Category Archives: Economics

Miscellaneous economy stuff

The Cynicism of the Obama Savings Plan

Posted on by
Reply

President Barack Obama in his SOTU speech offered a new “investment” plan for all those workers who don’t have access to a company sponsored 401(k).  His MyRA (My Retirement Account.  How cute.) would be available to anyone who has a job.  Sort of like traditional and Roth IRAs.

With those other IRAs, the owner can choose from a plethora of investment vehicles: stocks; mutual funds; bonds; even Treasury Bills, Notes, and Bonds.  And a bunch of other items, as well, but you get the idea.  The choice of investment, the choice of risk level, every choice of interest to an investor or a retirement saver, is that of the IRA owner.

MyRAs, on the other hand, have a single—count ’em—investment option: Treasury Bonds of the same type that Federal employees get if they enroll in the government’s Thrift Savings Plan Government Securities Investment Fund.  These bonds had an annual rate of return of 1.47% as recently as 2012, and a 10-year rate of 3.61%.  Talk about your wonderful employee discount deal down at the car dealership…..  At least the investor would be relieved of the burden of all those choices, though.

No, the truth of this wonderful Obama boon is that it’s just another way to con people into lending money to a spendthrift Federal government, this time with special emphasis on the targeted young and poor.

A Tiny Step

Posted on by
Reply

But sufficient for the moment.  Recall this in the next Congress, though, and address it more firmly then.

What is this?  It’s the food stamp compromise just reached between the Democrat-controlled Senate and the people’s House of Representatives.  The compromise keeps food stamp benefits for most Americans while cutting them overall by $800 million per year—a 1% cut.

That’s a step in the right direction, albeit chump change, but serious revamping isn’t possible so long as the Democrats control the Senate.  First things, first, and that means here, as with most items to come up this year, Republicans and Conservatives have to stay focused—and they have to develop a unified message with concrete solutions beyond just saying “No” to the Democrats (“No” is the Progressives’ knee-jerk answer to real reform) on which to focus—on the failures of President Barack Obama and the Reid/Schumer/Durbin Senate and on Republican/Conservative solutions to those failures.

With that, they can increase their hold on the House and gain control of the Senate and thereby start, in the next Congress, making real progress toward redressing the damage done by the Progressive policies of the last five (six, by this fall) years.  Building on that, they can also win the White House in 2016 and then truly start repairing the damage done.

Tapering

Posted on by
Reply

It seems the Fed is serious this time about starting tapering from its QEx foolishness—they’ve begun—and serious about continuing it—Fed Chairman Ben Bernanke, in his last FOMC meeting as Chairman, is unlikely to stop the taper, and incoming chairwoman Janet Yellen seems in no position to stop it.  And that’s generating some results.

[N]ow that the Fed seems set on drawing down the QE era, investors are hedging their bets and returning to dollar and euro assets.

The hardest hit are the countries with policies least able to stand without the Fed prop.  That includes Argentina, which the Kirchner clique has run like Venezuela without the populist charm.  Turkey’s lira has taken a bath amid the political showdown over corruption, a large current-account deficit, and monetary policy that has been too easy for too long.  Russia’s ruble is also hitting new lows against the euro, as its economy increasingly looks like a one-act play (oil).

And

A country that runs the world’s reserve currency is also the world’s central banker….  The last week’s exchange-rate gyrations are a repeat of what happened last summer when Mr Bernanke made clear he wanted to begin tapering the Fed’s bond-buying.  …  Now the Fed is leaking that it will keep tapering at its meeting next week, probably by another $10 billion, and markets are moving again.

This is hitting the domestic stock market, too, but then the market is not the economy—which is another factor underlying the domestic market’s negativity over tapering’s onset.

Get used to it, boys and girls.  We may be the world’s banker, but we aren’t the world’s piggy bank.

College for Everyone?

Posted on by
1

Maybe not.  I’ve written about the question of college for everyone elsewhere.

A report on a different subject, The Benefits and Costs of Delayed Marriage in America, posted at Knot Yet, has this in its “Conclusions and Implications:”

2 – How do we improve the job prospects for young adults who will not get a college degree but are willing and able to receive vocational training?
Surely improving the economy overall will help young adults without college degrees, as a rising tide lifts many boats, but how can these young adults be better prepared to enter the labor market even when the economy isn’t booming?  Even during recessions, there are decent jobs that go unfilled due to a lack of qualified applicants.  How can education and industry leaders work together more closely to target high-demand occupations that pay good salaries and formalize pathways into jobs in these sectors?  Countries like Austria, Germany, and the United Kingdom are achieving good success with vocational training, apprenticeship programs and placements for their young adults in industries as varied as nursing, information technology, and advanced manufacturing.  There certainly seems to be untapped potential for the United States to follow in their footsteps….

The Urban Institute‘s report, “Expanding Apprenticeship: A Way to Enhance Skills and Careers,” identified in a footnote to the above quote, points out that apprenticing—a natural extension of VoTech training (and given the modern responsibilities of office occupations—these aren’t your grandmother’s secretarial jobs—to Office Occupations training, also)—offers significant economic benefits to non-college graduate graduates (using middle-skill jobs as the baseline):

Looking at earnings impacts during the first 2.5 years after exiting [an apprenticeship] program, [Kevin Hollenbeck] estimated that the net social benefits to apprenticeship were about $50,000 per apprentice, far more than minimal gains accruing to community college students and WIA trainees.  In other words, it takes little time for a significant payoff to apprenticeship training to accrue to the worker and society at large.  On a lifetime basis, Hollenbeck projects the present value of earnings gains less costs at $269,000 per apprentice, compared to $96,000-$123,000 per community college attendee, and about $40,000 per WIA trainee.

We need to bring the VoTech and OO programs—updated to today’s technologies and business needs—back into our high schools, including public, private, parochial, charter, and make all of these programs voucher-accessible to the extent the programs are not already.

The UI report is well worth reading in its entirety, as is the Knot Yet report for its separate, main subject.

Income Inequality

Posted on by
Reply

According to a recent Fox News poll, most Americans don’t agree with President Barack Obama’s emphasis on income inequality, nor are we as dumb as Obama makes us out to be on the matter.

Obama’s latest squirrel is income inequality.  However,

  • all of 21% of voters with annual household incomes below $30,000 think the government should do something about it
  • 12% of those with incomes $100,000 or more feel that way.

What’s up with that?  It turns out that most Americans understand that economics in a free market isn’t a zero-sum game.

  • 84% of voters understand that if someone makes a lot of money, it does not mean someone else has to make less

It’s income agnostic, too:

  • 83% of voters with incomes below $50,000 say that
  • 84% of those with incomes $50,000 or more say that

Most Americans also understand that “spreading the wealth around” isn’t the path to prosperity.

  • 55% of voters think giving unemployment benefits to people who have been out of work for a long time discourages them from looking for a job.

Again, it’s income agnostic:

  • More voters than not in both higher and lower income groups say the benefits keep people from trying to find work.