Free markets and government subsidies

A fascinating article on how various government subsidies helped the energy sector develop fracking technology can be found here. 

"The free market has worked its magic," the Barnett Shale Energy Education Council, an industry group, claimed over the summer. The boom happened "away from the greedy grasp of Washington," the American Enterprise Institute, a think tank, wrote in an essay this year."

But the government was involved:

the natural gas and petroleum industries altogether accounted for about $2.8 billion in federal energy subsidies in the 2010 fiscal year and about $14.7 billion went to renewable energies, the Department of Energy found. The figures include both direct expenditures and tax credits.  Congress passed a huge tax break in 1980 specifically to encourage unconventional natural gas drilling, noted Alex Trembath, a researcher at the Breakthrough Institute, a California nonprofit that supports new ways of thinking about energy and the environment. Trembath said that the Department of Energy invested about $137 million in gas research over three decades, and that the federal tax credit for drillers amounted to $10 billion between 1980 and 2002.  The work wasn't all industry or all government, but both.

 I think it is fair to say that most Americans dislike subsidies (at least those that benefit someone else.)  We fail to recognize how many benefits we get from government expenditures.

US Census Bureau Provides Comprehensive Data on Taxation

If you go to the link provided below and choose a year, a very well organized and easy to follow summary will come up. The summary breaks up every type of tax the government implements with a clear definition of that type of tax.  The summary also provides information on which states are the highest contributors to that tax and the government’s tax revenue in general.  Since the Census Bureau provides summaries for years 1992-2011, it may be interest to compare two summaries and see what types of taxes increased or decreased in certain states over the years. 

http://www.census.gov/govs/statetax/historical_data.html

I tried to attach actual examples of summaries, but the data would not upload correctly. 

How did political polarization happen?

Perhaps the least-controversial issue in American politics is the idea that we should hand out more work permits to high-skilled foreigners, particularly people with STEM degrees. Not everyone thinks this is a good idea, but the consensus around it is pretty widespread. So why doesn't it happen?Well, roughly because there's no political percentage in writing a bill that passes. Increased immigration of foreign technical experts isn't just widely popular among policy analysts and opinion leaders, it's a key priority for high-tech companies. So legislators have the goal not so much of doing what the tech companies want, as trying to structure the situation so as to align the tech companies with their partisan interests.
 (see link here)

Basically, both parties block work permits for high-skilled immigrants because the blockage feeds into partisan agendas.  Read the blog entry and try to be proud of our American political process. 

The retirement crisis

Baby boomers have not saved enough for retirement.  Last year, ABC news reported that " 9 percent of the 77 million people born between 1946 and 1964 are not strongly convinced they will be able to live in comfort in their later years. Just today, 11,000 more boomers turned 60 years old.Further underscoring the financial squeeze, 44 percent of boomers express little or no faith they will have saved enough money by retirement. One in four said they do not think they will be able to retire – ever" (link)  Data shows that 40% of boomers are not financially prepared for retirement.  About half of those could save more and work longer and thus create their own financial resources for later years.  (see link)

A bill in California would create a private investment fund for workers that would provide annuity income.  The plan is as follows: "Eligible employees would have 3 percent of pay deducted from their paychecks, unless they opted out. The employee contributions would be pooled and conservatively managed by professional investment managers chosen by the state through a bid process. That could include private firms and the California Public Employees’ Retirement System, the big public pension manager. The program would be overseen by a board of public and private sector leaders, appointed by the governor and the Legislature. One of the advantages of the plan is that pooled contributions and professional management would reduce administrative costs and investing mistakes, which would boost returns beyond what most 401(k) investors achieve on their own."  (see link) 

What about Social Security?  These private pensions would augment social security pension benefits.  What is meant by retirement will change in the next couple of decades.  Notice that the Social Security system is not in trouble today.  Unlike the federal government, the fund has a surplus which has been built over the past 3 decades, largely through increased taxes,  to help fund baby boomer retirements.  The surplus isn't big enough to fully fund retirements. (see link). 

As with most public policy questions, there are no easy answers.  Should California lead the way to the creation of yet one more pension plan?  Trillions of retirement-oriented investment dollars have been "lost" since the financial crash of 2008.  Who should make up this loss?  What should happen to the baby boomers?

Pension Crisis Looms Despite Cuts

Across the country, states are cutting the benefit programs of their own public-employees. What does this say about how our larger economic policy is changing? Almost every state bureaucracy agrees that some trimming of benefits or contributory measures is necessary. But why?  (link)

CNBC Debates Fiscal Policy

The video attached below provided by CNBC debates the need to increase taxes.  This video brings up issues we have been discussing in class such as: where taxation matters, how fiscal policy creates growth, how to reduce the deficit, and how to raise revenue.  The debaters are constantly relating the current tax situation to what happened during President Clinton’s time in office.  Things have obviously changed since then, but do you think a similar fiscal policy model can be used today?  Also, since this video was made three months ago, what changes have we seen in fiscal policy since July?

http://www.youtube.com/watch?v=jEg1fJ-TAlE

Ability American Have to Work Out of Inequality

American has always been seen as the land of opportunity.   As American we have been told that if you work hard, you have the ability to succeed. Isn’t this at the core of the American dream?  The paper provide below, published by the Brookings Institution, is challenging this idea.  In comparison to other developed nations, is U.S.'s success system really all that merit based?  In the fight against inequality in America, do those who have been born into poverty really have the ability to change their socioeconomic statues just by working hard?  For those of you who studied abroad, it may be interesting to compare the United States with the place you studied in regards to ability people have to work out of their socioeconomic class.

http://www.brookings.edu/research/papers/2012/09/20-pathways-middle-class-sawhill-winship