Economic Myths from the Political Campaign

              I avoid about 99.5% of the blather that comes out of Fox and MSNBC, and I managed to miss about 95% of the Republican presidential debates. But even tuning in for a few minutes here and there, I've heard my share of political punditry, social commentary and economic posturing -- not to mention the opinionated reports one gets from newspapers and magazines. (By the way, I recommend The Week magazine. It's succinct, reasonably thorough, and not larded with too much political bias.)

           People promulgate their points of view and often try to present them as facts. Even when someone says, "But the fact of the matter is ..." usually what follows is just an opinion or unexamined assumption. Here are some of the things I've heard recently, repeated over and over -- things that are just not true, or (at least in my opinion) mostly not true.

Rich people create jobs. This is a favorite canard of certain politicians, but it’s not really true – unless you count the hiring of a few English butlers and undocumented gardeners. The people who really create jobs are middle-class consumers.

          Investors and entrepreneurs do create small companies. But most small companies are funded by family funds, not rich people's money. Think of Apple or Microsoft. They were started by college dropouts, not wealthy hedge funds. Or think of a local store or restaurant, or even a franchise. The capital to start these businesses typically comes from the person's family, supplemented by a bank loan or a credit-card loan, not a wealthy benefactor.

But aside from how a new company is funded, what a new company needs more than anything is customers to buy its products. The largest portion of customers, by far, is the middle class, which spends most of what it earns, as opposed to the superrich who save a lot of their money and store it in banks and non-productive assets like art or real estate. A lot of poor people create successful businesses if they have the customers. A rich person with no customers -- that's the DeLorean. 

Social Security is dead. Social Security has started paying out more than it takes in from the payroll tax -- especially now that the employee portion of the tax has been lowered from 6.2 percent to 4.2 percent. But according to latest reports, Social Security will be able to pay all of its obligations for the next 26 years. After 2037, it will still be able to pay 78 percent of promised benefits – and that’s assuming no change to the system. Congress has more than two decades to make adjustments that will keep the system whole, such as raising the retirement age, increasing the salary cap on the payroll tax, or changing inflation adjustments.

But let's not get complacent. Some people shout and scream that Social Security should never be touched because it does not add to the budget deficit. Actually, Social Security never did add to the federal deficit ... until recently. Now it does pay out more than it takes in from the payroll tax, so it's cashing out some of the surplus that it's been paying over to the federal budget for the past 75 years. But the real problem lies in the future, when beneficiaries overwhelm workers and, if things don't change, Social Security, along with Medicare, will add mightily to the federal deficit.

Another rallying cry you hear: "You can't cut my benefits, because I paid for them!" I sympathize with this point of view, but it's not entirely accurate. Sure, we all paid in for many years. But our payments went to our parents, not to any "lockbox." Now we're relying on our younger siblings and children to pay our benefits -- and there aren't as many of them. We are also living longer, and on average receiving more payments than our parents and grandparents ever did. Most beneficiaries get more out of Social Security than they ever put in, and the way to maximize your benefits is not to argue for a bigger check -- that's a hard sell in this economic environment -- but to take care of yourself and live a long time.

College is too expensive. Tuition has climbed over $50,000 a year at many private universities, leaving students deeply in debt. But, on average, college still pays off. Just consider the current unemployment rates as tallied by the Bureau of Labor Statistics:  Less than high-school education: 14.9%; high school education: 10.3%; college degree: 5.4%; professional degree: 2.4%.

Plus, on average people who pay top-dollar at the most-expensive universities also earn more money. One survey of Ivy League students graduating in the 1970s and ‘80s found that people from these high-priced schools earned 15 to 40 percent more than their counterparts from less competitive, and less expensive, schools.

But it's important to remember that not all graduates of prestigious colleges earn more than students from state universities or community colleges. A lot of a person’s earning power depends not on the size of his or her college tuition, but on the choice of major. Students majoring in engineering, business and management are the top earners. Those majoring in education, religious studies and fine arts earn a lot less. College is only “too expensive” if you go to an exclusive private school and major in a subject with little economic value.

Saving the environment costs jobs. Research says that environmental regulations make production more expensive, thus reducing demand and costing jobs. This is true, as far as it goes. However, studies have also shown that environmental technology creates even more jobs, ranging from blue-collar construction jobs to high-paying scientific research jobs.

          One 2009 study concluded that solutions to climate change – investing in renewable energy sources, building out high-speed rail, creating a smart-grid infrastructure – could generate over 1 million new jobs in this country. Another study calculated that a $100 billion decrease in oil imports would create 900,000 new jobs. 

The U.S. economy is in permanent decline. Despite recent financial problems, the U. S. still boasts the largest economy in the world, accounting for a quarter of the globe’s economic activity. The U. S. is the largest trading nation, provides the most reliable reserve currency, and is home to more major international corporations than any other country. Even with relatively high unemployment, America attracts the most foreign investment, and its net migration is among the highest in the world. The U. S. also ranks near the top in the global competitiveness index produced by the World Economic Forum.

           For a quick review of the challenges facing the U. S. economy, and how we can thrive in the midst of global competition, check out Thomas Friedman's piece in today's New York Times.

Experts project that China’s economy will catch up to the U. S. by 2020. But not because the U. S. economy isn’t growing. It’s because China is growing faster. With more than four times the population of the U. S., it only makes sense that China will eventually have a bigger economy. But even then, the average American will be a lot richer than the average Chinese.

Sit on the Fence -- or Walk a Fine Line

     First of all, let me admit that I'm as guilty as anyone. I had a desk job for over 30 years, for which the primary qualification was the ability to sit still for eight to ten hours every day, with an occasional break to attend a meeting ... where the main requirement was the necessity to sit still for somewhere between 45 minutes and an hour. In addition, I commuted to work, which for the first few years of my career involved sitting on a train for 45 minutes every morning and evening; then after that, sitting in a car every morning and night.

     "Sitting 6+ hours per day makes you up to 40% likelier to die within 15 years than someone who sits less than 3. Even if you exercise."

     For all my efforts what did I end up with? A 401K plan, an IRA account; a herniated disk in my neck and a case of carpal tunnel syndrome. Last year I had to undergo surgery for carpal tunnel, followed by six weeks of occupational therapy. Now, at night, I wear a flexible brace on my elbow to prevent further nerve damage in my arm. Also, when the disk in my neck acts up, causing back pain and tingling down my arm, I strap on a neck brace when I go to bed to keep my spine straight while I sleep.

     "People with sitting jobs have twice the rate of cardiovascular disease as people with standing jobs."

     Now that I'm retired, what do I do? I sit at my computer for about six  hours a day. However, now I make sure to stand up and take a walk at least once an hour -- in the winter I do six or eight loops around the house, through the kitchen, dining room, living room, around past the laundry and back into the kitchen. In the summer I walk around the yard. (I also walk the golf course, but that's another story.)

     "Those who sit 3 hours or more per day watching TV are 64% more likely to die from heart disease."

     The point is, too much sitting is very bad for you. I know this. We all know this. So last year I joined my local sports club. I now try to head up there as often as I can to ride a stationary bike and "pump iron" on a weight machine. The trouble is, life gets in the way, and I'm not very disciplined. I only get to the health club about once a week, and I know that's not nearly enough.

     "Obese people sit for 2.5 more hours per day than thin people."

     When I had kids at home, we had a dog, and it was my job to walk him every night. That helped some. But I was younger then; it was before I'd developed back problems and nerve problems. After my kids had grown and our dog died, I did not get another pet. But when I met B, she had a dog, and she got me to go with her when she walked her dog in the evening. But she couldn't get me to go with her in the morning. And that's when she walks two or three miles around the neighborhood. B doesn't have any back problems; she doesn't have any nerve problems, because she walks every day, rain or shine, summer and winter.

     Occasional exercise is better than no exercise. But it's walking every day that keeps you in shape, keeps the weight down, and keeps the muscles and ligaments and bones working through your 6th and 7th and 8th decades.

     "The human body simply isn't built to sit for long periods of time."

     I always knew I needed to sit less and walk more. Since discovering this graphic, I've redoubled my efforts. I'm getting better. I don't want to be 40% likelier to die in the next 15 years. But I'm also open to suggestions ... about how people manage to put more walking in their lives, and less sitting around watching TV or typing into the computer.

     For those of you who want to read the fine print of this graphic, step over to "Sitting Is Killing You" on this Medical Billing and Coding website. (For some reason, this is as large as I could get the graphic to reproduce via Blogger.) Go ahead, take the walk. It's good for you.
   

The Myth of the School Budget

     I was going to write about several economic myths that have circulating around lately, largely due to the political season. But then on Friday, B came home from work and she was outraged. "I heard they have to cut $3 million from the school budget," she harrumphed. "That's terrible!"

     "Where did you hear that?" I wondered. We'd been talking about the schools a few days ago, even though our kids are well past high-school age, and we no longer use the schools.

     "They were talking about it at the library," she said.

     "Wow, it's hard to believe," I replied. Not because I don't know that times are tough. It's just that I had written a check for the school tax, only a few days ago, due at the end of January, to the tune of $4,700 -- and that's only half of the annual school tax, the second installment. It seemed like a big check to me, so I'd dug out my files and compared it to last year's bill, which was $4,440. That's an increase of $260, or 5.9 percent.

     Plus, the other thing I'd noticed, last week, was that the parking lot at the town park is full of potholes, while I know that the school parking lot was recently repaved, one of the last steps in a multimillion dollar renovation. The contrast was so great it got me thinking that, in our town at least, the schools are rich, while the town gets along as a poor relation. When I'd gone into town hall to hand in my check, I remarked to the secretary that the town parking lot looked pretty chewed up, that the school tax bill was a lot bigger than the town tax bill, and it seemed to me that the school was rich and the town was poor.

    "Oh, well," she shrugged. "The school gets whatever it wants."

     Later, I saw the local newspaper. It turns out that the school superintendent is proposing a budget increase for next year of 6.77 percent, or $4.6 million. The alternative budget calls for a 2.2 percent increase. If the alternative budget is passed, it would total $3.3 million less than what the superintendent is proposing -- but still $1.3 million higher than this year's budget.

     So the rumored cut of $3 million is a complete myth. The $3 million cut is actually a $1.3 million increase. By the way, the reason the superintendent wants a 6.77 percent increase in this difficult economic time is because he needs the money to fund the pension program and, without it, he says he will have to lay off 25 "fulltime educators." What are fulltime educators? I don't know, but it seems they're not all teachers (as he's trying to suggest). Some are assistant coaches for the sports teams and others are classroom "helpers." It also seems that the majority of teachers would sacrifice 25 of their own -- 25 layoffs -- rather than take a smaller increase in their pensions.

     I don't mean this to be a diatribe against the schools or the teachers. I happen to think that teachers are important, and that we need to invest in the education of our kids. I just don't like administrators threatening the public that if they don't get what they want, then they're going to lay off a bunch of teachers. And I don't like the dishonesty involved in trying to say that a budget increase is somehow a budget decrease.

     I also like to think that I'm a liberal -- or at least, fairly so. And liberals are usually in favor of the schools and the teachers. But I don't know why it's "liberal" to back the interests of a superintendent making $200K a year over the interests of regular people who make a lot less than that -- many of them retired on fixed incomes that are a tiny fraction of $200K.

     This school taxes issue hits home, in part because I pay pretty high school taxes already, and I don't even have any kids in the school system. And while I want to support the local schools, and education in general, it seems that school administrators everywhere exploit the fears of the public, and the innocence of the kids, in order to gobble up more and more money into their system.

     Like I said, I think teachers do an important job and should earn good salaries (although as you can see, I'm not quite so supportive of school administrators). I also know that, around here at least, teachers do get paid pretty well. It's not unusual for a veteran teacher to pull in a salary of over $100K a year plus all the benefits -- and then make more coaching a sports team or teaching summer school.

     And I'm pretty sure it's not just around here. I recently drove through several depressed towns in upstate New York and central Pennsylvania, as well as parts of Virginia and North Carolina, where the houses are kind of shabby and the storefronts run down, but the school buildings are brand new, with nice landscaping and top-notch playing fields. Obviously, these school budgets are big. The school is the nicest building in town. 

      So sometimes I wonder how well all our tax money is put to use ... how effective the schools are in actually teaching kids, how much money is eaten up by administrative costs, and how many resources are spread around for nonacademic purposes.

     If the school system was really putting kids first, maybe the high school should start classes later in the day, because numerous studies have shown that adolescents do not learn as well early in the morning. Maybe school systems could start teaching foreign languages in first grade -- as they do in many other countries -- because many studies have shown that the younger you are the easier it is to learn a language.

     And maybe the highly paid administrators could lengthen the school year, which currently relies on the agrarian school calendar of the 19th century. Maybe with more days in school, our kids could start catching up with the Asians who are outscoring Americans at every turn.

Never, Ever Buy a New Computer

     Okay, I'm exaggerating a bit. But please, do yourself a favor. Don't listen to that guy in the computer store who tells you, "Oh, don't worry, the new one will work just the same as the one you had."

     I collected a virus on my computer the other day, and when I couldn't get rid of it myself, I called my local computer store. I know the people there. I visit them once or twice a year, and I bought a new laptop just last month. (But the truth is, I prefer my desktop.) The guy who owns it is friendly and helpful. He doesn't focus exclusively on the 20-something crowd, and he's happy to spend a little extra time with a customer to explain how things work. And, perhaps most important, he doesn't look down his nose at people like me, who have a little gray hair on their heads (okay, a lot of gray hair) and are not MIT graduates (okay, who had trouble in high school algebra).

     So I tell the computer guy on the phone what's gone wrong, and he instantly knows what it is. But it's not something he can help me with over the phone. I have to bring it in.

     I unplug my computer and, on my way out the door, grab the old receipt from when I bought it. I notice the computer is four years old. Driving over to the store, I wonder, maybe I'd be better off getting a new machine, rather than spending money to fix this old one.

     So I make this suggestion when I get to the store. It will cost between $125 and $150 to fix this four-year-old white elephant, my computer guru tells me. Or I could get a new one -- faster, better, with more more memory, more options, more capabilities -- for just over $600.

     "Okay," I said. "But I don't need anything fancy. I mostly surf the net and use word processing. I don't need anything that will, you know, make the gunfire on my video game look more spectacular, with more realistic blood spurting out from the aliens I slaughter."

     He laughed. "I get it," he said, "something simple."

     "And, honestly, I don't want to have to learn a whole new system, either. I just want to be able to use it."

     "Don't worry. The new one will work just the same as your old one. You won't even know the difference."

     I go home happy, looking forward to an upgraded machine. I go back to the store the next day. "So, is there anything I have to know?" I ask.

     "Nope," he said. "This will work the same as your old computer."

     "What about hooking up the printer?" I ask.

     "It will do it automatically," he replied. "Just go to your 'Start' button and follow the instructions."

     I take home the computer and go to plug it in. The first thing I notice is that there are fewer ports on the back of the computer. There's one cable back there that I can't plug in, because there's no spot for it. But I try out the computer, and it seems to work. Still, I wonder, what's that orphan cable all about?

     I go to the "Start" button to hook up my printer. I can't find the instructions the computer guy told me would be there.

     So I call him up. First, he tells me not to worry about the missing port. That one is for sound -- and I've got the right ones. I guess he's right. The sound coming out of this new computer seems okay. But I'm still slightly unsettled about that cable hanging out there behind my computer desk.

     He then leads me to the right place to hook up the printer -- I'm glad I called because I never would have found it myself.

     We hang up, and I go back to start work. As I said, I mostly do word processing, so I call up one of my files -- and I don't have Microsoft Word, like I did on my old computer. I have something called "Libre." It looks completely different from what I'm used to, and also from what I have on my laptop.

     So I'm back on the phone. "What's this word processing?" I ask. "I use Microsoft Word."

     "Oh, you don't get Microsoft Word. You have to pay extra for the Microsoft Office Suite. This is what we give you instead."

     "How much extra for Word?"

     "It's about $130. But really, Libre works just the same. You won't even know the difference."

     He then leads me through a swift introductory course in Libre -- which, of course, is entirely different from Word. It looks different. The functions are located in different places, It even saves files with a different label. He shows me how I can "trick" Libre into saving something as a Word file. But later, when I try to do it on my own, I can't make it work. I cannot save it as a doc file, or docx file, but only as something that looks like it's part of the Russian alphabet.

     "Arghhhh!"

     Then last night I went to the movies. When I got home I went to check my email. My computer was off. That's funny. I didn't turn it off. Had we lost power for a while?

     I turned it on and checked my email. This morning the computer was off again, and later it shut itself off when I took a break to have breakfast.

     Apparently, this computer -- this computer that will work just the same way as my old computer (despite having a completely different word processing program) -- has an automatic shutoff function. So if you leave the computer to take a bathroom break or get a drink, you have to be quick about it. No more malingering in the kitchen.

     Right now I hate my new computer, and I hate my computer guy. I just hope I get used to it. I'm trying to look on the bright side. Who knows? Maybe the automatic shutoff will mean I'll take fewer, shorter breaks -- and I'll end up improving my productivity!

Hot Topics at the Lunch Table

     I'm one of those older guys -- not really old, but plenty of gray hair -- you see having lunch by himself during the week at the food court at the mall, reading his kindle. Or having a weekday lunch with a couple of other "beached males" at Chilis. Did you ever wonder what three retired guys in their late 50s or early 60s were talking about over at the next table? Don't get your hopes up. Not sex. Not wives. Not children. We don't brag about our children in my group, even though (I like to think) most us probably could.

     One guy has a microbrew beer from the tap. One has a glass of house white wine. One drinks a Diet Coke with a straw. Three guys, about 200 pounds each, taking up a whole table and then some at Chilis. At one point we looked at each other, and wondered if we were a parody of ourselves. But then we thought, what's so wrong about three guys having lunch? So here are the hot topics at our Chilis Roundtable.

     1) One of us, I'll call him Peter, has just come from physical therapy. He's had a pinched nerve, or bulging disk, in his neck, with pain in the shoulder and tingling and numbness down his right arm to his hand. He's asking me about my experience with the same problem -- from which I suffered for five or six years, until I left work, when it miraculously cleared up. Peter complains that the pain is worse when he's sitting at the computer. But what's he gonna do? He has to spend a lot of time at the computer.

     The third guy, who I'll call Joe, chimes in that he has a similar problem -- he really can't lift his right arm above his shoulder, and when he tries to pick up anything heavy with his right hand, he gets a shooting pain in his elbow. He illustrates how he can't pick up a full mug of beer with his right hand, taking a big gulp using his left.

     "John McCain has that same problem," I deadpan, looking at Joe. "Were you a prisoner of war during Vietnam?"

     Joe laughs. I don't know what he was doing during the Vietnam war. Probably still in school. He's a little younger than me, and likely didn't graduate from college until after the draft was abolished in 1973. But anyway, I know he was never anywhere near the army.

     Yes, our number one topic of conversation is our health -- or rather, our medical complaints. We thus prove that older men are no different from older women, who are notorious for going on and on about their medical issues. Our conversation then turns to the drugs we are taking. Joe suffers from diabetes, and, it seems, a whole list of other problems, and both Joe and Peter are on blood thinners for their hearts. Joe reminds us that he had his first heart attack at age 47, almost exactly one year after he quit smoking.

     2)  A pause in the conversation brought a change of subject. Joe is considering buying a gas-powered generator for his house. We had that Halloween snow storm this year, which left a lot of people without power for three or four days. We usually lose power out here in the country, in the northern suburbs of New York, about two or three times a year. A few people in the neighborhood have generators just for that purpose.

     For a lot of people, including Peter, the Halloween storm was the final blow. Peter has ponied up $10K to install a whole-house propane generator that goes on and off automatically when the power is cut. This seems ridiculous to me. But Peter says, "What happens if you're away in the winter, and the electricity goes off for three or four days, and the temperatures are in the 20s? Your pipes freeze, and you could cause $100K worth of damage."

     Peter has lived in his house for about 20 years. That problem hasn't happened yet. And he doesn't even do that much traveling. But, apparently, he's a belt-and-suspenders man.

     Joe doesn't want to do anything that spectacular, and doesn't want to spend that much money. He's shopping for an 8000-watt gas-powered generator. But he wants the one with an electric starter (rather than the pull cord) so his wife or daughter would be able to turn it on if he's not around. This will set him back "only" around $3500.

     B and I have talked about the possibility of getting a generator. But I'm not much of a "technical" guy. If the power goes off, I'm happy to spend a night in the dark, and if it goes on for any longer than that, spring for an overpriced hotel room. As for B, she says, "My grandmother didn't have any electricity at all in her house. I think we can handle a couple of days, if it comes to it."

     That B. She's a tough one.

     3) The generator talk exhausted, our conversation turns to a more pleasant subject. Where are you going this winter? I'm headed to Arizona and Southern California. My two friends want to know some of the details, and Joe offers a little advice from when he was there a few years ago.

     Joe is talking about making a trip to Florida. We have a friend who bought a place near Ft. Myers last year. He's already left for three months in the sun, and he's invited us all down for a visit. Joe's wife is still working. She's got a trip planned to Florida for business. He's thinking of going down with her; then sending her home and taking an extra few days to play golf with our friend.

     Peter is thinking about a trip to the Dominican Republic. I tease him: Isn't there a lot of crime in the Dominican Republic? Don't the locals resent the tourists and pull hold-ups? But Peter doesn't take the bait. He only worries about his pipes freezing, not getting robbed on vacation. He and his wife went there a few years ago and had a great time. He wants to go back, probably sometime in March.

     So what do you think? We've caught up on one another's lives. Health. Generators. Vacation. We'll reconvene in late March or early April, to make plans for golf season.