Thread: The strongest economy in the world

Originally Posted by surasak

If you want to help people in retirement then give them free housing, medical, and necessities. Don't give them cash.

It's not about "helping" the retired, that's a different issue in European nations at least, those who need help can fall back on social security which is given independent of what one has paid into the pot. Part of the objectives for compulsory pension schemes is to enable people to retire with dignity, and keep the social security (which is financed from taxes rather than contributions) for those who've come to hardship.

Historically, compulsory pension schemes were introduced to minimise the damage a capitalist free market would cause to individuals and society - i.e. workers accepting wages designed for survival not for saving for future needs.

Pensions are an entitlement for those who have paid the premiums, and if you have saved and finance housing, medical etc yourself, you'll have a nice reward for a productive working life on top of everything else.

People should be able to retire with dignity. But let me decide my retirement plan...I don't think it should be mandatory for the government to take care of me when I reach 65. I don't think the government should be taking almost 13% of my income for 'my' retirement when the money I'm paying now won't be tehre when I reach 65. That's the objection I have.

If the government wants to mandate retirement schemes then let the person have individual accounts which aren't tied to a general fund. As it is now people who don't pay in can collect money, people are living longer and taking more money in benefits than projected, and, peolpe who are paying into the system now to 'support' past generations are going to get screwed.

Why can't I have the choice to take my money that I earned and invest it on my own?

I really don't know the situation in the US, but in Europe the issue is similar. The trend is towards a 2-tier system, i.e. you have the choice of directing a part or all of your contributions to approved private schemes of your choice.

Note that all this only applies to people in dependency, i.e. with employment contract -it's regarded as a protection. As an employer or self-employed person you're under no obligation, but have no entitlement in return.

In the US it's mandatory to contribute to the social welfare system (Social Security). The tax rate currently is 12.4%. If one is employed then the worker pays half and the employer pays half (that's a 6.2% cost of doing business per worker in addition to standard costs). Self-employed people pay the entire 12.4% in special taxes in addition to their regular income taxes. There's a lot of resistance here to anything other than the status quo because of fear mongering. The largest retiree lobby, the AARP, opposes anything that might possibly cut benefits for current retirees or change the current system. So the problem keeps compounding because the older generation (which is still powerful politically) opposes the kinds of changes needed so that my generation and beyond will be able to collect. Pretty soon because the older people haven't paid much in and due to their living longer and collecting far more in benefits than they paid the system will bankrupt itself in the next 1-3 decades at current spending and taxation.

It is beginning to turn into generational warfare here. I have seen many people my age and younger resent the older generation due to the feeling of being 'screwed' by them with regards to pensions, pollution, taxes, etc. They assured themselves legally a way to enjoy life and leave us the mess to clean up.

Take away the debt and what are you left with? It appears that the economy of the past several years is the result of debt spending. The personal savings rate is negative (meaning that people in general don't have much money left over after necessities are paid for). According to the Federal Reserve:

To prepare for retirement, "aging workers should be building their nest eggs and paying down debt," the note said. "Instead, many of today's workers are saving almost nothing and taking on large amounts of adjustable-rate debt with payments programmed to rise with the level of interest rates. Failure to boost saving in the years ahead may lead to some painful adjustments in the future. …."
The note blames "ongoing credit industry innovations (the growth of subprime lending, home equity loans, exotic mortgages, etc.)" for expanding consumer access to borrowed money and reducing consumers' perceived need for precautionary savings.

According to Bernard Baumohl, executive director of The Economic Outlook Group, "In 1980, about 78 percent of spending was financed from wages and salaries, he said. By 1990, the figure had dropped to 71 percent and it's been falling ever since. In January, it slipped to 64 percent. "

Debt to income ratio is at an all time high of 118% debt to income.

http://www.frbsf.org/publications/ec...el2005-30.html

^ Post of the week in Issues thread Surasak.

I have been noting this for some time, and the first people to hit the wall will be the baby boomers. Even though some are becoming aware, it's 1. too late to catch up financially and 2. most, even though aware, are not changing their spending/debt habits.

Originally Posted by surasak

Debt to income ratio is at an all time high of 118% debt to income.

And what's behind this trend? What are the underlying reasons that cause people to outspend their earnings?

Advertising. The feeling advertisers create by making a person feel as if they aren't good enough unless one buys their product.

Stupidity. The thinking that "I can get food stamps, welfare, and retirement from the government so why should I save?"

Lack of discipline. "Oh, I should save money but that sofa just looks so nice!" "I should buy the smaller car but the SUV is so much fun!"

Easy credit. The fact that there's a fortune being made due to high interest credit cards and adjustable rate loans that banks are willing to take the risk because the income is so high if people don't pay their debt off and pay just the minimum each month.

I just don't get it either. Take Wal-Mart. A good portion of the stuff they sell is low quality cheaply made items all from China. I'm talking about glass ware that has obvious flaws, furniture that has mismatches color in the veneer, etc. And the prices are really high considering how poorly made the items are. Yet they are the number one retailer.

So many things here in the U.S. are made in China now that I have to do a double-take when I see a "Made in USA" label. And, if we stop spending money, I would really hate to be in China.

This has nothing to do with the topic, but I really enjoy reading your quality posts, surasak.

Thank you, it's nice to debate things for a change without screaming, name calling, etc.

You know, my parents were married for 21 years. Cause of divorce? Likely my mother's penchant for spending every dime that they earned. Oh, we had a decent house, lots of furniture, etc. New cars every 2-3 years, the works. But then the mini-recession of 1984-1986 hit and my father lost his job. No savings because my mother spent every damn dime they earned and never saved anything. A year later I graudated from high school with no money for college because it was far more important that my mother spend $400 a month to lease a large car than to save money for my college (hence the allusion to the pressure from my parents to go into one of the military academies due to my excellent grades in high school). That same year my parents filed for divorce, the house was foreclosed, and I learned the hard way how to support myself.

Lessons learned the hard way, but, since that time I have always put savings first, necessities second, and whatever's left goes for fun.

My sister is just like my mother. Both her and her husband are officers in the U.S. military but don't have a dime saved. She got out of the Navy because it was too hard. Now they have to support 2 car payments and a mortgage on a $300,000 house in WA on a LT's salary (forgot if he's a first or second LT). They have a full house of furniture for 2 people, she spends $100 on pants, but now they are filing for bankruptcy. They spent a lot of money and the economy is better for them, but, now what? Does the economy give refunds if people are inherently stupid or have bad luck?

Go figure.

I certainly agree with the reasons you listed above, Surasak. Living in an ultra-consumerist society unyielding pressure is applied through marketing and media to satisfy your desires now. Happiness has almost totally been equated with money and the materialism that money will bring one's way. It's a philosophy of life that's being taught which has huge and disastrous flaws.

Aside from the general populace accepting this philosphy unquestioningly and making very bad decisions due to it I feel there's also been a steady burgeoning gap between income and the costs of goods. Labor has been losing significant ground IMO. During the dot.com collapse many major corporations instituted wage freezes. This is ground that the worker will never make up once times revert to greater prosperity.

Certainly not in all cases but they do exist where for many ends are truly difficult to meet (consider that the minimum wage has not increased in 9 years and has risen from $2.00 in '74 to a mere $5.15 by '97) and credit being so easily obtained some are faced with borrowing on high interest to pay for necessities and a few of life's little pleasures.

How many American households would survive on a single wage earner's paycheck? Or get ahead without working as much overtime as possible?

I don't want to nitpick, but doesn't the min wage vary from state to state and reach above $10/hour some places?
Thus the Unions, cough, "Teddy", cough, making the US uncompetitive?

Just something I was told in an argument before, cough, "JohnL", cough...

Originally Posted by surasak

Advertising. The feeling advertisers create by making a person feel as if they aren't good enough unless one buys their product.
Stupidity. The thinking that "I can get food stamps, welfare, and retirement from the government so why should I save?"
Lack of discipline. "Oh, I should save money but that sofa just looks so nice!" "I should buy the smaller car but the SUV is so much fun!"

Ahh, you mean women. Ok, I understand now.

^
^
You're right . . . and wrong, stroller. Yes, it is up to the individual states to set minimum wages and they vary from "none" to a max. of 7.63 for the state of Washington. The city of San Francisco is a special case (no small wonder considering housing prices) at 8.50, but it's also conditional. Overall there are a only handful of states that top the 7.00 mark. Minimum wage by state.

John L is absolutely correct about the uncompetetive labor costs in the U.S. What the U.S. needs is a return to slave labor. We'll be competetive then. Ahh, erm . . . fuck the standard of living for the masses . . . as long as the power brokers are able to satisfy their gluttonous appetites for the good life at the expense of the masses all is as it should be. Right?

Is U.S. labor to compete with China? India? Thailand? Or any other "low cost" region?

Countries compete via resources. China is poor in natural resources but rich in the most expensive resource: labor.

Raising the minimum wage isn't the answer. It's better to increase tax credits for the working poor than impose additional costs on businesses that rely on low wages.

If you're working for $2.00 per hour, or even $5.15, how would tax credits help? At those wages you would still have a difficult time sustaining yourself even if you had the ultimate tax credit . . . zero tax.

I'd argue that if a business requires labor which earns next to nothing in order to survive then there's something else wrong with the picture.

Tax credits are money paid to the taxpayer whether there's a tax liability or not provided certain conditions are met. For example, the EIC was fairly successful in getting people off welfare and into work. In 2005 a single person making between $5200 and $6500 would have hit the maximum EIC credit of $399. That's money the government gives the person even if their tax liability is $0. Married with no children gives one $399 with a range of income from $5200 - $8500. A married couple with 2 children would get $4400 cash if they earned between $11000 and $16350.

Many businesses do require cheap labor to compete effectively because the kind of service they provide is a low value one.

Many businesses as well charge outrageous amounts for labor but still pay their workers minimum wage. Computer and auto repair shops are notorious about this (one reason why I went out on my own).

Raising the MW isn't a good solution to the problem.

Originally Posted by Marmite the Dog

Originally Posted by Storekeeper

Originally Posted by Covertjay

What about the EEENNNOOORRRMMMOOOUUUSSSS debt spaz???

Not really a problem. Could easily be wiped out in a couple of years.

It hasn't gone the right way in over a hundred years, so why do you think it could be wiped out in a couple of years?

U.S. Govt Debt US$ billions
1910 2.6
1920 25.9
1930 16.2
1940 43.0
1950 257.4
1960 290.2
1970 389.2
1980 930.2
1990 3,233.3
2000 5,674.2
2005 7,932.7

How many times has G.Bush increased the national debt limit since he is in office?
Where does all that money come from?
If most of this money comes from foreigners...who does the U.S. belongs to?
If that piece of the pie belongs to me...can I become President of the U.S.?
Look out Arnold (Schwarzenegger) here comes HermantheGerman

[/quote]
U.S. Govt Debt US$ billions
1910 2.6
1920 25.9
1930 16.2
1940 43.0
1950 257.4
1960 290.2
1970 389.2
1980 930.2
1990 3,233.3
2000 5,674.2
2005 7,932.7[/quote]
2006 9,000

9 trillion!!!!!!!! about $30,000 for every man, woman, and child in the U.S.

C'mon Boys and Girls, is this not a real good reason to rejoice. The Washinton Post report was just an appetizer ...burrrp.... x-cuse me.
Good ol George ain't gonna pick up THIS check

"Britain's ailing car industry received another blow yesterday as Nanjing Automobile, which owns the remnants of Rover, announced that it would start building MG cars in Oklahoma. The motor industry had expected all MGs to be built at Rover's old base at Longbridge, Birmingham, but most production will now go to America.... Construction of the Ardmore factory will begin next year and MG is hoping to start production in 2008. About 60 per cent of its 12,000 to 16,000 forecast sales will be in North America and the rest in Europe... The Oklahoma factory will be the first to be opened in America by a Chinese carmaker. Other Asian manufacturers have also moved into the American South - Hyundai is in Alabama, Nissan in Tennessee and Toyota in Texas. The move by Asian companies to open factories in the US has come as the traditional Detroit car manufacturers - General Motors, Ford and Chrysler - have struggled."

http://business.timesonline.co.uk/ar...267895,00.html

^ I am sure they go there because auto-workers are well unionized. Also closer to the target market, american consumers.

Originally Posted by Tippaporn

I'd argue that if a business requires labor which earns next to nothing in order to survive then there's something else wrong with the picture.

Amen to that. Definitely a problem. With consumers chasing for lowest prices all the time, and too much competition in some service industry, and this is the kind of low value business we will get.

Originally Posted by surasak

Raising the minimum wage isn't the answer. It's better to increase tax credits for the working poor than impose additional costs on businesses that rely on low wages.

Not really an incentive for workers to work more or increase wages significantly for low income earners. Some workers are so poor, taxes is the least of their problem.

Originally Posted by surasak

Raising the MW isn't a good solution to the problem.

It's the only solution unfortunately as abuses from employers are mostly the rule, not the exception

Originally Posted by Butterfly

Originally Posted by surasak

Raising the MW isn't a good solution to the problem.

It's the only solution unfortunately as abuses from employers are mostly the rule, not the exception

Union membership is in serious decline in the U.S. Labor is on the verge of coming full-circle. And you're right, B-Fly, employers will do everything in their power to beat wages down.

That's not a comment directed to you, Surasak, as you've mentioned that your employees have become as family. But there your approach towards your employees would be the uncommon exception rather than the rule.

As an employer once blatantly admitted to me, "I'd rather have the money in my own pocket." Which leads me to believe the the true underlying issue is greed. From my perspective I see greed as America's worst enemy.