capitalism a Bit More Than We Do

Filed under: Economy,Taxes & Government — Tom @ 2:35 pm

Polls are always difficult things to place too much trust in, but……

It’s interesting, as this Wall Street Journal editorial notes (requires subscription), that the Chinese people are big believers in capitalism:

Comrade Capitalists
January 31, 2006; Page A14

Though Mao Tse-tung’s portrait still hangs in Tiananmen Square, a recent poll shows that the Chinese are crazier about capitalism than are Americans. In fact, they top the world-wide rankings in their zeal for free markets. No wonder Mao isn’t smiling.

In a poll conducted for the University of Maryland’s Program on International Policy Attitudes between June and August last year, fully 74% of Chinese citizens said they agreed with the statement “the free enterprise system and free market economy is the best system on which to base the future of the world.” The Philippines, at 73%, and the U.S., at 71%, were second and third. The poll, which surveyed 20,791 people in 20 countries, seems like a pretty good snapshot of current sentiment, as such things go.

Remarkable, isn’t it, that residents of the Middle Kingdom have maintained their appreciation of the benefits of free enterprise through six decades of oppression and economic backwardness imposed by their Communist cadres? Then again, for a culture in which common New Year’s greetings include “I wish you happiness and many riches” and “may you make great profits,” should we be surprised? Most Hong Kong residents are spending the current Chinese New Year holiday politely distributing packets of crisp new cash to friends and family. They have to earn this gift cash somehow.

I’d be interested in knowing if this was a poll of the Mainland or if Hong Kong, with its aggressive capitalist tradition, was included as part of the sample.

Regardless, this is, with all the qualifications associated with polls, good news. Now if only the Chinese people ran their own country.

Is USA Today’s Kathy Kiely Obsessed, or Is It Just a Glitch?

Filed under: MSM Biz/Other Bias,Taxes & Government — Tom @ 12:21 pm

From her USA Today’s piece on the Alito confirmation, check out this gibberish (3rd paragraph as it appeared at 12:15 PM; obviously it could be corrected at any moment or taken down, NOTE-USAT updated and fixed — see UPDATE below):

Alito, 55., who has compiled a mostly conservative record during 15 years on the bench, becomes the 110th. justice to serve on the high court. He succeeds retiring Justice Sandra Day O’Connor,who has provided a deciding vote in favor of maintaining a woman’s right to end her pregnancy and other controversies women’s right to terminate their pregnancies, among other controversial matters.

So is Ms. Kiely obsessed, or is it just a glitch? Given that abortion is the first legal issue mentioned in her report, my money is on “obsessed.”

Cross-posted at NewsBusters.org.


UPDATE: USAT did a 1:54 PM update (same link) and corrected the paragraph, now the fourth, which now reads as follows:

Alito, 55, who has compiled a mostly conservative record during 15 years on the bench, becomes the 110th justice to serve on the high court. He succeeds retiring Justice Sandra Day O’Connor, who has provided a deciding vote in favor of maintaining a woman’s right to end her pregnancy, among other controversial matters.

Coretta Scott King, RIP

Filed under: General — Tom @ 10:44 am

The wife of the Reverend Martin Luther King has passed away.

Mrs. King, your Heavenly Father awaits.

No This Is NOT My Spanish-Language Web Site

Filed under: News from Other Sites — Tom @ 9:42 am

Wow, it’s been out there for years, and I never knew (HT – a relative wondering what the bleep is going on).

The WHOIS registration is here, in case you doubt.

I know: The registration expires in a week. I’d be tempted to bid if the adult female models are part of the deal, but I don’t think that’s how it works.

Bizzy’s AM Coffee Biz-Econ Links (013106)

Free Links:

  • US Savings Rate was a negative 0.5% last year — This is the lowest rate since the early 1930s during the Depression, and this number is more troubling than it first seems. That’s because, as I have always understood it (Pending Resolved — see comments 1 through 4 below), it includes money put into retirement plans such as IRAs and 401(k) plans as positives. Since hundreds of billions of dollars go into those plans every years, that means people are negatively saving (i.e., borrowing) more than what they’re saving for retirement. This would not appear to be sustainable unless everybody decides that retirement is not necessary.
  • This bit of info seems inconsistent with the tiny 1.1% increase in 4th Quarter 2005 Gross Domestic Product, though it ties in to the previous item — “December Spending Surges as Consumers Dip into Savings”
  • Tony Blair Says Global Warming is Advancing — though it’s not necessarily contradictory, he should explain what he said on Sunday in light of what he said about nobody being willing to accept the Kyoto Protocol’s limitations back in September.
  • I find it amazing how often statistics that don’t even pass the stench test, let alone the smell test, get by the people who transmit them and, when they’re around, their bosses. Eugene Volokh noted that an Oregon college paper reported that 2,000 rapes occur in the US every 5 minutes, when the truth is it’s 2,000 rapes each day, or one every 5 minutes (of course anything more than zero is unacceptable). Oops.
  • Oil execs take cue from high-tech heads (HT Drudge) — I asked why they didn’t consider doing this yesterday (2nd item). I didn’t know they visited here (ha).
  • Exhibit A — Americans are divided ideologically on their perceptions of the economy. People on the left think it stinks, people on the right are generally pleased. CNN television reported that situation, and, within a half-hour, brought on an “analyst” with ideological biases that weren’t disclosed. Ken at The Free Market Project reports.
  • Balloons instead of towers for remote-area wireless service — If it works, bring it on.
  • The fastest-growing economy in the world last year was ……. IRAQ, at 52.3% (HT Don Luskin). More details about where the country stands in comparison to the rest of the world is here.

Man’s Wallet Returned, after 39 Years

Filed under: Positivity — Tom @ 6:14 am

With the money still in it (HT Good News Blog):