Sorry, Kids. We Ate It All.(nytimes.com)
nytimes.com
Sorry, Kids. We Ate It All.
http://www.nytimes.com/2013/10/16/opinion/friedman-sorry-kids-we-ate-it-all.html
6 comments
I still think we will muddle through it. Things that aren't sustainable don't continue. People will start charging more to lend to the US. Systems will feel stress. Health care will be rationed because there is no other way. Everyone will work longer because there is no other option. We may need to inflate some if our wealth away to lighten the debt load.
The wake up will be someone else's system collapsing first (Japan? France?) which will cause global economic stress. After the flight to US dollars, our borrowers will force us to get our act in gear.
The wake up will be someone else's system collapsing first (Japan? France?) which will cause global economic stress. After the flight to US dollars, our borrowers will force us to get our act in gear.
My bet's on Japan.
I love Japan as a country so I hope you are wrong. The demographics suggest you are right. The powerful interest groups that Friedman mentioned also exist there too.
Two differences with Japan: First, their debt is domestically held so they can avoid bond vigilantes. Second, as a country and culture they have been able to come together and solve great problems when they get consensus. (They just haven't had that consensus in decades)
Two differences with Japan: First, their debt is domestically held so they can avoid bond vigilantes. Second, as a country and culture they have been able to come together and solve great problems when they get consensus. (They just haven't had that consensus in decades)
Nice how they just stuck in cutting corporate taxes to zero. Sadly job creators are mostly small companies withy tiny tax burdens highly profitable companies tend to grow little because there extracting profit vs increasing the number of jobs in search of future growth.
Do you have any evidence to support this? The data that I can find point to a more subtle conclusion that does not fit this oft-repeated statement (myth?).
"We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age there is no systematic relationship between firm size and growth."
http://econweb.umd.edu/~haltiwan/size_age_paper_R&R_Aug_16_2...
EDIT:
I should say that it's not that small businesses don't create jobs, it's just a particular type of small business (young ones) that create most of them.
Additional discussion - http://www.richmondfed.org/publications/research/econ_focus/...
"We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age there is no systematic relationship between firm size and growth."
http://econweb.umd.edu/~haltiwan/size_age_paper_R&R_Aug_16_2...
EDIT:
I should say that it's not that small businesses don't create jobs, it's just a particular type of small business (young ones) that create most of them.
Additional discussion - http://www.richmondfed.org/publications/research/econ_focus/...
Your missing the point it's not a question of size it's a question of profitability.
There is a popular idea that reducing taxes on profits would spurn significant job growth. However doing so in no way changes the math on how many job's maximize profits. Further, profitable company's that higher people temporarily reduce there profitability which directly reduces their tax burden and has the same effect cheaply and automatically. Also, profitable company's can borrow money to assist growth so if you look at things from an accounting perspective removing all taxes on profits has a tiny impact on how fast a company can grow.
Note, there are ways to change the tax structure to actually promote job growth in the short term. Such as a reduction in payroll taxes for company's that employ more people now than they did at any time in the last 5 years. However, none of them change the long term math on what the ideal number of employees for a stable company is.
There is a popular idea that reducing taxes on profits would spurn significant job growth. However doing so in no way changes the math on how many job's maximize profits. Further, profitable company's that higher people temporarily reduce there profitability which directly reduces their tax burden and has the same effect cheaply and automatically. Also, profitable company's can borrow money to assist growth so if you look at things from an accounting perspective removing all taxes on profits has a tiny impact on how fast a company can grow.
Note, there are ways to change the tax structure to actually promote job growth in the short term. Such as a reduction in payroll taxes for company's that employ more people now than they did at any time in the last 5 years. However, none of them change the long term math on what the ideal number of employees for a stable company is.
The implication (point?) of the research is that older companies (regardless of size) create fewer jobs relative to younger companies.
I would disagree with the statement that reducing taxes on profits has absolutely no impact on overall job growth. Furthermore, a reasonable conclusion would be that reducing taxes on young (and almost by definition, small) companies independent of profitability would have a greater beneficial impact on job growth than reducing taxes on highly profitable and older firms (large or small).
Based on the research, maybe the best course of action for job growth would be to reduce all taxes (profitability and payroll) for young companies regardless of size and profitability rather than an indiscriminate scheme that reduces payroll taxes based on time constraints (such as 5 years of expanding employees) for all firms large and small.
I would disagree with the statement that reducing taxes on profits has absolutely no impact on overall job growth. Furthermore, a reasonable conclusion would be that reducing taxes on young (and almost by definition, small) companies independent of profitability would have a greater beneficial impact on job growth than reducing taxes on highly profitable and older firms (large or small).
Based on the research, maybe the best course of action for job growth would be to reduce all taxes (profitability and payroll) for young companies regardless of size and profitability rather than an indiscriminate scheme that reduces payroll taxes based on time constraints (such as 5 years of expanding employees) for all firms large and small.
Exactly, in fact some would argue that corporate tax rates are positively correlated with growth. This study shows that in effect, if any correlation exists, it's marginal:
http://www.epi.org/publication/ib364-corporate-tax-rates-and...
http://www.epi.org/publication/ib364-corporate-tax-rates-and...
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Whenever Druckenmiller (a friend) is challenged by seniors, who also come to his talks, that he is trying to start an intergenerational war, he has a standard reply: “No, that war already happened, and the kids lost. We’re just trying to recover some scraps for them.”
Are there still any scraps? I thought you ate it all!?
Are there still any scraps? I thought you ate it all!?
But unfortunately SS only worked when more people were joining the workforce than were leaving. Also, the life expectancy was not as great. SS is an inter-generational transfer of wealth, decided by our parent's parents but paid for by the children of each generation.
I keep wondering: if we applied 50% of the effort we applied to stopping SOPA, what would the world look like?
Assuming "we" is the young, tech-focused, urban demographic of hn: At least from my anecdotal experience, that demographic did apply an awful lot of effort in 2008 to get the President they wanted, a supermajority in the Senate they wanted, and a House majority they wanted. Did anyone think that a Washington that looked like that would have any incentive at all to modernize (sorry, "privatize"!) Social Security?
(2012) New Study: No Evidence That High-End Tax Cuts Help the Economy: http://www.offthechartsblog.org/new-study-no-evidence-that-h...
(2012) Nick Hanauer's (banned) TED talk: "Rich people don't create jobs" http://www.youtube.com/watch?v=CKCvf8E7V1g