Every year we see reports of the impending doom of social security. It’s going to run out of money. But then we get counterpoints that explain maybe things aren’t so bad like this one:Here’s what you need to know: social security will be depleted in 2033, according to the report, which was released Monday. The Medicare report showed that the program’s funds are now expected to deplete in 2030. Bad news? Not really. The estimate on social security’s funding is unchanged from last year. Medicare added a mere four years to its lifespan. Neither is going to die a sudden death. After the social security fund runs out in 2033, the annual revenue from taxes will still be enough to cover 75% of pension costs. By 2050, the revenue from payroll taxes will be able to cover 75% of Medicare’s costs. What people seem to forget: these are estimates, not bills coming due. “We caution the media not to overreact,” said Kathy Ruffing, a senior fellow at the CBPP, on a press call Monday afternoon. She said social security funding is a long-term challenge, not an immediate crisis.
The article goes on to explain that Baby Boomers aren’t even to blame for this. The government saw this coming and put in measure to absorb the financial strain caused by retiring boomers. However they made some reasonable assumptions about growth in income that did not pan out. The problems with social security are merely another symptom of the stagnant wages our economy has been dealing with for a generation. Thankfully the fixes to social security are straightforward, except that they’ll practically destroy anyone’s political career.
Not everyone buys this version of the story. One of them is a former economist of the Social Security Administration. He has testified to Congress:Social Security faces real and increasingly urgent financial challenges. Reform isn’t only the wise thing to do, it is critical to ensure that Social Security remains solvent and fiscally sustainable and can continue to provide retirement security for generations to come. Social Security reform must not only address the program’s fiscal solvency issues but also remove the disincentives to working later in life. This means reforms must focus on reining in the growth of program costs, encouraging personal saving and investment, and rewarding those in middle and early retirement age who make the decision to extend their working careers. Finally, Social Security reform must begin immediately…We can reform this critical program, and we can do it in a way that will improve the financial security of all future Americans in retirement.
His points are straightforward. Social security is a bit of a mess. Sure there is some time to fix it but no one has the will to do so. And fixes aren’t just about maintaining benefits. Fixes must also include changes in how benefits are awarded and monitored.
This is a complicated argument that I can’t begin to have a full grasp on. But regardless of whether you think it’s a crisis or not, the program needs reforms. The sooner we do that, the better.
During the first tech boom of the 1990s, many entrepreneurs saw the internet as a way to disrupt industries. Retail shopping is the easiest example, with Amazon as its king. The thinking was you could buy just about anything online. Retail was conquered. Hotels and travel were conquered. Music was conquered. Lending, borrowing, and investing too. But there remained a major category of consumer spending that remained relatively untouched: real estate.
Fast forward to today. The service Redfin has sought to disrupt the industry by making it cheaper to buy or sell a home. For the most part that is done by bypassing the traditional real estate agent system. Today, using a real estate agent to buy or sell a home is 6% of the transaction. You can rely on the listing and buying agent to each take half. When you sell your $200,000 home, you’ll only net $188,000 after the agents take your cut. 6% is a big number. In other parts of the world the fees can be half that or less. This means the margins in this business are likely very good.
Fat margins invite competition. In most industries this happens with some element of speed. Someone creates a new market and reaps high margins. Competition comes in and the margins compress. Not real estate. It has powered through for a while now and even the internet hasn’t made much of a dent. Until now perhaps.
Earlier this week Zillow and Trulia announced they would be teaming up. If you’ve never looked at these sites you’re missing out. It’s made the home shopping experience so much better. You can research the values, sales history, and all sorts of other things about houses; and they don’t even have to be listed to see this stuff. On top of that real estate agents pay for advertising so you can see all this for free.
These two titans of housing though have not tried to undercut the real estate industry. However the founder of Zillow was also the founder of Expedia, and the current CEO was one of the founders of Hotwire. Both Expedia and Hotwire played a huge role in destroying the travel agent profession. These guys clearly have their eyes on that big real estate agent commission.
But so far they’ve played it cool, acting like a complement to the agent’s goal of selling you a home. But this merger is going to set them up to take on the buying and selling directly. The whole housing industry has always been a fickle one. The Realtors have a monopoly on buying and selling, take a cut at every stop. The transaction is complicated and requires expertise. This is partially why the internet has been slower to take a chunk of the real estate pie. The Zillow/Trulia merger could begin to change all that.
Read: How a Zillow-Trulia Merger Could Finally Change the Business of Real Estate (BusinessWeek)
2014 is an election year with many major seats in Congress up for grabs. Election years bring out the worst in our politicians as attack ads dig up the best dirt around. It more or less doesn’t amount to much as very little will be accomplished in the next two years. However transparency into the election process is very important and we can thank websites like OpenSecrets.org which is run by the Center for Responsive Politics for help in that area. Today I want to show you how loaded our Senators are.
Before we dive into the data, a note on the calculation of wealth Open Secrets. Our elected officials must disclose holdings and properties but only in ranges. So you might say you own between $1 million and $5 million worth of stocks. To calculate the net worth, they folks at Open Secrets looked at the middle of these ranges. So don’t take these numbers as hard and fast. Just take note of the scale. Also, this data is from 2012 so there’s been a little turnover since. Let’s start with the average wealth by party.
The average Democrat is loaded, however averages can be skewed. And in this case they are by 10 senators with wealth above $10 million. The other 50 are below that mark. This is why median is a healthy metric. Between the GOP and Democrats, there isn’t much difference there. The median senator is worth between $2 million and $3 million.
You can see how wealthy everyone is in this scatter plot. Note the left access is a log scale, so even a small movement north is a significant change in wealth. The five richest senators are all Democrats, believe it or not. Herb Kohl of Wisconsin (retired in 2013), Mark Warner of Virginia, Richard Blumenthal of Connecticut, and Jay Rockefeller of West Virginia all have calculated net worth of more than $100 million. Warner was an early investor in Nextel, Blumenthal married into wealth, and Rockefeller is the great-grandson of John D Rockefeller. The source of wealth is as diverse as these guys for every senator. Some are self-made. Others have inherited or married into it.
As previously stated, no matter how you count it, just about every senator is rich. There are exceptions though. The combined net worth of the NY senators is less than $1 million. Same for NJ and VT.
Don’t assume that having wealthy senators is a bad thing. The importance here is around the transparency. It’s good to understand where people come from and where they are today.
Read more: Open Secrets Personal Finances
There aren’t many mornings when one wakes up and says “I want some Taco Bell”. Lunch? Sure. Dinner? Yeah. 3:00 AM when you’ve only consumer liquid carbohydrates for the last six hours? Oh yeah. But breakfast? Not so much.
Taco Bell is trying to change that as it goes after heavy hitters like Dunkin and McDonald’s. Fast food breakfast is a rarity for me. When it happens, usually The Sheconomist and I are on a road trip. And then it’s usually to McDonald’s for some light fare. So I don’t really know a whole lot about breakfast foods at the quick service restaurants. But for some reason this morning I decided to go to Taco Bell and see what the fuss is about.
Taco Bell has been marketing their new breakfast foods aggressively. And for this morning it seems to have worked, as I found myself standing in a Taco Bell for probably the first time in half a decade.
First of all, my impressions in the store were positive. This store had a modern layout that’s pleasing and inviting. Many seats have electrical plugs which in restaurant speak is an invitation to hang out for a while. I’m not sure if my store offered WiFi as well, but that would make sense.
The menu itself is somewhat confusing. But like any restaurant approaching a Mexican theme, it’s basically the same 7 ingredients mixed in different ways. I decided on a bacon/egg/cheese burrito with Cinnabons on the side and a coffee. We’ll touch on the food and then the coffee.
The burrito wasn’t bad. But there was a lot of extra tortilla in there and it made everything else seem kind of bland. The sausage burrito at McDonald’s quite a bit better. Especially since it includes peppers. But even a little black pepper would have helped. The Cinnabons were a welcome surprise. You can have them or a hash brown. I expected them to just be fried cinnamon bites but they also happened to be filled with a tasty creamy goo. That might turn off some folks but my description doesn’t do it justice. All in all, the food is…. fine. The dog was a huge fan.
But the coffee…
My first impression was mixed. It started with the cup. I have a lot of experience with coffee, and the variety of cups they come in. Ranging from low-end styrofoam to the nice reusable cups at Starbucks. Some places get it right, and some do terribly. This goes for the lids too. McDonald’s has a decent lid and a poor cup. Dunkin kind of sucks at both. Starbucks is decent at both. The balance between the two can make or break the coffee experience. One of the most critical elements is the connection of the lid to the cup. That security is important. The Taco Bell cup is awesome. It requires no sleeve and feels sturdy. The lid is strong and sealed well. However, the opening for the coffee sucks. My mouth just doesn’t fit well around it. It was different from other lids I’ve encountered.
But how was the coffee itself? My first impression was weak. The smell was off. Plus I was drinking it through that lid. But, once I removed the lid, things got a lot better. So good in fact that given the choice between Dunkin, McDonald’s, and Taco Bell coffee, I’ll go with Taco Bell. Dunkin enthusiasts are just brand obsessed. Their coffee really is mediocre. I’m not talking about your overpriced, sweetened, flavored, iced garbage. Real black coffee. And Taco Bell, absent the lid, got it right.
It’s quite odd for me to write a review of a fast-food breakfast. But when you’ve been as busy as I’ve been it’s great to have a weekend where this is the most exciting thing that’s happened. Nice work Taco Bell.
Even though he lost a shot at becoming Vice President two years ago, Paul Ryan remains a major player in the Republican establishment as a high ranking Congressman and overall budget expert in the legislature. Once or twice a year we can count on him rolling out budget proposals that are unrealistic and have no chance of actually becoming law. Long-term plans have included just about every imaginable proposal that would offend a Democratic lawmaker. But this week Ryan shifted gears and unveiled a framework for addressing poverty. It’s not designed to reduce spending or cut the deficit. He just wants to show the US that Republicans want to solve this problem too.
The idea is relatively straightforward. All the anti-poverty programs the US offers are disaggregated. If you need food stamps go here. If you need Medicaid head over there. Need a housing voucher, that’s over that way. Ryan would bring them all under one roof at the federal level. The federal government would then issue block grants to the states and the states manage their own anti-poverty programs with federal oversight. Ryan’s vision is that someone in need of assistance will go to a case worker that sets up everything they need. The case worker would also set expectations on how long this support will last. This allows a more targeted approach. Likewise the providers of these services could be state agencies, non-profits, or even for-profits. The idea is to let them compete and have the best providers win out.
There would be no change in the budgeting of anti-poverty programs. Which is why Ryan says there will be no change to the deficit. Critic quickly came out of the wood-work to pick apart the proposal. Block grants don’t have a great history. Paul Ryan is the wrong messenger. These are valid complaints. But they’re being made by liberal commentators that get paid to more or less not trust the GOP. Ryan may indeed have a long term agenda. Block grants not indexed to inflation are easier to cut over time than the programs in place today. States could support programs that teach abstinence or the importance of marriage over others. These are legitimate concerns.
But Ryan should be commended for offering a reform that at a high level looks pretty good. Let the states decide what’s best for their people. Make it easier to get the support our country offers. Put in place some accountability to receiving the support. If liberal lawmakers follow in the footsteps of these commentators and have no faith before pen is put to paper, they’re no better than the Republicans who have worked so hard to block the president at every step. There are two halls of Congress and a chief executive. Between these people they might be able to hammer out a plan everyone can get behind. But everyone has to work together in good faith.
Read: G.O.P. Congressman’s Plan to Fight Poverty Shifts Efforts to States (NY Times)
What if I were to tell you that the government operated more than just one bank? The Federal Reserve is well known on this blog and in any topic approaching policy or economics. But there’s another bank out there fully owned and operated by the United States government. It’s called the Export-Import Bank, sometimes just referred to as Ex-Im Bank. Ex-Im’s entire purpose is very straightforward: provide financing to foreign companies that want to buy American made goods.
There are many stipulations and rules around this financing. For instance, Ex-Im is not supposed to compete with other banks. They only step in if a transaction would not take place without them. For example: A foreign airline wants to buy a plane from Boeing, but no bank will finance the deal because of political turmoil in the airline’s home country. Ex-Im will step in and provide the funding.
The idea is that Ex-Im supports American jobs and the economy by enabling more exports. In many cases they provide the loan directly. In others Ex-Im guarantees a loan made by another institution. Either way Ex-Im assumes the risk that other banks won’t.
Not everyone is a big fan of this program though. Although traditionally supported within the aisles of Congress, many Republicans are taking a second look at whether or not this bank still needs to be around. And the loudest critics are other companies that don’t get to benefit, or are hurt, by the bank’s programs. Delta Airlines is one of the largest critics of the bank. They claim that Ex-Im offers too many loans and guarantees for Boeing, which makes airplanes. A full 45% of their loans and guarantees go to the Air Transportation industry and Delta claims that’s pretty much just Boeing.
Delta’s complaint is that Ex-Im isn’t just financing deals no one else would offer. They’re actually offering below-market rates which effectively means foreign airlines are able to buy Boeing for less cost than a domestic airline could. This could conceivably support the jobs at Boeing while costing jobs at Delta.
Delta has been pretty loud about their issues with Ex-Im. To what degree their claims are true will require more investigation into the bank’s practices. To many in Congress Ex-Im is starting to feel like government meddling in activities that could be handled within the private sector. The bank’s charter ends in September and must be renewed in order to keep going. We shall find out soon enough the future of the Export-Import Bank.
Is Social Security Screwed Or Not?Every year we see reports of the impending doom of social security. It's going to run out of money. But then we get counterpoints that ...read more
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