"Has America Lost Its Mojo?"

Ken Rogoff says the pessimists are probably going too far when they say the economy is headed for "a second worldwide Great Depression":

Has America Lost Its Mojo?, by Kenneth Rogoff, Project Syndicate: You know that American self-confidence is shaken when even the President starts expressing fear that the financial crisis may turn out worse than the Great Depression...

Professional forecasters ... forecast ... U.S. growth in 2009 at around -1.5 percent... This would be a painful recession, but far short of the 10-15 percent output drop normally associated with a full-blown depression. Of course, economic forecasters have generally been far too optimistic ... of late, so the public is understandably leery of their prognostications.

Consensus forecasts do still seem optimistic. With its financial system on life support, housing prices continuing to plummet, and unemployment rising, the U.S. economy is looking ... vulnerable...

Still, it must be noted that negative output growth for more than two years is a relatively rare event, even in the aftermath of severe banking crises. Historical statistical relationships are perhaps cold comfort... But they should not be dismissed. ...

The basic elements of a recovery package include, first and foremost, a rational approach to rebooting the financial system. This means mark-to-market pricing of assets, restructuring and recapitalizing banks, and a new approach to regulation... Help for housing is required to prevent overshooting in home prices, as is massive macroeconomic stimulus, including a moderately inflationary monetary policy.

A number of leaders, most prominently German Chancellor Angela Merkel, are understandably worried about the longer-term consequences of aggressive macroeconomic stimulus. These concerns are valid, even more so given government's growing role in the economy. But, as in wartime, one hopes these effects are temporary. Besides, is inaction a real alternative?

Prior to the 1950s, output drops of 15-20 percent in a single year were routine (admittedly, national income accounting was more primitive.) A number of academic economists say we should simply tough it out as we did back then. Recessions have important cleansing effects, helping to facilitate painful restructuring.

But today's social, economic, and political systems ― at least in developed countries ― are unable to withstand a peacetime decline in output of 15-20 percent within a short period. Massive stimulus and intervention ... is unavoidable. One can only hope that the state can get out of the economy half as fast as it is getting in. Nevertheless, the distinct possibility that stimulus and restructuring may work is further cause to hope that the deepening recession will not morph into a full-blown depression. ...

[J]ust as optimists were too sanguine in the boom, ultra-pessimists probably go too far in forecasting a depression around the corner. 2009 will be a tough year. Yet, absent a large-scale conflagration, there is a fair chance that 2010 will see a restoration of weak growth in the U.S., Europe, and Japan, and probably robust growth in most emerging markets. The U.S. economy may have lost a fair chunk of its mojo, but it will require a lot more bad luck and policy blunders to get to .

Comments

[anne]

Lost but found:

"The U.S. economy may have lost a fair chunk of its mojo, but it will require a lot more bad luck and policy blunders to get to a second worldwide Great Depression."

[Ken]

Maybe not the mojo, but I think the mystique is shot all to hell. That could be a problem, if I'm correctly recalling some of the policy arguments from a few years ago.

The argument was that it was OK to export the manufacturing base and large chunks of the service economy, because the financial sector would take up the slack. Obviously foreign investors would see that the US markets were the best and safest place to place their funds, and would make heavy use of the expertise of the US financial services giants. Thus the US would still maintain a strong position in the globalized economy.

[Richard H. Serlin]

I don't think the economy is heading for a second Great Depression but only because we are pulling out of extremely harmful simple-minded Republican ideology. That brought us to the brink and now we are pulling back.

[anne]

"I don't think the economy is heading for a second Great Depression but only because we are pulling out of extremely harmful simple-minded Republican ideology. That brought us to the brink and now we are pulling back."

We are in a severe and frightening recession, but more frightening is that the supposedly Democratic President to be is already talking like a Republican on the stimulus and especially in attacking Social Security and Medicare. For the coming Democratic President to attack Social Security and Medicare which were dreams of Franklin Roosevelt is cause for wonder as to what votes actually mean.

[anne]

http://krugman.blogs.nytimes.com/2009/01/07/more-stimulus-notes/

January 7, 2009

More Stimulus Notes
By Paul Krugman

Mind the gap [Chart]

The GDP gap is the difference between real (inflation adjusted) gross domestic product and its estimated potential level (which corresponds to a high level of resource—labor and capital—use).

1. The new CBO budget and economic outlook * is out. Above is its forecast for the GDP gap — the hole stimulus has to fill. I'd guess that the CBO estimate, which has unemployment averaging 8.3 percent in 2009 and 9 percent in 2010, is actually too optimistic (see 3, below), but even so it puts the Obama plan in perspective: a 3% of GDP plan, with a significant share going to ineffective tax cuts, to fill an 8% or more gap.

2. How ineffective? Howard Gleckman of the Tax Policy Center says Lots of Buck, not Much Bang. **

3. The official BLS numbers won't be out until Friday, but the ADP jobs estimate, based on private payroll data, is spectacularly grim. ***

* http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

** http://taxvox.taxpolicycenter.org/blog/_archives/2009/1/5/4047116.html

*** http://blogs.wsj.com/economics/2009/01/07/adp-reports-693000-private-sector-jobs-lost-in-december/

[kthomas]

I got my mojo! And so does Dr Serlin and Ms anne, I see.

[ken melvin]

Soon, we should be seeing books about finance based economies.

[Markel]

We are in a severe and frightening recession, but more frightening is that the supposedly Democratic President to be is already talking like a Republican on the stimulus and especially in attacking Social Security and Medicare

You would think the blogosphere would be alight with this. But no.

[Patrick]

Egotistical navel gazing. I experienced a sort of out of body time travel experience while reading it though:

Circa 431 BC: "Sophocles, do you think Athens has lost its mojo?"

Circa AD 450: "Maximus, do you think Rome has lost its mojo?"

Circa AD 1919: "Jeeves, do you think Britain has lost its mojo?"

[don]

Ken has obviously run out of anything useful to say.

"But today's social, economic, and political systems ― at least in developed countries ― are unable to withstand a peacetime decline in output of 15-20 percent within a short period."

Well supported, closely reasoned argument, but I admit I am at a bit of a loss on what he means here, exactly. Would political systems be less likely to collapse in less developed countries.

"A number of leaders, most prominently German Chancellor Angela Merkel, are understandably worried about the longer-term consequences of aggressive macroeconomic stimulus. These concerns are valid, even more so given government's growing role in the economy. But, as in wartime, one hopes these effects are temporary. Besides, is inaction a real alternative?"

What can one make of these statements? First we hear that Angela is 'understandably' worried about the longer-term consequences of aggressive stimulus and that her concerns are 'valid,' followed by 'one hopes these effects are temporary.'

What a bunch of sloppy gibberish. All the more unforgivable, considering its source.

[mmckinl]

Yep Obabma is already talking like a Republican ... its called the DLC.

My hopes for any real recovery are going down the tubes very quickly indeed.

Obama today : WASHINGTON – President-elect Barack Obama said Wednesday that reforming massive government entitlement programs — such as Social Security and Medicare — would be "a central part" of his effort to control federal spending.

We, my friends, are in for Great Depression II. I think when Rogoff finally sees that Obama will not get the job done he will be of this opion as well.

[calmo]

This is what I call the TSKO (s = self) Professional forecasters [not rubby-dubs like us...Richard H. aside]... forecast [so lovely Mark...King of the Dot-trains...this is a real problem ( but not for King of the Strikems : the forecasters in a confidence trap: no amount of blather surmounts the blather. Worse, the rubby-dubs expect to B recognized as...Alternatives! ]... U.S. growth in 2009 at around -1.5 percent...[ not -1.49, not -1.51...as rubby-dubs load their pea-shooters, slingshots... ] This would be a painful recession, [don't venture into some rubby-dub neighborhoods, right now, I make it ] but far short of the 10-15 percent output drop normally associated with [and who wants to get any close than this "associating" without comprising one's respectability, one's reputation...one's reptility...take both your pitbulls into some of those "shortened" places ] a full-blown depression. Of course, economic forecasters have generally been far too optimistic ... of late, [see, what gets edited...in...tis a talent, no question ] so the public [somewhat thinned audience the rubby-dubs make it, as this proceeding proceeds...] is understandably leery of their prognostications.[ dang Ken, we unnerstans...the punishment...an now begs fer mercy... ]

Can I make it to the next paragraph...seein how broke me suspenders are? No, not without a visit to the comments..."Lost but found" from anne...and I'm not sure (ergo a personal victory, a genuine triumph...for the side that thinks workin brain cells are better than ones loungin on presumptive, on "safe" positions) that this condemns KR or supports him...we did not get here by "bad luck" --and we won't get out of here by cheerleading "mojo".
Ken so sensible..."mystique...shot to hell", possibly the latest mystique...I like it anyhows...French, I bet (O people! I make a joke! Nestpa you monophones lookin for an opportunity to start another language to put yerself out of the misery of this one rightnow? N'est pa?)
Ok, Richard, learnin the melvinesque ofitall, I see.
Good.
More room for expansive me.
..like that 46% of stimulated Americans thinking otherwise ("we are pulling out of extremely harmful simple-minded Republican ideology. That brought us to the brink and now we are pulling back.") and we (so above-it-all non-ideologues...who can type so self-directly like this here...without too much constant supervision...or incarceration should I go missin shortly) will find evidence of this change in "simple-minded..." as soon as the media gives us back the representation it purports to have. And kt, mojo master hisself...party host and disarmingly good atitoo...calmo needs to hear your non-hosting voice. I will find it.

[Chris]

Anne says:

"For the coming Democratic President to attack Social Security and Medicare which were dreams of Franklin Roosevelt is cause for wonder as to what votes actually mean."

Yes indeed. Obama is turning very sour very fast. He was a thoughtless choice since liberals didn't calculate how the "Muslim" and "socialist" smears would prevent him from needed changes in Middle Eastern policy and in the economy. He's got to live down his "smeared" but rather widely believed reputation and that has put him into a box.

[mmckinl]

Rogoff ~ "The basic elements of a recovery package include, first and foremost, a rational approach to rebooting the financial system. This means mark-to-market pricing of assets, restructuring and recapitalizing banks, and a new approach to regulation..."

I see no signs that Obama will take on the insolvent Wall Street banks. Without a bank holiday to restore solvency and just as importantly, trust, the defllation keeps ravaging the economy taking down the profitable companies with the unprofitable companies ... the economic carnage will be staggering ...

[anne]

James Galbraith has actually been proposing an increase in Social Security benefits these last weeks, because of the damage being done to older workers and those retired in this recession. Also, program costs are increasing more quickly than inflation for Medicare recipients which is another problem. Benefit limits, especially so since limits would break a promise decades old and would have been considered intolerable if mentioned before the election, should be impossible but suddenly are not.

[Ben]

Our economy can't handle a traditional recession. A negative GDP can be weathered by a production-based economy. A consumer-based economy will fall into a deflationary spiral - a thrift feedback - whatever your catchphrase may be. It can't handle it. Hence the panic to prevent it at ALL COSTS.

If we're lucky, we can establish a global time-out. Watch for unprecedented global economic summits, followed by unprecedented economic shifts, such as overt currency revaluation. If we're not lucky, other countries will withdraw into nationalism, and it's every man for himself.

[calmo]

I see no signs here either:I see no signs that Obama will take on the insolvent Wall Street banks. Without a bank holiday to restore solvency and just as importantly, trust, the deflation keeps ravaging the economy taking down the profitable companies with the unprofitable companies ... the economic carnage will be staggering ...signs that mmcknl is "taking on" Obama or his economic and financial advisers, representatives of that culture, (you want McCreationists instead? Ron Paul Bunyans?) if not principal parties...Is "a bank holiday to restore solvency...to restore trust", the sign...that just needs a better marketing agent for difficult clients like me self?
If the US economy just does need to make this (ginormous) adjustment to a less consumption-centric economy for the good of the planet...let's just start darnin our socks...providing some services but mostly productive labor...so thin...so thread-bare that non-productive components of the production will have to darn socks too...seein how we can no longer exploit our now bare-foot client base...which is at least still footed and legged and mindful...respectful of others...so far.

[evagrius]

We need St. Ronnie back! He had a mojo, ( somewhere), if he or we could remember where it was.

Seriously, if Obama is being corralled by very "idiotic",( i.e; "private person"), ideology to change or modify public programs to reflect that ideology, the U.S. has no chance of surviving as a society.

[mmckinl]

calmo says...

"signs that mmcknl is "taking on" Obama or his economic and financial advisers, representatives of that culture"

~~~~

LOL , voted for Nader my dear fellow. My favorite nick name for BO was Barack O'Bilderberg. I wasn't fooled then and I'm not fooled now ... Proposals I have made were in spite of him, for the Common Good ... I can see plainly now BO will not even do what is in his best interest ... BO is a fool, a bought and paid for fool.

[Icarus]

It's great to see that Obama is moving toward a more prudent center, rather that the typical college campus liberal drivel which asks to tax the rich further, and handout goodies to all who breathe. Such progressive populism sounds good only on term papers and liberal blogs. It is not wise policy.

Medicare has to be fixed...the costs are spiralling out of control, and financing this entitlement program is an undue burden. Social Security seems like it's ok for a few decades.

Obama is proving a certain calm wisdom, which is great to see.

[JeffF]

""But today's social, economic, and political systems ― at least in developed countries ― are unable to withstand a peacetime decline in output of 15-20 percent within a short period."

Well supported, closely reasoned argument, but I admit I am at a bit of a loss on what he means here, exactly. Would political systems be less likely to collapse in less developed countries. "

It seems to me that he is arguing just that. The less developed world would "tough it out" like the world did before 1950. I think the 1930 depression would be a fairly strong counterexample as it seems to have triggered a wave of economic, social, and political revolutions. I am somewhat dubious that the history of large peacetime economic declines would suggest that societies used to "withstand them" particularly well, but I don't know enough about it to say for sure. The French Revolution began during a long depression in France for example (though military events had a hand in the depression... but could we say the same for the current mess?).

The argument also seems to get a bit circular or perhaps backward:
"Massive stimulus and intervention ... is unavoidable."

Current systems can't "withstand" a 15-20% decline so a stimulus to prevent such a decline is unavoidable.

Turn that around and it becomes 15-20% declines don't happen because current systems act to prevent them.

"A number of academic economists say we should simply tough it out as we did back then. Recessions have important cleansing effects, helping to facilitate painful restructuring."

So the old systems were actually better because they had all those depressions to facilitate restructuring, at least according to "a number of academic economists".

I'm guessing those guys don't expect to find themselves in the soup lines.

[Icarus]

Has America lost its Mojo?

Yes, perhaps.

If, by "mojo", we mean an implicit promise of middle class life for its remedial students, yes...it's over.

The US will still have a great professional caste, living the global dream. The graduates of top schools, in key areas, will live quite fine. They will enter productive corporations, and help generate great revenue, which they will get a handsome piece of.

It's the rest who are in trouble. The bad students in school, the felons, the moderately talented...all of them will face a paradigm shift. Their services will be less and less needed (at its current price points), as a globalized supply of labor competes with them. The wealthy professional caste (and the simply wealthy) will prefer to buy goods at its best price/best quality. This will usually entail imports.

The masses in the US will see competition unlike anything over the past 50-60 years, and that will have to lead to significant behavior modification. The promise of the american dream is kind of over. If that's the 'mojo' we're referring to...yes, it's lost.

[Patricia ShannonP]

Obama isn't even in office. Let's give him a chance. He's an intelligent person. And nobody will be able to turn things around immediately, even John Edwards, whom I voted for in the primary.

[mmckinl]

Icarus says...
It's great to see that Obama is moving toward a more prudent center,

~~~~~

We face an unprecedented economic crisis. We need bold measures. Obama is proving he is not up to the job ...

[mmckinl]

Icarus says...

The US will still have a great professional caste, living the global dream.

~~~~

And just who will be paying for their services ?

LOL ...

[mmckinl]

Patricia ShannonP says...
Obama isn't even in office. Let's give him a chance.

~~~~

We know enough of his stimulus package to know that it will not work much at all. We know enough about his philosophy of governance to understand that his will be a terrible administration unless large changes are made, and made soon.

[evagrius]

"Medicare has to be fixed...the costs are spiralling out of control, and financing this entitlement program is an undue burden."

Yes. It's time to fix the basically unregulated billing system that allows companies to charge Medicare for unwanted services, ( quite a few stories about such goings on in places like Florida and So. California).

[evagrius]

"The US will still have a great professional caste, living the global dream. The graduates of top schools, in key areas, will live quite fine. They will enter productive corporations, and help generate great revenue, which they will get a handsome piece of."

I don't thnk they will "help generate great revenue" though they will get a hansome piece of it.

By the way, are you one of these "professional caste" or are you just "moderatly talented"?

I would propose the latter...based on your resentiment logic.

[Icarus]

Mmckinl,

The professional caste I speak of will earn their wages by providing high value, skilled services. Their clientele will be global, and the product/service lines always adapting.

In the 1990s it may have been Information/Communication Technologies, and in the 2010 decade, it may be something else. The point is, innovation and product/service development will be part of the US economy.

And, pricing is not the issue...we can now get high end product/services to a larger portion of the base of the pyramid. Telecommunications are cheaper and cheaper, computing power the same...there is a model where high end work is done/created in the US, and the globes population is their customer base.

The people who matter less and less are the US middle class. Fordism promised a wage rate in which one could afford the products they labored for. Well now, the products often cost much less, and concommitantly, the wages required have decreased.

No longer do we have to pay $30/hour for unskilled work. This is a great thing for the vast majority of us.

[Rusty]

"Yes. It's time to fix the basically unregulated billing system that allows companies to charge Medicare for unwanted services, ( quite a few stories about such goings on in places like Florida and So. California)."

The feds very vigorously and very regularly prosecute the clowns, and the system is very heavily regulated.

Florida and CA do seem to be fraud centers, but also prosecution centers.

Stopping 100% of fraud would not come close to fixing Medicare.

[Icarus]

Evagrius,

I'm neither (not that what I am should matter).

What I am is a champion of a continued decline of the US public. This is a nation which has been nothing short of genocidal, and has been at the center of killings all over the globe. During all of this, this US 'middle class' has remained purposefully ignorant, racist, sexist, and all the other pickup truck beef eating casserole baking indy car watching syndromes.

If this 'culture' dissapeared, which I suspect is happening, aren't we all better off?

There will be a day (in a few decades) where the US is an Asian/Latino nation, and perhaps then with the yolk of Imperalism and Genocide be curbed.

Right now, we see an Imperial Zionist nation killing Palestinians without any real global restraint. This is a result of US policy (and US willingness to allow Israel to ignore all law), and it is a further continuation of colonialism.

What does this US Middle Class say? They don't...they support this form of ethnic cleansing out of ignorance, the flag, and their bible. Shameless.

[evagrius]

"The US will still have a great professional caste, living the global dream. The graduates of top schools, in key areas, will live quite fine. They will enter productive corporations, and help generate great revenue, which they will get a handsome piece of."

No. The "professional caste" will not generate great revenue, they will merely get a handsome piece of it. The reason is that the "professinal caste" are basically a bunch of parasites.

"It's the rest who are in trouble. The bad students in school, the felons, the moderately talented...all of them will face a paradigm shift. Their services will be less and less needed (at its current price points),..."

And...are you one of these, (since I don't think you're one of the "professional caste") and suffering from resentiment?

You may be right about the "mojo" no longer promising the "middle class life".

But I think you're wrong about the "remedial class" as you seem to describe working class Americans. Simply because one does not wish to be a part of the "professional caste" does not make one a member of the "remedial class". It's the "remedial class" that fixes your auto, does your plumbing, cleans the streets, picks up the garbage, etc;etc;

Denigrating working class Americans seems to par for the course for far too many.

[evagrius]

"There will be a day (in a few decades) where the US is an Asian/Latino nation, and perhaps then with the yolk of Imperalism and Genocide be curbed."

Well, I certainly hope the yolk of Imperialism and Genocide will be cooked into an Omelet of Righteousness.

The average, working class American, has no idea of what's going on, really. The same for most working class people everywhere. They're too busy trying to work and, if entertainment is available to distract them, they will follow the entertainment.

Don't focus on them. They're not responsible. It's the "professional caste" that you should focus your rage on.

After all, they're the ones breaking up the eggs.

[evagrius]

"The feds very vigorously and very regularly prosecute the clowns, and the system is very heavily regulated."

Actually, no.

In California, all Medicare/Medicaid billing, ( except for a few counties), goes to one center in Sacto, probably very overloaded with work. It takes quite a long time for them to notice patterns of abuse and then stop the abuse, sometime years.

The counties that manage to regulate Medicare/ Medicaid billing have very low rates of abuse but they're the ones who show up the rest of the system.

[mmckinl]

Icarus says...
Mmckinl,

The professional caste I speak of will earn their wages by providing high value, skilled services. Their clientele will be global, and the product/service lines always adapting.

~~~~

A few tens of thousands of jobs at most ... the global situation is going in the toilet as well. This new paradigm you allude to will include very few Americans ... it will be Asian and that won't happen for years while they dig out of this mess.

[Icarus]

Evagrius,

Hmmn...am I denigrating the american middle class by speaking of plumbing, auto repair, and other such non-university careers as somehow less than the university based careers?
Perhaps.

But, I think this is quite defensible. The only issue is the cost of replacement, in a global economy. Those jobs you site can be done for $1 less by an immigrant, usually. My car mechanic from a hispanic neighborhood, or plumber, charge less than my 'american' counterpart. So, what do I do? I support the price decrease. I don't really care that he may be paperless, living in a home with an extended family, sharing meals, and speaking spanish. As long as he provides me great service, I'm good.

It is this sentiment which is at odds with the uber-nationalism of the defenders of this "US middle class". Not all of us really care about saving 'your' jobs...in 'your' industries, in 'your' states. The US is quite divided...a west coast - northeast alliance, against a mythical 'heartland'. The coastal US is more and more latino and asian, and the black/white social history of the US is less and less relevant to them. They have their own histories, and it is pan-national.

I'm not hating those who service society...I just want to pay a market rate for that...and not a rate determined by lack of supply of labor. Let those who do it better, at any price point, be free to peddle their wares. I want the right to market activity, as much as possible.

[Invisible Hand]

America will need to go through the wringer to get its mojo back.

We have been living at an unsustainably high level for a decade, and we must learn to live within our budget. Unfortunately, the stimulus package is't really designed to help America live within its budget, but rather it's based on the belief that we can spend our way back to the boom times.

Because of this contradiction, the stimulus will not work for long. With luck, we might be able to inflate our way out of the mess. Or,over the next decade, technological progress might raise our productivity enough that income will surpass spending. In the worst-case scenario the stimulus packages will bankrupt the US Treasury, and we'll become an Argentina-like economy.

[Markel]

James Galbraith has actually been proposing an increase in Social Security benefits these last weeks,

It has always been hilarious, hilarious, to watch the earnest arguments for "fixing" SS by cutting benefits. Benefits will be higher in the future, not lower. That has always been clear.

[Jason W.]

Extremely well written article.

[OhNoNotAgain]

If your comments are any indication, you're a pretty despicable person, Icarus. You have no problem exploiting others for your own personal gain, and yet, like many assholes of your ilk, you're just ever-so-sure that you won't ever be one of those on the receiving end of the exploitation. Professional caste, my ass. What a bunch of ignorant, anti-democratic, drivel.

[reason]

This doesn't address the real issue at all. America has been consuming 5-7% more than it produces for a long time. Its terms of trade must change to adjust for this, so American's will be poorer in future. How this change is distributed amongst the population is the real political issue. I'm not so sure that economists (and more important politicians) know exactly what to do with a debt deflation episode (not a normal recession) as we now face. The example of Japan in the 1990s shoud be salutary. Times will be tough for quite a while.

[reason]

This doesn't address the real issue at all. America has been consuming 5-7% more than it produces for a long time. Its terms of trade must change to adjust for this, so American's will be poorer in future. How this change is distributed amongst the population is the real political issue. I'm not so sure that economists (and more important politicians) know exactly what to do with a debt deflation episode (not a normal recession) as we now face. The example of Japan in the 1990s shoud be salutary. Times will be tough for quite a while.

[ken melvin]

Ah, 'tis so nice to have a libertarian in fool bloom appear on the show from time to time.

[bakho]

Anne:
Obama did not attack SS.
Obama talked about "entitlements" which almost surely refers to rising health care costs but may or may not include SS.
The NYT changed entitlements to SS and Medicare in its story. Misleading, inaccurate, etc.

If Obama does move against SS, we will stop him the same way we stopped GW Bush.

[Chris]

I don't think the people who voted for Obama wanted a "centrist". Rather they wanted a "leftist" who would undo the damage done by years of "centrism" and "rightism" during the Clinton and Bush administrations. But Obama is clearly scared of the entrenched right wing and is rushing to pander to it immediately. Once he falls into its clutches he'll have a difficult time extricating himself, even if he wants to.

[evagrius]

"The example of Japan in the 1990s shoud be salutary. Times will be tough for quite a while."

Except that income distribution is more equal in Japan and has been for years.

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

On the other hand, this article points to some disturbing trends;

http://www.adbusters.org/magazine/81/big_in_japan.html

Basically, Japan, because of its still influential traditional culture and homogeneity, has continued to maintain its sanity, although it's beginning to show strains.

I'm not so sure about the U.S. with its high income inequality, its deep social/ethnic and cultural/religious divisions, and its lack of real democratic participation.

[anne]

http://www.nytimes.com/2009/01/08/us/politics/08obama.html

January 8, 2009

Obama Promises Bid to Overhaul Retiree Spending
By JEFF ZELENY and JOHN HARWOOD

WASHINGTON — President-elect Barack Obama said Wednesday that overhauling Social Security and Medicare would be "a central part" of his administration's efforts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs....

[anne]

http://www.nytimes.com/2009/01/08/business/economy/08deficit.html

January 8, 2009

$1.2 Trillion Deficit Forecast as Obama Weighs Options
By DAVID STOUT and EDMUND L. ANDREWS

WASHINGTON — Changes in Social Security and Medicare will be central to efforts to bring federal spending in line, President-elect Barack Obama said on Wednesday, as the Congressional Budget Office projected a $1.2 trillion budget deficit for the fiscal year....

[ken melvin]

Libertarianism b ok for the individual. but terrible for the aggregate. Big distinction.

[halbhh]

anne, in order to have social security 30 years from now, it has to be changed somehow of course. How would you change it?

My thought: since Social Security was designed during a time when the lifespan after 65 was much shorter, we simply have to recognize that since we live much longer we have to work somewhat longer. That's all, nothing else.

[halbhh]

Obama today : WASHINGTON – President-elect Barack Obama said Wednesday that reforming massive government entitlement programs — such as Social Security and Medicare — would be "a central part" of his effort to control federal spending.

This is simply being realistic, nothing more.

[halbhh]

This one is straightforward and unavoidable:

We live longer than 30 years ago, ergo we have to work longer. For instance, until 70.

My father is a good example. He realized it was entirely necessary for himself when he ran the numbers. Just that simple.

[ken melvin]

Simple alright.

[Icarus]

Ohnonotagain,

I assume when all you have is name calling, your sense of argument is barren?

What exactly is dispicable? Who am I exploiting? I want better products/services at any price point, and I have no allegiance to an american middle class...who, in aggregate, have shown nothing but xeonophobia and political ignorance. Why should any of us be sympathetic towards them?

The bottom line is that there are many around the globe who will work harder, live more prudently, and not be as racist/imperialist.

[anne]

"----, in order to have Social Security 30 years from now, it has to be changed somehow of course. How would you change it?"

Of course fears for Social Security are absurd or for wild conservatives are deceptive, since Social Security has a massive and growing surplus and will have a growing surplus for at least another decade and a remaining surplus to suffice decades longer and possibly indefinitely. Social Security is of course fine, but for those who wish to smash the system and the promise I suggest waiting, say, 25 years and bringing the matter up again.

Of course.

[anne]

"We live longer than 30 years ago, ergo we have to work longer."

Ergo, we have been planning for living longer for more than a generation, ergo we have a massive and growing Social Security surplus, ergo no problem but raising the issue which should have been settled with the Republican Congressional losses in 2006, ergo Obama and advisers have done us a remarkable disservice.

[anne]

The issue of preparing Social Security for an older population is serious, since the preparing began in 1982 with workers paying a higher share in taxes than necessary to provide for current retirees. Preparation has proven enough to allow for Social Security to be fully covered till about 2048, possibly indefinitely, but somehow having a massive and growing surplus, as I like to repeat, remains worrying for some. I suspect the worriers are generally the would-be smashers of Social Security.

[anne]

What is additionally discouraging, is that if Social Security is a problem for Obama advisers, then universal health care insurance which will be costly where Social Security is not costly has no chance of being politically acceptable.

[evagrius]

Icarus- You're forgetting that you're in the stew yourself.

Unless you have a magic way of escaping the chaos, you really need to think it through a bit better.

[Patricia ShannonP]

Anne,

I notice that the newspaper articles you posted did not have exact quotes of what Obama said.

I have learned from past experience that what someone says, and what the reporter reports, can be very different. Sometimes, it is obviously a matter of misunderstanding, just as we misunderstand and are misunderstood by each other, and in face-to-face conversations. I have no doubt some of it is deliberate, for reasons of partisanship, but of course that can't be proved except in the rare cases someone admits to it.

As far as I know, the media we are relying on is the same that has been misinforming us in the past, in order to safeguard the interests of the ultra-rich power elite owners and advertisers.

[anne]

http://www.nytimes.com/2009/01/08/business/economy/08fiscal.html

January 8, 2009

A Crisis Trumps Constraint
By EDMUND L. ANDREWS

Despite the consensus on the need for a mega-stimulus package, the sheer size of the projected budget gap is likely to revive age-old tensions between short-term goals like an economic recovery and long-term goals like reining in the soaring cost of the entitlement programs Social Security and Medicare....

[Notice that a rationale is being built to needlessly smash Social Security and Medicare. Suddenly, the idea is that soaring costs of entitlement programs like Social Security are the problem when Social Security is no such problem. The smashing of the system would be a betrayal of so many millions of workers who have been preparing for this very day for more than a generation.]

[anne]

There is no Social Security problem, none, other than the discussion of a possible betrayal of the legacy of Franklin Roosevelt and the New Deal. The Washington Post is rampaging against Social Security continually, and we should be quite worried.

[Julio]

anne,

"There is no Social Security problem, none"...

I disagree: it has TOO MUCH money.
The buildup of the Trust Fund beyond a few years' worth of benefits (much like having some extra money in your checking account) has become a regressive tax on the working classes.

People have been sold a bill of goods allright, but not the one that the right-wing troglodytes keep talking about. Quite the opposite.

Consider that under perfectly reasonable projections, the accummulated surpluses will NEVER be drawn down. So, this generation of workers is paying taxes to collect bonds that will never be cashed in.

I think we've been forced to spend all our time defending SS against the accusation that it is bankrupt. Time to go on the offensive, eh?

[BJ Feng]

Anne, liberals have sown the seeds for Social Security's destruction. If it is a retirement program and not an entitlement, then there should never have been talk about raising SS tax caps on wages. As you said, SS is well funded and can last until 2048. The only reason to raise caps would be if SS is just another welfare program or social spending program that is mixed in with all the other welfare and entitlement programs the government has ongoing. Caps need to be raised only if the extra money is seen as current government revenue and allocated to other spending programs. If this is the case, then there is no justification for SS to exist at all.

You cannot claim SS as an retirement program, maintain that it is fully funded, and then seek to raise SS tax caps. Something has to give here, there is no need to raise more revenue if SS is just an retirement program. See what liberals in their greed for other people's money have accomplished? They've destroyed the purpose of SS and with it, all support for the program. Is nothing sacrosanct? Must liberals seek to grab any and every source of money they see?

If you want to save Social Security and preserve it, you MUST fight against any increase in the SS tax caps which would expose SS as a redistributionary program. I'm glad I can count on your support Anne, for the coming battle against those who would destroy FDR's legacy.

[bakho]

Anne. Precisely the point. As Dean Baker noted, Obama said "Entitlements".
The NYTimes took "entitlements" and rewrote it as SS and Medicare.
This greatly changes the meaning of what Obama actually said.

The NYTimes gets a lot of things wrong. It is not just a Judy Miller problem.

http://query.nytimes.com/gst/fullpage.html?res=9401EFD6163BF937A15750C0A9649C8B63

[Patricia ShannonP]

bakho

You're right as far as you go, except that it's not just the NY Times that gets things wrong.

[Patricia ShannonP]

Another post from BJ defending the rights of the nobles to be defended from us serfs who do the actual work.

[anne]

"The NYTimes gets a lot of things wrong. It is not just a Judy Miller problem."

The New York Times is easily the finest newspaper in scope and depth and writing quality in the country, and almost surely the finest in any country, and possibly the fiends who continually, mindlessly slander the writers of the Times ought to think of the damage they are doing. That there will be problems with articles is a given, as in any paper but especially in a paper that is so ambitious in coverage. Criticize the specifics then and do not try to destroy the Times as wild conservatives have tried and suddenly supposed liberals are trying in defense of the coming President.

[Patricia ShannonP]

The quotation in question. I was directed to this by http://www.dailyhowler.com/

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/07/AR2009010701156.html?hpid=topnews

"We are beginning consultations with members of Congress around how we expect to approach the deficit," Obama said. "We expect that discussion around entitlements will be a part, a central part, of those plans."

[Patricia ShannonP]

For all we know, he might want to raise the cap on social security and medicare taxes. Since I'm not a mind reader, I will have to wait to find out what he means, unlike the psychics who are ranting hysterically.

says...

There is no cap on Medicare Taxes, by the way, and raising the cap on Social Security taxes undermines support for the program and the concept of the program as public insurance. Again, raising the cap on Social Security taxes, when the program is superbly in surplus and the surplus is growing means that the additional taxes will be used to fund other programs which again detracts from what Social Security represents.

The savings to be gained from Medicare should be gained by quickly stopping subsidies for private insurers offering coverage through Medicare and immediately beginning to negotiate Medicare drug prices. Raising the costs of Medicare coverage which are already canceling cost of living increases for Social Security, would be intolerable.

I could not be more displeased that the coming President should intimate Social Security and Medicare are budget problems.

[anne]

The matter is quite serious, since the Washington Post especially repeatedly calls for Social Security reform in no kind way, while Medicare reform will be needed but not at the expense of those receiving Medicare.

Darn, I am sorry, but that was my unnamed response.

[anne]

As for the New York Times and the war in Iraq, the Times opposed the war editorially, and for any inciting reporting leading to the war there were continual reports showing just how strategically and morally wrong a war would be. Morally wrong because the Times printed all the reports of the United Nations arms inspectors showing no possible cause for war in supposed self-defense, and the Times continually printed reports showing Administration inciting positions to be wrong.

That a ceaseless critic of the Times, was ceaselessly for war only recently finding reason for regret does not explain why the critic was not capable of reading the Times transcripts of the United Nations arms inspectors showing no possible reason for war.

[BJ Feng]

"The savings to be gained from Medicare should be gained by quickly stopping subsidies for private insurers offering coverage through Medicare..."

I can agree with that.

Patricia, what I said was logical and supported by Anne, champion of the serfs. As only those who work pay SS taxes, my statements were in defense of the hard working serfs, let them keep what they've earned.

[cm]

reason: "America has been consuming 5-7% more than it produces for a long time. Its terms of trade must change to adjust for this, so American's will be poorer in future."

While I find this a plausible course of events, it doesn't (necessarily) follow. Aside from many details that I conveniently gloss over (including the important "human capital" issue of underdeveloped or decayed qualified labor and business networks), big question marks I see are (1) energy/raw material resources and (2) environmental limits - capacity to tolerate direct pollution, waste disposal, etc. I suspect that offshoring industry had a big part in improvement of environmental standards that has been credited to the effectiveness of environmental regulation. Industry can be "brought back", but even with modern anti-pollution measures, there will be increased emission volume. We may find that there is no way around nuclear energy, as undesirable that is.

Aside from that, poverty is a relative and multidimensional concept. Many of the trappings of "modern" consumerism can be elided with little loss of quality of life, but that's notoriously in the eye of the beholder. What one person may consider a desirable (low tech/frugal) way of life, others may find utterly boring and uninspiring.

Also, my experience tells me that many more things are "technically" possible than will "socially" come to pass. Many things seem to require too broad a consensus, or broad cooperation that is all too easy to tacitly withhold. That has been a frustration of many a (would-be) technical, business, or social engineer.

What do you think? I hope I didn't miss your point this time ... :-)

[cm]

evagrius: I'm not aware of Icarus having announced his age here, but it sounds like he is in his 30's and in the sweet spot of his career (it's easy to be off on this thought), the career being consulting on outsourcing/offshoring, which may still give him a good run for some time, and quite possibly a long time -- I don't expect the global labor leverage differential in many occupations going away anytime soon.

[calmo]

Greetings to you cm ...and to you too Icarus...whose views if held by a 30-something are more palatable? tolerable? comprehendable and therefore manageable by/for cm (who is older than 30-something)...but fit for social consumption by those such as Patricia?...who so far, refuse to stamp this product Approved...no matter the due date onit. ["Pastit" she says. "Condemned" she stamps.]

I find Icarus's views most palatable (calmo gets out meat tenderizer) if he were a mortician.

Can BJ agree with that?
[Is BJ a champion of corpse tenders? or only serf tenders?]
It's easy to be off on this thought...damn easy. So damn Off too.

[cm]

calmo: I was just speculating, as I indicated. And it wouldn't make it more palatable.

[calmo]

I thought so cm, and I was just managing the over-drawn Icarus (the Mach-lined entrepreneur) and the over-drawing Icarus ( tis his hand that draws the Mach line) and the polarizing effect he has on us, entrepreneured...just slide yerself onto the skewer people.
BJ, too has this effect of expanding our universe while reducing us to vigilantes for all that is Good...little specs of condensed matter we daren't step on...esp not with silly tickling feathers...when they have bazookas --mo, prolly!
Of these 3, Patricia is the mathematician IIRC and...the biggest vigilante...which comes from parenting? My impressions, once upon a time parent, maybe misplaced. Ok, and everybody much more intelligent than my impressions from reading comments here...late into the night BOINKED.

[reason]

cm
I suppose I interpret your comment as meaning "American's will be poorer" (and I meant it ceterus paribus) is too strong a comment. Americans as a whole will have to produce more and consume less, because the subsidy they have been receiving from the rest of the world will disappear. How the pain is distributed (and how much pain that really is given American's appetite for conspicuously inefficient consumption) is another question entirely.

[cm]

reason: Again, producing more does not entail consuming less (in the absence of resource constraints). Importing less for non-producing consumption, sure, that is likely to happen.

I find it also likely that overall consumption will be lower, and I do suspect that increased production (if any!) will be first attempted by working job-holding workers harder if the past is any guide, path of least effort and all that.

[Icarus]

CM,

Yes, I do have a desirable consulting career, and work in off-shoring strategy, and am in my 30s. I put myself through university, which (with graduate school) took me through my 20s, and then, started my career. I've saved and saved only, and have refrained from starting a family.

These are simple steps to avoiding the horrible anxiety of global markets. Refrain, my friends...save, and save, and increase your skills.

Now, I do earn a handsome salary, and it improves my savings pace. Hence, in 10 years of working, I can save enough to be financially stable for my life. And then, I can start a family, and manage any career transitions I may have to unfortunately manage.

CM/Calmo...my choices required many sacrifices, from socializing to eating expensive meals. I lived without a car through my 20s, walked mostly (in Los Angeles at that), had less than $500 in my pocket, but, despite it all, simply focused on school.

During that time, I saw countless friends/acquaintances make risky, and hence bad choices. Friends who were waiting tables and living paycheck to paycheck having children. People having children without really knowing one another. People playing video games for years, uninterested in self investment. People partying left and right, and not too concerned with job improvement.

These were their choices in their teen years and through their 20s/30s...and their lives reflect that. Their children are not future honors students with a strong liklihood of finanial stability. The thrill of living a 'fun life' has eroded, and the dullness of lower middle class existence depresses many of them.

People have the right to screw up in our 'freedom' oriented world. We don't seem to want a strange future in which people have to pass exams or jump through hoops to qualify to become a parent. We don't want the state to provide discipline to students in a heavy handed way.

Given that freedom, many screw up. And, many more are waiting to take their place in the economic ladder. This is what's happening, and I applaud it.

I respect that kid who wakes up early, to study, and hopefully succeed to help her family. The other kid, hanging out in parking lots with his skateboard, conspiring to have sex with some girl in his class all month...they can fall by the wasteside, as they seem to be.