Archives for posts with tag: Economy

by Michael Maiello

This week, President Obama will boldly propose to lower the retirement age to 63 and to increase Social Security benefit payments by 10% across the board while also indexing future payments to a measure of inflation that includes health care costs, which tend to rise faster than other parts of the economy.  Though denounced by critics as an irresponsible socialist, Obama’s proposals make sense and are the best way forward for the United States.

The fact is that private savings vehicles will not be able to generate enough wealth to see most Americans through a multi-decade retirement, particularly in the absence of a private pension system.  The 401(k) plan, named for the section of the tax code that allows workers to invest for retirement with pretax dollars, has failed.  Under the pressures of globalization, American workers simply don’t make enough money to save enough for retirement and the equity and bond markets have failed to deliver reliable returns.

The 401(k) and related accounts like the 403(b) or the traditional IRA, were never intended as a total retirement solution.  These accounts were meant to supplement private pension plans and Social Security.  They were intended to give the average worker a chance to invest in the company that employed them, or in the broader markets, on a tax advantaged basis.  They were simply one piece of a much farther reaching retirement safety net, one that no longer exists in a non-unionized private economy.

When the economy cannot provide for its people, the government must step in.  That’s what Obama is doing.  Far from being irresponsible, Obama has proposed to make Social Security solvent forever by applying Social Security taxes to incomes above the current cap of $113,000 for wages and by taxing unearned investment income.  In 2012, fewer than 6% of Americans even made enough money to worry about the Social Security tax cap.

Still, these wealthier Americans will also get larger benefits later on.  Though the amount of benefit a retiree receives per dollar paid in does drop at higher income levels, they will still be able to collect larger retirement benefits than they otherwise would have.  So, while some will whine about a tax increase, it’s important to keep in mind that this is hardly an expropriation of wealth.

Lowering the age at which Americans can retire with full benefits might also make room for younger workers in the labor market and by freeing people from potentially dangerous jobs, it might improve the overall health of the retired population.

Further, it will mark the fist time in a long time that the government will manage to expand benefits and services to its citizens.  This could, in a way, lighten the national mood which has been sullied by a seemingly dysfunctional government and fierce global competition.  While the effects of psychology and confidence on the economy is often overstated to the point that it slips into magical thinking, a better national mood certainly can’t hurt.

Politically, this should also aid Obama’s party in the 2014 elections.  If John Boehner and the House Republicans refuse to raise a completely modest tax on the country’s highest earners to insure retirement security for the rest of the country, his party will have to answer for that at the polls.

Should he find himself succumbing to the urge to blink, Obama should remind himself that even Tea Party Republicans like Social Security, so long as they’re getting the checks.

by Michael Maiello

Since the passage of the Volstead Act in 1919, the United States has been a “dry” country, though you wouldn’t notice if you visited any of its major cities, including its capital.  It is well known that the very politicians who, year after year, fail to repeal Volstead (or even address it) consume alcohol in private even as they speak against it in public.

The Bureau of Alcohol Tobacco and Firearms has tremendous political clout and has been, for decades, hammering the great middle of the country with anti-alcohol propaganda and hysterical warnings about behavioral and health risks.  As the government has effectively cracked down on home stills and brewers, the wealthier classes think nothing of taking a “booze cruise” outside of the three mile limit, to party it up in international waters.  The scheme seems to be that the upper classes, and the political classes should be allowed their freedoms but that the population at large can’t be trusted.

Continued alcohol prohibition has largely benefited organized crime in Canada and Mexico, where they exist outside of the sophisticated law enforcement powers of the U.S. Federal government.  Meanwhile, Americans have sacrificed many civil rights and liberties with urban police being allowed to stop and search people on almost any pretense, looking for contraband alcohol.

The Federal government is now, also at odds with many states.  Thirty states allow doctors to prescribe alcohol containing “tonics,” for a variety of maladies.  The Federal Government views this as an illegal act and has cracked down on medical dispensaries in California that is suspects are selling folk medicine for recreation use.  Still, we know from years of experience, research and family lore that alcohol has many medicinal properties and can be used for the treatment of stress, to dull the unpleasant affects of other medications and to cure digestive ailments.

Voters in two states, Colorado and Washington, have approved amendments to their states constitutions legalizing beer and wine consumption for pleasure.  These states should be allowed to experiment and, if all goes well, its conceivable that voters could approve the use and sale of harder spirits.

The economic arguments in favor of fill alcohol legalization are well known, almost to the point of tedium.  Consumption could be taxed, which would more than cover the costs of any negative social effects.  California, currently experiencing higher than usual unemployment, and parts of the Pacific Northwest could support extensive wineries.  Europeans might scoff at this notion but there could come a time when a meritage of California grapes rivals any blend from Bordeaux in terms of quality.  If Chile and Australia can make good wine, certainly the U.S. can.  Parts of the south and midwest could return to their Scot-Irish roots and begin the production and sale of whiskeys.

The U.S. has fallen behind in manufacturing, even in high technology.  Many former white collar jobs are now being outsourced.  More than ever, Americans need a drink.  It’s good for the soul and good for the wallet.