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Make This Obstruction Thing Go Away

My Comments: Coming to terms with the chaos in Washington, DC is not easy. Especially if you are inclined to favor Democrat Party values and themes. The insights expressed here may help Democrats and Republicans alike. I simply know many of us on the left are not happy.

By Dahlia Lithwick / June 22, 2017

It will shock nobody to learn that Donald Trump doesn’t understand what lawyers do. If you are a “successful businessman,” it’s hardly surprising that you would conceive of lawyers as well-compensated plumbers and cocktail waitresses—folks who make crap disappear and bring you everything you want, wordlessly and with short skirts. If you are a Trump-style “successful businessman,” one who is apt to hinge his success on infinite lawsuits, threats of lawsuits, and the invitation to your creditors to file other lawsuits, your lawyers are pretty much just the guys and gals who empty your ashtrays of whatever debris is left behind once the court has ruled. If one lawyer won’t get you the outcome you desire, the next one surely will. With massive fees and important connections on offer, there will always be a nearly infinite pool of people willing to file some brief on your behalf.

As soon as Trump started to talk about lawyers and the law on the campaign trail last year, I recognized the type: a rich guy who had never been told “no.” If you have small children you, too, will recognize the type. It’s a developmental stage that usually ends at toddlerhood, but if the toddler has enough money, power, and influence, that person can grow up to be an adult who is a nightmare to represent. Before I was a journalist I briefly worked at a family law firm, and I occasionally had the professional obligation to assist extremely wealthy “successful businessmen” with their divorces and custody battles. Sometimes these folks were on the other side. Always, they held a view of lawyers I didn’t remember learning about in law school: They believed attorneys were the help and that laws were problems that—with enough help and enough money to buy even better help—could be made to go away.

It was a good life lesson, in that I came to understand that there are people who can at once achieve the greatest heights in corporate America and remain truly baffled that they can’t get sole custody just because they want their ex-wives to suffer. Some of these people had quite literally never encountered judges who had told them “no,” much less lawyers who said, “This is the statutory child support formula, and it’s not negotiable.” So when Trump began to suggest on the campaign trail that, say, Judge Gonzalo Curiel was a “hater,” or that Merrick Garland didn’t deserve a Supreme Court hearing, I was pretty unsurprised. Trump is every fancy divorce client ever, announcing that judges and lawyers either play for his team or get canned.

Much has been made of the fact that Trump fired his FBI Director James Comey either because of Comey’s Russia investigation or not because of it. Much has been made of the fact that he fired Sally Yates because he didn’t like the advice she offered about Michael Flynn and that he fired U.S. Attorney Preet Bharara because Bharara wouldn’t return his phone calls. Trump also makes endless businessman-y noises about his plans to fire Rod Rosenstein; Robert Mueller; and his attorney general, Jeff Sessions. And in the meantime, he surrounds himself with other lawyers, many of whom have no experience in government service but seemingly infinite experience in emptying his ashtrays. The personal attorneys he’s recently brought on to deal with the FBI investigation (which he claims doesn’t exist, incidentally) include a fellow who appears to be engaging in the same branding and get-rich side gigs that Trump dabbles in himself and another lawyer who was on the losing side of the massive Trump University suit for which the president had to pay $25 million to settle claims from students who alleged they’d been defrauded. Nobody should be surprised, then, that Trump’s personal lawyer is now doing work that should be done by the White House Counsel’s office. We also shouldn’t be surprised that some of the Trump ashtray-emptiers now have to hire their own ashtray-emptiers. Nobody’s ever said “no” to those guys either.

This pattern goes a long way toward explaining why most serious Washington lawyers want nothing to do with the president’s dubious criminal defense dream team. Lawyers who have been trained to answer to the Constitution first and their wealthy clients far later don’t want to be in the position of having to tell the world’s largest preschooler that sometimes no bendy straw for the juice box really means no bendy straw for the juice box. And lawyers who have done far more with their careers than Sherpa a “successful businessman” through multiple bankruptcies may have a hard time explaining to the president that no amount of money or power in the world can make certain judges and some courts disappear.

In the end, the same intellectual underpinnings that gave us the “unitary executive” theory—the notion that the president has unbounded control over the executive branch and its agencies—plus the burgeoning belief that corporations are people and that money is speech have created the preconditions for a president built of equal parts money, power, and a return to Louis XIV’s conviction that “l’etat, c’est moi” (“the state is me”). And as Sen. Sheldon Whitehouse has been arguing, so long as dark money can continue to buy judicial seats, the president’s view that “successful businessmen” are above the law will increasingly be affirmed in the courts.

I suspect that if one asked Trump if there was any difference between the Office of Legal Counsel, the White House Counsel’s office, the attorney general, his divorce attorney, and the FBI director, he would say, without guile or uncertainty, that they all work for him. Perhaps the unitary executive crowd would agree. But as we inch nearer to a showdown between Mueller’s and the president’s views of what lawyers do each day, it’s worth considering that there is one place left in America in which lawyers in crumpled shirts work for a tiny fraction of what their law school classmates earn. In Washington, the “successful businessmen” may buy a lot of $100 signature cocktails at the Trump International Hotel bar, but lifelong government lawyers don’t usually empty ashtrays for anyone.

Trump’s robber baron view of all attorneys as fungible well-paid loyalists may someday prove to be the Washington way. But so long as the rumpled, badly paid government lawyers are sitting on the other side of the table, this won’t be as simple as a divorce settlement. And Trump still has to contend with the most rumpled and principled government lawyers of them all: the judges who haven’t been much impressed, at least thus far, with all the president’s men.

A $400 Trillion Financial Time Bomb

My Comments: Scary. I’ll be gone by then, but are you kids listening?

Allison Schrager / June 2, 2017

Financial disaster is looming, and not because of the stock market or subprime loans. The coming crisis is more insidious, structural, and almost certain to blow up eventually.

The World Economic Forum (WEF) predicts that by 2050 the world will face a $400 trillion shortfall (pdf) in retirement savings. (Yes, that’s trillion, with a “T”.) The WEF defines a shortfall as anything less than what’s required to provide 70% of a person’s pre-retirement income via public pensions and private savings.

The US will find itself in the biggest hole, falling $137 trillion short of what’s necessary to fund adequate retirements in 2050. It is followed by China’s $119 trillion shortfall.

Asset returns have been lower than they were in the past and people are living longer, so some of this shortfall is to be expected. The WEF assumes many people born recently will live beyond 100, which may be a bit much (the Social Security Administration expects most Americans born today to live into their mid-80s). But much of the massive shortfall is baked into retirement systems; setups in which nobody, neither individuals nor the government, saves enough. About three-quarters of the projected comes from underfunded promises from governments, with the rest mostly accounted for by under-saving on the part of individuals.

Michael Drexler, head of financial and infrastructure systems at the WEF, who edited of the report, likens the problem to climate change. “Like climate change, you don’t see the consequences today, but if you do nothing the problem builds up and then there is nothing you can do,” he says. “Today you can still change things, but if you do nothing you’ll wind up with a problem that is three to four times the global economy.”

Forecasting anything accurately in 2050 is tricky. We could get lucky, in a sense, and people might start dying younger. More happily, asset returns might pick up. Some argue that worries are unfounded, because we can still pay pensions today and sort out any future problems if they become acute. Others cite uncertainty around the estimates as reason to delay action today. But uncertainty goes both ways—things could be better or worse, and the worst-case scenario poses much bigger costs than we can bear.

Acting sooner ensures lower costs in the future. Putting money aside for retirement now confers the benefit of compound interest and provides certainty to financial markets that fear ballooning government debts. For example the US Social Security Administration estimates that its shortfall could be fixed with an immediate 2.58-percentage-point tax increase, or a 16% cut in benefits. If the government waits until 2034 (the year it can no longer pay full benefits given its current trajectory) it would need a 3.58-percentage-point tax increase, or a 21% benefit cut. If the shortfall proves bigger than expected, the costs of waiting will be larger, too.

The report offers several suggestions to address the shortfall. Most include ways to boost individual saving by offering retirement accounts to a wider population and expanding financial literacy. The authors advocate diversifying investments beyond traditional stocks and bonds. Drexler says that investing in a diversified portfolio of infrastructure projects can increase returns and enhance economic growth.

Financing a long and comfortable retirement requires contributions from multiple sources, as well as shared risk. “If in 2050 people reach 85 and run out of money they’ll need to rely on Social Security,” Drexler explains. “But if there’s a shortfall the government will be overwhelmed by demand or pensioners living in poverty. We must start educating people now, so we have a good [defined-contribution pension] plans so people have something.”

Still, an overwhelming majority of the short-fall comes from government programs. In order to address this problem, governments must adequately and proactively fund their entitlements too, either by increasing taxes or by cutting benefits. Individuals alone cannot save enough to compensate for the unrealistic promises their governments have made. ■

Nursing Homes, LTC And College Planning Are Toast, So Is Retirement

My Comments: I graduated from high school some 58 years ago this month. So… Time for a visit and see who is still alive. And also meet up with my college roommate whom I haven’t seen for 54 years. A busy few days. He’s the one in the middle staring at the camera.

So I leave you with these thoughts as you think about your future in retirement…  We’ll be back in a few days.

June 8, 2017 • Evan Simonoff

Retirement isn’t the only stage of life or financial planning discipline that is headed for the history books, Edelman Financial Services founder Ric Edelman believes.

Nursing homes have lost 20 percent of their residents since 2010, and long-term-care insurance will soon be history as well, Edelman told attendees at Singularity University’s Exponential Finance conference in New York on June 8.

Americans’ longevity is increasing, and their financial lives are changing faster than most advisors or their clients can imagine. Clients who live until 2030 can expect far longer lives than most expect today, Edelman said, citing Ray Kurzweil, Google’s chief futurist.

Breakthroughs in health care and medical science are likely to eliminate heart disease and cancer as major causes of death in 15 or 20 years, Edelman said. This may sound like happy talk. But in 1900, cholera, dysentery and scarlet fever were among the five major illnesses that caused people to check out. Where are they now?

This means that retirement, which was only a late 20th century phenomenon, will soon cease to be advisors’ chief challenge. Advisors’ major task will become career counseling, or second-career counseling, Edelman said, because even clients who are well off at 65 and would be able to retire if their life expectancy was 90 will face a different set of variables if they have a good chance of living to 110 or 120.

The upshot is that advisors should start thinking in terms of a cyclical lifeline of education, work, re-education, more work, a sabbatical and a third or fourth career rather than a linear lifeline. It means clients need to diversify skills and occupations and maintain their employment viability as much as they need to diversify their investments.

Edelman also predicted that many forms of education would become free or very inexpensive. States like Oregon, Tennessee, Arkansas and New York already have offered free or very cheap tuition to students, and free online education is appearing all over the planet.

At George Washington University, over 1,000 students are 50, though it’s not cheap. But the cost of college has become so ridiculously high that it is unsustainable, Edelman implied. Free college may sound far-fetched, but it was not that long ago that America’s best state university system, California’s, was essentially free.

Hey, in the 1960s, the Free Speech movement was born at UC, Berkeley, a university that rivals Harvard in America or Cambridge in the United Kingdom. Both speech and tuition once were free at Berkeley, but these days it is hard to believe that was only 50 years ago.

Other industries that can expect to see higher growth rates include leisure and travel. The cruise ship business is booming, and on at least three cruise ships, state rooms have become permanent homes for residents who live there year-round.

Asked how clients in their 40s and 50s respond when they are told retirement at 65 or 66 is so yesterday, Edelman acknowledged that their first reaction is usually denial, followed by fear and anger. But when the idea of living a lot longer in good health sets in, their reaction is more balanced.

The timing of these predictions from Singularity University remains debatable. But as Yogi Berra said, the future isn’t what it used to be.

When to Start Social Security

My Comments: A very serious question, and one that requires some thinking about. We’ve talked about this before, but if you’ve not yet signed up, here are five questions you can ask yourself to get a better answer.

Chuck Saletta – May 19, 2017

Your lifetime Social Security retirement benefit is expected to be about the same no matter when you start collecting. Still, when you start collecting matters when viewed in the context of your end-to-end retirement plan.

You can start your Social Security retirement benefits any time between age 62 and 70, and the longer you wait within that window, the larger your monthly check will be. The trade-off between the age you start and the benefits you receive is such that, actuarially speaking, you’re likely to get around the same lifetime benefit amount no matter when you start in that window.

Even so, depending on your personal life circumstances, it may make more sense for you to start earlier in that window, later in that window, or somewhere in between. Here are five key things for you to consider when it comes to determining when to start your benefits.

No. 1: Are you still working?

If you’re still working and below your full retirement age (somewhere between age 66 and 67 for those who haven’t reached it yet), it generally makes little sense to collect your Social Security benefit. That’s because you’re penalized as much as $1 for every $2 you earn above $16,920 in the year.

Even if you’ve reached full retirement age, you may want to hold off collecting Social Security until age 70 if you’re still drawing a paycheck and that paycheck is enough to allow you to make ends meet. That’s because your Social Security check increases by 8% per year you wait past your full retirement age, up until age 70, to start collecting, and an 8% guaranteed increase like that is very hard to come by.

No. 2: How long will you live and stay active?

Aside from spending on healthcare, people’s spending tends to drop off the deeper into retirement they get. While you may technically get more money overall by waiting until age 70 if you survive long enough, how much of that extra money will come after you’re no longer able to make much use of it? As my Foolish colleague Todd Campbell recently pointed out, the crossover age happens somewhere between 79 and 81 years old, depending on when you start claiming.

Even if you do live long enough to receive more money from Social Security by waiting to collect, ask yourself how active you really see yourself being in your 80s and beyond. There’s value in getting the money sooner, while you’re more active and better able to enjoy it. If you reach the later part of your golden years regretting the things you didn’t get done because you didn’t have access to more money younger, there’s no do-over option at that point in your life.

No. 3: What other sources of financial support do you have?

If taking your Social Security check early makes the difference between surviving and starving, by all means, take it. If, on the other hand, you’ll be receiving temporary retirement income such as from a structured sale of your business or an employment severance agreement, it may make sense to wait. If you don’t need the money right away, waiting for the bigger check might make a whole lot of sense.

Remember, too, that your Social Security benefit itself can become taxable if your income is high enough. According to Social Security, as much as 85% of your Social Security benefit can be considered part of your taxable income. All it takes is $34,000 in combined income if you’re single or $44,000 in combined income if you’re married filing jointly, and 85% of your Social Security benefit becomes taxable income to you. Almost everyone filing as married filing separately will see their benefits taxed.

Social Security defines your “combined income” as your adjusted gross income plus your non-taxable interest income plus half your Social Security benefit. Because it includes your non-taxable income and half your Social Security benefit, it can be easy to reach that level even if your otherwise taxable income is low.

If your other sources of income are longer term in nature, such as a pension, rental income, or investment income, then it makes less sense to wait. After all, you won’t be avoiding the tax on your Social Security benefit by postponing taking that benefit, and the sooner you start Social Security, the less you have to depend on your other income for support in those early years. That could enable you to keep more invested more aggressively for longer, potentially improving your overall retirement income.

No. 4: How big are your Traditional 401(k) and Traditional IRA balances?

Once you turn 70 1/2, you’re generally required to start taking distributions from your Traditional IRA and Traditional 401(k) plans. While the distributions start off fairly small — around 3.6% of your balance — they grow as a percentage of your account balance every year after that until age 115. While you can’t avoid those required distributions, you can get your money out earlier and potentially at a lower tax rate.

Once you turn age 59 1/2, you can start withdrawing money from your traditional 401(k) and Traditional IRA plans without facing a tax penalty . If you have a substantial Traditional IRA and/or Traditional 401(k) balance, you can start taking that money out to cover your living expenses before you start your Social Security. By holding off on Social Security while you take those withdrawals from your Traditional 401(k) and/or Traditional IRA, you can keep your income and tax down while drawing down those balances.

If you get your Traditional 401(k) and Traditional IRA balances low enough, then you won’t face as steep required minimum distributions later in your retirement years. In addition, any money you took out of those plans and didn’t spend remains yours to use as you see fit. By leveraging those factors over time, the combination can give you the opportunity to keep your overall taxes lower in retirement without really affecting your overall retirement lifestyle.

No. 5: Do you plan to convert your Traditional IRA and/or Traditional 401(k) to a Roth IRA?

Similar to the previous point, you can convert your Traditional IRA and 401(k) balances into your Roth IRA, paying taxes on the conversions along the way. Roth IRAs are not subject to required minimum distributions for the original account holder, and thus once the money is in your Roth IRA, you can keep it in that account as long as you are alive.

There are three key differences between this point and the previous one, though. First, you can convert your Traditional plans to your Roth IRA starting at any age, not just at age 59.5. Second, remember that money you convert to your Roth IRA isn’t available for you to pay the conversion taxes on, unless you subsequently withdraw that money from your Roth IRA. Third, money you are required to withdraw from your traditional plans after age 70.5 must be withdrawn, and can’t be part of a Roth conversion.

That combination of factors means that when it comes to Roth conversions, it’s useful to have another source of money to cover the taxes associated with the conversions as well as your costs of living. As a result, it may make sense to start taking your Social Security to have a source of money to cover those costs while converting your Traditional IRA and Traditional 401(k) plans into your Roth IRA.

Make the right Social Security choice for you

Social Security serves as a cornerstone for the retirement plans of millions of Americans. As with any cornerstone, it works best when it’s part of an end-to-end structure designed around a useful purpose, in this case, your retirement. By understanding how these five key factors interact with your choice on when to start taking Social Security, you can design an end-to-end retirement plan that better suits your needs with the resources you have available. And that’s a recipe for retirement success.

A Look Back at Michael Flynn

My Comments: With recent testimony from James Comey, the narrative we’ve been glued to for the past many months takes a new turn. Please understand that once elected, I wanted 45 to succeed. I’m not happy with all the talk of impeachment. It’s not in my best interest as a citizen of these United States to have a duly elected official fail. But the odds of that happening are increasingly likely.

I profoundly disagree with most of his policy suggestions, but know that we are a substantive and significant collection of caring human beings in this country and we will survive. This article was written a few weeks ago and is worth a revisit. It lends credence to the story about how we arrived at the point we’re at today.

By Gloria Borger, CNN Chief Political Analyst \ Wed May 3, 2017

It’s been 11 weeks since Gen. Michael Flynn was ousted as national security adviser. He lied to Vice President Mike Pence about his conversations with the Russians, lobbied on behalf of Turkey while an adviser to the Trump campaign, and is now seeking congressional immunity in exchange for his testimony about Russia and the election.

Not a great scenario for a new administration. But it’s one that could have been avoided had the new team actually done its homework about the man they nominated. Only they didn’t.

Consider this scenario, retold by multiple sources with knowledge: When Donald Trump’s initial transition team met for the first (and last) time two days after the November election victory with its executive committee — which included Trump family members — the group was visited by two people who were not expected to be at the session: Gen. Michael Flynn and Gen. Keith Kellogg. Apparently invited by Jared Kushner, the men were asked by both Kushner and Ivanka Trump to talk about the positions they would want in the new administration.

Kellogg wanted to be White House chief of staff, which was apparently a non-starter. And Flynn told the group there were only three positions he would accept: national security adviser, secretary of state, or secretary of defense. The trouble is, he was not on the transition team’s list for any of those jobs.

But he was on the family’s list.

The rest is history: The next day, transition chairman Chris Christie was ousted, his voluminous plans scrapped, and the rest of his team was gone shortly thereafter. And Flynn became the first big Trump appointment, named national security adviser within 10 days of Trump’s election — only to be gone just over three weeks into the Trump presidency.

The rise and fall of Flynn

The story of Flynn’s rise and fall — from loyal Trump adviser and campaign rabble-rouser to a very short-term top job in national security — is the story of an insular family takeover of a transition process the President himself never wanted. (In fact, one source says that Trump wanted to close it down, thought it was bad karma, but was told that transition preparations are actually in the candidate’s best interest.)

According to multiple sources familiar with discussions inside the first transition team, Flynn was viewed suspiciously. He was considered a “wild card” — someone who made officials uncomfortable. But because he had been so loyal to Trump they reluctantly put him on their list as the director of national intelligence.

After the election — and the Christie ouster — the transition was outsourced in name to Pence, who led a largely inexperienced team, including Trump’s family — especially his daughter and son-in-law. What’s more, this new transition was hobbled by inadequate vetting and preparation, falling woefully behind in nominations. And Flynn’s appointment as national security adviser was an easily avoidable mistake, say initial transition officials, but apparently no one was interested in listening to advice about extreme vetting.

Flynn was announced as national security adviser with the clear backing of the Trump family. But Flynn did not have something just as important: a complete, new, deeper internal vet of his associations and potential conflicts.

The new transition team had prepared “public source” vetting on potential nominees — which means anything available on the public record — but had not gone beyond that. And the ousted transition team had specifically warned the new administration not to nominate anyone officially until more robust investigations could be complete.
But it didn’t happen that way.

So Flynn was nominated, says one source with knowledge, “without anything deeper than a public vet.” Another source familiar with the transition added that Flynn “certainly wouldn’t have passed my vetting to be anything with a security clearance.” The lack of homework created obvious problems.

The main questions are these: Why didn’t the Trump administration know about either Flynn’s business or his Russian contacts? Wouldn’t a fuller vetting process have sent up red flares?

The explanation now from the Trump administration is that it’s the Obama administration’s fault. Flynn, they say, had the proper clearance because he was vetted by the Obama administration — having served as their Defense Intelligence Agency director before he was fired from that position in 2014.

Donald Trump explained it this way: “When they say we didn’t vet, well Obama I guess didn’t vet, because he was approved at the highest level of security by the Obama administration.” And Trump spokesman Sean Spicer said there was no need to “rerun a background check” on someone who had a high position in intelligence” and “did maintain a high level clearance.” He said it’s done every five years, and can be updated which, he said, “occurred in this case.” So case closed.

More elaborate vetting?

Except that intelligence officials have told CNN and others that any high-level job like national security adviser should require a separate, more extensive background check, even for those with current security clearance. And as Flynn’s predecessor — former national security adviser Susan Rice — pointed out in an interview with Fareed Zakaria last week, those appointed to high positions normally receive “a separate and much more elaborate” check than a security clearance. “It gets into the financial information. It gets into your relationships and contacts. It gets into your behavior.”

During the campaign, Flynn was cleared, along with Christie, to accompany then-presidential nominee Trump to a briefing with intelligence officials. (“Maybe that’s the Obama vet they’re talking about,” speculated one source. “But that’s not the vet you should get if you are going to be national security adviser.”)

It was held at FBI headquarters in New York. One source with knowledge of the briefing says that “Trump acquitted himself well,” but that Flynn was “an abomination with an ax to grind” against the intelligence officials with whom he had formerly worked. Even Trump started having concerns about Flynn, this source says, but acknowledged his loyalty.

In the end, loyalty wasn’t enough. “Flynn was their responsibility,” one transition source says. “If they had truly vetted him before any announcement, none of this would have happened.”

Growth Is Not Dead, But It Is Dying

My Comments: My post on May 26th last about Demographics and Money suggested reasons why economic growth in long established nations will be nothing to brag about going forward. Despite the current Administration suggesting a return to not just 3% annual growth for the US economy, but wait for it, 4% annual growth, it’s just not going to happen.

The tax plan outlined by the White House the other day makes the basic assumption that with high growth, tax revenues will grow to pay for everything. What is not said is that without significant growth, the hole we are in now will simply get deeper.

Right now the Federal deficit is almost $20T. That’s a staggering amount. Pretty soon, the annual cost to service that debt will be $1T per year. That money has to come from tax revenues, which means you and I. Are you prepared to pay your share when the top 1% get more tax breaks?

I’m far from a pacifist, but do we really need to keep paying more annually for our military than the next seven nation’s combined spending? Yes, some of that spending filters back into the economy and functions as a stimulus, but the Administration wants to spend more than we do now.

May 28, 2017 Lorenzo Fioramonti

Growth is dying as the silver bullet for success. Why this may be good thing

The idea that the economic “pie” can grow indefinitely is alluring. It means everybody can have a share without limiting anybody’s greed. Rampant inequality thus becomes socially acceptable because we hope the growth of the economy will eventually make everybody better off.

In my new book “Wellbeing Economy: Success in a World Without Growth” I point out that the “growth first” rule has dominated the world since the early 20th century. No other ideology has ever been so powerful: the obsession with growth even cut through both capitalist and socialist societies.

But what exactly is growth? Strangely enough, the notion has never been reasonably developed.

For common sense people, there is growth when – all things being equal – our overall wealth increases. Growth happens when we generate value that wasn’t there before: for instance, through the education of children, the improvement of our health or the preparation of food. A more educated, healthy and well-nourished person is certainly an example of growth.

If any of these activities generate some costs, either for us individually or for society, we should deduct them from the value we have created. In this logical approach, growth equals all gains minus all costs.

Paradoxically, our model of economic growth does exactly the opposite of what common sense suggests.

Negative values of growth

Here are some examples. If I sell my kidney for some cash, then the economy grows. But if I educate my kids, prepare and cook food for my community, improve the health conditions of my people, growth doesn’t happen.

If a country cuts and sells all its trees, it gets a boost in GDP. But nothing happens if it nurtures them.

If a country preserves open spaces like parks and nature reserves for the benefit of everybody, it does not see this increase in human and ecological wellbeing reflected in its economic performance. But if it privatises them, commercialising the resources therein and charging fees to users, then growth happens.

Preserving our infrastructure, making it durable, long-term and free adds nothing or only marginally to growth. Destroying it, rebuilding it and making people pay for using it gives the growth economy a bump forward.

Keeping people healthy has no value. Making them sick does. An effective and preventative public healthcare approach is suboptimal for growth: it’s better to have a highly unequal and dysfunctional system like in the US, which accounts for almost 20% of the country’s GDP.

Wars, conflicts, crime and corruption are friends of growth in so far as they force societies to build and buy weapons, to install security locks and to push up the prices of what government pays for tenders.

The earthquake in Fukushima like the Deep Water Horizon oil spill were manna for growth, as they required immense expenditure to clean up the mess and rebuild what was destroyed.

Disappearing growth

Against this pretty grim depiction, you may ask yourself: where is the good news? Well, the good news is that growth is disappearing, whether we like it or not. Economies are puffing along. Even China, the global locomotive, is running out of steam.

And consumption has reached limits in the so-called developed world, with fewer buyers for the commodities and goods exported by developing countries.
Energy is running out, particularly fossil fuels, and even if polluting energy sources were endless – as some supporters of shale gas, or fracking, suggest – global agreements to fight climate change require us to eliminate them soon.

As a consequence, mitigating climate change forces industrial production to contract, thus limiting growth even further. What this means is that, on the one hand, growth is disappearing due to the systemic contraction of the global economy. On the other, the future of the climate (and all of us on this planet) makes a return of growth, at least the conventional approach to industry-driven economic growth, politically and socially unacceptable.

Window of opportunity for change

Even the International Monetary Fund and mainstream neoliberal economists like Larry Summers agree that the global economy is entering a “secular stagnation”, which may very well be the dominant character of the 21st century.

This is a disastrous prospect for our economies, which have been designed to grow – or perish. But it is also a window of opportunity for change. With the disappearance of growth as the silver bullet to success, political leaders and their societies desperately need a new vision: a new narrative to engage with an uncertain future.

In my new book, I argue that as we begin to recognize the madness behind growth, we start exploring new paths. These include: forms of business that reconcile human needs with natural equilibria; production processes that emancipate people from the passive role of consumers; systems of social organisation at the local level that reconnect individuals with their communities and their ecosystems, while allowing them participate in a global network of active change makers.

This is what I call the “wellbeing economy”. In the wellbeing economy, development lies not in the exploitation of natural and human resources but in improving the quality and effectiveness of human-to-human and human-to-ecosystem interactions, supported by appropriate enabling technologies.

Fulfilling lives

Decades of research based on personal life evaluations, psychological dynamics, medical records and biological systems have produced a considerable amount of knowledge about what contributes to long and fulfilling lives.

The conclusion is: a healthy social and natural environment. As social animals, we thrive thanks to the quality and depth of our interconnectedness with friends and family as well as with our ecosystems. But of course, the quest for wellbeing is ultimately a personal one.

Only you can decide what it is. This is precisely why I believe that an economic system should empower people to choose for themselves. Contrary to the growth mantra, which has standardised development across the world, I believe an economy that aspires to achieve wellbeing should be designed but those who live it, in accordance with their values and motives.

Source article: http://theconversation.com/growth-is-dying-as-the-silver-bullet-for-success-why-this-may-be-good-thing-78427

Social Security Changes Coming

My Comments: We all know Social Security is here to stay, right? Well, maybe not.

What was started in 1935 has undergone a few revisions, the last significant one in 1983. That was because it was going broke fast, and the baby boomers and their impending retirement were on the horizon.

Well, it’s time for another major revision, but right now there is no political will to make it happen. However, like it or not, some changes are on the near horizon and you need to know about them.

Sean Williams | May 22, 2017

Social Security is, for many retired Americans, a financial foundation that they’d struggle to live without.

A study conducted by the Center on Budget and Policy Priorities (CBPP) found that the elderly poverty rate inclusive of Social Security benefit payments is 8.8%. Without these payments, the CBPP estimates that senior poverty rates would shoot above 40%! Based on the more than 41 million retired workers receiving a monthly benefit as of March, we’d be talking about an increase in the elderly poverty rate of more than 12 million people. That’s no insignificant figure, and it demonstrates the importance of this program.

There’s a big Social Security change that’s just three years away

But as many of you may have heard by now, Social Security is on a collision course with disaster. According to the Social Security Board of Trustees 2016 report, the Trust’s more than $2.8 billion in excess cash will be completely exhausted by 2034. Once this money is gone, the Trustees have estimated that across-the-board benefit cuts of as much as 21% may be needed to sustain payouts through the year 2090.

What you may not realize is that a big change that’ll precipitate this cash downfall is right around the corner. Beginning in 2020, per the Trustees’ estimates, Social Security will begin paying out more in benefits than it’s generating in revenue. In other words, the switch will officially be flipped, and the more than $2.8 trillion spare cash pile will begin to dwindle.

Why, you ask? There’s no one specific reason. Rather, it’s a confluence of factors that include:
• The ongoing retirement of baby boomers, which will lower the worker-to-beneficiary ratio
• Lengthening life expectancies, which allows people to claim benefits for an extended period of time
• The rich, who are living noticeably longer than lower-income folks and are able to draw a (large) benefit payment for a longer period of time
• America’s poor saving habits, which coerce workers and seniors to be extra reliant on Social Security during retirement
Say goodbye to over $90 billion in annual program revenue

Yet, there’s another issue not mentioned above.

Social Security has three means by which it generates revenue:
• Payroll taxes
• Interest income on its spare cash
• The federal taxation of benefits

Payroll tax helps funds Social Security at a rate of 12.4% of earned income between $0.01 and $127,200, although most workers only pay 6.2%, with their employer covering the other half. This maximum taxable income figure of $127,200 changes in step with the average wage index most years. In 2015, payroll taxes accounted for 86.4% of the $920.2 billion in revenue collected for Social Security.

The federal taxation of benefits amounted to about 3.4% of total revenue in 2015. Social Security recipients with incomes above $25,000 or joint filers with income above $32,000 are subject to having at least half of their benefits exposed to federal taxation.

The final 10.1% (the numbers don’t add to 100% due to rounding) is comprised of interest income from its more than $2.8 trillion in spare cash. This cash is invested in special issue bonds designed for trusts and, to a far lesser extent, certificates of indebtedness. In 2015, nearly $93 billion in revenue was generated by this spare cash.

But beginning in 2020, this spare cash will start to dwindle — and as it dwindles, so will the interest income generated for the program. Higher interest rates could help ebb the pain a bit since it will mean higher yields on the aforementioned special issue bonds, but it’s not going to do enough to prevent the program from running out of excess cash by 2034.

The two most popular Social Security solutions are at opposite ends of the spectrum

Now, this is where things get interesting. It’s not as if Congress doesn’t have effective ways to fix Social Security’s more than $11 trillion, 75-year budgetary shortfall. It does. The issue is simply that Democrats and Republicans both have an effective fix, and neither wants to cave in to the other party’s solution.

The Democrats’ thesis is that the wealthy should shoulder more of the load. As noted above, the maximum earnings cap as of 2017 prevents the payroll tax from being applied to earned income above $127,200. Democrats have suggested lifting this earnings tax cap to a figure between $250,000 and $400,000 (essentially giving earned income between $127,200 and $250,000-$400,000 a free pass, then reinstituting the payroll tax), or even removing the cap altogether and taxing all earned income.

Removing the payroll tax earnings cap altogether would only impact about 10% of the population, which is what makes it such a popular choice among the public. It would also completely eliminate the program’s cash shortfall.

At the opposite end of the spectrum, Republicans have been pushing the idea of raising the full retirement age, or FRA. Your FRA, which is determined by your birth year, is the age at which you become eligible to receive 100% of your retirement benefit. The FRA began increasing by two months per year in 2017 from 66 years, and it’ll continue to do so until it hits 67 years by 2022.

Republicans have proposed further increasing the FRA to 68, 69, or 70 years to account for increased longevity. Raising the FRA forces seniors to wait longer to get 100% of their due benefit or to claim early and accept a steeper cut in benefits. This solution fixes Social Security’s shortfall, too.

In order for Social Security to be fixed for the long term, we’re probably going to need to see compromise with both sides meeting in the middle. But one thing is for certain: The longer Congress waits, the direr the situation could be for seniors.

Source article: https://www.fool.com/retirement/2017/05/22/a-big-social-security-change-is-coming-in-2020-and.aspx