PeakOil is You
US faces lost decade
Re: US faces lost decade
by Ferretlover » Sun 02 Mar 2008, 14:16:32
$this->bbcode_second_pass_quote('cube', 'h')ell must of frozen over, I actually agree with LoneSnark for once.
Hell must Have frozen over-I think I actually understood one of Golem's posts the other day! *shudder*
"Open the gates of hell!" ~Morgan Freeman's character in the movie, Olympus Has Fallen.
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Re: US faces lost decade
by MrBill » Mon 03 Mar 2008, 07:08:37
Waterthrush wrote:
$this->bbcode_second_pass_quote('', 'M')r. Bill, I'm way below your league in evaluating economic impacts of various scenarios, but I want to challenge the common notion that the aging US population (or other aging populations) by themselves spell some kind of doom.
Children and young people are not a constant factor across different types of economies. An agricultural economy seems to absorb them more effortlessly than a post-industrial economy.
$this->bbcode_second_pass_quote('', 'M')r. Bill, I'm way below your league in evaluating economic impacts of various scenarios, but I want to challenge the common notion that the aging US population (or other aging populations) by themselves spell some kind of doom.
Children and young people are not a constant factor across different types of economies. An agricultural economy seems to absorb them more effortlessly than a post-industrial economy.
Senior citizens are not bad for the economy. They can be productive and they are still consumers of goods and services that provide jobs and opportunities to younger workers.
The key public policy debate is always how to find a balance between spending scarce resources - tax dollars and public borrowing (future tax dollars) - to provide income support, old age pensions, healthcare, unemployment insurance and other benefits, while having enough left-over to spend on public infrastructure, schools, defence and the other roles that government does on behalf of taxpayers.
A young, working population is paying 'net' into the system, while 'net' taking less out. An older, retired population is taking 'net' more out of the system than they are paying 'net' into the system.
We do not pay 100% taxes, and yet it is quite possible to start work at age 22, work for 35 years, retire at 57 (public sector and some union employees) and live until 89 years old. The first 18-22 years are a net drag on the economy paid for by either your parents, the taxpayer or both. How can 35 years of work pay for 89 years of living expenses of which 54 were spent not working?
Even if you use 45-years of working, retiring at 67 and dying at the average age of 76 years old, I think it should be obvious to anyone that does the math that even with marginal tax rates of 50% - some pay substantially less - that working for 45-years still only adds up to about 27.5 years of fully vested earnings. So actually substracted from 76, and one has 48-49 years of earning less than one spends 'on average'.
Private savings aside workers are actually paying their way as they go, but on a macro-level everybody has entitlements, while not all workers save and the unemployed have to live on something.
Keeping in mind that those that actually work for the state are a double drag on income as they are taxed on a salary paid for by the state that comes out of other tax income. We can only do that if some pay into the system and die early without collecting benefits. Or if we tax other income than salaries - corporate, interest, capital gains, fees - for example. Or if we borrow future taxpayer dollars to pay for benefits today. In essence running a deficit paid for by future generations through higher taxes, elevated real interest rates, a devalued currency and lower living standards.
So even though an aging population does not spell doom per se there is an economic cost in terms of lower productivity, and all that social spending and those wealth transfers do have to be paid for out of the income generated from the real economy. My point was that we (collectively) have in many cases already spent future wealth on past consumption, so not only do we have to provide for those future outlays on an aging population, but we also have to replace that wealth already spent. You can slice and dice the numbers however you want, and make whatever assumptions you care, but to square the circle you need equal revenue coming in as going out over time.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: US faces lost decade
by MrBill » Mon 03 Mar 2008, 08:05:07
LoneSnark wrote:
$this->bbcode_second_pass_quote('', 'M')rBill, Tyler got it right, not you. You posted a graph of "nominal GDP" which is a bad measurement, as it is not inflation adjusted, or in this case deflation adjusted.
$this->bbcode_second_pass_quote('', 'M')rBill, Tyler got it right, not you. You posted a graph of "nominal GDP" which is a bad measurement, as it is not inflation adjusted, or in this case deflation adjusted.
Having reflected on this I can say that the GDP is inflation-adjusted each year, but is added together cumulatively without adjusting for currency appreciation or depreciation, and without adjusting it into constant inflation-adjusted terms.
The methodology to adjust for this would be to show country by country GDP growth in SDR units for example. It would still show that Japan's GDP grew significantly slower than either the US or the EU. Which is good because that means they were able to absorb more Japanese imports over that period of time.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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