What should we do about the US safety net?

Following links form blogs I am reading this day before Valentine's Day, I came across this piecefrom the New York Times. It is very interesting to read others' perspectives on government taxing and the social safety net in this country.

In some cases the individulas appear to understand just how they will be affected by their own political positions and in other cases one cannot help but think that these people do not understand the consequences.

Several citizens want to grandfather seniors over 55 to the old benefits. They expect anyone under 55 to have the time and fortitude to save enough to survive in old age with less government assistance. Is this a reasonable assumption? I have my doubts. I truly believe that people will need to make belt tightening decisions much earlier than age 55. As young people they must start saving with 401K plans at work and private IRA savings accounts. As I talk to young people I encounter, I find they often do not even know about these incentives to save.

Also, personal debt and family size have a major effect on income available for savings. To implement less generous safety nets, society must address these early choices households and individulas make and the effect they have on future financial security.

Stimulus efforts and deficit

As my macroeconomics classes end, we explore the current political discussion of the federal deficit and how to reduce it. This recent article I encountered online explains the Federal Reserve Chairman's concern about the efforts to reduce the deficit also creating set-backs for an economic recovery.

This is an example of economic trade-offs. Economists tend to sound unsure or even obtuse when they make recommendation or respond to lay questions. This is because there are often no easy answers.

"There is no such thing as a free lunch!" I would credit the originator of this phrase but I cannot ascertain to my satisfaction who that was. I do know we used it extensively in economics classes in the 60's. I believe it was a phrase popular with the late Chicago economist, Milton Friedman. Somehow someone pays for everything!

US losing high tech jobs to Asia

This Washington Post article explains that we are losing professional, scientific jobs to Asian countries, particularly China. One reason is the sheer numbers, but also because of massive Asian governments' investment in education and research.

I believe there is a lesson here for the US government with respect to measures considered for reducing the budget deficit - do not reduce spending on education or research! It is just these areas that are integral to economic growth for our country. The good news is that the article also says US workers are more productive. Highly productive well educated scientists coupled with research dollars can produce innovations that could be the key to our future economic success!

Note should be taken that math and science are primary areas for educational investment. As the article points out, we need only so many generalists; and we need more specialists in the areas of technology and science. One of my pet positions is that everyone should know their multiplication facts and that's only scratching the service of this iceberg!

Should Wall Street bail out Main Street?

Alan Sloan writes about a plan to reduce the interest rates on government backed mortgages that would benefit homeowners and cost investors who have already been bailed out by the US government. What do you think? Is this an unfair changing of the rules in the middle of the game or a leveling of the playing field?

As usual in economics, one needs to think about the opportunity costs and the unintended consequences that may occur.

Questioning Senior Discounts

There are several reasons an article on senior discounts in USA Today caught my eye.

* By most accounts I am a senior. I am eligible for Social Security, but I continue to work full time.
* I live in Florida where there are an abundance of seniors and discount programs to provide incentives to spend.
* In our microeconomics class we discuss discriminatory pricing. In our macroeconomic class we discuss the funding of Social Security and Medicare versus reducing the federal deficit.

This USA Today article raises a lot of interesting questions for us to ponder. However, I see it as a response to the relative frugality of seniors compared to a youth culture that heavily discounts the future(savings).

I completely understand that I am over generalizing. My parents were survivors of the great depression and far more frugal than my husband and me. My daughter who is in her late 20's is also frugal (could be genetic)! My husband and I have been married 40 years and have a comfortable nest egg (let's see what the market does to it next), but we are discussing how to budget for his fast approaching retirement. We are a very savings conscious family of three generations. So perhaps attitudes toward savings are more about experiences and family tradition. If so, it will be interestingt to examine how this next generation reacts to the lessons of the great recession. The housing market will be a good sector to watch.

Following Inside Job; regulator gets hired by those he once regulated

Our macroeconomic class jsut viewed "Inside Job" and today I am reading Matt Taibbi in RollingStone: Revolving Door: From Top Futures Regulator to Top futures Lobbyist.

This just adds to the caution on regulation. For regulation to mean anything, the regulators must be ethical. It is difficult to be ethical when the incentives are so enticing. Does anyone out there know who first said to the effect "Everyone has his/her price."?

Why the middle class is important

I read an online Washington Post article that rings the alarm for concern about an eroding middle class. Since this has been a concern of mine for some time now, I found it thought provoking.

The most alarming part of this piece for me is found in the last two paragraphs. I have found myself thinking that the Chinese system is attempting to utilize parts of our capitalist system along with their centrally planned government. David Ignatius, in this article, warns me why admiration of this hybrid system is a slippery slope.