Neolib Hack Robert Samuelson: Determined To See Oldsters Eating Cat Food!

"What's happening is simple: Spending on the elderly is slowly overwhelming the rest of the federal government" - Robert Samuelson

Well, seems that columnist Robert Samuelson is at it again, beating the drums for elderly austerity and more money for the war machine. It seems this guy never gives up. He's thoroughly Neoliberal after all, having committed himself for years (even in a response email to me some 7 years ago) that no one ought to be receiving money just for breathing. (As most seniors do).

In his latest screed ('The Twisted Priorities of a Graying Nation') we're informed "government is being gutted" and "priorities are being skewed" by a reckless,  profligate over-spending on the elderly. Meanwhile, spending is behind on "vital activities" like defense and financial markets - he references their "regulation"- but if you've read any of his past articles it's really about their expansion, i.e. using further globalization such as the TPP. He and we know the GOOps will never allow more genuine financial regulation, especially as they already killed what was left of Dodd-Frank  in the 2014 end of year spending bill. (This was via a poison pill amendment that was stuck in the spending bill, enabling the banks to once again use FDIC monies to back up their risky trades - leaving us open to another 2008-style meltdown)

As usual he harps on the CBO projection that annual federal spending will grow by $2.6 trillion or 75 percent from 2104 to 2025 and "almost 90 percent of the increase comes from three sources: Social Security, health spending and interest on the federal debt."

Why he includes Social Security is mystifying for a number of reasons, including that Social Security. has never added to deficits given its payroll taxes essentially more than fund its outlays. Right now, in fact, the size of the S.S. Trust Fund is at $2.74 TRILLION which exceeds the $2.6 trillion Samuelson cites as federal spending for S.S., healthcare and interest on the debt! And we're not even including  as S.S. revenue  the taxes on Social Security income which none of these austerity nabobs factor into the mix. Namely, that up to one third of your Social Security benefits can be clawed back once you exceed a specific threshold. Why do none of the austerity fetishists mention that? Well, because it inveighs against their "entitlement" cutting agenda!

Meanwhile, a large part of health care spending is on prescription drugs, a little problem that could easily be remedied by allowing Medicare to do what the VA does, and bargain for the lowest drug prices with PhRMA.   As for the large federal interest on the debt, any moron could have informed Samuelson that the main reason for that is too little income, as in revenue - for all the spending that's being done - mainly on the military since 2001 (When ol' Gee Dumbya decided to cut taxes instead of increasing them when he commenced his "war on terror" - that's now sucked up 13 years and nearly $4 trillion)

Samuelson goes on to whine about "the degradation of government"  and points to the National Institutes of Health "losing nearly 25 percent of its purchasing power" in the last decade. Well, whose fault is that, Maestro? It's the fault of the Repukes who cut the NIH (as well as CDC) budgets which money they preferred to spend instead on military toys like the F-35!

In the same breath he also reports:

"The Internal Revenue Service blames budget cuts and reduced staffing for delays in mailing refunds and responding to taxpayer questions"

But again, this wasn't incepted by Social Security but by the Repukes cutting the IRS budgets as "payback" for what they believed to be singling out right wing groups for greater scrutiny, i.e. when claiming any tax exempt status under Internal Revenue code 501(c)(4). As a result, the 'Pukes cut an additional $346 million from the taxman's budget - virtually tying the IRS' hands to assist taxpayers or to expedite refunds. See e.g.

http://brane-space.blogspot.com/2015/01/if-youre-late-getting-tax-refund-thank.html


Samuelson then rightly wails about the "national parks being hit..since 2010 their funding has decreased by 12 percent in inflation-adjusted dollars and the backlog of deferred maintenance has topped $11 billion."

Again, this awful, deficient funding situation has nada to do with Social Security but the same House Republicans and their cruel austerity punks who also de-funded the SNAP food stamps program in 2013 and want to do the same again now. Don't blame the favorite scapegoat of Social Security but rather a bunch that has its own priorities askew and would ten times rather spend on defense and war toys (now taking up 6.3% of GDP) than domestic programs - including out infrastructure which is falling apart.

Instead of lying his ass off about the need to cut Social Security - making it a red herring for Neoliberal austerity groups like "Fix the Debt" he ought to applaud the program's expansion which - if effected- could ameliorate the ongoing low aggregate demand problem that's keeping our economy down. The solution then is not less senior capacity to spend, but MORE! The more senior spending on goods, services - even health care- the more money infused to create more jobs!

But never mind, Samuelson and his ilk won't be satisfied until the elderly are on a permanent cat food (or kibbles) diet!

See also:

http://brane-space.blogspot.com/2011/05/is-robert-samuelson-for-real.html

and:

http://www.smirkingchimp.com/thread/richard-eskow/60951/the-republicanclasswars-new-front-social-security-for-the-disabled

Robert Samuelson Calls Out "Propaganda" - Is Blinded By His Own

                                                                                                    

Neolib hack Robert Samuelson is on his high horse again ('Make Jobs, Not Propaganda') this time calling out Obama's Affordable Care Act  for bamboozling people by not giving the lowdown on how many jobs would be "lost".

According to the nattering Neolib, a denizen of the WaPo:

"An administration serious about job creation has to sacrifice other priorities to attain it. This President Obama hasn't done.  The CBO estimates that the health insurance subsidies in the Affordable Care Act would discourage people from working, resulting in the loss of an equivalent 2.5 million full time workers by 2024."

But again, either Samuelson doesn't get it or doesn't want to. After all, Neoliberalism dictates that at every turn the market rules over worker security and welfare. Hence, a dedicated Neolib would be purblind to any advance that benefits workers, as opposed to sacrificing their interests to the maw of the market.

The point is that the ACA  changes  will enable workers to be freed from the yoke of jobs they detest - merely to keep health insurance. This has been a monkey on the back of most ordinary workers since health insurance was linked almost exclusively to having a job after World War II. No more. Now, tens of millions of people who currently have insurance through their employers will  have the option to quit their job and get insurance through the exchanges.

This is the purview of a truly FREE WORKER'S MARKET!  The worker now gets to make his calls, as opposed to being an economic slave for some goober boss to lord it over him, knowing the poor guy has little choice other than to take it or be without health insurance.  According to the New York Times (Feb. 23):

This is a phenomenon that economists call “job lock”: when people stay in jobs they dislike, or don’t want, solely to keep their health coverage. A Harvard Business School study in 2008 estimated that 11 million workers are affected by this dilemma. Other studies show that when people don’t have to worry about health insurance, they are up to 25 percent more likely to change jobs.


The freedom inherent in this truly free worker's market doesn't end there. Millions of older workers, for example, will finally be able to tell "Boss Man"  to get screwed and retire, having access to affordable health care without fear of financial ruin- or having to stay in a suck-ass job just to have insurance.  The unspoken bounty not mentioned at all by Samuelson is how this change will leave many job openings for younger workers - who up to now have been shut out, because the oldies were forced to work longer.....mostly just for health insurance....at least until Medicare kicked in a age 65. Now, no more.

Of course, the typical Neolib hates this! He hates that a worker or non-rich person has any kind of freedom of choice outside what the coercive market dictates or allows.  In this case, he abhors that a worker can be Scot-free with no job obligations, and can still get insurance. To this manner of economic brigand, it amounts to "cheating".


Other benefits also accrue from a truly free worker's market:

- People will be able to switch jobs, from those that suck the life and energy from them to those that better suit their talents.


- Parents will be able to downsize their jobs on their terms to be able to spend more time with families. This will be especially true for many parents of young children who would rather work less to spend time with their kids.

- People with serious health conditions will be more  likely to cut back their hours or quit work altogether since they will no longer need to work at a job that provides health care insurance.


THIS is where the 2.5 million jobs (not necessarily workers)  Samuelson claims the CBO asserts will be "lost" by 2024, will go.  Yes, in a manner of speaking, they will be lost to the Neoliberal coercive jobs market, but the people - the workers - will gain greater job autonomy. They will have the job choice - or no choice- they've always cherished but which the Neoliberal market denied.


This was the basis for the Congressional Budget Office's (CBO) assessment that the ACA would reduce the supply of labor by 2 percent. CBO calculated that several million people would either cut back their work hours or leave the labor force altogether.

The other aspect the Neolib hates is that higher worker pay could result from the diminution in jobs.

While the CBO  report didn't specifically explore this issue, other things being equal, a reduction in the supply of labor would be expected to lead to a rise in its price. In other words, wages would rise. That would be good news for workers who've seen their wages stagnate since 1973.    The Neoliberal textbook story is that a rise in the supply of labor lowers wages, and this is exactly what happened. It happened for two main reasons: 1) steady reproductive rates that keep job production below population growth rates, and 2) the jobs- health insurance lock which forced more workers to stay in jobs than they otherwise would - artificially increasing the labor force beyond what it needed to be.

 

For all these reasons, Samuelson's challenge to Obama to "make jobs, not propaganda" rings hollow. Samuelson doesn't want Obama to "make jobs",  he wants the Prez to make jobs that conform to the dictates of the Neoliberal job market imperative!

 

"Lights Go Out on Dismal Science"? A Long Time Ago!

Illustration of  the Gaussian Copula Formula used by economists to justify credit default swaps.


"How many economists does it take to change a light bulb? One!  When the one they used in graduate school goes out, they sit in the dark."

The above joke, as cited by Neolib hack Robert Samuelson, is supposed to hint at why economists are so pathetic at making accurate predictions. Unlike astronomers,  who can accurately predict the position of Jupiter or Mars in 2050 or the next lunar eclipse or occultation of a star, the economists can't even predict simple stuff in their immediate domain - say like forecasting the growth would be 3.2 % in 2011 when it was only 1.7%

Of course, the reasons for that failure are now well known. Unlike astronomers and astrophysicists who - when they make predictions - must take into account all relevant information, the economists tend to leave out what they dismiss as irrelevant. In the case of the growth forecast, it was simply that the economic stimulus passed in 2009 wasn't large enough to promote the growth expected. As Nobel winning economist Paul Krugman noted it needed to be at least a trillion dollars more, given the recession was much deeper than the economists originally thought.

On April 26, 2010,  a letter of mine published in The Financial Times,  drew attention to the abysmal failure of modern macro-economics (touted as a “science”) to predict the 2008 market meltdown and financial crisis. I pointedly noted that economics had too many “externalities” which included aspects like environmental costs and resources that were omitted from its models, as well as lacking any consistent empirical basis analogous to physics.

In the particular case of the failure in predicting the credit crisis and meltdown, academic economics erred by assuming a putatively poorly regulated system was capable of sustaining massive risk entrenched in obscure, poorly understood credit derivatives created by Wall Street “quants” , most of whom had forsaken bright careers in science or mathematics to invent these devious financial instruments for investment banks. The assumption saw all the hinges come loose when the credit default swaps were immersed in securities purported to be safe, since they were given AAA ratings by credit agencies like Moody’s and Standard and Poor’s.

Thus, the  forecast failure was predicated on a three-way collapse of the paradigm: 1) commercial banks taking on the risk of investment banks by leveraging their assets to preposterous ratios (sometimes as high as 33:1), 2) credit derivatives designed using the Gaussian Copula Formula which enabled them to be sliced, and spread throughout ordinary securities such as collateralized mortgage obligations, and 3) a failure of the credit rating agencies to take proper note of (2) and in effect, be blinded while assigning bond ratings the securities didn’t deserve.

Since then, it’s become ever more evident why economics is a failure and can’t even be regarded as a science like Physics, or even in a “pre-scientific phase” as one respondent to my FT article (Sanjay Bissessur) claimed. But economists' failure to even appreciate or use the Gaussian Copula formula correctly shows that they aren't even in the pre-scientific phase.

In the case of the Gaussian copula, invented by David X. Li while working at JP Morgan Chase and articulated in his (2000) paper: ‘On Default Correlation: A Copula Function Approach”  it isn't a true mathematically sound equation analogous to those used in physics or celestial mechanics.. It is more an intellectual Frankenstein monster that never should have seen the light of day any more than a four-headed baby with a pointed tail. For example, Li's misuse of the distribution functions (F_A(1)) and (F_B(1)) would appall any genuine mathematician or physicist. Each is actually based upon significant uncertainties via survival law distributions which can vary enormously. There is no way to normalize any probability based on (T_A, T_B so there is no way to equate Pr[T_A, T_B] to anything on the left side. The equal sign is dangerous recklessness masquerading as math. Were economists or "quants" know any of this when they cranked out credit default swaps? The evidence of failure to predict the 2008 credit crash shows they didn't.

Back to Robert Samuelson who,  in his recent piece on the Dismal Science (2/ 21, Denver Post), attempts to blame Keynesianism (the theory of John Maynard Keynes that when aggregate demand is low government must offset the decrease via stimulus and deficit spending.)  He asserts "the U.S. DID respond aggressively to the financial crisis" - but misses the point (as was missed by most Pareto- compromised economists) that in reality the stimulus and deficit spending weren't large enough!  This was only evident in retrospect when it was learned the negative growth actually hit -1.6 % in the first quarter in which the stimulus was initiated, in 2009.  Hence, Krugman's insight that the stimulus ought to have been nearly $1.7 trillion instead of $787 billion.

Samuelson also makes the error of most Pareto -distribution based economists, in referring to the "Fed pouring $3.2 trillion into the economy since 2008 to keep interest rates low and accelerate economic growth".   He adds that "so much money pumped out so quickly should have spawned higher inflation by monetarist reasoning, but it hasn't."

But one wonders what planet he's living on. In fact, inflation has been going up and rapidly  - more than 16% a year in the health care costs domain, and 5% a year in food costs. Don't believe me? Check meat , egg, dairy costs at different intervals. The problem isn't that there is no inflation, but that the Federal Reserve selectively ignores those costs -expenses it doesn't want on its cost of living assessments.  The problem is that the Fed leaves these costs, as well as for fuel, out of its CPI or Consumer Price index.

According to  former Fed honcho Ben Bernanke (WSJ, Feb. 17, 2012,, p. B1, 'Consumers Price in Real Cost of Living'), all such costs as food, housing - even exploding rent, as well as meds - are designated as "shelter costs". Hence, they are, get this:  "essentially made up numbers" .   Bottom line, according to Bernanke's statistics, higher costs of gasoline, groceries, rent and so forth - while not directly in our heads- are of no concern to him as regards inflation. After all, the CPI or consumer price index, is gamed to lowball the impact of these shelter costs so that even if inflation is really going up by about 2% a month, to Bernanke and his Pareto-stats it is really ZERO since his statistics (like the 'owner's equivalent rent") don't show up anything worth fretting over.

And economists wonder why they can't even get basic predictions correct?

The other aspect, is that although Bernanke pumped in $3.2 trillion - via his "quantitative easing" - it largely benefited only Wall Street and the stock pushers, traders by inundating them with cheap money.  Bernanke likened the Fed’s $85b a month bond buying to giving the economy small, needed doses of medicine - but it was more like crack to the financial markets that quickly became hooked on it.  This is the main reason a giant stock bubble has been produced which has no relation to actual corporate performance, i.e. corporations are still sitting on over $1.7 trillion in cash - one reason job creation is so sluggish.

Bernanke's pumping up of the economy  via QE I and II certainly hasn't helped seniors on fixed incomes who depend on the interest earned from fixed income investments for extra money to spend. (They lack the time horizon to be dabbling in stocks, or even mutual funds,  as they'd never have the time to make up the losses like a young Turk.)  It hasn't helped most college students whose loan costs have grown higher, and it hasn't helped minimum wage workers who've now seen their food stamps benefits cut!

In fact, a much superior alternative, if the economists had any sense and weren't tied to their delusions (and the Tea Party idiots in the House wouldn't have opposed it), would have been for much greater food stamp benefits - no cuts -and similarly extending unemployment benefits especially for the long term unemployed. These simple measures would have instantly - relatively so - spurred aggregate demand and a healthier economy. The reason? People receiving that money would have gone out to buy food, pay car or home loans, or buy fuel and meds. As opposed to corporations using the money to buy back their own stocks creating a false jump in stock prices, or traders jacking up the P/E ratios to make stocks look better and enhance their own commissions.

The sad fact is the entire U.S. economy is 'upside down' - in so many ways it makes a genuine scientist's head spin. In any rational real world economy, for example, the country would be creating jobs to repair its crumbling infrastructure - thereby killing two 'birds' with one stone (or rather stimulus cash infusion). It would also long since have pulled out of Afghanistan, realizing that quagmire, like Iraq, is a losing wicket and merely a money drain. All the money saved from the last two years in Afghanistan alone could have funded a major infrastructure repair program.  But we're a nation too deluded by external "threats" and security while ignoring our true domestic security.

Incredibly, the dismal science economists even have much of the nation  dumbing down - going gah-gah over their stocks or mutual funds' performance, but forgetting that doesn't mean diddly if they can't get water because their water mains are rusted through, or their toilets back up because the sewer lines are corroded.

The very condition of our nation, with so many serious, unmet domestic needs,  shows that the economics adhered to is more in the way of magical thinking than any "science"-  even a dismal one.

Neolib Hack Samuelson Defends NSA Invasion Of Privacy

"In every interview Snowden has relied on the simple notion that informed the founders of our nation regarding the primacy of truth in public discourse.   His commitment to that ideal cannot be comprehended by a mass media culture of careerism informed by public relations that trivializes all differences of truth and logic into incomprehensible mulch. His is instead the simple veracity of the once honored slogan that the truth shall set us free and that it is overwhelming government power that is most threatening to that freedom." - Robert Scheer, on  smirkingchimp.com

I figured that eventually the WaPo Neoliberal hack Robert Samuelson would chirp up in a column to praise the NSA, and diss Edward Snowden - while again seeking to confuse his readers in conflating truths and jabberwocky.   Before even getting to his nonsense, it really ought not be a stretch to grasp that arch-Neoliberals would be wholesale salivating for the national security state, just as they drool for the military.

As Thomas Frank observes in his remarkable expose of the market worshippers, One Market Under God, the Neoliberal basic imperative is "let them eat stocks" (or mutual funds). This despite the fact that since the investment trusts of the 1920s (precursor to today's mutual funds) the traders and brokers have regarded the ordinary public as a "dumb herd" (p. 109) and sheep to be shorn. After the 1960s the message softened  - in order to lure more proles into the market - but the subtext has been the same: popularize the "Street", make people believe they're big shots too, and wait for the crash to suck up their assets.

The main message of the Neoliberal imperative: People must not depend on the government for their security, including for Social Security, veterans' benefits, Medicare or Medicaid.  If they are to sustain themselves they must be cajoled to do it by investment in the market where all factors are "democratized"  - and no one suffers, i.e. by having to pay more taxes so some old fart can get his prostate cancer treatments, or pay his monthly heating bills.

And to ensure this imperative is met, the Neoliberal pushes the political matrix to allocate ever more resources to military and national security interests, thereby leaving little for domestic social insurance programs. This, in fact, is what we beheld last month, when in a "bipartisan" deal, the Dems allowed the Reepos an extra $23b to use for military spending, while their side sucked up the loss in compensating domestic cuts - mainly by disallowing the extension of unemployment insurance.

For the same reason, a hack like Samuelson would plump for the NSA and the overall national security budget (now at $71b /year) increasing - again to put more pressure on domestic spending programs, including food stamps, Medicare etc. Samuelson actually has the nerve to spout this disingenuous tripe:


"There is more than a little hypocrisy to the outcry that the government, through the National Security Agency (NSA), is systematically destroying Americans’ right to privacy. Edward Snowden’s revelations have been stripped of their social, technological and historical context. Unless you’ve camped in the Alaskan wilderness for two decades, you know — or should — that millions upon millions of Americans have consciously and, probably in most cases, eagerly surrendered much of their privacy by embracing the Internet and social media."


Let's back up so that casual readers aren't lured into buying this bollocks. As I noted before, people willingly putting out their information in the expectation of social communication or comity- say on a blog, Facebook page, or Twitter, is NOT the same as having their social intent perverted by some impersonal spook technology to vacuum up every word for filing and cross-referencing.  In the latter case,  collecting every fucking thing surreptitiously then compiling it into a database for which criminal intent or terrorism might later be associated (including domestic terrorism for protesting against a fracking operation, or demonstrating against Wall Street shysters.)  Recall that investigative reporter Christopher Ketcham learned that  NSA's Main Core:

"Can identify and locate perceived ‘enemies of the state’ almost instantaneously. One knowledgeable source claims that 8 million Americans are now listed in Main Core as potentially suspect. In the event of a national emergency, these people could be subject to everything from heightened surveillance and tracking to direct questioning and possibly even detention.”


Thus it  ought to be a no brainer that Samuelson's efforts to assuage doubts are not to be trusted. Apart from which, the casual blog poster, or FB poster doesn't expect his words to be collected by these disreputable sneaks and assembled in a program called "Main Core" - because those words were interpreted by some snotty eggheads as being indicative of "an enemy of the state".

None of that downside is noted by Samuelson, but we know this sort of 'dodge and hide' template is his forte.   Indeed, after his initial codswallop Samuelson seeks to further justify it by writing:

"The Internet is a vehicle for self-promotion, personal advertising and the pursuit of celebrity"

Again, even if it is, it doesn't mean people ALSO welcome having all their ruminations, images, beliefs, philosophies compiled by spooks into some nefarious hidden database that regards these as evidence for being an "enemy of the state".  No, people expect that IF that is done - and indeed it is using the NSA's MUSCULAR, PRISM and Xkeyscore programs - they want the fourth amendment followed and that means an individualized warrant brought before a proper FISA court - not the rubber stampers we have now.

Oh, and then we have Samuelson's brilliant  "solution":

"If Americans think their privacy is dangerously diminished, there are remedies. They can turn off their PCs, toss their smartphones and smash their tablets"


Yes, seriously, these are the very words of this character. If you are humbugged by the notion of the spooks vacuuming up all your words, beliefs, pictures and filing them into a Main Core program for "enemy of the state" profiling - you can always disconnect! Toss that Ipad or notebook down the chute and let not your hearts be troubled!

Oh, and then there's the "commercial scare" routine again:


"To these conscious sacrifices of privacy must be added murkier, collateral losses that are orchestrated by the world’s Googles, Facebooks, service providers and “data brokers,” writes Alice Marwick of Fordham University in the New York Review of Books. They scan users’ digital decisions (sites visited, products and services purchased, habits and hobbies favored) to create databases, often merged with other socio-economic information"


But again, Google, Facebook, ISPs etc don't have the power to take away your freedom, like the government does (say by invocation of its 'Continuity of Government' program - with all the data they've gathered on you being an "enemy of the state")

And then the hack strikes again:


"The NSA’s damage to privacy is dwarfed by the impact of market activity...... Suddenly, Big Brother looms. In our mind’s eye, we see the NSA’s computers scouring our every phone call. We’re exposed to constant snooping and the possibility that the government will misuse the information it finds.

The reality is far more limited. The NSA is governed by legal restrictions. It does not examine the full database. It searches individual numbers only after it has determined there’s a “reasonable, articulable suspicion” that a number might be linked to terrorist groups"  


Puh-leeze! All of this amounts to disinformation. The same sort of twisted nonsense Samuelson delivered earlier regarding "deficits" being created by JFK, during his administration, which I have already skewered. http://brane-space.blogspot.com/2012/07/thats-right-now-blame-60s-jfk-for.html

The reality is that Samuelson's cited "legal restrictions"  governing the NSA are little better than the merest figleaf. Those (original) restrictions ceased to exist when the FISA law was changed after the Bushistas' illegal wiretapping over 2005-08. Instead of prosecuting the Bushistas, a compliant congress and the courts excused the transgressions and actually made them lawful!  Hence, whatever protections people think they have disappeared when the illegal variant of the FISA law was extended back in 2011.

We also know that it isn't necessary for NSA programs "to search the whole database" and that the Main Core will assemble suspicious words whether a human person searches or not.  This is also why the Occupy Wall Street protestors literally came under the gun.  Finally, even one of the original authors of the Patriot Act, Jim Sensenbrenner, insisted he never intended it to go as far as it has, and as Snowden revealed.  As he was quoted in a UK Guardian piece two months ago"


 "Oversight only works when the agency that oversight is directed at tells the truth, and having Mr Clapper say he gave the least untruthful answer should, in my opinion, have resulted in a firing and a prosecution,"

Sensenbrenner was referring to NSA honcho James Clapper lying before a Senate hearing  months earlier, when asked if the NSA did mass surveillance. So if Clapper was lying, it is obvious that Samuelson must be too by his specious defense of the NSA - and that those poor little souls aren't doing anything beyond the limits of Sec. 215 at all.  Oh no, so just rest your little heads! All is well!

Is Samuelson calling Sensenbrenner a liar?  If the original author of the Patriot Act believes the NSA overstepped the bounds of the law who the fuck is Samuelson to claim anything different?

Oh wait, he's a Neoliberal hack!

Next time you see anything from Robert Samuelson and wonder if it has some veracity, consider the source. Would you drink water from a sewer ditch? Of course not, so why take anything from Samuelson as useful information you can trust?

See also (from someone you can trust):

http://www.smirkingchimp.com/thread/robert-scheer/53531/exposing-public-wickedness-is-more-american-than-apple-pie

"Well Off" Seniors - And Maybe Why the 401k Needs to be Abolished.

Perhaps the most superlative financial education I ever received, was thanks to William Wolman and Anne Colamosca in their book 'The Great 401k Hoax', (2002), which offered the best advice on recognizing real returns as opposed to the bubble variety. With their solid arguments they showed, for any given fiscal environment, what a realist investor could expect to make. As they noted, one needed to look carefully at the percentage profits returned by X, Y or Z company. If it is averaging 1.3% a year, then that is the real return you can expect.  The stock hawkers bejabber of 10% annualized returns, or more often, 7 percent, is purely designed to lure the unwary into stock investment.

The authors' arguments were further reinforced about 6 years later in a London Financial Times article (‘A Metaphorical Proposal’, Mar. 13, p. 11A, 2008) by Michael Skapinker. He cited remarks by Joseph Berardino – chief exec of Arthur Andersen- who noted how the existing reporting system “fails to communicate essential information about the real risks facing companies” to the small investor.

Skapinker quoted Berardino as noting how accountants can only issue generic ‘pass’ or ‘fail’ judgments on companies – but never disclose the red ink being bled by a company that’s been passed. (What's referred to as a “bleeding edge” company wherein auditors are actually resigning). As the author notes, to do so would precipitate a collapse in share prices. Duh! (But, tough luck!)

And yet, dear readers, that is the blind financial world that 401k investors are bid to enter. And that more of them will be pushed into if Obama goes ahead and makes the "Chained CPI"  for Social Security a reality (See, e.g. http://www.nytimes.com/2013/04/05/us/social-programs-face-cutback-in-obama-budget.html?src=rechp&_r=0  )

Wolman and Colamosca, meanwhile, paid great attention to how the 401k has been abused and misused, usually by financial shysters - often in workers' companies, but also on the "Street".  Their primary beef? The 401k was never designed as an "investment" vehicle but as a purely savings medium! It was meant to salt your money away in safe, low risk abodes - while being matched by your company to some degree- and all the while not having to pay taxes on it. But almost from the start of the plan, named after the section in the tax code, people -workers were driven to put money into stocks, mainly equities, and other high risk instruments.  Little wonder, that small fry investors in 401ks have been fried and refried, over and over again. Under such conditions, the small investor risks his money and security, by investing in ANY non-FDIC insured monetary device


Michael Lind's recent account in salon.com of how the 401k emerged from the reluctance of companies to offer defined benefits plans, should also be required reading for any small scale person - i.e. not of the 1 percent or even of the 10 percent. Lind points out that when Social Security was created in 1935 it was never intended to be the sole means of support for retirees, and the expectation was that employers would make up the difference by providing decent pensions. I mean REAL pensions! Not artificial devices where workers had to save on their own.

As Lind observes:

"The number of private sector workers with defined benefit pensions has fallen from around 40 percent in 1980 to a mere 15 percent today. At the same time, among public sector workers, poor management by state governments, combined with years of economic trouble, has created a crisis for public pension systems in many states.


In order to save money and shift risks to individual workers, employers in the last generation have been switching from defined benefit plans to defined contribution plans like 401Ks. 401K retirement plans and other defined contribution plans, including individual retirement accounts (IRAs), now cover about 42 percent of the workforce as opposed to only about 17 percent in 1979."

Lind adds:

"In these defined contribution plans, savings by individual workers received favorable tax treatment. But the risks, including risks from poor investments and the chance that you will retire during a stock market downturn, fall entirely on the individual. Even worse, many working-class and middle-class Americans with 401Ks are stealthily fleeced by money managers, who charge high and often difficult-to-find fees for allocating retirement money among stocks, bonds and other assets."

Well, this introduces the argument of why have these mutant  contribution "pension" plans at all? IS this the best we can do? Look at this fact, given by Lind:  "One in four Americans, lacking other liquid savings, has been forced to pay for emergencies by withdrawing prematurely from 401Ks or other retirement accounts."

And bear in mind, if that money isn't paid back in a timely fashion there's an enormous tax hit. No surprise, as Lind notes,"the failure of the private alternates like defined benefit pensions and 401Ks has made Social Security by far the most important source of income for most American retirees." 

He notes that according to the U.S. Social Security Administration in 2101, 84.3 percent of the income for Americans over 65 in the bottom income quintile comes from Social Security. Even for the middle quintile, Social Security provides 65.7 percent. Meanwhile, for my wife an myself, it provides roughly 45%. Even then, some maniac pundits consider us "well off" (Yeah, right - assuming one or both of us doesn't get Alzheimers and end up in a nursing home at $3,600 a month!)

One of these nuts is Neoliberal columnist Robert Samuelson. In a notorious column from last year ( 'Well Off Seniors Can Live Well With Less', The Denver Post Business section, May 15, p. 2K),  he argued that:

"trimming benefits for well off seniors isn't just budget arithmetic, it's the right thing to do."


This, of course, brings up the question of how he defines a "well off senior". The first impression I had, without further reading, was one that had an ostensible income of say $250,000/ year (mainly from a defined benefit pension) and also had amassed a net worth of at least $2 million. But on perusing the piece, I saw I was totally wrong and Samuelson's threshold was much, much lower. This then presents a problem if Samuelson's base argument is that "Government over-subsidizes the affluent elderly".

Samuelson began by referencing the government's defined "poverty line" of $12,968 for 2009 for an over-65 couple. Let me say first that, as with the Bureau of Labor Statistics unemployment rate, this income level is low-balled, and I'd say deliberately. By lowballing the poverty line it translates into the government having to do much less for citizens in need, including for an array of benefits such as food stamp qualifications, Medicaid and so forth. But anyone who's done any economics knows this number is farcical. Indeed, its been unchanged since ca. 1969 when the value of the dollar was at least 4 times greater. Hence the more plausible poverty line for a couple today would be around $48,000/year. However, we will go with the lower level of $38,000/yr. advanced by the Economic Policy Institute. The point is, Samuelson's entire specious arguments rests upon an ab initio lowballed number, from which he can lowball all this thresholds of what defines an "affluent senior".

(By contrast, Lind's sober and rational definition of 'well off' senior applies only to the top two income quintiles, the income categories in which are found almost all American political donors, politicians, pundits, journalists and policy wonks. For these rarefied folks Social Security provides a mere 17.3 percent  of the total income for members of the top quintile and a microscopic smidgen (3%) for elderly members of the 1 percent. So it's no wonder these are the jackasses who are salivating most over the Chained CPI).

Back to Samuleson's piece, in which he stated:


"The proportion of elderly living in the high income group- defined as four times the poverty line or almost $52,000 for a couple in 2009- rose from 18.4% in 1980 to 30.6% in 2007"


But again, this is neither here nor there. As I showed, the REAL poverty line, not the lowballed farce, is more like $38,000/yr. even if we are very conservative (since factoring in inflation since 1969 I computed $48,000/yr which $52,000/yr. is barely above). Even at $38,000/yr. this means the retired couple at $52,000/yr. is only one major calamity away from indigence since it's barely 36% above the true poverty line. Indeed, most financial columnists writing on retirement incomes (e.g. in Smart Money magazine last issue), place a couple over 65 with $50,000/yr. income as just barely in the middle class!  AARP statistics, meanwhile, show this amount is firmly within the third quintile or the 'middle of the middle'. It's still a long freaking way from how the well off senior category that Lind defines lives! (The middle of the 2nd quintile, for example, starts at abbout $79,000/yr.)

Samuelson compounded his defective perceptions (which he obviously hopes to pass on to an untutored American population) by invoking "net worth". He writes:


"In 2007, the median net worth (that is assets minus debts) of 65-plus households was $237,000, or about twice the amount of households aged 45 to 54. Among 65-plus married couples, median net worth was $385,000"


 Again,  this misses the point! All it really shows is that the average American of whatever age group is a terrible saver, and this is most likely based on wage scales that have declined absolutely since 1973 - coupled with increased dollar value debasement. To get a more realistic picture, recall net worth factors in the home as well, and we do know most over 65's own their homes. (Which is a move also heartily recommended by financial planners). Let's say the home is nominally worth $100,000 then subtract to get the actual monetary net worth, which turns out to be $137,000 for the average over-65 household and $285,000 for married couples. But this is nothing! Given current over-65s are already advised to have on hand $225,000 to cover expenses and co-pays Medicare won't! That already eats up the total net worth in real money terms of the average over-65'er and most of the net worth (79%) of the married couples! So WTF does Samuelson want? For our "affluent" or "higher income" seniors to live off cat food, along with no vacations ever, and no amenities, period? A life little better than a peon's with no frills, not even minor luxuries? What, is he fucking nuts?

Again, turning to the expert columnists in niche financial magazines, including Smart Money, Money as well as Forbes, the general consensus is that for a senior couple to be able to live comfortably they will need a net worth of at least $1 million, minus the home value! Along with Social Security, according to this lot, they should be able to arrive at an income of at least $75,000 a year! Once more, we see that Samuelson is being dishonest in how he portrays the conditions, but we can't be amazed because they are based on dishonest government definitions, first of the poverty line for couples, and then for the "high income" definition based on this spurious poverty line.

Samuelson's other stat is more or less correct, to wit that ""for the poorest two-fifths of seniors Social Security provides 83% of their income"


But again, that merely shows the desperation of the bottom two quintiles, not that the next highest quintile is living on Easy Street! It shows, indeed, that the bottom two quintiles are living right at the knife edge of imminent poverty, homelessness or worse. Every American ought to be outraged at this, and not merely use it as a basis to take all seniors down to the lowest common denominator - which would indeed happen if Samuelson's plans were implemented.

Perhaps unwittingly, Samuelson provides - by his misuse of economic statistics- the best argument to support Michael Lind's case that we need to EXPAND Social Security, and either cut back or eliminate the 401k. Or, perhaps most sensibly, leave it exclusively for the wealthiest who have the means to sustain market -equity losses over and over, as well as tolerate the highly overcharged fees from 401k plan managers.

But for most little guys, unless they are firmly into safe vehicles like money funds or such, and get their main gains from employer matches only, 401ks are a terrible idea.

Obama, take note! And don't go through with that silly-ass, betraying plan to cut Social Security via the back door! We don't want NO "superlative" Chained CPI, or "semi-superlative". And for christ's sake already, stop bargaining with yourself when  the Repukes aren't even on board!