The General Economics Thread

"Economists have called twenty of the last three recessions." Let's not get too excited by these alleged predictors.

The ones who really annoy me are the people who seem to want a recession just to prove some kind of point. No thanks, mate. You go stew in your ideology and leave the rest of us alone.

Edited by Fighteer on Apr 26th 2024 at 10:30:23 AM

The US alone accounts for more than a quarter of global GDP? Wow, that's impressive. What's also interesting is that the upward trend started in 2014, during the Obama administration.

Oh, and this headline? "America’s Economy Is No. 1. That Means Trouble."

Talk about accentuating the negative!

Edited by DeMarquis on Apr 27th 2024 at 6:44:51 AM

I care more about paychecks for most people and whether they can make useful things with the money, otherwise, it just feels like someone bragging about their high score, really.

Finished reading Does the Richness of the Few Benefit Us All? by Zygmunt Bauman.

This talk of America's GDP reminds me of that book quoting Steward Lansley:

I think I've been really apathetic about my country's "economic growth" recently kinda because of this kind of reason.

Especially since much of our home country's money is tied to real estate. During the asset bubble of the last few years, I wondered how much people get richer across the board when the media talks about things like golfing and going out to eat expensive sushi are popular.

Henry George was right all along!

A report claims that two of the US' programs, Medicare and Social Security will be insolvent in 11-12 years.

This has me asking about historical cases in which the welfare state fell, the immediate aftermath of those incidents and if they were eventually restored afterwards.

Edited by MorningStar1337 on May 7th 2024 at 11:50:48 AM

Generally what you see in such cases is that the welfare programs get reformed, either with additional funding (often direct from the government), entitlement changes (normally with a time delay to avoid upsetting current recipients) or some combination of the two (such as making your entitlement closely connected to your contribution).

In the event of a total rapid collapse of welfare services? That’s a good way to risk food riots, which can be the harbinger of a revolution. The grain dole in imperial Rome was something that even emperors wouldn’t fuck with to much, it was that risky.

Medicare and Social Security will not "go bankrupt". That's not mathematically possible.

It is a commonly held myth that there is some finite reserve of money to support these programs. In fact, they are paid directly from tax revenue (the Social Security and Medicare taxes on your paycheck), with any surplus held in secure treasury bonds. Should the programs run a deficit, those bonds are sold to cover it. Even if the bonds run out, payroll taxes will continue to fund the programs, albeit not at full amounts.

The US Treasury's 2024 fact sheet contains the following data based on current projections:

• The OASI (core Social Security) trust fund will be able to pay 100% of benefits through 2033 and 79% afterwards.
• The DI (disability insurance) trust fund will be able to pay 100% of benefits through at least 2098. This is the one that pays you if you become disabled prior to retirement age.
• Combined, OASDI can run at 100% through 2035 and 83% afterward.
• The HI (Hospital Insurance) trust fund can run through 2036, paying 89% afterwards.
• The SMI (Supplementary Medical Insurance) trust fund is "adequately financed" because its premiums are automatically adjusted based on costs.

The federal government could of course pay out any shortfalls in these funds through general revenue, although I'm not sure if that's automatic or if Congress needs to do something to make it happen.

So no, we won't "run out" of Social Security and Medicare. Old people counting on it for income security might find themselves taking a haircut after 2033, assuming no action is taken to support the programs, but old people have a lot of free time to vote so I don't think we need to be super worried.

Edited by Fighteer on May 7th 2024 at 3:53:30 PM

@ Morning Star 1337

From the experience of my country, I can give you an approximate of how and why such a thing could happen.

For the welfare state to completely collapse, you need to have an economic crisis like hyperinflation and overspending from the government.

While Fighteer is right that there's no finite reserve of cash, it is also true that a country whose currency is not even worth a damn runs into the issue that the cash it gets can't be used to pay the entire chain of people and objects that allow the service to be provided. Made worse by the fact that investment will decline in countries in which the economy is unstable, creating a sort of death spiral, and any loan given will be at a higher interest due to the risk.

Now, in such a situation, the first priority of the state becomes to survive, which means avoiding bankrupcy, and that means cutting any overspending while also reigning in the currency. We call this the economic shock, and it often leads to prices skyrocketing for a while as the economy readjusts to the true "value" of things as well as privatization all across the board as the state does its best to put the numbers out of the red, akin to a doctor amputating a limb to save their patient.

What happens next though depends on what the state does, the whole reasoning behind economic austerity for instance is to prevent the state from ever reaching that low point again, however, it is also true that by letting people face the market without aid that means that vital services like health will become more expensive overall as the providers have a near rigid demand, and thus can demand whatever price they want for their services. Hence why states try to restart their welfare programs in general to protect their population from being prey to the market.

In the long run, not reactivating welfare programs leads to an untenable situation as the economic disparity will lead to people being locked out of services and, because economic centers are tied to trade or administrative areas, this means an effective centralisation of such services in certain cities. End result, polarization of the population and an increase of crime all across the board, and that's just the beginning.

As you correctly observe, the prerequisite for the sort of collapse that would kill all social programs in a nation is that its currency is unstable and rapidly decreasing in value. This is not something that the United States is likely to suffer from unless the government completely falls apart. So vote blue this November.

In my personal experience, social security and Medicaid have been about to go broke in 10 years for at least forty years.

If something were to happen to social security, it'll be because of conservatives just terminating it outright, I feel reasonably confident about.

As an outsider, I will say that the USA has absolutely all the ability to keep social programs alive and even expand them. All that’s in the way is the lack of political will to sustain and improve them.

As an insider, I also don’t believe that the U.S would find it impossible or just too much to expand social security programs like Medicaid and the such.

It’s, well, I won’t say “just”, but I think an overwhelming factor is a certain political party that has lost anything resembling forethought, empathy, planning, or the concept of normal behavior and dignity that thinks it’s alright to run on and cut down social security. Because. (Well, I think we know the because.)

Around the time when the Republicans were messing up on their ability to walk the walk when it came to destroying Obamacare in 2017, I actually remember a quote from Eisenhower in an article around then: “Should any political party attempt to abolish social security unemployment insurance and eliminate labor laws and farm programs you would not hear of that party again in our political history. There is a tiny splinter group of course that believes you can do these things. Among them are a few other Texas oil millionaires and an occasional politician or business man from other areas. Their number is negligible and they are stupid.”

Republicans have been trying to get rid of Social Security and Medicare since they were created. Eliminating social insurance programs is one of the keystones of the party's ideology. It's inconvenient that a lot of its constituents depend on those programs and the resulting cognitive dissonance is fundamental to the party's intellectual decline; one might reasonably see it as the original sin.

• Republican leadership depends on the wealthy for the party's primary financial support.
• The wealthy want lower taxes and to eliminate social insurance.
• Republicans need low-income and low-education voters to win elections, who overwhelmingly benefit from social insurance.
• Hence, they have to create a fantasy platform based on grievance politics.
• Eventually, the true believers start to drive out the grifters who maintained a facade of intellectual conservatism.

Bearing in mind that this is not the US Politics thread, this is why the GOP wants to eliminate its own constituents' benefits and has been building a support base for this since the mid-20th century. It would be economically disastrous, but they don't care.

Edited by Fighteer on May 8th 2024 at 11:31:27 AM