J. K. Galbraith thinking outside the box

[Thailandnotes]

"The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less."

http://www.foreignpolicy.com/article...isdom?page=0,7

[Thailandnotes]

Re: J. K. Galbraith thinking outside the box

http://www.bostonreview.net/BR36.1/galbraith.php

"Now, with fifteen million unemployed, Robert Pollin calls for a new emphasis on full employment. But how do we reach it in our present world? A revival of New Deal shovel projects would be foolish—these days that sort of work is done mostly with machines. A general expansion of demand would create jobs, many of them in China. A new bubble (in what?) would be unsustainable. And we have issues of energy and climate that weren’t there in 1945.

"Thus strategy going forward should emphasize concrete acts consistent with full employment and other necessary goals. Why not rebuild the country to meet our energy needs and cope with climate change? Putting these in a stimulus bill doesn’t work: when the political winds turn, the projects get canceled. We need stable institutional funding, planning, and execution over time—just the sort of thing delivered best by an infrastructure bank."

[flintlock]

Re: J. K. Galbraith thinking outside the box

I agree, we don't need the workers. The problem is, they can't afford to retire, and we can't afford to support them. Or can we?

[jtabeb]

Re: J. K. Galbraith thinking outside the box

Galbraith gets it totally right here. Guaranteed income is what's needed.

[c1ue]

Re: J. K. Galbraith thinking outside the box

The direction is good, but in order for this to be possible, the US must cut its military spending significantly.

And I don't see that happening barring a revolution-level political shift.

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

The direction is good, but in order for this to be possible, the US must cut its military spending significantly.

And I don't see that happening barring a revolution-level political shift.

Don't forget, defense spending is mostly a jobs program.

The US does not have to cut its military spending.

Here's a solution: take all of that fat 401(k)/403(b) money and put it into T-Bills.
Amend title 26 of the United States Code (chapter 1, subchapter D, part 1, subpart A) to only allow for Qualified Cash of Deferred Arrangement in cases where employers and employees invest in treasury securities.

Here's another solution: Enforce a stricter version of the Omnibus Foreign Trade and Competitiveness Act.

Here's another solution: Bump the top marginal tax rate up to the median of it's value over the last century (50%).

Here's the easiest solution: Eliminate the FICA Wage Base and tac a FICA percentage tax on to all declared capital gains.

Then let people retire at 62, bring the young into the work force, and call it a day. This is not hard. It is a revenue problem, not a liability problem.

[c1ue]

Re: J. K. Galbraith thinking outside the box

Here's a solution: take all of that fat 401(k)/403(b) money and put it into T-Bills.
Amend title 26 of the United States Code (chapter 1, subchapter D, part 1, subpart A) to only allow for Qualified Cash of Deferred Arrangement in cases where employers and employees invest in treasury securities.

You might be surprised just how small that pool is.

As late as 2003, the total amount in 401Ks was only $1.9 trillion (up from $1.81 trillion in 2002). That's only enough for a bit over 1 year at current national debt accumulation levels.

http://www.ebri.org/pdf/publications...0205fact.a.pdf

While the total has probably gone up, on the other hand it is debatable how much it has gone up given the market's performance in the past 8 years. It certainly isn't $4 trillion or more.

As for military spending - while certainly it has aspects of a jobs program, more accurately it is a pork barrel program. The actual cost to employ each person via Defense is likely many multiples more than just giving out a living wage directly.

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

As for military spending - while certainly it has aspects of a jobs program, more accurately it is a pork barrel program. The actual cost to employ each person via Defense is likely many multiples more than just giving out a living wage directly.

Yes, but that's the price of running a jobs program that is difficult to cut. Handing out a living wage directly would spark public ire. F-22s do cool maneuvers...

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

You might be surprised just how small that pool is.

As late as 2003, the total amount in 401Ks was only $1.9 trillion (up from $1.81 trillion in 2002). That's only enough for a bit over 1 year at current national debt accumulation levels.

True enough, but $1.9 Trillion would offset both China's and Japan's current holdings, and it would be a relatively stable inflow of funds. It would also serve to stabilize and make (somewhat) predictable retirement accounts while keeping foreign lenders relatively happy. Meanwhile it's a quick influx of demand.

The FY10 discretionary budget was ~$1.4 Trillion with about $850 Billion of that going to defense - likely a hundred billion or so is war support. The wars themselves are off the books, of course, so there's another $117 Billion for Afghanistan alone. Point being that we could cut defense entirely and the situation would not resolve itself. Increased payroll taxes are the only way responsible way out of the rest of the morass. Or one could put off retirement until 85 for anyone born after 1980. The only question is whether the lower 99% will pay for it or whether the upper 1% will. Take a guess who's going to win that one...

[c1ue]

Re: J. K. Galbraith thinking outside the box

True enough, but $1.9 Trillion would offset both China's and Japan's current holdings, and it would be a relatively stable inflow of funds. It would also serve to stabilize and make (somewhat) predictable retirement accounts while keeping foreign lenders relatively happy. Meanwhile it's a quick influx of demand.

The FY10 discretionary budget was ~$1.4 Trillion with about $850 Billion of that going to defense - likely a hundred billion or so is war support. The wars themselves are off the books, of course, so there's another $117 Billion for Afghanistan alone. Point being that we could cut defense entirely and the situation would not resolve itself. Increased payroll taxes are the only way responsible way out of the rest of the morass. Or one could put off retirement until 85 for anyone born after 1980. The only question is whether the lower 99% will pay for it or whether the upper 1% will. Take a guess who's going to win that one...

Fair enough, though offsetting China's and Japan's holdings via 401k would only be 1 year worth.

I think in reality it would need to be a combination of activities to implement what you are advocating: not just effective nationalization of savings in 401Ks, but also cutting of the more egregious defense spending.

[lektrode]

Re: J. K. Galbraith thinking outside the box

Don't forget, defense spending is mostly a jobs program.

The US does not have to cut its military spending.

IMHO, i dont think we have a choice at this point.
i say CLOSE ALL THE BASES NOT ON US TERRITORY, bring all the troops home and PUT EM TO WORK REBUILDING _OUR_ INFRASTRUCTURE, and let the rest of the world take care of themselves - we CANT AFFORD to be the worlds beatcop anymore.

and start building 500 nuclear power plants - as soon as possible, with ONE SINGLE DESIGN that gives all producers a piece of the action - kinda like the boeing 787, but with better coordination (cuz if we cant depend upon our own/US companies like boeing to 'get it right' - we are screwed.)

Here's a solution: take all of that fat 401(k)/403(b) money and put it into T-Bills.
Amend title 26 of the United States Code (chapter 1, subchapter D, part 1, subpart A) to only allow for Qualified Cash of Deferred Arrangement in cases where employers and employees invest in treasury securities.

emphatically DISAGREE: that would be THEFT, worse than what the .gov just allowed the banksters to get away with.

Here's another solution: Enforce a stricter version of the Omnibus Foreign Trade and Competitiveness Act.

Here's another solution: Bump the top marginal tax rate up to the median of it's value over the last century (50%).

Here's the easiest solution: Eliminate the FICA Wage Base and tac a FICA percentage tax on to all declared capital gains.

Then let people retire at 62, bring the young into the work force, and call it a day. This is not hard. It is a revenue problem, not a liability problem.

the main problem = SPENDING in the wrong areas.

and i agree with this " Eliminate the FICA Wage Base and tac a FICA percentage tax on to all declared capital gains."

at least until the soc-sec account balances - I WANT EVERY LAST DOLLAR OF THE BILLIONAIRE BOYS CLUBS INCOME TO HAVE THE FICA TAX LEVIED ON EM - also the celebrity universe, as well as the sports heros' multi-million-dollar salaries to boot.

AND THEN ****MEANS TEST**** for 'eligibility' with a cutoff at 200% of per capita income in 'retirement' - because if you got that much money coming in while NOT working, YOU DONT NEED 'social security' - which was orig designed to be 'insurance' (and not just another 'entitlement') against being indigent and unable to feed yerself after getting too old to work - and what makes 'social security' any different than any other form of 'insurance' ? so what - "i paid-in all my life for that" - well, so didnt you pay-in all your life for auto, home and health insurance - BUT IF YOU DONT FILE A CLAIM YOU DONT GET ANYTHING BACK -

right????

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

Fair enough, though offsetting China's and Japan's holdings via 401k would only be 1 year worth.

I think in reality it would need to be a combination of activities to implement what you are advocating: not just effective nationalization of savings in 401Ks, but also cutting of the more egregious defense spending.

Agreed. I am no fan of the BS we're being sold on a regular basis. I would like to put forth potential solutions to the problems of the day that actually could balance the books and increase employment. Government programs are not a good way to do this generally. It is much better to handle it with the tax code, trade policy, labor law, and regulatory tools. This is exactly the sort of thing J.K. Galbraith is advocating, which is why I enjoyed the article so much (thanks Thailandnotes!)

I'm willing and eager to entertain other concepts and solutions so long as the arithmetic actually works. Policy based on sound arithmetic and the best available information of the day should be the goal. I do not like to 'bet' on 'innovation' or 'entrepreneurship' lifting us out of this mess. Let it be a happy by-product if/when it happens, but the arithmetic of policy has to make sense regardless. Right now, it does not. Policy makers craft a more fragile system with each passing day.

I also am very suspicious of any recommendations that foster greater wealth inequality. At this point the US is between Turkmenistan and Senegal on the GINI index rankings out of the UN. Greater wealth inequality will not benefit the economy, public health, public safety, etc. Yet whether you're a Republican House Speaker or a Democrat in the White House, a more regressive tax structure is the goal. Nixon took us off the gold standard and gave states no-strings-attached money. Obama can't raise taxes in the top bracket 4%? Then he slashes payroll taxes? If a Republican ever slashed payroll taxes, they'd hang him/her out to dry. Give me a break.

By the way, the most egregious defense spending is probably outright theft/fraud. The system is so opaque that it likely happens more often than in other sectors. Off the wire today.

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

and i agree with this " Eliminate the FICA Wage Base and tac a FICA percentage tax on to all declared capital gains."

at least until the soc-sec account balances - I WANT EVERY LAST DOLLAR OF THE BILLIONAIRE BOYS CLUBS INCOME TO HAVE THE FICA TAX LEVIED ON EM - also the celebrity universe, as well as the sports heros' multi-million-dollar salaries to boot.

AND THEN ****MEANS TEST**** for 'eligibility' with a cutoff at 200% of per capita income in 'retirement' - because if you got that much money coming in while NOT working, YOU DONT NEED 'social security' - which was orig designed to be 'insurance' (and not just another 'entitlement') against being indigent and unable to feed yerself after getting too old to work - and what makes 'social security' any different than any other form of 'insurance' ? so what - "i paid-in all my life for that" - well, so didnt you pay-in all your life for auto, home and health insurance - BUT IF YOU DONT FILE A CLAIM YOU DONT GET ANYTHING BACK -

right????

Perhaps we are getting somewhere then. I say do it for the Medicare HI too (that brings the 6.2% up to 7.6%). Is anyone here adamantly against this (I'm sure someone is, but debate would be good)?

As an aside, the problem with the typical .gov means test is that it rarely attempts to calculate net worth and simply looks at income. This is how trust fund babies can get food stamps to trot off to whole foods with. At least it's a start.

[thriftyandboringinohio]

Re: J. K. Galbraith thinking outside the box

http://www.bostonreview.net/BR36.1/galbraith.php

...A revival of New Deal shovel projects would be foolish—these days that sort of work is done mostly with machines. ...

True, but only if taken literally to mean shovels and picks.

There are many activities in the modern interconnected world that we need to be essentially perfect -the chain of title for real estate is a good example; contracts and specifications for large infrastructure projects are another. Applying many people to this sort of work could would increase the perfection of critical things in useful ways.

[dcarrigg]

Re: J. K. Galbraith thinking outside the box

True, but only if taken literally to mean shovels and picks.

There are many activities in the modern interconnected world that we need to be essentially perfect -the chain of title for real estate is a good example; contracts and specifications for large infrastructure projects are another. Applying many people to this sort of work could would increase the perfection of critical things in useful ways.

Very true. One only needs to establish the rules that require it. One could establish rules that actually benefit manufacturing on American soil. It's up to us and our representatives...