Life in the Safety Net

If you have been reading my posts, you know I am among the long term un/underemployed. I was laid off from my then employer in April 2004. I know most economists place the official start of the Great Recession in December 2007 but given their continual "surprise" at how the economy does not conform to their expectations, the reality is a bit different. When I was laid off, I had spent the past seven to eight years working within IT on various State and Local Government social service projects. Unfortunately for me, many states had started cutting back in this area starting around 2001. Declining tax revenues led to cut-backs to contracts led to further declining revenues, etc.

Over the past nine years, I spent my unemployment benefits (I only received 6 months of unemployment benefits since my layoff preceded the official recession and advent of extended benefits.) I spent my savings. I cashed in my 401K and SEP/IRA (the best benefit there was even with paying the early cash-in penalties, I still got to spend more of the funds on myself instead of seeing the balances swirl down the toilet when the market crashed.) In 2007, I landed a part-time, online job that has been a god send.

I finally swallowed my pride in January of 2012 and applied for Supplemental Nutrition Assistance Program (SNAP) benefits (formerly known as Food Stamps). I was approved for benefits of $200 per month from Florida from February 2012 through June 2012 when I would have to be re-certified. I did not re-certify at that time as I was dealing with my late sister's estate by June and was able to pay myself a nominal salary. Since then, I have moved from Florida back to my home state of Kentucky. After I wrote this post in early July, documenting my soon to be homelessness, a friend from my hometown of Cynthiana, KY offered me a room in her home for Dan'l (my cat) and me. I am paying a nominal rent, my share of the utilities plus helping around the house. I have since applied for SNAP benefits here in Kentucky. I was initially denied due to lack of information, then approved for $159 per month then after a review after the state had received the remainder of my supporting information, the benefit amount was upgraded to $189 per month starting November 1. I do not know if the cuts to the over all SNAP program will affect my benefits but if there is a cut, so be it. I am fortunate enough to know how to cook and purchase food for myself so I can generally live within the benefit. I most likely would have to cut out the occasional treat of cookies or soda.

At this point, I am just trying to hang on until I reach age 62 next June and can apply for early Social Security. According to the SSA, my benefit for Social Security at age 62 is $1,371, a little above the current average overall benefit of $1,271 (as of September 2013.)

I do not have a car any longer. Maybe next year when I start the social security, between that and my small salary from my online job, I might be able to buy something (and pay the taxes and title and upkeep and maintenance and gas and insurance.) Once I am collecting social security, I will most likely no longer qualify for SNAP benefits and that's OK as I will have been able to use them to stay alive until I reached the "retirement" point.

Through all of this, I know I am still luckier than most. I have received help from family and friends that has kept a roof over my head. I am relatively healthy having had only a bad case of the flu back in early 2005 that I saw a doctor for, a cut on my hand in December 2005 that required an emergency room visit for four stitches (costing roughly $2,000 out-of-pocket as I am uninsured), and an infected tooth pulled at the dentist's in January 2013 for $175. The dentist gave me a 'scrip for free antibiotics to clear the infection before he pulled the tooth.

While I have been fortunate in many ways, I also know I am not alone. There are 900K veterans and 5K active military receiving SNAP benefits alone who will be impacted by the upcoming cut to the benefit level.

We hear all the stories about "fraud" in the SNAP program (and yes there is such a thing) but let me show a quick example. Let's pretend that one person has been receiving SNAP/Food Stamp benefits since age 18 at $150 per month and is now 70. Let's pretend this person has been committing fraud all along. If this person has received $150 a month for 12 months a year for 52 years, the total amount of fraud is $1,800 a year and $93.6K total. Compare that amount to the amount of farm subsidies that some members of Congress have been receiving. Which group is costing the tax payer more, my hypothetical SNAP fraudster or the recipients of hundreds of thousands of dollars annually in subsidies?

We have workers at McDonalds being directed on how to apply for SNAP benefits and Medicaid through the company's own Hot line. WalMart is the largest employer in the country yet is subsidized by the taxpayer nationwide paying for various welfare programs for the WalMart Working Poor.

It is not going to get any better anytime soon. The US economy needs roughly 90K each month just to keep pace with population growth. The ADP Jobs Report for October 2013 estimated a whopping 130K jobs for October while revising their September figures downward from 166K jobs to 145K. Add in the effects of the Government Shutdown and Sequester, I am willing to go out on a short limb and predict the official numbers from the BLS tomorrow (Friday, November 1) may well be down around 50K jobs for the month.

Some of the Beltway Village Idiots Politicians, Pundits, and Courtiers like to talk about how the numbers of people on Food Stamps and Medicaid are so high under President Obama while they avoid talking about people like Lloyd Blankfein quoted a couple of months ago at the Clinton Global Initiative:

In another remark likely to generate controversy, Blankfein praised the U.S. for having "accepted a higher unemployment rate" over the past few years, even as it bailed out the banks. Labor market flexibility—reflected in the ability of U.S. companies to fire workers—is one of the reasons the U.S. is doing so well despite many headwinds in the economy, he said.

Yep, there surely is no cause and effect between the rise in the folks using the Social Safety Net and the desire of people like Blankfein to keep unemployment higher so that wages and benefits can be kept lower.

And because I can:

The Concern Trolls Very Serious People Are Out

Damn but just when I reach a point where I think things can't get any stoopider inside the Beltway, we have a week like this one with the release of President Obama's "budget" and once again the reality of stoopid is even worse than imagined.

Word leaked last Friday (April 5) that Chained CPI was going to be part of President Obama's budget, prompting me to point out a simple truth, "A Bad Idea Is a Bad Idea, No Matter Who Proposes It." Of course, starting Monday, all the usual suspects and even a few somewhat surprising suspects started pushing the idea as a wonderful thing, maybe even as good as sliced bread.

The first cheers I saw, came from the Wall Street Journal. It is difficult to detail all the errors in this piece but it starts with the idea that Social Security has any bearing on the Budget in the first place the goes on to "explain" why Chained CPI is just such a good idea:

The chain-weighted CPI registers slower inflation than the usual CPI because it allows for the substitution effect of price changes. When the cost of one item rises, consumers switch to a similar product that has not risen in price (or not increased as much). The substitution can occur intra-item (whole wheat bread instead of white bread) and inter-item (beer versus wine). The chained CPI takes the shifts into its calculation; the traditional CPI does not.

Of course, these types of discussions never point out how the folks who are already "substituting" are supposed to pay for price increases, just as it fails to recognize the basic facts of Social Security, including the fact that the average monthly benefit is $1,264 per month, which is barely more than a minimum wage job pays and we all know how richly you can live on minimum wage. (Yes, that's snark.)

The Washington Post also is on the bandwagon and loving them some Chained CPI, once again pretending that Social Security is a part of the overall Federal Budget:

Most important, the president committed himself in writing to more than $100 billion in Social Security spending restraint over the next decade, along with $400 billion in health program reductions.

Ruth Marcus yesterday earned her WaPo0 money by being oh so very concerned with how the Republicans react to the President:

The conundrum of President Obama’s budget is that he has produced a “come let us reason together” proposal aimed at a Republican Party that has demonstrated no interest in being reasonable.

On Tuesday, Jared Bernstein of the Center on Budget and Policy Priorities wrote a blog post comparing Paul Ryan's "budget" with the President's by stating that if Ryan's budget is (self-described) as visionary, then the president's is "strategic." Bernstein quotes his colleague, Robert Greenstein (President of CBPP) who produced a statement in favor of President Obama's budget, and specifically, in favor of Chained CPI.

I can't begin to detail all the errors in Greenstein's statement but will try to address the most egregious ones. First off:

As it stands, the package makes tough policy choices while largely adhering to the principle, as enunciated by the Bowles-Simpson commission, that deficit reduction should not increase poverty or inequality. Nevertheless, the budget’s substantial spending cuts, both in entitlements and discretionary programs, would have real-world consequences for millions of individuals and families.

While there was a Bowles-Simpson commission, there was nothing "enunciated" by the commission as there was no report since the recommendations could not achieve the necessary vote count to be accepted as official. And once again, we have someone who should know better (and most likely does) trying to conflate Social Security as part of the overall Federal Budget.

Then there's:

Experts widely regard the chained CPI as a more accurate measure of inflation for the population as a whole. It may well be, however, less accurate for elderly individuals and many low-income people and, thus, understate the inflation that they face.

What experts are saying this? The best I have found is that the NY Times had an article claiming this that they would later correct as Dean Baker points out here.

Reuters presents it as The Grand Bargain while the Christian Science Monitor presents it as a great idea because liberals are angry so that must mean it is bi-partisnay or something.

Tiger Beat On the Potomac (h/t Mr Pierce) of all people, actually gets to the nut in their lede:

President Barack Obama says he’ll protect the most vulnerable seniors from his “chained CPI” proposal – but he’s not going to protect everyone. Not even all seniors.

The White House, fighting back against liberal critics who say he’s giving away too much, released details Wednesday of the protections Obama would include to make sure older seniors and low-income people don’t get hurt by lower benefits.

There it is. As I said the other day and will say many more times I'm sure, IF YOU HAVE TO MAKE SPECIAL PROVISIONS TO ASSURE PEOPLE ARE NOT HURT, YOU ARE DOING IT WRONG.

Such a simple damn concept. But of course, with all the people doing the cheerleading, none of them are people who actually have to live on Social Security so for them, it is only an intellectual exercise, not reality.

And because I can:

A Bad Idea Is a Bad Idea, No Matter Who Proposes It

Let me state this right up front - Chained CPI is a bad idea. A very bad idea. Former Clinton Labor Secretary Robert Reich explains why here:

Even Social Security’s current inflation adjustment understates the true impact of inflation on the elderly. That’s because they spend 20 to 40 percent of their incomes on health care, and health-care costs have been rising faster than inflation. So why adopt a new inflation adjustment that’s even stingier than the current one?

Social Security benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.

Dean Baker also explains why here (from The Nation 12/18/2012):

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has constructed an experimental elderly index (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

CNN Money seems to be in favor of Chained CPI but they add a significant caveat near the end:

By contrast, other liberal economists do see chained CPI as a more accurate inflation measure but say adjustments should be made to protect the most vulnerable from any hardships caused by the smaller benefit increases under chained CPI.

Obama has indicated he would support such adjustments, although he hasn't specified what they would be.

One option could be a one-time increase to Social Security benefits for seniors once they're in their 80s, said Goldwein, senior policy director at the bipartisan Committee for a Responsible Federal Budget. Another option: Exempting Supplemental Security Income, which pays benefits to poor seniors and the disabled, from chained CPI.

My bold. Please note: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

I say again: IF YOU HAVE TO MAKE SPECIAL PROVISIONS FOR THE LOWEST INCOMES YOU ARE DOING IT WRONG!

The Center on Budget Policy and Priorities has a list of 10 basic facts about Social Security here. Facts #4, #6, and #7 are especially pertinent (though all are important):

Fact #4: Social Security benefits are modest.

Fact #6: Almost half of the elderly would be poor without Social Security. Social Security lifts 14 million elderly Americans out of poverty.

Fact #7: Most elderly beneficiaries rely on Social Security for the majority of their income.

This is a link to the Social Security Administration's "Monthly Statistical Snapshot" (as of February 2013). As of February 2013, the average Social Security Retirement benefit is $1,264.88. This works out to be $15,221.28 per year. A mythical (non-existent) full-time minimum wage job ($7.25 x 40 hrs per week x 52 weeks) receives $15,080 per year. This is a blog post I wrote a couple of years ago showing how far the minimum wage goes these days. Short answer? Not very far at all. I tried to find the median Social Security benefit but was not able but given that the highest Social Security monthly benefit today is $2,513 for a person who retired at age 66 in 2012. In order to receive the highest monthly benefit, a person has to have earned maximum Social Security wages for their entire work life.

Once again, the people who will least need the use of Social Security are the ones most in favor of the cuts. For those who offer the cliche of "Everyone most have skin in the game" I will reply, "My skin in the game is all the years I have worked and earned Social Security and I will not see it destroyed so the 1% can avoid paying the bill that is now due from their "borrowing" of FICA wages to fund tax breaks.

I have not even mentioned the Veterans who will also be affected by Chained CPI. Their "skin" is the blank check they wrote when they signed their name and swore the oath of enlistment.

And because I can:

Jobs and Social Security

The January Jobs reports are out and for once, there is a modicum of (somewhat) good news. The Labor Department reported 157K new jobs for January 2013 and significantly revised both November and December 2012 numbers upwards:

Employers added 157,000 jobs in January, the Labor Department said, which was right in line with analyst expectations. The best news, though, was that revised estimates put job creation in November and December much higher than earlier estimated; the nation added a whopping 247,000 jobs in November and 196,000 in December, revisions that place those numbers a combined 127,000 jobs above earlier estimates.

The unemployment rate ticked up to 7.9 percent, from 7.8 percent, however, as both the number of people reporting having a job and the number looking for one edged up.

I'm sure we will hear a lot about how the January figures were "...right in line with analyst expectations" given how they are usually "surprised" that their predictions are wrong.

The .1% uptick in the unemployment rate (from 7.8% to 7.9% is not all that much of a surprise - or shouldn't be - if the economy truly is improving after all these years. The BLS U6 figure for the un/underemployed and marginally attached folks was unchanged at 14.4% (a figure that I believe is low but can't prove). Bloomberg reported the jobs news as:

Sustained hiring gains will give incomes a lift, buffering American workers from the sting of higher payroll taxes and helping them keep spending. At the same time, bigger employment advances are needed to drive down a jobless rate that Federal Reserve officials say is too high.

We can but hope Bloomberg is correct in this analysis that incomes will be lifted.

This past Wednesday, ADP reported 192K private sector jobs for January (versus 166K reported by BLS - see Bloomberg link).

One of the areas that seems to escape a lot of notice is how the jobs reports impacts the Social Security Trust Fund. Bloomberg touches on this with the mention of higher wages offsetting "...the sting of higher payroll taxes" but still seems to miss how higher employment will provide more funds to keep Social Security running without needing to be "fixed."

Of course, this in no way will stop people like Robert Samuelson of the Washington Post from offering up his fantasy of cutting Social Security as part of a "sequestration":

To be effective, a sequester has to hit millions of Americans so hard that, if it took effect, mobs of outraged voters would storm Capitol Hill.

Here’s my modest proposal to do that. Unless congressional negotiators agreed on at least $1 trillion in deficit cuts over a decade — personally, I’d go higher — then the desired amount would be raised in two ways: half from across-the-board income-tax increases and half from across-the-board Social Security cuts. People would see their take-home pay and retiree benefits reduced. There would be no mystery.

...snip...

It won’t happen. Truth in journalism: I have proposed this before. There were no takers. It would astonish me if there were any now. But the point is that there is a path to agreement. The fact that our so-called leaders don’t take it reflects their calculation that disagreeing is better politics.

Thankfully, he has had no takers so he has a sad.

Allison Linn at NBC News offers a counter to Samuelson and his gibberish with this report of a survey with results that fly in the face of so much Beltway Conventional Wisdom:

Most Americans think it’s important to preserve adequate Social Security benefits for younger generations — and they may even be willing to pay more taxes to get that assurance, a new survey finds.

The survey, released Thursday by the nonprofit National Academy of Social Insurance, found that about eight in 10 Americans think it is critical to support Social Security even if it means that working Americans have to pay more in taxes. A slightly higher percentage of the 2,000 people surveyed said they think it’s critical to save Social Security even if wealthy people have to pay more.

But here’s the thing: Many Americans also want something in return.

The study found broad-based support among both younger and older Americans for a plan that would gradually increase the amount of payroll taxes everyone pays and also eliminate the cap on the amount of income that can be taxed for Social Security. In return, that plan would call for raising minimum benefits and increasing cost-of-living-adjustments.

Raise minimum benefits, remove the cap on wages subject to Social Security, and increase cost-of-living-adjustments! Whocoodanode? Just the opposite of what Samuelson and the Washington Post (read: Pete Peterson) have pushed to get. It is only inside the beltway, with people who do not need Social Security, do we see the push to eviscerate it. Out in reality land, people understand the value of Social Security.

Now if we can just stop electing people who want to operate in Bizarro World.

And because I can:

Today's Anti-Social Security Propaganda

Well, it looks like there is a new push on in the long term destruction of Social Security today. Now, I usually write about the plight of the long term un and underemployed but I am getting close to Social Security eligibility so decided I would discuss the anti Social Security effort today.

I'll start with Fact Free Fred Hiatt's Concern Troll op-ed in today's (Monday, January 28) Washington Post. It seems Mr Hiatt wants to offer his advice to President Obama on "entitlement reform" using the guise of how Democrats and Republicans view the past four years:

To achieve a fiscal compromise, Obama agreed in 2011 negotiations with House Speaker John Boehner to changes in Social Security that would be anathema to liberals, but Boehner walked away from the talks.

...snip...

Both histories are factually correct. That coherent accounts can be written either way ought to suggest to partisans that neither version is quite the slam-dunk they imagine.

At a minimum, it ought to propel the White House to continue acting in the national interest, whichever party that seems to serve. And for a long time, Obama has said the national interest requires both revenue increases and reform of entitlement programs.

Once again, Mr Hiatt and the Post are pushing the myth that Social Security is a part of the overall Federal Budget and needs to be "controlled" to "fix the deficit" when in fact, Social Security loans to the Genera Fund have been propping up the Federal Budget for decades, allowing for the tax cuts over the years.

While I expect this type of nonsense from the Washington Post, today's Tampa Bay Times had a decidedly misleading headline ("US spends far more on seniors than on kids.") How is it misleading?

In 2008, all government (local state, and federal) spent $26,255 on average for each person 65 or older, most of which is Social Security and Medicare.

The blurb on children spending:

Conversely, the federal government spends relatively little on children and Medicaid is the largest single item. State and local governments spend much more n children because they pay for schools. But overall, governments spend far more than double on seniors than they do on children 18 and younger.

Finally, at the very bottom of this post, the Times offers a couple of caveats to offset the misleading nature of their headline and opening:

And boiling it down to a zero-sum game between young and old can make it seem as if those were the only choices. Indeed, other portions of the federal budget could be targeted instead, from defense spending to interest on the debt. Or people might be willing to pay higher taxes for government to do more.

Perhaps most crucially, if you spend dollars on the old, that can indirectly aid the young, and vice versa.

...snip...

Finally, some experts suggest that the issue isn't spending on the elderly versus spending on children. Rather, it's a question of what policies can promote high employment and growth versus policies that promote consumption today.

This brings us to Politico which offers this article titled "The quiet liberal plans for entitlement reform." Of course, the first "liberal" plan is the Chained CPI:

This new formula — a tweak to the consumer price index — would assume that people switch their buying habits when prices rise, rather than just buying the same things over and over. So, for example, if the price of ground beef goes up, someone might buy chicken or fish instead.

...snip...

But a lot of Democrats and liberals aren’t on board. They say seniors are already having a hard enough time with the current cost-of-living increases without dialing them back.

...snip...

That’s why liberals want any chained CPI agreement to be balanced out with measures to ease the burden on the seniors with the lowest incomes. For example, Paul Van de Water, a senior fellow at the liberal Center on Budget and Policy Priorities, suggests exempting people on Supplemental Security Income — which pays benefits to the lowest-income seniors — and making a special payment to seniors who have been on Social Security for 20 years because they get poorer as they get older.

Note to Politico and inside Beltway Villagers: if you have to make special provisions for the poorest and lowest income on the scale to avoid the bad impacts of a policy, that should by definition tell you the policy is bad for everyone.

For what it is worth, Politico does mention lifting the cap on Social Security earnings but limits this to:

Lift the cap so 90 percent of all Americans’ earnings are taxed — it’s only about 83 percent now — and a Social Security deal could raise about $550 billion in revenues over the next 10 years, according to estimates by Third Way, which has endorsed the approach. It would also wipe out Social Security’s deficit through 2020.

Of course, this is also misleading as "...wipe out the Social Security deficit through 2020..." discounts the loans Social Security has made to the general fund for 30 plus years and the surplus that was built up that was used to fund tax cuts.

There is a large amount of cluelessness across the board with the policies being discussed. A week and half ago, the "Business Roundtable" proposed raising the Social Security and Medicare eligibility ages to 70. Jon Walker at FDL Action made a rebuttal on this level of idiocy here. I would just like to ask these CEOs where the jobs are that allow folks to keep working until age 70? The BLS information for December 2012 shows the Unemployment Rate as 7.8 and the rate for the long term un and underemployed and those who have given up at 14.8% (a figure that I believe is much too low than actual). But of course, they don't actually have to do anything that might mitigate the problems they have helped to create.

And because I can:

Let's Play With Some Numbers, Social Security Edition

Boy howdy, but did I make a mistake this morning. I made the mistake of allowing myself to become distracted while I was "multi-tasking" and surfing the cable channels at the same time I was checking my emails AND getting a phone call. All of a sudden, I realized I was on MSNBC and listening to Moanin' Joe where the topic of the day appeared to be whining about how those dastardly libruls just wouldn't get with the program and worship at the altar of Pete Peterson (as Joe declared he does.)

Then I saw someone by the name of Rick Stengel talking about how "entitlements" needed to be cut in order for everyone to show how "serious" they are with the "fiscal cliff."

Of course, everyone that was on that show this morning (it included Harold Ford, Steven Rattner, Michael Steele, Disco Dave, Tweety, and Chuck Todd) as well as everyone on all the various talking head shows watched by the Beltway Village Idiots Courtiers are people who will never have to worry about living on Social Security as the only thing keeping them from poverty and homelessness, so they are all fine with most any and all changes being discussed. After all, they are all Very Serious People, often wrong but never in doubt. Why, we could almost call them all "economists" they are wrong so often.

A couple of years ago, I wrote this post, "Let's Play With Some Numbers" as a "what-if" about the mythical person working the mythical full time, minimum wage job and what that person might be able to afford as far as a place to live, and associated costs.

Why is this pertinent?

Well, the current average monthly Social Security payment (for October 2012) is $1,237 per month which works out to be $14,844 per year. This will go up to $1,261 in 2013. Where I had my mythical full time minimum wage earner paying FICA/Medicare taxes, other taxes (and some healthcare costs) and missing work on the "Big 6" holidays (New Years Day, Memorial Day, July 4, Labor Day, Thanksgiving, and Christmas) before getting into the actual available funds to pay bills (lowering the income from $15,080 by $2,570 to $12,510), the mythical average Social Security recipient pays $99.90 per month for Medicare Part B starting at age 65, going up to $104.90 for 2013.

The point of all this is that a mythical person collecting average Social Security benefits is in roughly the same position financially as the mythical person who works a mythical full time minimum wage job. My WAG is that for every person who is collecting Social Security and also has the benefits of a defined pension, 401K, or robust savings, there is another person who is relying solely and completely on Social Security and Medicare to stay alive. With the Great Recession having taken its toll these past few years, I imagine there are many people just trying to hold on until they reach age 62 and can start collecting something. I imagine there are many more, like myself, who have had to cash in their 401k/IRAs early just to try to stay alive for these past few years.

So let's remind the Beltway Village Idiots Politicians, Pundits, and Courtiers that there are real world consequences when they so blithely toss around "cut entitlement spending" as a "solution to the deficit." As Mr Pierce puts it so eloquently, "Fck the deficit. People got no jobs. People got no money."

And because I can:

The Vortex of Stupidity, also known as Washington, DC

I sometimes think that there has to be a crest to the levels of stoopid coming out of Washington, DC but obviously, I am wrong. Just the past two days, Dean Baker at his blog Beat the Press refuted three different pieces of so-called "conventional wisdom" by different members of the Beltway Village Idiots Pundits, Press, and Politicians in good standing.

First up was his having to counter a column from Steven Pearlstein of the Washington Post. Pearlstein says:

Europe is a different story. The bubble years allowed much of Europe to avoid making the kind of structural changes necessary to put its social welfare system on a sustainable fiscal path and reform its labor and product markets. The euro crisis — which is both a banking crisis and a sovereign debt crisis — has forced Europeans to begin addressing those issues.

Baker points out however:

Of course this is completely wrong. The countries with the well developed welfare states, Germany, Denmark, Sweden, the Netherlands are doing fine. The countries that are in crisis, Spain, Greece, Portugal, Ireland, have the least developed welfare states among the older EU countries.

Next up we have a WaPo0 opinion piece decrying the "looming short fall in public pensions." Baker points out here:

The pensions are underfunded in part because policymakers would not take seriously those of us who warned that pensions were making overly optimistic assumptions about stock returns before the market crashed. Returns have been well below expectations in the dozen years since the peak of the stock bubble in 2000.

The other reason is that some politicians, like New Jersey Governor Chris Christie, think it is really cute to not make the state's required contribution to the pension fund. Not surprisingly, if states get into the habit of not contributing to their pension fund, as has been the case in some states, then pension funds will be underfunded.

However it is more than a bit bizarre that we should therefore ripoff the workers who are counting on these pensions. Suppose state and local governments contract with construction companies for road work or hospitals to treat poor people. If the governments don't put aside the money to pay these contracts would we then think it makes sense to tell the contractors and hospitals to get lost?

Finally, today Baker goes after NPR and Nariman Behravesh, the chief economist of the forecasting firm IHS Global Insight, who thinks that the biggest problem we face is "the deficit":

Wow, isn't that impressive. So Europe, China and the rest of the world will be really impressed if the United States throws even more people out of work as long as it reduces its budget deficit! That's interesting, had it not been for NPR I never would have known people in the rest of the world thought this way.

As one of the 25 Million plus long term un and underemployed Baker mentions in his post, I would like to quote the inimitable Mr Pierce, "Fck the deficit. People got no jobs. People got no money.

David Dayen at FDL News today (Monday, October 22) covered a survey on the wage gap between federal workers and their private industry counterparts. Not so surprisingly, the public sector workers are paid far less than private sector jobs requiring comparable levels of skills and education:

If you compare organized federal employees, many of whom have college degrees, to unorganized service-sector and retail workers, then yes, you will find higher wages in the public sector. But if you do an apples-to-apples comparison between public employees and their private-sector counterparts in related fields, you will find that the public sector is significantly undervalued.

...snip...

You cannot lump together those who clean up the National Mall and those who work on scientific breakthroughs at the National Institute of Health, compare them to the “average worker,” and come up with a legitimate pay scale for federal employees. You have to go sector by sector and find the appropriate comparison in the private sector. And when you do that work, you see that federal employees are underpaid. This has an impact on millions of hard-working Americans, who are forced to take less than their skills would bring them back in the open market, because of a foolish tendency toward austerity and the demonizing of public workers.

Over these past few years, we've all seen many articles decrying the "generous pensions and salaries" of public sector workers, whether teachers, fire fighters, EMTs, or police at local levels or scientists at the NIH, NASA, JPL, EPA, or any other federal agency you wish to name.

My question is why?

One of the themes to emerge from this year's presidential race has been Mitt Romeny's "infamous" speech at a private fund raiser last May, calling 47% of the US basically moochers and freeloaders because they don't pay federal income taxes or they receive some level of federal benefits be it Social Security, VA or the Earned Income Tax Credit (EITC) among others.

But why is it so fashionable to trash people who have earned pensions, earned veterans benefits or Social Security or have used the EITC because of low wages? Shouldn't we be asking why there are so many people earning such low wages that they don't even pay a minimum federal income tax? I know for myself, I would dearly love to be earning a salary that would have me paying federal income taxes. Reuters offered this analysis on Friday (October 19):

The number of Americans not owing federal income taxes has been growing since the mid-1980s, and the increase largely stems from expansion of these two tax credits - championed by Republicans from conservative economist Milton Friedman to former President Ronald Reagan.

I want to work in my chosen field, earn a decent wage with benefits and pay my fair share of taxes. Instead, we see the "champions of industry" threatening employees with lay offs should President Obama be re-elected.

Right now, I'm a bit surprised we don't see more news articles like this one from the AP last Sunday (October 14) about a man attempting to rob a bank of $1 so he could be sent to a Federal Prison. How bad must it be to want to rob a bank so that you can get sent to prison. My guess is the three hots and a cot and health care sounded mighty appealing if the option was starving on the street.

And because I can:

The Very Serious People Missing the Interconnectedness of Everything

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As we see the various articles today about President Obama and the "grand bargain" being offered to get Republican votes for raising the debt ceiling, we also see further indications of the total cluelessness of so many of the folks who live inside of the beltway village.

A few weeks ago, I wrote this post explaining how good jobs would attack the so-called deficit problem. This is without addressing the $3.7T plus costs of our wars since 2001 nor that the cost of the Bush/Obama tax cuts are far larger contributors to the "problem."

The last few days, I have seen a couple of articles reinforcing for me that Pete Peterson and his acolytes are winning the battle. Just last Friday (July 1), Bloomberg had this article on the Government Accountability Office releasing a study (pdf) on how people are going to have to delay collecting Social Security and "buy an annuity" in order to pay for their retirements:

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

...snip...

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

Of course, the study does not and cannot explain how we are all supposed to be able to come up with the cash to buy an annuity nor does it explain how we're are supposed to find insurance companies that will actually be around to pay off on the annuities, even if we could afford them.

Ripples of Budget Cuts

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Over a lifetime of watching the political dances and games, there are a few things that can always be counted upon. The deficit hawks invariably claim that they are really, really, really only interested in "cutting out the fat honest." Except that public sector budgets have been slashed so many times over these last few years, the politicians are not only slicing meat and bone, they are carving up the gourmet cuts, all in the name of some nebulous "greater good" and "sacrifices must be made by the courageous." From Friday's (June 17) NY Times:

Lawmakers and aides say the negotiators quickly gobbled up low-hanging fruit like trimming agriculture subsidies and selling more of the telecommunications spectrum to generate revenue. There is a general consensus that federal workers are going to have to contribute more to their pensions, though the details are still to be determined. The Pension Benefit Guaranty Corporation will collect higher fees from stable companies, and some idle federal property could be up for sale.

...snip...

To get there, negotiators are going to have to make some excruciating choices about federal health care and safety-net programs, as well as the tax structure. At the same time, they need to reach a deal that not only can be sold to a bipartisan majority in the House and Senate, but also is credible enough to assure investors worldwide that Washington is getting serious about taking care of its financial health.

...snip...

Republicans want to see Democrats embrace more changes in Medicare and Medicaid, the federal health programs for older Americans and the poor.

Former adviser to presidents of both parties, David Gergen, was all over the AARP sell out with praise for their "courage":

The Beltway Fantasy Land in Operation

It is almost impossible for me to freshly describe the ongoing disconnect between what we see and hear coming out of the mouths of people in and around the Beltway Village and the facts on the ground for the rest of the country. I won't say that they must be on drugs because I've used drugs and I never was as far away from reality as the Beltway Village Idiots Pundits, Politicians, and Courtiers. They just live inside a fantasy bubble. It might be acceptable if the decisions they make each day didn't have such negative consequences for the rest of us.

The Initial Unemployment Claims report for last week came out today (Thursday April 28), and guess what? It surprised the economists. From Reuters:

Initial claims for state unemployment benefits jumped 25,000 to a seasonally adjusted 429,000, up from a slightly upwardly revised 404,000 the preceding week, the Labor Department said. Economists polled by Reuters were expecting claims to slip to 392,000 from the previously reported 403,000.

Of course, usually the surprise is the claims didn't fall as much as expected but today the claims went in the totally opposite direction than the predictions. Yet some of them refuse to give up their pre-conceived notions as AP quotes a Deutsche Bank economist that it is just "technical factors."

Well, those "technical factors" include the US economy growing at 1.8% for the first quarter of the year. From the NY Times:

American economic expansion slowed to a crawl in the first quarter, but economists are hopeful that the setback will be temporary. Total output grew at an annual rate of 1.8 percent from January through March, the Commerce Department said Thursday, after expanding at a 3.1 percent pace in the fourth quarter of 2010.

When the year began, economists expected a more robust growth rate of about 4 percent, only to be barraged by bad report after bad report. Turmoil in the Middle East led to higher oil prices, which had already been climbing because of increased demand in emerging markets like China. Housing sales dropped sharply. Winter blizzards closed businesses and delayed construction, causing investments in nonresidential structures like office buildings to fall 21.7 percent from the previous quarter. Imports, which are subtracted from gross domestic product, surged. Military spending sank.

There are all sorts of ready-made excuses for the economists as to why the slow growth, however there were two other stories in the news today that tell me far more about where the economy is today than any of the economic predictions.

Will the Gang of Six Receive the Gang of Four Treatment?

I won't say that great minds think alike but I had to laugh when I saw a link to this from HuffPo's Ann Stark. Beyond Teddy Partridge's Firedoglake post from Sunday night "Anti-gang Enforcement Needed On Capital Hill," Ms Stark's tweet about the Gang of Four rather crystalized for me some thoughts about how easily the Beltway Village Idiots Pundits fall into their usage of short hand terms without really any apparent understanding of the genesis of those terms. Whether it is the "Gang of Fourteen" or either of the two "Gang of Six" in the US Senate, I wonder if they want to remind people of the fate of the "Gang of Four."

From Time Magazine Gang of Four On Trial:

After many delays, the "evildoers "finally enter the dock

The long parade of limousines and buses knifed through Peking's wintry smog just before 3 p.m. As police and soldiers kept away curious bystanders, sober-faced men and women emerged from the cars, strode through the gates of the public security compound at No. 1 Zhengyi (Justice) Road near Tian'anmen Square and entered a large, brightly lighted courtroom. After taking their seats, the 35 judges and 880 "representatives of the masses" looked on impassively as the ten defendants were led into the court by bailiffs to hear the charges against them.

Thus began the long-awaited trial of China's notorious Gang of Four and six other high-ranking "evildoers." The carefully orchestrated courtroom drama, which is expected to last for several weeks, is the most important show trial to take place in the 31 years that the Communist Party has ruled China. The most celebrated defendant is Jiang Qing, 67, the widow of Mao Tse-tung, who, along with her allies in the Gang of Four,* led Mao's reckless and violent Cultural Revolution from 1966 to 1976. They were arrested four years ago, shortly after Mao's death in 1976. Also on trial are a group of senior military officials who allegedly plotted with the late Defense Minister Lin Biao to assassinate Mao in 1971 and seize supreme power for themselves.

Now I am not advocating that the current "Gang of Six" from the US Senate be subjected to a "show trial" for their zeal in dismantling the social safety net under the guise of "saving" it. But when these men have to next face the voters, they probably will not want to highlight their participation in cutting Social Security, Medicare, and Medicaid, all while preserving tax cuts for the top of the income chain.

It's Not Just Jobs That Are Needed

While I write mostly about the need for jobs and long term un and underemployment, there are always a number of related issues bubbling just below the surface for me. The past couple of days, I've seen a few articles that are seemingly unrelated but are probably more closely related than most folks realize.

The first article was from today's (Friday 1/28/11) NY Times on Standard & Poors downgrading Japan's Long Term Sovereign debt.

S.& P. lowered its sovereign credit rating for Japan to AA- from AA. That is three levels below the highest possible rating, and S.& P.’s first downgrade of Japanese government debt since 2002. With the lower grade, Japan’s debt rating is now on par with China’s, which last year overtook Japan as the world’s second-largest economy, after the United States.

S.& P.’s move came just weeks after both it and its rival ratings agency, Moody’s, cautioned that they might take a more negative stance on the United States. It highlighted just how deeply indebted many of the world’s developed economies remain — despite concerted efforts on the parts of governments to improve their balance sheets.

Yesterday was this from Reuters on Moody's considering downgrading the ratings for states:

(Reuters) - Some U.S. states face so much pressure to fund pensions for public employees that it could hurt their credit ratings, Moody's Investors Service said on Thursday.

As concerns grow over the financial health of many states after the 2007-2009 recession and how they will cut spending to cope, the ratings agency combined pension and debt data to rank the liabilities of each state.

In the past, Moody's evaluated credit risks from pensions and debt levels separately. Lower credit ratings could raise the costs to states of borrowing money.

Interesting isn't it how suddenly Moody's has to change how they figure things for rating the states and combine debt AND pension liabilities all of a sudden. One might think they have an ulterior motive in doing so.

Smart Cities, DeeCee, and Kitchen Table Conversations

Last night as I was channel surfing between snaps of the Patriots-Jets bash in Foxboro, I was momentarily distracted when I reached one of the local, Tampa area stations. They had a graphic up and were talking about the "Smartest Cities" as determined by Portfolio dot com. Boulder, CO was number one, Ann Arbor, MI at two and Washington, DC was third. I can't say I found any of these all that surprising given the criteria Portfolio used:

Portfolio.com followed Census Bureau guidelines in designing an educational ladder. The following are the five rungs, with average annual earnings for all workers, both full-time and part-time, at each level (as of 2007) in parentheses:

* Advanced degree ($61,287), including professional, doctoral, or master's degree
* Bachelor's degree ($46,805)
* Associate degree or attended college without any degree ($32,874)
* High-school graduate ($26,894)
* High-school dropout ($19,405)

Portfolio has a pdf download available that lists the top 200 in case you're interested.

However, I would contest the declaration of Washington, DC as the "third smartest city" even though it probably does fit the description based on the stated criteria. Educated? Yes. Smartest? Not hardly.

Cluelessness or Cognitive Dissonance?

My apologies for not writing any posts for a while but I do get tired of having to repeat myself so frequently.

Once again we see the cluelessness of the financial reporters in a couple of articles from the past few days. First up was an AP story (via MSNBC) which reported on an analysis from Fidelity Investments on people raiding their 401Ks due to "hardships." This came on top of the Weekly New Unemployment claims report showing (Reuters via CNBC):

New U.S. claims for unemployment benefits unexpectedly climbed to a nine-month high last week, yet another setback to the frail economic recovery.

Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended August 14, the highest since mid-November, the Labor Department said on Thursday.

Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday's report.

But today's (Sunday, August 22) NY Times really steps in it.

Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

Jobs and the Cat Food Commission

Have I mentioned recently that I NEED a FREAKIN' JOB?

Well, I do. As do many millions more of my fellow citizens. I'm feeling a bit too lazy to go get the official figures but just last week, the official Unemployment rate was 9.9% (roughly 15 million). Add in another few million for the Underemployed and a few million more to cover the folks who have given up, "self-employed," and the other groups not counted and the figure is probably doubled or more.

So what do we get? Scaling back of the so-called Jobs Bill to appease the Deficit hawks.

Under fire from rank-and-file Democrats worried about the soaring national debt, congressional leaders reached a tentative agreement Wednesday to scale back a package that would have devoted nearly $200 billion to jobless benefits and other economic provisions while postponing a scheduled pay cut for doctors who see Medicare patients.

Nothing about scaling back on fighting two wars of choice. Nothing about raising taxes on Hedge Fund managers who pocket Billions and pay taxes at the Capital Gains rate. (Parenthetically, why is "unearned income" felt to be so much more valuable than "earned income" that it is taxed at less than half the rate of earned income? Doesn't that fly directly against the traditional Horatio Alger effect that hard work is one of the primary positive attributes in the US and should be rewarded?)