Tag Archives: economics

Retirement Age

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Senator John Kennedy (R, LA) says Congress “of course” should talk about changing the retirement age for federal entitlements.

The life expectancy of the average American right now is about 77 years old. For people who are in their 20s, their life expectancy will probably be 85 to 90. Does it really make sense to allow someone who’s in their 20s today to retire at 62? Those are the kind of things that we should talk about.

He’s right, but there’s more underlying the current age-to-retire paradigm than just raw life expectancy, and those factors need to be addressed as well.

Two such factors are these. One is that when Federal Social Security was enacted during the reign of then-President Franklin Roosevelt (D), the worker-to-retiree ratio was in the neighborhood of 7:1, meaning that there were seven workers paying into the Social Security system for every American who’d retired. Today, that ratio has fallen to less than 3:1, and it’s continuing to shrink. There is less and less money coming into the system compared to what’s being paid out to retirees.

The other factor is the relative life expectancy of retirees, not just the raw longevity of Americans today. When Social Security was first enacted, the average life expectancy for a retiree was about seven years—a retiree lived about seven years after he’d retired. Today, that post-retirement life span is in the neighborhood of fifteen years and slowly lengthening. On top of less money being paid into the system per retiree, that more money being paid out also is being paid out for a longer period of time.

These are the problems that need to be solved. Raising the retirement age and/or raising taxes collected for the system are only stopgap measures that kick the heavily abused can down the sidewalk a short way.

The solution to both problems is to eliminate them. Privatize social security, making the tax payments a worker pays into the retirement system for the benefit of current retirees payments instead into a future retirement account for the worker’s own, and sole, benefit, with that account under the worker’s own investment control. Certainly the conversion from the current system to the new will be deucedly expensive, but that cost will only get worse the longer we delay the conversion.

In parallel with that, Congress needs to eliminate the limits on existing private retirement accounts to which workers have access: Traditional IRAs and 401(k)s, Roth IRAs and 401(k)s, 403(b)s, etc. There should not be (never should have been) any limits on the amounts a worker can contribute annually to these accounts, nor should there be any income limits even to eligibility to contribute.

If a worker, highly compensated or minimum wage, has his own money in his own retirement account, he’ll take much better care of it than Government can ever hope to do. That’s especially true of the minimum wage worker, who understands priorities, risks, and the value of his dollar much better than any Government bureaucrat, however well-intended that bureaucrat might be.

“Banking System is Safe”

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That’s what President Joe Biden (D) claims after the Silicon Valley Bank collapse.

Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you that we will not stop at this. We will do whatever is needed.

But that’s true only if regulators do their job and enforce the rules in place—as they chose not to do in the runup to SVB’s failure—and if risks are well-known and left to the responsibility of the risk-takers in a free market rather than laid off to us taxpayers to make those taking the risks whole.

That last just transfers the risks to us and leaves the risk-takers entirely free of risk. That last, also, is what concerns Senator Tim Scott (R, SC), even though Biden claims that taxpayers won’t cover the losses. Yes, we will. SVB doesn’t have enough book value, even were its liquidation not done at fire sale prices, to cover the billions of investor—venture capitalists, startups, bond holdings, and on and on—losses that will occur. Scott’s concerns:

We just heard recently that they’re going to really have the greatest form of corporate cronyism that we’ve seen in a very long time. They’re going to insure all the deposits, even the ones over the $250,000 limit, which means that the most sophisticated investors are now going to have the insulation of the federal government. That is problematic. It sends a very negative statement to the marketplace….

Scott’s concerns are well-founded. Here’s what Treasury Secretary Janet Yellen, Fed Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg said in their Sunday joint statement

Today we are taking decisive actions to protect the US economy…providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

That bailout is destructive of our banking system and of our economy at large.

I’ll have more on that last tomorrow.

Ending Subsidies

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President Joe Biden wants to end fossil fuel subsidies, per his budget offering.

I actually partly agree with him on this. But only partly, because he’s only partly ending subsidies—those for fossil fuels. He needs to end—or propose ending; it’s Congress that has to do the deed—all subsidies for any purpose in any industry.

Still he could make a major step forward were he to produce a favorable answer to my question:

Will Biden also end the “green” energy subsidies, or will the Progressive-Democrat continue to insist on picking industrial winners and attacking those industries of which he personally disapproves?

Guess.

A Strong Economy

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Stipulate, arguendo, that we actually have one of those going on. Federal Reserve Chairman Jerome Powell wants to cool it down hard.

The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

That is the Fed’s standard answer for dealing with inflation, manipulating interest rates are its primary tool, and it’s not an entirely wrong answer. Burgeoning economic activity that has demand for goods and services overwhelming the ability of producers to deliver the goods and services is a major driver of inflation, and that inflation hammers us average Americans by badly devaluing our incomes. Dampening demand is a way to deal with inflation.

However.

Consumer demand isn’t the only component of overall economic demand: Federal spending is another major player, and the Federal government creates completely artificial demand with its spending.

Repeat my opening stipulation. If our economy is strong, we don’t need nearly so much Federal spending. The Biden administration—and any following series of administrations—need to cut out the stimulus spending, cut back on “baseline” spending, and get out of the way of the private economy. Absent Federal…interference…in our economy, spending and supply will align quickly as us Americans decide for ourselves what we will buy, what we will produce, and the price levels at which we will carry out the relevant exchanges.

Take note, also: that puts a premium on the Republican House and Senate caucuses standing firm on requiring spending cuts beginning next fiscal year and continuing into the out years as a quid pro quo for raising the debt ceiling this year.

Needs

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In an editorial centered on the travails of a small pharmaceutical company, Novavax Inc, in developing medicines—here, particularly, Novavax’ Wuhan Virus vaccine in alternative to Pfizer’s and Moderna’s—there were these claims by then-NAIAD head Anthony Fauci in explaining the apparently deliberate regulatory delay in getting FDA approval:

We don’t need another vaccine.

And

It just seems rather unusual that people are waiting for something else when you have vaccines that have been given to now nine billion people[.]

This is another instance of Government presuming to dictate to us average Americans what our needs are instead of accepting that we know our needs and how to satisfy them much better than any Government bureaucrat.

Novavax’ alternative vaccine was 90.4% effective against symptomatic infection and offered 100% protection against moderate and severe illness, and now the company is on the verge of bankruptcy due to this governmental arrogance.

So much for medicine innovation.