Wednesday, October 16, 2013

Older Workers & Retirees Blamed for Slow Recovery?

New York Times: Sorry, Kids. We Ate It All by THOMAS L. FRIEDMAN (former chief economic correspondent for the New York Times)

"Druckenmiller urges young people to design their own solutions, but, when asked, he recommends: raising taxes on capital gains, dividends and carried interest — now hugely weighted to the wealthy and elderly — to make them equal to earned income taxes..."

Ok, so far, so good, but he failed to mention that capital gains are also exempt from Social Security taxes, nor does he say anything at all about the cap on Social Security taxes on regular wages. But what did he mean by "the elderly"? People like Warren Buffett? THEN HE GOES ON TO SAY...

"...making all consumers more price sensitive when obtaining health care; means-testing Social Security and Medicare so they go to those most in need; phasing in higher age qualifications for entitlements and cutting corporate taxes to zero, so the people who actually create jobs will have more resources to do so."

Is he suggesting that older workers, especially those earning hourly wages in labor intensive jobs, should be forced to work until they're 70 years old? As it is, most unemployed people over 50 can't find a job now. (See the links below).

And I won't even bother arguing his ridiculous notion of ZERO % for corporate taxes. The "effective" corporate tax rate, especially as far as a percentage of GDP, has been dropping like a rock since we first put a man on the moon. And the myth about "job creators" has been thoroughly debunked many times over these past several years.

New York Times: Aging, Taxes and the State of the Labor Market By CASEY B. MULLIGAN (an economics professor at the University of Chicago)

"Economists disagree about many things, but they seem to agree with the basic idea that the lack of recovery is partly attributable to population aging..."

This may be true to a certain degree, as older people are working longer to recover their losses from the recession, thereby, not making room for more new entrants into the labor market. BUT THEN HE GOES ON TO SAY...

"Aging is not the only change affecting labor supply. Marginal tax rates have increased five percentage points since 2007 and will increase another five percentage points over the next 15 months, a trend attributed especially to expansions in health and other safety net programs. By 2015, a typical worker will keep only half of the value created by employment, compared with 60 percent kept before the recession."

Can somebody please check these numbers please? What does he mean "a typical worker will keep only half of the value created by employment"? That 50% of someone's paycheck goes to taxes? And yes, the tax on capital gains --- which should be taxed as regular wages --- went up from a measly 15% to 23.8% to include a 3.8% surtax for the expansion of Medicaid in Obamacare. And the temporary payroll tax cuts for FICA taxes on working Americans (who earn regular wages) weren't extended again. But then again, nothing was ever mentioned about eliminating the cap for Social Security taxes...for which capital gains are completely exempt!

  • Read "Taxes: How Congress Lets the Rich Pay Less" -- Congress benefits from the lower capital gains tax rate, because half are millionaires and most own stock. And Congress also benefits from the cap on Social Security taxes (taxed up to $113,700 of their $174,000 congressional salary). So why would they want a more fair and progressive tax code? Self-interest.

New York Times: After the Jobs Disappear by JULIET B. SCHOR (a professor of sociology at Boston College) --- Take a horrific peek at the dismal future awaiting those who expect to earn a livelihood in the near future. This is what's forecast in this New York Times. It reminded me of a time in earlier human existence where hunter-gatherers traded and bartered goods and services with their counter-parts, such as nomadic herders.

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