Dear 22 Year Old: Concerning your economic Future
drurywriting.com
drurywriting.com
It amazes me how people fail to see their own Luddite-ism. Look, here's the deal: The Luddites protested the mechanization of the textile industry during the industrial revolution. Their reasoning was that if one person maintaining one machine could do the same work as 100 individual laborers, then that would mean 99 people out of work. It turns out, what businesses actually did was keep all 100 workers employed and instead turned out 100 times the product.
The U.S. (and the rest of the developed world) is only in trouble if we cannot continue to grow our economy exponentially (and keep in mind that an exponential increase in efficiency or an exponential decrease in material costs is just as good as an exponential increase in gross product). What really _kills_ me, though, is that the very thing that we need to achieve sustained growth is the very same thing that people are trying to cut out: funding for science and technology research.
Every time I hear some Republican's campaign add talk about: "Can you believe we spend money digging up dinosaur bones in China? Shouldn't we spend that money at home?", I die a little inside. If China overtakes the U.S. as a world power, it will be due, in part, to the rapid increase in Ph.D.s and research funding that they are currently undertaking.
In the history of the world, there has never been a time when the most powerful nation was not also the most technologically advanced.
Now it is certainly true that we'll be in less trouble if the economy grows faster than the hole being dug, but a hole is still being dug. If things improve it would be in spite of, not because of, the indebtedness being incurred. Again, the luddite fallacy is not applicable.
It is also certainly true (and proven over the centuries) that investment of capital accumulated through deferred consumption can, when applied toward improvements in technology, yield productivity gains, thereby improving the balance sheet of the inventor and the living standards of the common man. Such gains will emerge from the market, revealing what works and what doesn't, and in not working will free that capital to be put to more productive ends. It's not at all clear to me that a debt-funded, politically-allocated system will yield better outcomes.
The Ludic fallacy refers to making predictions based on past events, even though the probability of future outcomes includes variables not contained in the past dataset.
I think this attitude of "healthcare is expensive, deal" is particularly dangerous because of how insidiously defeatist it is. You start thinking nothing can ever improve healthcare, so why bother paying for research into improving healthcare, so healthcare doesn't improve. Universal healthcare is socialist and evil and doesn't work, and nobody ever solved problems by increasing the size of the public sector and funding research through the public sector...
To which I say: BULLSHIT! This is the very fundamental problem that we face. The private sector has no reason to decrease the cost of healthcare when they can just pump up their profits instead. Or, at least, they'll have no incentive to do so until healthcare is rationed. Or they'll start to have an incentive to be cheaper when people can no longer afford insurance. Either of those scenarios is not pretty, and will have a nasty transition period where people cannot get the care they need while the private sector figures out how to do things cheaper.
The public funds fire departments because structures burning, even private homes, is bad for society. If your house burns you become a burden on your neighbors or on the community, you can't be productive in the economy, etc. Why is it so hard, then, to see the parallels with healthcare? Healthy people are as or more beneficial to society as people with homes! If we can protect people's homes, why can't we protect their health?!?
After all, it was not government research that gave us the ability to manufacture Germany into submission. That came from people like Henry Ford. Even the airplane came from a private endeavor, while a government effort failed to get off the ground.
And if you look to the decline of the last great empire, Great Britain, in came in the wake of an expansion of the public sector. New technologies developed by government funding did not save the day.
Talk about oversimplifications that fit ones own viewpoint! A lot of things changed in the UK since they were at their peak. Correlation, Causation and all that jazz.
And yes, it all eroded away. It wasn't the loss of the colonies, but the loss of the things that gave it the ability to project its power in the first place.
If the government hadn't established AT&T as a monopoly, we would've had more innovation. Somebody would have tried to send faxes decades earlier if it were legal to plug your own equipment equipment into the wall.
Conflict of interest statement: I am a pure science graduate student, so take my opinions on science funding with an aliquot of NaCl.
Putting these kinds of things on the back burner may be a good thing only if you're sure that the money being spent on it will be used for something more necessary/efficient/whatever.
America isn't remotely close to a serious debate.
The problem with articles like this is that they assume the country is still capable of negotiating changes that would require significant shared sacrifices. The last thirty years, and 2008-2010 in particular, show exactly the opposite. Americans are going to insist on high spending and low taxes until a serious, generational crisis like the Great Depression makes that impossible.
Can anyone seriously look at the political culture today and imagine that a VAT could become law? Or that anyone is going to fall on their sword to cut Medicare and Social Security benefits? If anything is clear about American politics since the emergence of movement conservatism, it's that any attempt to increase taxes or tackle popular social programs is political suicide. Look at Obama's health care bill. I hope you like it, because no one is going to touch healthcare again in our generation.
I expect exactly nothing to be done about America's problems until those problems are so serious and the social dislocation so severe, that one party assumes near-dictatorial control of Congress and the motivation to use it, as happened during the Depression. There was an opportunity for rapprochement after the 2008 election, but that moment has passed. Now it's only a matter of time until the next, far more serious crisis.
If you want to plan for the future, don't assume American politics is somehow going to become more rational on its own. Plan for the crisis. Invest defensively. Don't assume the existence of government programs or the absence of sudden, sharp tax hikes.
Well, no one's going to take on the mantle of vast reform anytime soon, but there isn't an administration in recent history that hasn't tweaked health care a bit one way or the other.
At this point there are so many people talking of what's 'inevitable' that I'm disinclined to trust anyone who has a prediction range longer than a week.
I would at least give it more credence if it was from someone who appeared to have any sort of track record with or familiarity with economics. Looking at this guy's past columns, I see a pretty strange mix of stuff: http://www.drurywriting.com/keith/
I teach practical ministry courses at Indiana Wesleyan University. I write a weekly Tuesday Column during the school year and am usually backpacking or bicycling in the summer.
A real economics guru we've found.
The real problem people are complaining about is the burden that was shared by many (by having lots of kids) is going to be shared by fewer and fewer people.
WRT "growth in assets": they send out letters to all enrollees stating the amount of money that each has coming to them. and the number is higher than the amount the enrollee has paid in (to reflect the interest that "will accumulate").
WRT "paying out dividends": the system is paying out dividends, obviously. I know some of the people getting checks. Not sure what you meant by this.
I think it's a bit misleading to call Social Security a ponzi scheme -- mostly because it implies a ringleader, which I observe to be a dangerously appealing falsehood to many -- but your observations seem to be false.
either way, people have the right to the results of their own work and this scheme violates that right.
And that's precisely how Social Security operates, and precisely why it will run into problems.
I definitely agree that Social Security is going to go through growing pains as the population demographics change and benefits won't be the exact same as the previous generation, but I feel like people use the term "ponzi scheme" to smear the whole idea of Social Security rather than articulating why we shouldn't have it.
(According to this source http://www.ssa.gov/OACT/TRSUM/index.html the projected deficit was going to be $41 billion as of the beginning of August, a couple of months before the end of FY 2010).
According to Wikiepedia FY 2010's DoD budget, all categories except the black budget was $663.8 billion; that's a bit less than the year's Social Security expenditures. As for it's relationship to the whole budget (http://en.wikipedia.org/wiki/US_defense_budget#Military_budg...):
"The U.S. Department of Defense budget accounted in fiscal year 2010 for about 19% of the United States federal budgeted expenditures and 28% of estimated tax revenues. Including non-DOD expenditures, defense spending was approximately 25–29% of budgeted expenditures and 38–44% of estimated tax revenues."
The "including non-DOD" apparently includes:
"This does not include many military-related items that are outside of the Defense Department budget, such as nuclear weapons research, maintenance, cleanup, and production, which is in the Department of Energy budget, Veterans Affairs, the Treasury Department's payments in pensions to military retirees and widows and their families, interest on debt incurred in past wars, or State Department financing of foreign arms sales and militarily-related development assistance. Neither does it include defense spending that is not military in nature, such as the Department of Homeland Security, counter-terrorism spending by the FBI, and intelligence-gathering spending by NASA."
A substantial fraction of which can't be reasonably scored as "military spending".
Me neither, and I'm 22 as well. So long as we're not just being manipulated, I think it's probably a good thing. Hopefully it will make us more independent and self-sufficient in the long run.
Wasn't it Warren Buffet that mentioned he pays less taxes than his secretary? Or is this propaganda that I've been duped into believing?
Whether it's a good example, propagandistic, etc., is another story, but on the factual question of whether he said it, he did. The main reason isn't so much loopholes as source of income: employment income (what his secretary gets) is taxed at a higher rate than investment income (what Buffett gets).
Be frugal, marry wise and start a business. Take risks now while you are young. The future is bright.
This is the best analysis of the issue that I've come across, and well worth the reading time: http://www.ssab.gov/documents/IMMIG_Issue_Brief_Final_Versio...
I believe that's exactly backwards - they should need less total money if that happens. If student loans immediately ceased to be available, couldn't we expect the price of college education to drop in response?
If no student loans are available, affordability goes down followed by demand. The bottom feeder Universities get wiped out of the map first, but enrollment will fall across the board.
If a critical mass of applicants exist to support a reduced University System, a new equilibrium point will be found, and education cost will be cheaper. However, if this is not the case, the only survivors will probably be a handful of Ivy League schools, who will actually raise tuition and cater to the children of the wealthy.
If you're nice, I'll let you live in my Seastead: http://seasteading.org/
On the other hand my mother hasn't lived in the US for close to 35 years now and she still has to file a tax return and pay a few bucks every year, due to still having some financial ties with US.
Oh yea, if you have $10k at any moment in the course of the year you must report all bank accounts where the money was (i.e. 3k in one account, 5k in another, 2k in a third, report all 3). You wont hear about this rule unless you live in a so-called "tax haven". Guess why that is.
[1] This is very complex. For a single earner you can take an exemption on the first ~$80k. In most of the US that's a lot of money. Not necessarily everywhere, so depending on where you live you may hit this pretty fast. Taking the exemption makes you unable to claim certain things so you can also chose not to take the exception and use a more complex form. I have a tax guy do this for me (takes him over 3 hours to go through the paper work) and costs about $1k/year.
Say you move to France because US taxes increase. It's great in France. Then they up taxes, so you move to Australia. Then Australia goes to war and you disapprove, so you move again. At what point do you stick it out?
I'm not saying your country or city of origin is by default the best region for you to live. But the only reason there are great places to live is because intelligent, creative, passionate people found a community they cared about and they stayed to work through the difficult problems. You could be one of these people... or you could move to a country with currently lower taxes.
If you do find some place better, that's good for you. If you don't? then you'll have a much better appreciation for your birth country.