Contributors

Tuesday, August 31, 2010

Take a look at this video that was sent to me a while back.



So, let's see if I have this right...Detroit sucks because it's run by leftists and entitlements. And Mr. Crowder would like to know how that is working out?

Apparently, better than he wants to say in this video.

Jobs are growing. Factory workers are anticipating their first healthy profit-sharing checks in years. Sales are rebounding, with the Commerce Department reporting Friday that automobiles were a bright spot in July’s mostly disappointing retail sales.

What? Really?

The improving mood here reflects real changes in how Detroit is doing business — and a growing sense that the changes are turning the Big Three around, according to industry executives and analysts tracking the recovery.

Certainly they have a long way to go. But here are the facts.

Ford made more money in the first six months of this year than in the previous five years combined. G.M. is profitable and preparing for one of the biggest public stock offerings in American history Even Chrysler, the automaker thought least likely to survive the recession, is hiring new workers.

GM? Don't you mean "Government Motors?" It was my understanding from my colleagues on the right that this was destined to fail. And yet we have this news.

GM said Thursday that it made $1.3 billion from April through June, its second straight quarter in the black and a complete reversal from last year, when it was forced into bankruptcy and the U.S. government took a majority stake.

The federal government got a 61 percent stake in GM in exchange for $43 billion in aid to keep it alive. It could sell some or all of that when GM makes its public stock offering perhaps as early as November.

The proof is emerging in dealer showrooms, where customers are buying more of Detroit’s cars and paying higher prices. In July, G.M., Ford and Chrysler sold their vehicles at an average price of $30,400 — $1,350 more than a year ago and higher than an overall industry gain of $1,100, according to the auto research Web site Edmunds.com.

But why is all this happening?

Many of the excesses of the past — overproduction, bloated vehicle lineups, expensive rebates — are gone. All three carmakers have shed workers, plants and brands. And a new breed of top management — the three chief executives are outsiders to Detroit, as is the newly named G.M. chief executive — says it is determined to keep the Big Three lean, agile and focused on building better cars that earn a profit.

And this was all done at the behest of the government...a supposedly socialist one who is now poised to sell back their shares and let the big three continue on their merry capitalist way.

Of course, the image isn't completely rosy and they do have a long way to go but it certainly is working out much better than Crowder's heavily biased and over generalized piece makes it out to be. Just as FDR told GM to turn out a plane an hour, President Obama told them to restructure their companies to be more profitable.

It's like I've been saying all along. He's not a socialist...he's trying to save capitalism.

23 comments:

Anonymous said...

http://www.bloomberg.com/news/2010-09-01/gm-s-total-u-s-vehicle-sales-fell-24-9-last-month-more-than-estimated.html

A 'long way to go' indeed.

dw

last in line said...

That NYT article is almost 3 weeks old and is full of generalities like "Optimism is building, I felt like the worst was over in Detroit, important work to do, analysts say the current makeover has a more permanent feel, It’s just different now that they are in fighting shape, jobs are growing," etc. I loved this gem from it – "The company is recruiting again on college campuses and bringing in entry-level engineers and managers." Translation – we’re going on the cheap, you engineers with 25 years of experience have done priced yourselves out of the market. Hope and change baby.

From the Bloomberg article released today the dw linked to – Gm and Ford just had their worst August in 28 years. GM said deliveries fell 25% in August. Ford sales fell 11% in August. Chevy sales fell 22% in August. But on Notes from the Front – it’s all on the up and up!!

Now, I understand libs these days deciding to search for bright spots these days but as I said in the discussion on here some time ago about German economic numbers, a quarter or two of success attributable to government policy do not mean that the overall policy was successful. GM has indeed cut costs but can it stay in the black in an environment of declining sales and lower market share? Even with their pension obligations still in place that Toyota and Honda are not burdened with at all? GM is currently forecasting returns on its pension investments of around 8.5 percent a year. That’s pretty optimistic to me. A more realistic calculation may leave GM’s pension with an annual shortfall of around $7 billion, which might dampen investors’ appetite when the company’s IPO rolls around.

According to that NYT article - "The bankruptcies at G.M. and Chrysler slashed debt". Really? They got huge loans from taxpayers and really haven’t paid them back. Out of $50.7 billion in loans given to GM, only $7 billion, or 13.8 percent, has been repaid. Chrysler got $10.7 billion, of which it has repaid $2 billion. And let’s not forget about GMAC (now Ally Bank), GM’s financing arm, which received $16.2 billion and has yet to repay any of it. GM rid itself of GMAC’s problems by spinning it off shortly before declaring bankruptcy.

If you dig deeper, it looks like GM merely used one source of TARP funds to repay another. The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and members of the Obama administration have claimed in their speeches, press releases and television commercials. It’s kind of like paying off your Visa credit card with your Mastercard and then bragging about your financial condition. Only after careful scrutiny did it come to light that GM had paid off one set of taxpayer loans with another line of taxpayer credit - in effect, moving bailout funds from one account to another.

last in line said...

That NYT article is almost 3 weeks old and is full of generalities like "Optimism is building, I felt like the worst was over in Detroit, important work to do, analysts say the current makeover has a more permanent feel, It’s just different now that they are in fighting shape, jobs are growing," etc. I loved this gem from it – "The company is recruiting again on college campuses and bringing in entry-level engineers and managers." Translation – we’re going on the cheap, you engineers with 25 years of experience have done priced yourselves out of the market. Hope and change baby.

From the Bloomberg article released today the dw linked to – Gm and Ford just had their worst August in 28 years. GM said deliveries fell 25% in August. Ford sales fell 11% in August. Chevy sales fell 22% in August. But on Notes from the Front – it’s all on the up and up!!

Now, I understand libs these days deciding to search for bright spots these days but as I said in the discussion on here some time ago about German economic numbers, a quarter or two of success attributable to government policy do not mean that the overall policy was successful. GM has indeed cut costs but can it stay in the black in an environment of declining sales and lower market share? Even with their pension obligations still in place that Toyota and Honda are not burdened with at all? GM is currently forecasting returns on its pension investments of around 8.5 percent a year. That’s pretty optimistic to me. A more realistic calculation may leave GM’s pension with an annual shortfall of around $7 billion, which might dampen investors’ appetite when the company’s IPO rolls around.

According to that NYT article - "The bankruptcies at G.M. and Chrysler slashed debt". Really? They got huge loans from taxpayers and really haven’t paid them back. Out of $50.7 billion in loans given to GM, only $7 billion, or 13.8 percent, has been repaid. Chrysler got $10.7 billion, of which it has repaid $2 billion. And let’s not forget about GMAC (now Ally Bank), GM’s financing arm, which received $16.2 billion and has yet to repay any of it. GM rid itself of GMAC’s problems by spinning it off shortly before declaring bankruptcy.

If you dig deeper, it looks like GM merely used one source of TARP funds to repay another. The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and members of the Obama administration have claimed in their speeches, press releases and television commercials. It’s kind of like paying off your Visa credit card with your Mastercard and then bragging about your financial condition. Only after careful scrutiny did it come to light that GM had paid off one set of taxpayer loans with another line of taxpayer credit - in effect, moving bailout funds from one account to another.

last in line said...

Doh!

last in line said...

That NYT article is almost 3 weeks old and is full of generalities like "Optimism is building, I felt like the worst was over in Detroit, important work to do, analysts say the current makeover has a more permanent feel, It’s just different now that they are in fighting shape, jobs are growing," etc. I loved this gem from it – "The company is recruiting again on college campuses and bringing in entry-level engineers and managers." Translation – we’re going on the cheap, you engineers with 25 years of experience have done priced yourselves out of the market. Hope and change baby.

From the Bloomberg article released today the dw linked to – Gm and Ford just had their worst August in 28 years. GM said deliveries fell 25% in August. Ford sales fell 11% in August. Chevy sales fell 22% in August. But on Notes from the Front – it’s all on the up and up!!

Now, I understand libs these days deciding to search for bright spots these days but as I said in the discussion on here some time ago about German economic numbers, a quarter or two of success attributable to government policy do not mean that the overall policy was successful. GM has indeed cut costs but can it stay in the black in an environment of declining sales and lower market share? Even with their pension obligations still in place? GM is currently forecasting returns on its pension investments of around 8.5 percent a year. That’s pretty optimistic to me. A more realistic calculation may leave GM’s pension with an annual shortfall of around $7 billion, which might dampen investors’ appetite when the company’s IPO rolls around.

last in line said...

According to that NYT article - "The bankruptcies at G.M. and Chrysler slashed debt". Really? They got huge loans from taxpayers and really haven’t paid them back. Out of $50.7 billion in loans given to GM, only $7 billion, or 13.8 percent, has been repaid. Chrysler got $10.7 billion, of which it has repaid $2 billion. A nd let’s not forget about GMAC (now Ally Bank), GM’s financing arm, which received $16.2 billion and has yet to repay any of it. GM rid itself of GMAC’s problems by spinning it off shortly before declaring bankruptcy.

If you dig deeper, it looks like GM merely used one source of TARP funds to repay another. The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and members of the Obama administration have claimed in their speeches, press releases and television commercials. It’s kind of like paying off your Visa credit card with your Mastercard and then bragging about your financial condition. Only after careful scrutiny did it come to light that GM had paid off one set of taxpayer loans with another line of taxpayer credit - in effect, moving bailout funds from one account to another.

Mark Ward said...

Ah, but I never said it that all was wonderful and beautiful. Certainly the new numbers stink. But is it because of leftist entitlement policies?

No.

My point was to prove the pure propaganda of the video not say that GM is in the best shape ever, OMG! And that Obama is trying to save capitalism and is not, in fact, a socialist.

I also wanted to point out how a lot of waste is out of the company now. They aren't going to start improving in a significant way until the economy gets better.

RW said...

There were 655,000 moderately priced used cars destroyed under the cash for clunkers program.

That's 655,000 used cars off the current used car market. That reduces supply, and even in a down economy people need cars. Those who would, for economic reasons be shopping for a used car have found to their detriment that the reduced supply of used cars has raised the cost of those used cars.

http://blogs.edmunds.com/strategies/2010/08/with-used-car-prices-up-10-percent-over-2009-buyers-need-shopping-discipline.html


Edmunds.com says that the average price of a used car is up over 10%. This during a down economy!

When you want to spend, say $10,000 on a 3 year old mini-van for the family, but you can't get one for less than 11,000 and with crappy interest rates to boot. Buying a unsatisfactory micro-compact GM at a reasonable interest rate and a full waranty makes economic sense if not being practical for the usage.

That may look good for Detroit, but the rules of a free market economy have been skewed, again, by government intervention.

6Kings said...

Skewed is right! GM basically a huge amount of old debt and swapped it for equity stake for pennies on the dollar. Must be nice to get a free pass from the government to start again, bypassing the rule of law for creditors. Who couldn't benefits from not having to pay back debts?!

Anonymous said...

Umm. Yes, Mark. Re-read Last's post and you'll see that the failed policy of entitlements - in the sense of the UAW pensions - equates to the entitlement spending for Social Security and various other programs designed to 'help'.

They cannot be funded. The money to pay the future debts is simply 'assumed'.

When more is consumed than produced, the whole structure- the 'program', the company, the community, the nation - has to end at some point.

Perhaps there is a conection between a bankrupt automaker and a bankrupt country....

It isn't that difficult to explain the overwhelming union vote for Democrat, since the motto of D (and disgustingly - R) seems to be, that you can steal from your neighbor forever. You seemed to express that opinion yourself Mark, not so long ago. Didn't you say that these US could borrow forever without paying it back?

dw

Mark Ward said...

No, the US cannot borrow "forever" without paying back. But they have run much higher debt in the past and we've come through it just fine. Check the historical tables.

Congress has the power to borrow money on the credit of the US. This is written in the Constitution. I understand that you don't like how much they are borrowing or what it is for but the simple fact is that Social Security, for example, lowered the poverty rate from 50 percent in 1935 to 9 percent today.

http://politifact.com/truth-o-meter/statements/2010/aug/17/eddie-bernice-johnson/texas-congresswoman-eddie-bernice-johnson-says-soc/

That's not failure. That's a success. The problem we have here is that you are letting something you don't like (entitlements) color your judgment. You're letting your feelings get in the way of the facts.

I never said that things were rosy and perfect in Detroit. But they are NOT as described in this video. Yes, watching it is entertaining...sort of the conservative version of hearing David Bowie play Ziggy Stardust live...but it's not reality.

And now we have this....

http://www.startribune.com/business/102028108.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aULPQL7PQLanchO7DiUr

Again, not amazing awesome nor where we should be but not the picture painted by this video.

One more note on social security....suppose after the 2004 election, your wish was granted and Social Security was privatized. Where would that money be right now? I'll add Orwell to your answer.

"[A] return to 'free' competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the state."[

last in line said...

The poverty rate for Eddie Bernice Johnsons granchildren is even lower than 9.4% considering she just got busted steering college scholarships their way. Now that is change I can believe in.

Even if her numbers are true (which the politifact link had a hard time verifying), there are most certainly other factors involved in the poverty rate going down than social security, like an overall improvement in the standard of living in this country for everyone.

Social security is already in the red so the money isn't even in there now. The number of people turning 62 increased 30% in 2008 and will continue to increase each year for the next 15 years due to the baby boomers reaching age 62.

Mark Ward said...

"like an overall improvement in the standard of living in this country for everyone."

Do you think that this improvement can be attributed in some way to entitlement programs like Social Security, Medicare, and Medicaid?

RW said...

"But they have run much higher debt in the past and we've come through it just fine."

Yes, like the 40's through the mid 50's.

Taken from an accounting perspective you are comparing apples to rocks.

Debts due to a world war in which we financed half the materiel used to fight that war.

This was followed by a economic boom due to the fact that most of the worlds economies had been bombed into ruin and those that hadn't were indebted to us for loaning them guns and ships and tanks and bombs (or they were the soviets who couldn't run a profitable operation of selling pre-formed gold ingots).

From a business perspective we currently are in competition with every other economy in the world. And we have the disadvantage of much higher labor costs. So to an investor or loan officer our P&L sheet and debt to income ratio has to show a reasonable degree of solvency.

In the post war years that reasonable degree had a lot more latitude since the entire world needed widgets of all sorts, and we were the only source of the worlds widgets for the next five to fifteen years. From an investors point of view that monopoly looked pretty good.

The times have changed, the situation has changed and unless you are advocating that we start carpet bombing the industrial centers of Europe and Asia again you have to stop using this comparison. It just ain't valid.

6Kings said...

From: http://theblogprof.blogspot.com/2010/09/welcome-to-d-tires-and-rims-stolen-from.html

"Recently, Detroit was ranked #4 in what is called the "City Crimes Ranking Index," which includes in its calculations the performance of sports teams (go Wings!). Besides a top-4 placing in the City Crime Rankings Index, Detroit is ranked the #2 emptiest city in the nation, and has resorted to gaming census data to boost funding opportunities. In addition, Detroit is also ranked the most dangerous city in the country, the number 1 city in both lack of jobs, homicide rate, and in job sprawl, #2 most toxic metro area in the U.S., the most miserable city in the nation (#6 if sports teams are taken into account), with the worst jobless rate in the state (28.9%) and likely the nation, dead last among the 50 largest cities for finding jobs (if you want to see a real hockey stick graph look here), is run with much ineptitude and incompetence, home of the worst football team in NFL history, with a recent felon ex-mayor and a City Council that until recently was run by a moonbat, and still full of tax cheats after an election to replace a Council full of tax cheats, home of the very worst public school district in the nation (with an obscene 1 in 4 graduation rate) and maybe in history, with residents turning to rodents for food, printing their own money, with an average home price of a mere $5,800, and with some of the worst air in the nation.

An audit recently revealed that Detroit is incompetent at being incompetent. After 6 years and $10 million spent, the police department is only 40% done with its required reforms, in part because the federal monitor supposedly watching the process was allegedly getting stuffed like a Thanksgiving Day turkey by felon ex-mayor Kwame Kilpatrick, who the FBI had this to say about: "Kilpatrick and his associates used the mayor's office to run a criminal enterprise". While the city burns, 4 squad cars gave an escort to a bunch of stuffed toys for Michael Jackson, while the DPD cooked the books to keep the homicide rate artificially low. Recently, dead people have been receiving health benefits in the Detroit Public School security system, and weapons and motorcycles have been missing. In addition, the union workers in Detroit work only 35 hours per week but get paid for 40, and have 42 days off each year, are covered for Viagra, in addition to receiving Christmas bonuses. And remember - all of the above is the short list."

Now, how is that progressive agenda again? Oh, right...FAIL

last in line said...

I notice you conveniently trying to limit the discussion of entitlements to SS and medicare. There are plenty of other government entitlements beyond those two examples. It’s kind of like the examples of capitalism you always put forward being insurance companies, big banks and Enron-type crooks.

In the 30's and 60's, your folks were able to get virtually every piece of big-government legislation they wanted passed and implemented and we can see the damage now. The amusing thing about government-run social programs and entitlement spending is that their results are always in dispute. It’s pretty obvious to a lot of people that 40 years of liberal entitlement spending on poverty and welfare have resulted in the very epidemics of crime, homelessness, poor education, and racial tensions that liberals decry today. Liberals, on the other hand, have an endless supply of evil, white, conservative males they can pin their failure on (see: any blk post), even as they demand more money from those very people they decry to pay for even more failures of government entitlement programs. That’s the reason liberals need conservatives so much.

When FDR introduced the Social Security (FICA) program, he promised that participation in the program would be completely voluntary, that the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program, that the money the participants elected to put into the program would be deductible from their income for tax purposes each year, that the money the participants put in would go to an independent "Trust Fund" rather than into the General operating fund, and therefore would only be used to fund the Social Security Retirement Program and no other Government program, and that the annuity payments to the retirees would never be taxed as income.

Fast forward to 2010 - the folks who are now receiving a social security check every month are being taxed on 85% of that money, politicians eliminated the income tax deduction for Social Security (FICA) withholding, the independent "Trust fund" no longer exists – SS is put it into the General fund so that Congress could spend it every year, and immigrants who come here at age 65 begin receiving benefis immediately even if they never paid a dime into the program. Good job. And you guys trust government to solve problems?

The Social Security Administration essentially bet, many years ago, that a lot of people who paid into this mother of All Ponzi Schemes would simply not live to collect their benefits in any significant degree. It was a "You pay but don't play" sort of deal. As long as the dead suckers outnumbered the living suckers, all was well. Now that, through the wonders of medicine, our elderly can suck down benefits for one, two, or even three decades after 65, the Reverse-Ponzi kicks in and people actually get more out than they ever put in. Nice government solution you got going there.

last in line said...

I notice you conveniently trying to limit the discussion of entitlements to SS and medicare. There are plenty of other government entitlements beyond those two examples. It’s kind of like the examples of capitalism you always put forward being insurance companies, big banks and Enron-type crooks.

In the 30's and 60's, your folks were able to get virtually every piece of big-government legislation they wanted passed and implemented and we can see the damage now. The amusing thing about government-run social programs and entitlement spending is that their results are always in dispute. It’s pretty obvious to a lot of people that 40 years of liberal entitlement spending on poverty and welfare have resulted in the very epidemics of crime, homelessness, poor education, and racial tensions that liberals decry today. Liberals, on the other hand, have an endless supply of evil, white, conservative males they can pin their failure on (see: any blk post), even as they demand more money from those very people they decry to pay for even more failures of government entitlement programs. That’s the reason liberals need conservatives so much.

When FDR introduced the Social Security (FICA) program, he promised that participation in the program would be completely voluntary, that the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program, that the money the participants elected to put into the program would be deductible from their income for tax purposes each year, that the money the participants put in would go to an independent "Trust Fund" rather than into the General operating fund, and therefore would only be used to fund the Social Security Retirement Program and no other Government program, and that the annuity payments to the retirees would never be taxed as income.

Fast forward to 2010 - the folks who are now receiving a social security check every month are being taxed on 85% of that money, politicians eliminated the income tax deduction for Social Security (FICA) withholding, the independent "Trust fund" no longer exists – SS is put it into the General fund so that Congress could spend it every year, and immigrants who come here at age 65 begin receiving benefis immediately even if they never paid a dime into the program. Good job. And you guys trust government to solve problems?

The Social Security Administration essentially bet, many years ago, that a lot of people who paid into this mother of All Ponzi Schemes would simply not live to collect their benefits in any significant degree. It was a "You pay but don't play" sort of deal. As long as the dead suckers outnumbered the living suckers, all was well. Now that, through the wonders of medicine, our elderly can suck down benefits for one, two, or even three decades after 65, the Reverse-Ponzi kicks in and people actually get more out than they ever put in. Nice government solution you got going there.

last in line said...

Why does it keep double posting my shit?

As to your repeated claim on here that stocks go down and the SS money would have gone with it...

It’s common knowledge that most wealthy people invest their retirement savings in a mix of stocks, bonds, and other investments. The smart ones start off investing aggressively when they are young, getting more conservative and more liquid as they get older. That’s how you retire rich. That is not gambling. That is investing. But then you have folks of modest means in this country who find it difficult to save and invest. One of the reasons they may find it difficult to save and invest is that Uncle Sam skims 15 percent off the top of their paychecks and forces them to "invest" in Social Security — which, for most Americans, is an investment that provides embarrassingly low returns. So yes, there is risk when investing in stocks and bonds. But there is also terrifying risk when "investing" in Social Security. Have you seen what Social Security’s unfunded liabilities are? If it were a bank or an insurance company selling retirement annuities, it would have been shut down long ago, and its executives probably would have been charged with crimes. There is no corporation in the world that I am aware of with a hundred trillion dollars in net liabilities.

Stocks and bonds go bad sometimes; that’s why you don’t put all of your money into one company. But for people of modest means, who will be almost entirely dependent on Social Security, all of their eggs are in a red, white, and blue basket — and they could be scrambled at any time because when the time for choosing comes, and your politicians have to decide whether to pay its bondholders in Beijing or little old blue-haired ladies in Lubbock, Texas, waiting for their Social Security checks, who do you think is going to get shorted? The bond markets have the power to end Congress’s ability to borrow money on amenable terms - and that prospect scares the political class more than anything short of manual labor.

Since you, blk, Brandon, and Obama never talk about what you would do to solve the ss problems we face, maybe I’ll try to bait you here. Up to now, there only seems to be three options for Social Security reform: raise taxes, cut benefits, or switch to personal accounts. While benefit cuts are defensible economically, they are a disaster politically and are not likely to prove any more politically popular than personal accounts were, probably less so. Democrats are already organizing to fight any reductions.

Here’s another way of looking at it. Social Security pays out benefits according to a complicated formula based in part on recipients’ lifetime earnings. I’d be open to adjusting that formula so that the wages you make in the future "earn" you fewer Social Security benefits. Perhaps it could be said that a 65-year-old has a moral right to the payments that have been promised to him but a 21-year-old in his first day at work doesn’t have a moral right to benefits he hasn’t earned yet. Every plan to adjust the benefits formula recognizes this distinction. (That is, it lowers the rate at which benefits are earned going forward). The alternatives to reducing the future benefits of middle-income and high-income workers are 1) to tax them more heavily (which is pretty stupid econimcally and politically or 2) let the system collapse. And while there are a lot of problems with Social Security, it doesn’t have to keep spiraling toward bankruptcy every election cycle. Cut the growth of future benefits and it has a chance to be sustained for decades to come.

last in line said...

Why does it keep double posting my shit?

As to your repeated claim on here that stocks go down and the SS money would have gone with it...

It’s common knowledge that most wealthy people invest their retirement savings in a mix of stocks, bonds, and other investments. The smart ones start off investing aggressively when they are young, getting more conservative and more liquid as they get older. That’s how you retire rich. That is not gambling. That is investing. But then you have folks of modest means in this country who find it difficult to save and invest. One of the reasons they may find it difficult to save and invest is that Uncle Sam skims 15 percent off the top of their paychecks and forces them to "invest" in Social Security — which, for most Americans, is an investment that provides embarrassingly low returns. So yes, there is risk when investing in stocks and bonds. But there is also terrifying risk when "investing" in Social Security. Have you seen what Social Security’s unfunded liabilities are? If it were a bank or an insurance company selling retirement annuities, it would have been shut down long ago, and its executives probably would have been charged with crimes. There is no corporation in the world that I am aware of with a hundred trillion dollars in net liabilities.

Stocks and bonds go bad sometimes; that’s why you don’t put all of your money into one company. But for people of modest means, who will be almost entirely dependent on Social Security, all of their eggs are in a red, white, and blue basket — and they could be scrambled at any time because when the time for choosing comes, and your politicians have to decide whether to pay its bondholders in Beijing or little old blue-haired ladies in Lubbock, Texas, waiting for their Social Security checks, who do you think is going to get shorted? The bond markets have the power to end Congress’s ability to borrow money on amenable terms - and that prospect scares the political class more than anything short of manual labor.

Since you, blk, Brandon, and Obama never talk about what you would do to solve the ss problems we face, maybe I’ll try to bait you here. Up to now, there only seems to be three options for Social Security reform: raise taxes, cut benefits, or switch to personal accounts. While benefit cuts are defensible economically, they are a disaster politically and are not likely to prove any more politically popular than personal accounts were, probably less so. Democrats are already organizing to fight any reductions.

Here’s another way of looking at it. Social Security pays out benefits according to a complicated formula based in part on recipients’ lifetime earnings. I’d be open to adjusting that formula so that the wages you make in the future "earn" you fewer Social Security benefits. Perhaps it could be said that a 65-year-old has a moral right to the payments that have been promised to him but a 21-year-old in his first day at work doesn’t have a moral right to benefits he hasn’t earned yet. Every plan to adjust the benefits formula recognizes this distinction. (That is, it lowers the rate at which benefits are earned going forward). The alternatives to reducing the future benefits of middle-income and high-income workers are 1) to tax them more heavily (which is pretty stupid econimcally and politically or 2) let the system collapse. And while there are a lot of problems with Social Security, it doesn’t have to keep spiraling toward bankruptcy every election cycle. Cut the growth of future benefits and it has a chance to be sustained for decades to come.

last in line said...

It keeps double posting my shit!

As to your repeated claim on here that stocks go down and the SS money would have gone with it...

It’s common knowledge that most wealthy people invest their retirement savings in a mix of stocks, bonds, and other investments. The smart ones start off investing aggressively when they are young, getting more conservative and more liquid as they get older. That’s how you retire rich. That is not gambling. That is investing. But then you have folks of modest means in this country who find it difficult to save and invest. One of the reasons they may find it difficult to save and invest is that Uncle Sam skims 15 percent off the top of their paychecks and forces them to "invest" in Social Security — which, for most Americans, is an investment that provides embarrassingly low returns. So yes, there is risk when investing in stocks and bonds. But there is also terrifying risk when "investing" in Social Security. Have you seen what Social Security’s unfunded liabilities are? If it were a bank or an insurance company selling retirement annuities, it would have been shut down long ago, and its executives probably would have been charged with crimes. There is no corporation in the world that I am aware of with a hundred trillion dollars in net liabilities.

Stocks and bonds go bad sometimes; that’s why you don’t put all of your money into one company. But for people of modest means, who will be almost entirely dependent on Social Security, all of their eggs are in a red, white, and blue basket — and they could be scrambled at any time because when the time for choosing comes, and your politicians have to decide whether to pay its bondholders in Beijing or little old blue-haired ladies in Lubbock, Texas, waiting for their Social Security checks, who do you think is going to get shorted? The bond markets have the power to end Congress’s ability to borrow money on amenable terms - and that prospect scares the political class more than anything short of manual labor.

last in line said...

Since you, blk, Brandon, and Obama never talk about what you would do to solve the ss problems we face, maybe I’ll try to bait you here. Up to now, there only seems to be three options for Social Security reform: raise taxes, cut benefits, or switch to personal accounts. While benefit cuts are defensible economically, they are a disaster politically and are not likely to prove any more politically popular than personal accounts were, probably less so. Democrats are already organizing to fight any reductions.

Here’s another way of looking at it. Social Security pays out benefits according to a complicated formula based in part on recipients’ lifetime earnings. I’d be open to adjusting that formula so that the wages you make in the future "earn" you fewer Social Security benefits. Perhaps it could be said that a 65-year-old has a moral right to the payments that have been promised to him but a 21-year-old in his first day at work doesn’t have a moral right to benefits he hasn’t earned yet. Every plan to adjust the benefits formula recognizes this distinction. (That is, it lowers the rate at which benefits are earned going forward). The alternatives to reducing the future benefits of middle-income and high-income workers are 1) to tax them more heavily (which is pretty stupid econimcally and politically or 2) let the system collapse. And while there are a lot of problems with Social Security, it doesn’t have to keep spiraling toward bankruptcy every election cycle. Cut the growth of future benefits and it has a chance to be sustained for decades to come.

rld said...

Thread killed. Good job last in line.

last in line said...

Thanks RLD. Nothing in here but the crickets. That usually happens when you ask them a question or ask for their solution to an issue.