Final Political Blog in the Series

In this short final blog in the series of political blogs before the election of November 7, 2006, I'll just identify a number of issues the Democrats should be trying to address. And I have comments on a couple of them.

Electronic voting. This is emerging as an issue of critical importance. Tampering with voting machines can destroy our democracy all by itself. In the elections of 2000 and 2004, there is evidence of tampering to the extent that the outcome on the presidential level was changed. And now there are reports of plans to do more tampering in the elections next week.

The Middle East. I'll simply add to the blogs I've written earlier on this question. I've now come up with a recommendation: go back to square one, that is, to 1948 when Israel became a state. Israeli borders should be restored to where they were at that time, and Palestine should agree to accept the existence of Israel as a state. Palestine could become a state if it so desired.
And both Israel and Palestine would have to pledge not to attack each other.

Other issues for Democrats, both before and after the election, that is, if any Democrats are elected: global warming and environmental protection, increase in the minimum wage to the level of the so-called living wage, preservation of Social Security as presently constituted, stopping Congressional corruption, an energy policy, universal health insurance for Americans, including prescription drug coverage, tuition help for students in higher education, better pay for teachers, full employment, ending poverty, legalizing marijuana, civil rights for same-sex couples, legalization of helping patients to die according to their wishes, regulation of airlines to the extent necessary to assist in the avoidance of bankruptcy, strengthening fire and police departments, better inspection of cargo coming into this country, stopping construction of that fence on the Mexican border and working on the immigration issue if we can ever think of any way to make it better rather than worse, easing the trade deficit, making taxes more progressive, reform of the electoral college, setting up a department of peace in the president's cabinet, restoring civil liberties including the right of habeas corpus, mass transit and more funding for Amtrak, public financing of elections, ratification of the Kyoto Prootocol, equal rights for women, including equal pay for equal work, day care, elder care, and parental leave for families, and making computers available to everyone, along with guaranteeing Net Neutrality. I'm sure there are lots more, but these should keep us out of mischief for awhile.

Globalization and International Trade

What a topic! Both exciting and too big to handle. Also in a state of flux. All I can do here is mention some items that Americans ought to be dealing with in order to survive in this super-competitive global environment. And we can indeed survive.

Let's start with globalization. One way to view this huge and fascinating phenomenon is as the integration of technology, commerce, culture, and knowledge across national boundaries, something potentially enriching and enlightening. We're all connected! But as we have seen, globalization has also energized protesters by the millions all over the world because of its apparent role in defiling the environment, taking away workers' rights, making impoverished countries still more impoverished, and more. Globalization seems to be governed by multinational corporations (MNCs). These two perspectives have been ingeniously described as globalization from below, as from the Internet, versus globalization from above, as from the establishment.

It is not that globalization is bad per se, as I see it, but that policies being pursued in recent decades have been unfortunate. This could be reversed.

What could a Democratic candidate say about globalization? A big problem is that there is no agency in existence for overseeing the incorporation and/or the behavior of MNCs, and as a result one can play off one nation against another for environmental favors or lower taxes and the like. We could seek counsel and action from international organizations such as the United Nations or the Group of Eight. But inasmuch as they are not set up for such a role, this doesn't seem very promising. (Structural reform of the United Nations would be a worthy endeavor, if and when success appears possible.) We could, nonetheless, work through other international organizations such as the World Trade Organization, the World Bank, and the International Monetary Fund, on such issues as corporate taxes, environmental regulations, workers' safety, debt forgiveness, foreign aid, and so on. We should insist on the particiption of environmentalists and workers in the deliberations of international agencies.

It gets a little easier when we look at international trade. The term "free trade" is now more descriptive of what corporations do: write the rules as they see fit. So let's talk about "fair trade" as something Democrats should favor. Trade does indeed increase GDP, and lowering tariffs and quotas is in fact good for the economy. Protectionism is usually a step backward and should be avoided when at all possible. There are better directions to take, but changes must get under way immediately in two (related) areas: (1) labor and (2) competitiveness.

(1) The American worker has been taking a beating in recent decades, and this is grossly unfair and also unnecessary. While productivity is high, wages stagnate, the workweek is too long, and unemployment is too high. Historically there have been two ways to help the cause of labor, unions and legislation. The weakening of labor unions should be reversed. But here we'll focus on what the federal government can do for labor.

In no way should workers have to bear the burden of the so-called unfavorable balance of trade, a situation in which imports exceed exports. We know how to reach full employment through the use of progressive fiscal and monetary policies. Let's insist on full employment. At the same time let's see that, when workers are laid off, unemployment compensation (and/or wage insurance) is adequate and continuing as long as needed. Add to this programs for retraining and relocation. All of this can help workers while they seek new employment. Legislation is also urgently needed for raising the minimum wage up to the level of a living wage. Arguments about this are treated in an earlier blog.

Pensions must also be guaranteed through legislation, and Social Security should be assured as a guaranteed monthly payment (not privatized). Universal health insurance should be provided; this would cost much less than the present chaotic "system." Programs that benefit families, such as day care, elder care, and parental leave, should be put in place.

We should be made aware, however, that layoffs from jobs sent overseas are usually visible, while the gains from trade are spread out over the entire economy and are not so readily apparent.

One more thing in the area of trade: the huge excess of imports over exports may not be sustainable and should not be ignored. The nations financing this debt could decide to dump dollars in favor of other currencies, and this could mean the end of the use of the dollar as the world currency. We must put resources into studying this issue and making recommendations.

As for the second item, competitiveness, there is a question about whether Americans are being "dumbed down." However serious that is, the remedies required, although not small, are fairly obvious. Simply, competitiveness can be assured by investing in people and infrastructure. American workers and employees must be made more creative, more motivated, more efficient, more productive. Americans have a history of being innovative and entrepreneuial; this can continue.

Investment in education is essential. Let's consider free tuition for higher education. Can we afford it? Here I can only advocate a serious look at the costs of this relative to the costs of preemptive warfare we are now engaged in, along with a look at the heavy weaponry we are now financing when the response to worldwide terrorism requires quite a different, and actually less expensive, approach. We financed education for veterans of World War II, when American GDP was much lower than it is now. And the payoff from the increased investment in education was then, and would be now, enormous.

Education at all levels should focus not only on science and engineering but on the arts as well. Instead of cutting down on the arts as something less than essential, we should recognize the arts as productive of creativity.

An item of great importance all by itself is the question of Net Neutrality. Surely the Internet is the most amazing and, yes, wonderful thing that has happened in this age of great happenings. We must keep it accessible to all.

If the measures suggested above were in place, then we could expect that globalization and increased trade would be not only acceptable but exciting and welcome, even a great adventure. Let's bring on more globalization from below.

Let's Have Some Wage Rage

The US Congress recently failed to pass a bill that would have raised the minimum wage, presently at $5.15 an hour, which is about $10,500 a year for a full-time worker. The value of the minimum wage has dropped 20 percent since its last increase in 1997. It's at its lowest value in 50 years.

Jim Hightower reports that there are 7.3 million Americans working for a minimum wage. And 72 percent of them are adults. The average worker brings home more than half the family's weekly income, and a third bring home 100 percent of their family's earnings. Sixty percent of these workers are women, and 760,000 are single mothers.

This is happening in the US, the richest country in the history of the world. Per capita GDP is $41,800, while per capita personal income is almost $33,000, or, for a family of four, $132,000. There are several million millionaires in the US, by various estimates, and Forbes says there are 374 billionaires. Increasing disparities in income have been widely noted. All of this would suggest the possibility, and the desirability, of realizing not only increases in the minimum wage but in the so-called living wage as well. Here we consider both.

Let's look at the reasoning. The usual argument in opposition to an increase in wages is that it would cause a loss of jobs. Yet in the states that have raised the minimum wage, employment has increased. The problem is that the job-loss argument is based on a microeconomic model: if an employer has to pay higher wages he will have to lay off workers. If he is the only employer who is affected, that result indeed would seem plausible. But if a higher wage is mandated for everyone, we must go to a macroeconomic model. That would mean that the increased purchasing power would increase demand and thus employment. The workers affected, by definition, are in the low income brackets and thus would spend every dime of an increase. Obviously, then, a federally mandated increase, rather than a local one, would be the wiser choice.

Interestingly, however, there are some examples of success on a local level. Santa Fe, NM
mandated a living wage in 2004. The sky did not fall in as predicted. With the city's $9.50 an hour wage floor, slated to rise to $10.50 in 2008, Target and Sam's Club are thriving and Wal-Mart is building a superstore. Las Vegas, NV, another example, is also thriving, although it has raised wages through a labor union--the Culinary Workers Local 226 of the Hotel Employees and Restaurant Employees International Union. In January 1, 2004, housekeepers were making $11.40 an hour and tipped hotel employees a $9.60-an-hour base wage. People are buying homes and the economy is booming. It helps that these jobs can't be outsourced.

More examples: Chicago recently mandated a living wage of $10.00 an hour plus benefits of $3.00, but it was vetoed by Mayor Daley because big-box stores were threatening to locate in the suburbs. This illustrates the problem of doing it locally instead of over an entire area. Six states are proposing minimum-wage laws to be voted on in the upcoming election November 7, 2006. In Colorado, where most businesses are located on the front range rather than on the state's boundaries, it well might work. But the issue on the ballot in the state of Missouri might run into problems because of the fact that large cities in that state are on its borders and thus might face competition from businesses in neighboring states. In any case, these and other state and local ballot issues on wage increases will be something to watch, along with those in the 130 or so localities that have already mandated a living wage.

Hundreds of economists, including five Nobel laureates, have gone on record as recommending an increase in the minimum wage. And a great many governments, on various levels, have put in place either a minimum-wage increase or a living wage.

Clearly, low wages and extreme disparities in incomes are issues on the march. What's more, they are issues just made for Democratic candidates.

Poverty in the United States

The question of poverty in the US is closely related to other issues, notably the level of unemployment, the level of wages, and the extreme disparities in income. But today I'll focus on poverty.

Having seen the poverty level cut in half in the 1960s under President Lyndon Johnson's War on Poverty, ending the decade at 11.1 percent of the population--had I pushed the fast-forward button and landed in the US in 2004 and found that the poverty rate was at 12.7 percent (and had fluctuated between 11 and 15 percent during the last 35 years) , I would have been in shocked disbelief. What happened? Johnson showed us how to cut the level of poverty. Are we in a recession? No, would be the answer, the economy is strong and the Dow Jones Industrial Average has broken a record in each of the last few days.

Poverty does not even appear as one of the most important issues the country is facing today. Although there was a flurry of attention after Hurricane Katrina made us aware that 28 percent of the population in New Orleans was living in poverty and that that had been the reason that those trapped in the water had been unable to leave the city, the issue has again disappeared from the national dialogue.

And what is perhaps the saddest of all, around 20 percent of children under the age of six are living in poverty. What is happening to their ability to learn in those crucial first years when basic services are being denied them? Children are our future.

It is a national disgrace that, in the richest country in the history of the world, some 12 percent of the people are living in poverty, and, worse, it is a national tragedy. Following are some of the things I think we might look at to help to reduce the poverty level.

• Fiscal policy. This refers to the level and structure of federal taxes and expenditures. During World War II it was demonstrated that these factors could drop the level of unemployment to less than 2 percent, and following the war fiscal policy was used deliberately to keep the level of income reasonably high. Now, however, fiscal policy seems to have fallen out of favor. Both the level and the structure of taxing and spending are seriously amiss. Taxes for the highest brackets of income are being continuously reduced, while taxes for the poor and middle incomes are being increased, mostly at the state and local levels because federal money for mandated programs is being cut. What should we do about this? We should make the structure of federal taxation progressive and spend enough on lower income people to stimulate the economy to full employment, say, less than 4 percent. This did happen during the Clinton administration.
• Monetary policy. This determines the rate of interest and the quantity of money and is the other major tool traditionally used to keep the economy operating more or less acceptably. The law requires monetary policy to be employed to fight inflation and to keep the economy at full employment. For some years the Federal Reserve has used its tools, fairly successfully, to control inflation. But it seems to pay no mind to the level of unemloyment. The Fed should return to concern about both inflation and unemployment.
  
• Wages. The minimum wage, now at $5.15 an hour at the national level, has not been increased since 1997, and this has become a major cause of workers falling below the poverty level.
• Health care. Lack of health insurance has become a major factor causing families to fall below the poverty level.
• Pensions. The loss of pensionsl has become a second cause of poverty, particularly as major corporations reward CEOs excessively even while falling into bankruptcy and/or problems with the law and thus depriving workers of jobs and pensions.
• Help for families. The poverty rate for both women and children is higher than for the rest of the population. The provision of day care for young children, elder care, maternity and paternity leaves, and other help for families would help to alleviate poverty.
• Education. Lowering tuition, lowering the rate of interest on student loans, more income-related grants for students, and the like would help students to attain the highest possible level of education. In fact, why not extend tuition help to all, as was done with the so-called G.I. Bill after World War II? That provided a major boost to the economy. The US is falling behind other developed countries in providing education to its citizens.
• Help for workers. As union membership has fallen sharply and as it is made less available by governments and businesses, both low wages and a longer workweek have caused the level of poverty to increase. As jobs are being allowed to go overseas, the least that could be done for workers would be to provide retraining, relocation, and unemployment compensation and/or wage insurance for those whose jobs have disappeared, not to mention pursuing policies of full employment.
  

More on Corporate Behavior

In my last blog, on corporate behavior, I made a coupld of remarks that could stand a little clarification if not revision.

First, I asserted that corporate behavior is most in need of watching and checking today, in contrast to the behavior of government and the church. Actually, there could hardly be a bigger offender than the government in the present administration. But we'll hope this is a matter of temporary politial insanity rather than habitual misbehavior or structural breakdown. The coming election of November 7, 2006 will tell us a lot about whether we still have a democracy, in the wake of Congressional corruption, the Patriot Act, presidential signing statements, and the like. And, now that I think of it, even the church shows some signs of departure from its usually more appropriate behavior in a democracy. Again, one hopes, a matter of temporary misbehavior.

My other comment is about myths, aka BIG LIES, gaining acceptance in recent times. The one I called "voter fraud" might send a different message than I intended. I was thinking of the phenomenon of illegals voting and the purported necessity, therefore, of requiring voter identification in the form of photos and evidences of citizenship. This kind of voter fraud is virtually non-existent, but stamping it out, of course, would tend to wreak hardship on lower-income and more disadvantaged persons (read Democrats). So let's pass laws to stop it, right? More recently, however, the practice of hacking election machines has been in the news--and here really is a major problem. In case this might be thought of as voter fraud, the caption is misleading. I guess we'll just have to see how the language describing these practices develops.

Corporate Behavior

As I continue to write blogs, it occurs to me that it might be in order to review my credentials. I've been a student of economics and politics since 1946, in seven institutions of higher education, and have an MA with a minor in political science from the University of Denver and a Ph.D. in economics from the University of Colorado at Boulder, with an emphasis in macroeconomic theory. I'll mention two handicaps: I have no staff, and I'm visually impaired.

Today I'm focusing on the corporation and its role in the modern world. This is so important I don't know why I haven't tackled it sooner. I'll just barely scratch the surface today--no, even that is an overstatement. I'll just barely start, and hope to continue as time permits. Notable scholars have written about the corporation before. I'll just comment on a few examples of corporate misbehavior today.

At times in history, tyrannical governments have been the chief offenders in human affairs; at other times it has been the church. I submit that today it is the corporation that most of all needs to be watched. And checked. Following are some noteworthy items, some small, some major.

• Corruption in Congress. This issue is huge. It is scarcely an exaggeration to say that corruption is so great that we scarcely have a democracy. The administration of George W. Bush has governed by accepting large political contributions from corporations and then inviting those corporations to craft legislation in Congress. A well-known example is Vice President Cheney closeting himself with Halliburton to write legislation on energy. Notable also is similar behavior on the part of other corporations in the oil and gas industry.

• Corporations controlling the media. Another issue of huge importance. For a democracy to function, there has to be access to information. (I think Jefferson said something to this effect.) Networks in TV newscasting are owned by large corporations. Radio is also controlled by corporations. The same is true of newspapers. And only last night--somehow this seems the saddes story of all--Bill Moyers reported on the Net Neutrality issue: the fight over whether ordinary individuals will continue to have as much access to the Internet as corporations have. Already the US is way behind on this. Residents of Japan and countries in Europe have better access than we have. Ironically, those in charge of this country have perpetrated the myth--actually, the BIG LIE--that in America the media are largely liberal. Exactly the opposite is the truth. What is especially outrageous is that even in public TV and public radio the great majority of those interviewed and covered come from the right--in government, in industry, in academia, and so on. No matter what the category--men versus women, minorities, corporations, whatever--those who appear on the news represent the right far more than the left. This was true even in 1993, although less so, when both the presidency and the Congress were in the control of the Democrats. It does indeed seem to be the case, as has been noted, that if you keep telling the BIG LIE long enough, people will begin to believe it. Clearly that has happened in the liberal-media question. Also on the question of fiscal responsibility. And not to mention weapons of mass destruction. And--they're working on this--the prevalence of fraud in voting.
  
• The war in Iraq. Obviously here is another phenomenon of overriding importance. Here, however, I'll only point out that corporations have been reaping egregious profits. Many of what in the past have been considered government responsibilities have been privatized, allowing outrageous war profiteering by corporations such as Halliburton and Bechtel, and, what is more important, with unfortunate consequences for the troops and for the country. And the mess in Baghdad scarcely needs comment. It has been reported (I read this in Antonia Juhasz) that Paul Bremer privatized 192 services, by fiat, before the present government was in place, and virtually no useful oversight exists. After all, aren't governments supposed to be incompetent anyway?
• Globalization. Yes, although globalization is in many ways, and could be enormously so, a beneficent development, multinational corporations have assumed enough control to see that treaties and whatever are written as they wish rather than for the benefit of workers and poor countries, as well as with insufficient regard for the environment. The world lacks institutions with sufficient power to exert control over multinationals. But also, even where remedies could be undertaken with present institutional arrangements, corporations have managed to see that things go pretty much their way.
• Global warming. I just can't take time, yours and mine, to go into this. I hope you've seen Al Gore's documentary, An Inconvenient Truth. I'll only say that, as usual, the Bush administration has seemed more heedful of the counsel of his corporate friends than the fate of the planet.
  
• Health care in US. The US spends about twice as much per capita on health care as do other industrialized nations, with less desirable health outcomes. But when somebody brings it up as a problem, corporations in the insurance industry and in pharmaceuticals jump in and see that anything like a plan for universal health coverage is nipped in the bud.
• Prescription drugs for the elderly. The same corporate powers from insurance and pharmaceuticals inserted the famous "donut hole" to require citizens to pay them for coverage at cerrtain levels.
• The labor force. Through several decades, real wages for the American worker have been stagnant while corporate profits have ballooned. The minimum wage, already unconscionably low, has not been increased since 1997. But never mind that, why are workers not receiving a so-called "living wage"? Quite a number of lower-level governments, especially states and municipalities, have enacted such measures. And another thing, the workweek has become unconscionably long. One institution that has worked in the past to raise wages and lower the workweek, the labor union, has been rendered largely nonexistent or impotent. The corporation is at work again. Need I mention a corporation called Wal-Mart? The largest retail corporation in the world has initiated processes of great efficiency, with very handsome profits: members of the family are listed among the ten richest billionaires in the world. Yet Wal-Mart refuses to pay a living wage and denies health care and other benefits to a large portion of its workers. Not to mention gaining tax benefits and other favors from local governments where it locates.

I end here, obviously far short of decent coverage of the corporate phenomenon in the 21st century. I hope to do more later.

Easy Lesson in Federal Budgets

The chief difficulty with understanding federal budget deficits and surpluses is the political hype that comes with them. Another difficulty is that they don't occur in a vacuum; they're part of the whole economic picture.

But it's really pretty simple.

One more note, in case anyone wonders: the federal deficit measures the excess of government spending over its revenues for one year; for example the federal budget deficit for Fiscal Year 2006 was around $250 billion. A debt is the total of all deficits; for example, the total national debt is $8.837 trillion.

Let's look at the record. Since 1929 the US budget has been in surplus only twelve times: four during theTruman presidency, three under Eisenhower, once under Johnson, and four under Clinton--in other words more often when a Democrat was president. The biggest deficits since World War II have been realized during the administrations of Republicans: Eisenhower, Nixon, Reagan, and the two Bushes.

Yet fiscal responsibility and balanced budgets have long been a staple of Republican political philosophy, and Democratic presidents are constantly under attack for presumably being fiscally irresponsible. The facts show exactly the opposite. The trouble is a lack of understanding of how the economy works.

A modern monetary economy requires some debt creation somewhere to finance new investment, because spending all of the income realized in a year is necessary to clear the market of what has been produced during that year. Debt formation may occur in the business sector, in the consumer sector, or in government. If business does not finance investment sufficiently, and consumers can't afford to (consumer debt is at a rather scary level now), it is left to the federal government to see that it happens or the economy will go into recession. Thus most of the time some government deficit financing is needed. If it is not forthcoming, the resulting recession will send the budget into deficit anyway. Thus is explained the budget deficits that regularly occur during Republican presidencies. In their efforts to balance the budget they siphon purchasing power out of the economy and cause recessions and therefore deficits.

Democratic candidates, correctly anticipating attacks, are fearful of allowing a deficit. The fiscally responsible policy, however, would be to allow a deficit if needed to keep the economy going at full employment. It would indeed be instructive to compare Clinton's fiscal policies with those of George W. Bush: Clinton shifted the tax structure upward by increasing taxes in the top brackets and restoring the Earned Income Tax Credit for the lowest brackets. Bush shifted taxes downward by cutting taxes for the rich and trying to balance the budget on the backs of the poor by cutting social services. The result? Clinton stimulated the economy and realized budget surpluses. Bush has achieved nothing but budget deficits.

The problem is in explaining this in this age of ferocious and mendacious attacks from the right.

Social Security--We've Still Gotta Save It~

Didn't we save Social Security last year? Yes, but reportedly the Bush administration has simply moved privatization of Social Security to the back burner until times look more propitious for it. And with the baby boomers about to retire, the present might look like a good time to put it out there again.

So what's wrong with privatization? First, it would put the risk on every worker instead of spreading it out to all of us, and the world of investments is notably risky. Ordinary citizens do not have the expertise to gain good returns consistently. (Of course Wall Street would love it--having all that extra business.) Second, there would be no provision for dependents and the disabled. Third, it would tap existing revenues scheduled to go to current retirees. So where is the extra money to come from to finance it? In sum, are we to expect these uncertainties to yield an adequate replacement for the current guaranteed lifetime monthly checks retirees have been receiving for more than seventy years? Clearly privatization is not a satisfactory replacement for Social Security as we know it--apparently the most popular and successful government program ever, with administration costs around 1 percent.

Plans to get rid of Social Security go back to the Republican platform of 1936 and have never stopped. Current demographics make the present look like a good time to do that by declaring it in crisis. Suggesting that illegal immigrants collect benefits is a good arguing point too, even though it is doubtful that they collect as much as they pay in.

So let's look at the facts. Social Security is a pay-as-you-go system, with revenues coming from a tax on wages up to $94,200, with a current tax rate of 7.65 percent being levied on both employers and employees for a total of 15.30 percent. Revenues have exceeded benefits for a number of years, with the result that there exists a "trust fund" of $1.993 trillion. Yes, that's trillion. Now we come to the real argument, about the nature of the trust fund. Is it simply an accounting device? Of course, as are almost all monetary assets, including your bank balance. And has the government been using it to cover other programs? Of course. It's not sitting in a box somewhere. In fact, present law requires that the US Treasury borrow from the trust fund. The Social Security trust fund, then, consists of special non-marketable Treasury securities that bear a maturity date and earn a market rate of interest, which is now more than 5 percent.

How do we know they will be paid back? Well, I'll grant that the US in recent years has been incurring record budget deficits, and as a consequence the current federal debt is over $8.8 trillion, about half of it owed to foreigners. Things could get difficult if holders of US securities should start dumping dollars and holding euros. But the US, through wars and natural disasters and savings-and-loan bailouts and all the rest, has never defaulted on its obligations. In fact, US Treasury securities are (correctly) regarded as the safest assets in the world. But how can the Treasury honor so much debt when it comes due? Just as it always has, through other borrowing or out of taxes, as, for example, after World War II when it paid back much, much larger obligations relative to GDP, without any hardship to the economy. In short, we can be certain that the US Treasury will not default. And we can be sure someone has been paying attention to the maturity dates of those special trust-fund borrowings. It isn't as if it will be a surprise.

To continue: Let's look at the anticipated future health of Social Security. Around 2018 the fund's benefits will begin to exceed receipts but will continue to increase until 2025 because of interest receipts. And the trust fund will be exhausted by 2042, according to the Social Security Administration, or by 2052 according to the Congressional Budget Office, both of which used excessively pessimistic estimates of GDP. Or, it will last indefinitely if realistic GDP assumptions are used. Of course, GDP growth rates are very unpredictable so no one knows just exactly when the trust fund will play out. In any case, however, it can easily be fixed if and when there is a shortfall. The easiest and most logical recourse, it seems to me and to lots of others, would be to raise the cap on the level of wages that are subject to the Social Security payroll tax.

This is a crisis? Is there any other government program that is expected to run surpluses for decades and then to require only tweaking to produce surpluses? No, Social Security is not in crisis. However, one well might wonder how the projections can be so positive, given the dependency ratio (the ratio of workers to dependents) expected as the population becomes older, as it is expected to do. The projections come out as they do mostly because of estimates of productivity increases. More women entering the labor force help too. Expectations of fewer child dependents should make it larger still.

It should be pointed out, additionally, that concerns about the financial aspects of Social Security seem obsessive. Excessive payroll taxes can hurt effective demand and therefore real income. Also, the trust fund simply transfers purchasing power, not real income, from the present to the future. In other words, the trust fund is not about the level of real income but only about the share of real income the elderly will get. American financial institutions are very sophisticated. Should the focus on real output be less so? How is it that no one seems concerned about the production of real goods and services? In other words, instead of putting so many resources into manipulating the financial aspects of Social Security, it would seem more productive to invest more in human beings, in education and health care, for example, and in infrastructure, such as mass transit, Amtrak, roads and bridges, computers, and so on. Future workers will have to produce real income for everyone, not just to satisfy financial assets for seniors.