Trump as Your Rogue Mailman

Trump creates so much daily chaos that it is easy to lose track of why Congress has moved ahead with impeachment hearings. A simple analogy to explain his conversation with the Ukrainian president might help.

Congress authorizes social security payments. Of course, they are just legislators so they don’t actually deliver the check to recipients. Your mailman – a part of the executive branch – does that.

Imagine that the mailman tells the social security recipients on his route that he’s running for city council and he will give them their check but first they have to make a public statement claiming that his political opponent is involved in a corruption scandal.

Once this is revealed, you would expect an investigation into the mailman’s behavior. You would not be surprised if he were fired.

So, what does that have to do with Trump’s situation?

Congress – the House and Senate – authorized money for the Ukraine. Why? Largely to defend itself from Russia. Russia has already invaded – and now occupies – the Crimea. (Another quick analogy? Imagine that Mexico had taken Texas from the US because a chunk of its residents spoke Spanish. That’s essentially what Russia did by invading and taking Crimea from the Ukraine.) Russia may have plans to take more – perhaps even all – of the Ukraine. The US would rather deter Russia with a show of support than to wait for Russia to again attack and force the US and NATO to either just watch Russia conquer the Ukraine or force a war between NATO (the Ukraine is not a member of NATO but has applied to join) and Russia. Congress wants to check Putin’s aspiration for conquering former Soviet territory.

Trump, apparently, does not.

Just like social security checks, Congress has authorized money for the Ukraine. Just like social security checks, Congress does not actually deliver the check. Trump’s White House – which is, like the post office, a part of the executive branch – delivers that money. And just like our rogue mailman, Trump was using his position of power to withhold money as a way to get something of personal value. He was asking the Ukrainian president to declare that they were investigating Joe Biden for corruption before Trump would deliver the Ukraine money Congress had already authorized.

Trump is not a monarch. He is subject to laws just as every other citizen. And when he uses the executive office to extort foreign heads of state to do him a personal favor, he is as much in violation of law as the mailman who extorts the social security check recipients on his route. 

What Your Fellow Americans Are Making - And What That Suggests About Minimum Wage Law

13 October, our Social Security Administration released data on last year's wage earners.

An income of $95,000 put you in the top 10%, made you 1 out of 10.

An income of $250,000 put you in the top 1%, 1 out of 100. 

$500,000 put you in the top 0.1%, or 1 out of 1,000.

$50,000,000 - fifty million - put you in the top 0.001%. It made you one in a million. 143 people reported incomes of over $50 million and those 143 people had average incomes of $100 million.

Here's another remarkable stat. Merely having an income put you in the top 50%. When I write, "top 10%," above, I'm writing about the top 10% of wage earners. Social security has data on 163 million wage earners. There are about 325 million Americans, so only about half of Americans reported incomes. Some were too young. (My wife's second grade class is full of slackers who haven't earned a dime in their life.) Some were too old. Some are too rich to work or make their living from investments rather than wages, property or stock owners. Some are too handicapped. Some are working jobs without wages, jobs like caring for their kids or parents. Some depend on family or friends for food and housing, some are in school, some recovering from injury, some permanently disabled, etc.

Now let's get into the normal people, the wage earners who don't make six figure salaries but still work. The 90%.

If you make $15,000, you make more than 30% of all wage earners. $15,000 a year works out to $1,250 a month. Median rent for a one-bedroom apartment in the country's most expensive 22 cities is higher than $1,250 a month. Assuming that you have to eat, buy clothes, get transportation, etc., what nearly a third of Americans make is not enough. 

If you made $30,557.71 last year, you made more than half of all wage earners. You have as many people who would trade wages with you as you would trade wages with. In some sense, you are the representative American, someone fellow Americans are as likely to pity as envy.

$30,000 a year works out to $15 an hour. Half of wage earners make less than this. Half.

Seattle is a wonderful city. It's both home to two of the richest men in the world and to many liberals who folks in the Midwest would consider more liberal than Scandinavians. They've recently passed a $15 an hour minimum wage. 

I have a problem with that.

I don't have a problem with places like San Francisco and Seattle - places where median wages are $90,000 to $100,000+ a year - saying to employers, "If you want to hire our people you have to pay more than you would elsewhere." That makes perfect sense to me. 

What doesn't make perfect sense to me? Choosing to make that minimum wage $15 an hour - an amount MORE than what half the people in this country make. 

Average wages in Belarus and Armenia are about one-tenth the average wage in the US. You can't just pass legislation requiring all businesses to pay Armenian employees the same as American employees. It's a noble and proper aspiration to lift wages but the way you get there is complicated. Better education. Easier access to foreign markets where they can sell their goods and services. More capital investment that makes their people more productive. 

Minimum wage seems to work as a prod to businesses or industries that aren't keeping up. It can force the folks in the bottom of 10% or 25% of labor productivity to either go out of business, go overseas or to up their game and make their employees more profitable even at a higher wage. What it can't do is force wages up for half the workforce. You need more complicated policies than that.

Policies that make it easier to live when you make only $15,000 a year or less - something that 30% of the workforce is doing - are good, humane and necessary. Minimum wage laws that ignore what the market says about the value of half your workforce seem, by contrast, bad, silly and doomed to backfire. 

Sacred Cow Sausage

Hopefully we won't take our deficit problem too seriously this year but once the recession is clearly behind us, it will be important to address. Very important.

Right now, the problem seems intractable. When a problem can't be solved, it is time to look in new places for solutions.

Currently, there are three places that are considered sacred for budget cuts, three places we don't even consider as sources for potential savings.

1. Defense. We still spend money as if preparing for a large-scale conventional war. We fund weapon systems long past their "not feasible" expiration date. We don't know the difference between war and occupation. But if you want to lose an election, simply mention the possibility that we might want to decrease - rather than increase - defense spending. We will not get to a balanced budget without changing the assumption that defense spending is sacred. We don't have to spend more on defense than the rest of the world combined and it makes up about a trillion of our three trillion budget. I don't know how you ignore this if you are serious about balancing a budget that is off by about a trillion.

2. Social security. Technically off-budget and its own category, but still leaves a large carbon, I mean fiscal, footprint. When it was introduced, social security kicked in around the time that the average person died: life expectancy and retirement age weren't so very different. Today? Very different. This is simple. For my generation, we have got to raise retirement age by 1 to 5 years. This will make a huge difference in the money collected by and paid out from social security. We can't pretend that the rules for when people retire remain unchanged as life expectancies increase.

3. Medicare and all health care. People are bankrupt by medical costs and this is wrong. Millions are not covered and this, too, is wrong. What else is wrong? Covering expenses that are, say, under $1,000 or even $2,500. This creates overhead for billing, adding costs to health care. It makes us less price sensitive (imagine that filling up your gas tank had a set co-pay of $5 whether you were buying it at $2.50 a gallon or $5.20 a gallon) for services whose price would be lower if subject to price competition. And it makes us feel entitled rather than careful about casually using health care. If we did not cover services under some threshold, we could greatly reduce the cost of administration and coverage. Health care - like defense and security - should be a right. That ought not to be construed to mean that every piddling service we need is something we should pay for through the roundabout means of taxation and government reimbursement.

Right now, we can't seem to reduce the deficit, much less balance the budget. When your current set of assumptions preclude your goal, it is time to challenge the assumptions.

Oh, and one other thing. Even challenging spending on these sacred cows will not be enough. We will have to raise taxes. We may as well make the slaughter wholesale.

Foreigners Will Fund Your Retirement

Our attitude towards immigration and trade could cost us our retirement.

In a great column on American exceptionalism, Fareed Zakaria explains that Americans rank dead last among countries surveyed on their belief that trade between countries is a good thing. Americans acceptance of immigration has also precipitously dropped in recent years. This new anxiety comes at a bad time.

This month, the first baby boomer began to collect social security payments. She's merely the first of a very large parade. During the next twenty years, 46 million college-educated baby boomers will retire. There will not be enough American-born workers to replace them. By 2015, the United States and Europe will face shortages in workers. In 1950, the ratio of working age to elderly was 7 to 1; by 2030, it is projected to be 3 to 1.* No matter how we structure retirement, it ultimately rests on this: the people who are working have to make enough to pay for their own lives and the lives of those who aren't.

There are four things that will either make this coming demographic shift a non-issue or make it a huge issue.

One is productivity gains. If a person in 2030 is 3X as productive as a person in 1950, he can more easily take on the task of funding more retired people. To the extent that these productivity gains come from capital investments, returns to capital can help to fund retirements.

Two is the total ratio of non-working to working people. It is true that there will be more retired people for every working person in 2030, but at the same time there will be fewer school-age children for every working person. Non-working = in school + retired. As the retired number goes up, the in school number will go down. Factoring in school-aged children makes the ratio of working to non-working look less worrisome. Plus, real advances in medical and psychological treatments could make it possible for a higher percentage of the working age population to be productive.

Three is the number of immigrants. Just as we're projecting a drop in working age population, Africa, Asia, and South America is projecting an increase. Inviting immigrants to maintain our population of window washers and brain surgeons will help them and help us.

Fourth is trade and investment across borders. If my retirement fund pays me from returns to capital invested in a foreign company, I've helped to create jobs for foreigners and they've helped to fund my retirement.

The truth is, we need a combination of these four factors in order to smoothly sail past this jarring and unprecedented shift in demographics. No one factor listed above would be enough, on its own, to ensure retirement funding.

I've written before about how oddly inflated is the concern about immigration in this country. The truth is, we have only two choices: take a step back in prosperity or step further into this age of globalization. Insulating ourselves from the outside world is not an appealing option. The politicians who feed Americans' fear of immigrants or trade are doing worse than pandering to phobias - they're setting us up for failure.

The facts from the * paragraph are taken from James Canton's The Top Trends That Will Reshape The World in the Next 20 Years.

What Nobody Says About Social Security

One of the reasons that social security is projected to be a problem is that our population is aging. This problem of more retirees per working person is even worse in places like Italy and Japan. Whereas as one point about 7 - 10 people all chipped in to fund the social security payments of the retired, the projection is that once baby boomers retire the ratio will be more like 4 - 5. Obviously this strains the system.

But system boundaries can be redefined. If you instead define the problem of one of working to non-working population, the problem is less onerous. It is not just those over, say, 65 who working people have to carry; they also carry those under, say, 20. It is worth remembering that as the number of children drops, the ratio of working people to children will raise. If at one point there were about 4 - 5 working people chipping in for the schooling, etc., of every minor, the projection is that it'll be more like 7-10 in the future.

Looked at as a problem of working age population to not-working population (a group made up of school-age children and Winnebago-driving seniors alike), the problem is easier to solve.

(Blogger's note - I'm quickly writing this note in between breakfast and the start of my work day. My researcher has yet to show up for work (and I'm not sure what year they are scheduled to start but apparently it isn't this year), so the numbers I've used are for purposes of illustration only and would match reality only by coincidence. Further, the cost of funding retirement is greater than the cost of funding schooling, so the ratio doesn't have to neatly flip in order for the funding to neatly flip. The point is, you get the point.)

Conservatives don't point this out because they don't want to save social security. Like a man who doesn't wake up his wife in a house fire - not because it would have been too dangerous but because he already had his eye on a younger, sexier wife - conservatives are hell-bent on private accounts (a bad idea that deserves its own posting).

Liberals don't point this out because it suggests shifting money from education to retirement, a budget change that sounds like they're giving up on the future - or at least it sounds like they are giving up on the teacher's unions, one of their stronger supporters.