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On The Money
We got a big reminder of the importance of government spending in the Q4 GDP report. The damn military delayed some expenditures for a few months, and it knocked 1.3% of the quarter's growth rate. If it weren't for the pikers at the Pentagon, we would have been in the black. GDP = Jobs, and everyone wants jobs, so it would be "patriotic" if the Generals and Admirals got off of their asses and and got back to spending. Right?
As it turns out, the Top Brass can't move the economy's needle, at least not compared to other parts of the government that are spending the bucks that keeps things humming.
The pride of the military is the aircraft carrier. We have 11 of them floating around today. There's good reason to believe these ships, with their monster offensive capability might come in handy, so for that reason, and the good of the economy, we should build some more. These babies cost $12B:
$12B sounds like a lot, but compare it to what Social Security has paid out in just the month of February - $66b went out the door. SS is now spending at the rate of five aircraft carriers a month!
Of course if you're going to build the odd dozen carriers, you will need lots of new planes to go with them. Each ship needs 70 of the F/A -18 attack bombers.
The F/A-18 goes for $60m, about 90 minutes worth of SS payments. Some other comparisons of military hardware and SS:
The M1 Abrams Tank (a monster) cost the same as 3 minutes worth of SS's annual cost.
We could probably use a few more of these B1 bombers. They must be a blast to fly. They are very expensive, each one costs about two hours of the tab for SS.
The future is drones. What better way to fight a war but behind a TV screen, right? The MQV-1 Predator is just what we need. The good news that these killers only cost the equivalent of 3 minutes of SS. The Hell Fire Missiles the MQV fires leave a big hole in what ever they hit, the cost is negligible. SS is spending at a rate equal to the cost of 15 Hell Fires - every second.
Okay, I'm kidding a bit with this. But the comparisons are legit. America can't change spending by reducing the carrier fleet 10%. The cost of the extra ship is a rounding error when compared to SS.
Please don't take this to read that I want to increase military spending as a vehicle to create jobs. This is just another effort of mine to make some comparisons of what is going on at SS. The numbers are mind boggling. Yet in the next several weeks, as the sequester talks hit the pavement, SS will not be addressed. There will be some talk, but there will be no action.
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The money borrowed by Social Security is less noble than other borrowing?
Borrowing by Warren Buffett to enrich Warren Buffett?
Even the relatively poor, shirttail cousins of Wall Street banksters need their muppets to eat some losses. To the finance mind, it's how it's spozed to be.
You don't think these guys feel any real respect for honoring debts . . . when they become the guys paying them, do ya?
I've been taxed for 30 years for Social Security.
They just raised payroll taxes by 2% for SS.
They can cut CONgressional salaries and bennies, FED money to foreign banks, and taxpayer money to overseas governments and slush funds, and the military/industrial complex first.
If they cut SS or extend the age to 70 I will have yet another reason to leave the U.S.S.A. crony captialist kleptoligarchy.
Speaking of "No Action", Billie Joe Armstrong (lead singer of Green Day) with Elvis Costello doing "No Action" live (can't find the studio version on YouTube):
http://www.youtube.com/watch?v=imAkjt7nagA
"No Action" from one of the best albums of all time, "This Year's Model" circa 1978.
if you need another reason, and are still part of the matrix, its your fault you are still tied to the USSA. Make the move, i did it, and am enjoying my true freedom.
No one on Earth is truly free.
Paying SS for 30 years you say? That makes you about 50, and if that is the case, I've got bad news for you.
You well get SS checks at 67 (maybe 68). That means you will get your first check in 2031. Bad timing for you.
Based on the current forecast for SS, the Trust Fund will run dry in 2031. When that happens, by law, ALL BENEFITS must be cut by about 30%.
So as far as it goes, a person your age is in about the worst position of anyone in society. Old people will get a free ride, younger people will at least understand that they can't depend on it.
So start thinking where you might be headed; what you fear, is certain to come true.
I'm a couple of years behind this dude. 48 to be exact. I'm not dependant on this LIE.
I'm 52 and I just assume I'll get nothing. The forecasts always seem to be rosier than the actuals.
You are correct, which is why I have no trust, and no allegiance.
Good advice.
Denial; it's not just a river in Egypt.
Meh...sure, "the President having proposed massive cuts in defense is now complaining that Republicans are causing massive cuts in defense spending." doing more with less is the basis for the totality of the economics profession...so "stretch your dollars Big Government" if you want more. Social Security obviously goes right back into the economy (amazingly it is TAXED. Hmmmm. I wonder why Cousin Brucie doesn't bring that up.) I see we have another bankster coming on board the Obama Train...this one at Interior. What would be amazing is if someone actually asked her "what do you think qualifies you in any way for this position?" i mean..."were you ever a logger? How about in charge of a mining company? No? How about anything having to do with energy extraction? No? You sold hiking boots at a profit tho? Wow. Interesting." we shall see what awaits as it relates to the deficit...but clearly interest rates are not a factor. Economic growth sure is tho...
Article I read said she was an executive of Big Oil with a fondness for convervation before heading over to REI.
And of course every carrier needs a crew and additional DOD personnel to monitor it. Just look at all the economic activity it creates. Krugman probably has a boner right now
No. PK wants to increase SS payouts. Government spending is governent spending. It all adds to GDP. If SS checks were to go up 10%, it would add $80B onto GDP. That would boast annual GDP by 1/2% - forever!
It's like magic, except for the part about paying for it....
I'm sure PK would happily agree to a "compromise" of doing both.
That's because Paul Krugman can't understand that increasing government spending means (in real terms) reducing consumption, investment, and net exports. He also can't understand that the only way to increase wealth is to increase output, and the only way to increase output is to increase investment to build capital and increase production.
Yep and everyone loves a magic show
Seems like you're determined not to pay down the national debt:
http://www.gao.gov/special.pubs/longterm/debt/debtbasics.html
About 18% of it is owed to the SSTF alone.
Why do you hate paying off the debt, Bruce?
Granted, of course we need to cut down on spending. Can't get your head around doing it in the case of the terrorist/war machine? Seriously?
You need to stop harassing bruce. Those are intragovernmental obligations, and as Bruce has already written, they're simply a ledger entry and it makes no difference whether we just mark that debt to zero. The reason is that when those debt IOUs are "cashed in", it means the treasury has to go out and issue government bonds to raise the cash that redeems the IOUs. In other words, you destroy an IOU and create a government debt at the same time. It's just there to keep track of how much of the surplus has been misappropriated by Congress.
Transparently self-serving double talk.
$16T in federal debt. Deal with it.
$80 Billion is what the FED is putting into the banks per month via MBS purchases.
Thanks, Bruce, as always!
You left off Medicare, which is the other unsustainable entitlement.
I harp on SS because it is, in theory, "fixable". If left untouched, it will fester to a point where it is no longer fixable, and becomes a systemic risk.
As near as I can tell Medicare is not "fixable". You can tweak it here and there, it does not matter, it WILL become a systemic risk.
So to your point, yes, both are unsustainable. We are certainly going to shoot ourselves in the foot on one, there is no sense that we set it up so we shoot both feet out from under us. That is what is happening however.
b
Systems like Medicare are only "unfixable" if you remain committed to the defective design that created them in the first place. But they're just LAWS created by men. They can be changed, and similar (or much better) outcomes can be achieved.
The fundamental problem with Medicare is that it's an all-inclusive "insurance" program that isn't insurance. It's not at all difficult to imagine better ways of doing it, but our politicians aren't prepared to have an honest discussion about the options because they know the masses of the voters would *NEVER* tolerate maintaining the existing fascist giveaway to so many private for-profit industries, and it's those industries who actually pay the politicians.
Social security is fixable without even changing the program. Full employment at living wages and the problems of social security are no more. If we can't get there because those with capital refuse to deploy that capital in a meaningful way, then you have to fix it by making those with capital pay more. Perhaps an additional 5% capital gains tax? S.S Tax on earnings up to $200,000? Making people work longer and for less benefits is not the answer.
The truth of the matter is that for the foreseeable future social security will only being paying out what was contributed by workers and not one cent of it comes from taxpayers or cuts in other spending. The whole missles instead of social security is just rubbish.
Medicare though is a problem. Instead of focusing on benefits, we need to focus on cost of care. This doesn't mean less money to doctors, it means less money to device makers, drug companies, etc. Why Medicare pays multiples of what other countries pay for the same drugs is beyond me. If you ever want to start inserting common sense into the Medicare debate, the inability of Medicare to negotiate drug prices would be a great starting point.
Bank of Japan member Sato decried this very thing in a speech last night, saying that all those yers Japanese corporations were making a killing, The Bank of Japan expected them to pass on the money to workers but they didn't.
Then, corporations sat there with tons of money on their balance sheets or invested overseas but nothing moving in the economy. And boom! Stagnation. And boom! Deflation.
Sounds eerily familiar to today's set up in the US, doesn't it?
:D
No - coercion is not the answer. And "full employment at living wages" should not even be the goal. Not every job should produce a "living wage" - some jobs should just be for people who want a little more cash in their pockets. If you require all jobs to be "living wage jobs" you destroy the low wage pocket-cash jobs.
The answer is to stop attaching progressive policy goals to economic decisions, and to instead focus on maximizing wealth, production, and growth instead of attempting to legislate "fairness"
You have described a very serious train wreck, then. A lot worse than "shooting ones own foot" which is stupid but survivable. Even, both feet. The better metaphor might be shooting ones self in the head. Because I don't think any of us will recognize America after a failed SS and Medicare dustup. Apt comparisons might be made with 1980's Romania. Except with aircraft carriers.
Fix for SS and Medicaid is Predator Drone. Corral dissident population in FEMA camp and to play whack-a-mole!
I only think Social Security is "fixable" via a much higher induced inflation rate of 5% consistently.
This will provide the only real opportunity to try and meet Social Security payments, if even in nominal terms.
Admittedly, it could be 4.5% or 7% (or anything much higher than actually reported), but you hopefully get the point (and a math whiz could crunch some sort of semi-accurate projection).
With no corresponding adjustment to SS.
This chained CPI bull ain't gonna cut it.
They have to freeze benefits at the nominal amount they are now, then inflate the economy.
Of course that means a $100 value menu at McDonalds will be all but guranteed, with a super sized meal at about $1k.
Yippie!
Bruce, great info! Always a good read.
So Obummer's Hawaii vacations cost us only 30 min of SS spending... What value!
http://www.whitehousedossier.com/2013/01/04/taxpayer-bill-obamas-hawaii-...
Me thinks its cheap to make capital like stuff in the modern world.
Sailing, flying & driving stuff is a different matter.
Comparing the energy consumption of lets say the bottom 10% of the population to the US military may be a better way of looking at things.
Then again maybe not..........
I love the comparisons to "real world" things, like how Tyler posts those Infographics of the national debt in hundred dollar bills and it makes the skyline of New York City.
It helps us plebes wrap our heads around these gigantic numbers.
Thanks for taking the time, Bruce.
:D
Boris is like Tyler pornoGRAPHy. Tyler, more color please!
You can build the aircraft carriers, but you'd still have to build extra ships to support the carrier, namely cruisers, destroyers, submarines, and supply ships.
This would cost a lot of money, but I doubt it would amount to what is going to be spent on SS in just one year.
Now, if we were to build a fleet of Death Stars, that would truely be a jobs program.