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Changing the Numbers

2/13/2013

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Recently, Tennessee Senator Lamar Alexander appeared on CNBC to hawk his solvency plan for the nation. He should have been apologizing for his vote supporting the “fiscal cliff” bill, which was a travesty, because it was as much a spending bill as a revenue bill. The CNBC host, asked for specifics about his plan, but Alexander only offered vague ideas. Among his offerings was “means testing” for benefits. One of the other hosts, correctly, told Alexander that the entitlement programs would turn into welfare, and, of course, the programs would be robbed of their integrity.

I think the country would be better off if we worried less about changing basic entitlement policies and adhered to the underlying philosophy behind the entitlements. Entitlements are incapable of being anything more than a supplement! We all know that now, and it is wrong and deceitful to give people the impression they can retire and only depend on entitlements. Yet, for 65% of all retirees, Social Security is the majority of their cash income. For 24% of retirees it is all their income. That’s why any solvency plan must involve changing the numbers, which Alexander, to his credit, alluded too.

A good businessman, constantly, has to contract his numbers to establish his bottom line. He doesn’t change his whole business model; he just floats the numbers. Politicians, in order to retain personal power, have incentive to expand the numbers of people relying on entitlements. We can change the payroll taxes, change eligibility, and change compensation for our entitlements, but the changes I am talking about are contractions. But, this is only half of the equation.

The other half of the equation, a highly concentrated national economy, is what I am worried about with today’s elected government. This alone, stunts growth! For example, concentration and the lack of competition is acute in the medical field. That is the main reason why medical cost rises seem intractable. In addition, we have new household terms, such as “too big to fail” that have come along since Alexander was first elected. So Senator, give us your blue print of a diverse economy, with adequate competition at every level.

Republicans like to talk about growth and the part tax policy plays in economic growth. I think most good and honest economists will say tax policy, within certain perimeters, is a minor contributor to economic growth. Not unimportant; just minor. But, if you “monkey” with the tax policy, like the infamous “Bush tax cuts,” you can distort, in time, the economic outcomes. Economies have to evolve and change. We can’t sustain a dominant consumer economy, through policy changes, without unintended consequences.

The virtue of democracy is public debate.  Let the Congress “go public” with today’s economic issues, otherwise they will fester on us.





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