Sunday, March 06, 2011

Social Security as a National Pension, Part 2

First, a satirical take on the disparity between how wealthy people (business and financial executives) see their compensation versus what their employees and public service employees should receive:

Back in 2007, I proposed that Social Security should become a full pension system. Interestingly, policies are now proposed to allow states to disregard their promised deferred compensation contracts because they are allegedly cost prohibitive. Here is a snippet from the linked Forbes article:

The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.

Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete. As a means of allowing their ball club to have enough money to operate, lowering their own tax obligations and for other benefits, ball players often defer payment of money they are to be paid to a later date. In the meantime, that money is invested for the ball player’s benefit and then paid over at the time and in the manner agreed to in the contract between the parties.

Does anyone believe that, in the case of the ball player, the deferred money belongs to the club owner rather than the ball player? Is the owner simply providing this money to the athlete as some sort of gift? Of course not. The money is salary to be paid to the ball player, deferred for receipt at a later date.

A review of the state’s collective bargaining agreements – many of which are available for review at the Wisconsin Office of State Employees web site - bears out that it is no different for state employees. The numbers are just lower.

As has been the case for some time, there are two rules in the United States when it comes to compensation: one rule for executives at the top of the income scale, and another for those who work for them.

Many years ago, it was common for workers to live in the same place their whole lives and they would also work for the same employer substantially that entire time. However, mobility is now a premium as workers now need to move -- across country, at times -- if they want to stay employed or advance in their careers. Our country's retirement system should reflect this reality. As such, Social Security best meets that goal. It is already set up as a portable -- albeit supplemental -- pension system, designed to prevent "destitute poverty" in old age. However, because Congress "borrowed" from the Social Security Trust Fund in the 1980s -- when it allegedly was "over-funded," the Trust Fund is now supposed to be "in crisis."

It is interesting that workers who borrow from their 401Ks are required to pay back what they borrowed with interest, but Congress is supposed to skate when it does the same thing with the Social Security Trust Fund? That borrowing "financed" tax cuts for the top tax brackets.

It is time that that "borrowed" money be paid back. People who paid into the system by working substantially all of their lives deserve to receive what they paid in. That is why Social Security is called an entitlement program; and the U.S. Government has a contractual obligation to make good on its promises. This is also true of the states. In all of this, actuarial calculations were made (admittedly, with unrealistic calculations in order to bring down required expected contributions) wherein workers changed their positions on their then present salary and wage increase demands. Now thirty years later, we have seen the result of these sacrifices by working men and women. Here is graph from Mother Jones magazine that creates a visual depiction of the changes:

The other reason why Social Security should be a national pension is that both private employers and states have shown that they cannot be trusted to contribute to their pensions like they are required to, and both have sought to shirk their obligations through bankruptcy protections. Furthermore, it is an outrage that corporate executives should be allowed to divvy up the company's contributions to those plans through what is known as a "bleedout."

As I said in the previous post, I am not opposed to the Trust Fund being allowed to invest in the stock market based on the worker's age, as long as the investment is made directly from the market and not through Wall Street. There are plenty of talented Wall Street traders who are hungry enough (especially now) who would be willing to accept a government salary for security. I realize there is a danger of a "revolving door" just like there is now with regulatory agencies such as the SEC. But with the right regulation, those problems could be minimized.

The time has come to create a guaranteed retirement system for all Americans that cannot be taken away at the whims of corporate executives or the pressure of political interest groups. And as Ronald Brownstein has opined: the problem isn’t that public-sector workers have too much retirement security. It’s that everyone else has too little.

Thursday, October 14, 2010

Tidal Power

A recent news story, Catching Waves, details how a new green energy source seeks to capture untapped energy sources in oceans and rivers.

The potential for harnessing ocean waves, currents and tides to produce electricity is vast.

The technical potential for ocean wave power in the U.S. is 90,000 MW, according to estimates by the Electric Power Research Institute. If the U.S. adopted a national renewable energy standard of 25 percent, more than 13,000 MW of that potential could be realized by 2025, according to a study by Navigant Consulting.

Up to 10,000 MW could be feasibly extracted from the swift currents off the coast of Florida, according to Florida Atlantic University’s Center for Ocean Technology.

Ocean Power Technologies (OPT) is working hard to monetize some of this potential."

Here is an interactive on how one form of it could work.

One great thing about tidal energy -- if it can be made feasible -- is that the tides always flow, unlike the wind or solar energy. The biggest hurdles are startup capital and salt corrosion. There is also some issue with prevention of harm to marine life. However, this is a power source that needs exploring.

Tuesday, October 12, 2010

Machiavellian Economics

Here is a great video for discussion:

OK, some thoughts on this video:

At about the 6:00 mark, the speaker talks about the system as a "Ponzi scheme." I think this is inaccurate. I think it is more accurate to describe it as "parasitical." I think this is a more accurate way of thinking about it as those who loan money live off of the production of others. Granted, a Ponzi finance system is a very simple parasitical system where either one person, or a small group, feeds off of the production of other "investors." But the relationship between banks and lenders isn't purely a Ponzi system (it can be symbiotic, believe it or not).

At about the 6:30 mark, the speaker remarks that "people are realizing their debt slavery condition." I am not so sure. They might have a really good sense that something is wrong; but I think we are at a point where a straw man or red herring can be successfully employed.

At a little before the 11:00 minute mark, the speaker talks about "return on capital." This works as long as people pay back their debts. However, herein lies the risk. If the debt is not paid back, who suffers the risk of loss? On the one hand, (in theory) the holders of capital lose (because they lose their expected return and any capital that is not repaid). What they get in return, however, is control of any land or assets used as capital. Even if money is lost, power is gained (which I thought was his point based on the title referencing Machiavelli -- i.e. "power is it's own reward").

Sunday, September 26, 2010

Sunday Music: Appalachian Melody

It's the beginning of autumn here in the United States, and it looks like someone posted one of Mark Heard's early songs on YouTube. Enjoy.

Appalachian Melody

Sunday, April 13, 2008

Earth Day Sunday Music: John Denver

Even though Earth Day 2008 is still more than a week away (technically it is April 22, 2008), I wanted to get a jump on a post about it. There are many events planned around the world next weekend. The zoo in Houston, Texas will be holding an event this coming Saturday, April 19. Anyway, last year, when I was searching for a song that had an environmental theme to it, Charles Hugh Smith of Of Two Minds blog suggested Big Yellow Taxi originally done by Joan Baez.

Later I realized some of the songs sang by the late John Denver also had environmental themes. John Denver in many ways epitomized the cognitive dissonance we all exude in our ideals. While he championed protection of the environment, he had a hobby of flying airplanes, which leave a pretty large carbon fingerprint for a hobby. I also heard that he pushed for the construction of an airport near his home over the objection of many of his neighbors. Even so, the music he left is loved by millions and expresses the ideals of conservationists.

Rocky Mountain High

And in the following video, Denver talks about the development of the song Calypso, which is based on a trip he took with Jacques Cousteau (it includes the video for the song).


Wednesday, February 20, 2008

The Greatest Happiness Principle

60 Minutes: Happiness

We could learn a lot from the Danes (and all Scandinavians for that matter). A new study shows that they are the happiest people in the world.

I consider myself a Utilitarian in this sense: we should strive to create the greatest happiness for the greatest number of people. I am not a purist, mind you. There obviously are values that would more important (where it would conflict with Justice, for instance), but in a broad sense I find this principle to be the correct one.

Sunday, February 10, 2008

Sunday Music: Major Tom

There are a few reasons why this video seems appropos right now:

1. I recently visited the Houston Space Center. I'll get around to posting the pics eventually. I promise.

2. Hellasious yesterday wrote a post on his blog, Sudden Debt, called "Space Oddity" where he referred to David Bowie's Major Tom lyrics. Why am I not using David Bowie's song, then? Because I like this song more.

3. There are some reports of a bus-sized satellite hurtling toward earth that will hit sometime in early March. They don't know where it will hit yet. Or they are not telling us so that we won't panic. How big was the meteor that killed the dinosaurs again?

Peter Schilling - Major Tom