Too Much Debt, Not Enough Solutions

That’s the title of a recent opinion piece written by Alan Simpson and Maya MacGuineas. Simpson is a former Wyoming senator and was the co-chair of the National Commission on Fiscal Responsibility and Reform (the Simpson-Bowles commission). That commission offered common sense approaches to controlling the national debt in the report it issued in 2010. The commission’s findings were of course ignored by the President and Congress because they couldn’t reach a consensus. Politicians kick the can down the road when someone, such as the commission tells them, “Our fiscal challenges are real. The solutions will be painful, and there is no easy way out.” Those words will never escape the lips of a politician whose primary focus is getting reelected.

The national debt has increased markedly in the past few years, and is approaching $18.5 trillion dollars. The article points out that people have a difficult time conceptualizing a trillion dollars. “If you spend a buck a second, you won’t hit a trillion for 32,500 years. If you spent a million a day since the birth of Christ, you wouldn’t be at a trillion yet.”

The headlines today indicate that our current politicians are not ready to take action on getting the debt under control. The new grand plan that was cobbled together to prevent a government shutdown increases the debt by $80 billion over the next two years. Debt has increased from 34 percent of the GDP in 2007 to 74 percent today. Further increases will only add to the crushing problem we are willing to leave to future generations.

Co-author of the article MacGuineas is president of the Committee for a Responsible Federal Budget and head of Campaign to Fix the Debt. I predict the AARP won’t like anything that the committee or the campaign recommends.

Insurance Costs and Credit Ratings

We recently posted a commentary about how we had learned that accepting offers from retailers for price breaks if we applied for their credits cards was costing us in insurance costs. The September 2015 issue of Consumer Reports has an article about their extensive two year study of insurance costs. One of their conclusions is that, “The way insurers set prices is shrouded in secrecy and rife with inequities.” Their study resulted in study of “…2 billion car insurance price quotes from more than 700 companies with the greatest share of customers in all 33,419 general U.S. ZIP codes.” What they found “…is that behind the rate quotes is a pricing process that judges you less on driving habits and increasingly on socioeconomic factors. These include your credit history, whether you use department store or bank credit cards, and even your TV provider.”

Reading the entire article and our own experience with having higher insurance costs because of taking out more credit cards leads to the conclusion that insurance companies have found a way to artificially increase costs for customers, which of course increases their profits. Insurers “cherry pick” elements in credit reports in a proprietary manner. Some of the results are quite astonishing. The study found that “…single drivers who had merely good scores paid $68 to $526 more per year, on the average, than similar drivers with the best scores, depending on which state they called home.” Credit scores were found to have more impact on rates than driving records. Having a moving violation in Kansas increased rates by $122 per year while having only a good credit rating increased rates by $233. A poor credit rating would add an average of $1,301 a year. Another trick being used is called “price optimization,” which is prohibited in a six states. It uses data about how much of a price increase will trigger you to shop around for a better price.

One suggestion is to shop around, because there is some truth to the ads that say “People who switched to our company saved and average of…” Of course there were people who didn’t switch who aren’t included in that average. California, Hawaii, and Massachusetts prohibit insurers from using credit scores to set prices. Perhaps those of us in the other states should begin a campaign with our insurance commissioners to have our state added to that list. Page 37 of the magazine has a petition you can mail to Consumer’s Union.

GMOs Revisited – Still Look Fine to Me

tomato.svg.medProducts certified by Non GMO Project (by a private entity – proving the government is not the only source of such information) nearly tripled last year, and Whole Foods may require GMOs to be labeled in their stores, while Trader Joe’s and Chipotle have “sworn off”

GMOs, according to But my opinion, expressed in previous posts about GMOs, has not changed. I see opposition to GMOs as increasingly irrational.

While philosophical concerns may appeal to some, fear of health effects seems to be the primary motivation for avoiding GMO foods. I have noticed no one worries about GMOs that manufacture medications.

I still find no compelling scientific evidence that GMOs are more dangerous than conventional foods.

Slate says “it’s true that the issue is complicated. But the deeper you dig, the more fraud you find in the case against GMOs. It’s full of errors, fallacies, misconceptions, misrepresentations, and lies… [Activists] defend drugs, pesticides, and non-GMO crops that are loaded with the same proteins [as the GMOs they condemn].” That’s a pretty strong statement.

The article goes on to discuss a few anti-GMO campaigns in detail, concluding that “the stories of papaya, Bt, and Golden Rice demonstrate, in several ways, that [health] concerns are unfounded.” If you’re worried I encourage you to read the article for yourself.

Slate also discusses pesticide resistance, which is a legitimate concern. Evolution doesn’t care where environmental factors come from, and weeds could become Roundup resistant. Shifting to crops that are naturally herbicide resistant also contributes to the future problem. A wise farmer will look beyond this year’s crop.

Slate also covered the super tomato: “Tomato lovers, rejoice, for science has achieved the impossible: the perfect supermarket tomato. The Garden Gem won’t bruise during shipping, it resists many of the major diseases that regularly decimate tomato crops… the Garden Gem is very different from every other supermarket tomato: flavor. It actually has it. Lots.”

Sounds perfect, doesn’t it? If your own garden tomatoes are suffering from blossom rot, like mine this year, this could be the answer. But the tomato industry (yes, apparently there is such a thing) has said “no” in what Slate calls “incomprehensible dysfunction in the tomato market.” Garden Gem would cost more, and the tomato industry does not believe consumers will pay more because they just won’t believe a supermarket tomato will taste better.

I bet they’d be cheaper than my garden-grown! (Dip into The 64 Dollar Tomato for a story crazier than mine.)

Our previous GMO posts are here.

Too Much Money

US_productivity_and_real_wagesI’m afraid our country has too much money – or, at least, too much money in the wrong places.

America had a wonderful run after World War II when the middle class blossomed, but over the past thirty years or so there has been a gradual redistribution of wealth upwards.

Over the decades, the wealthy and powerful have tweaked the tax code and financial regulations to make it easier for them to make and keep money. When rising workforce productivity does not lead to rising wages, something seems unfair.

This trend has been documented in many places, for example:

“Unequal wealth distribution is hardly a new or uniquely American problem. In fact, it’s been prevalent throughout society since humans first built civilizations: A small minority of aristocrats has always wielded the most power throughout history.

“The [top] 1 percent [executives, doctors, lawyers and politicians, among other professions] are worth about 70 times the worth of the lower classes.

“It’s historically common for a powerful minority to control a majority of finances, but Americans haven’t seen a disparity this wide since before the Great Depression — and it keeps growing.”

Ideally, the wealth at the top would be used to capitalize increased production and an expanding economy, but America today doesn’t need more production. Wealthy people, quite reasonably, want to invest money in a safe place that earns a decent return, which fueled the 2008 recession debacle – the financial industry decided to meet the demand through fraud.

Are we in the same place again?

I fear we will see increases in corporate corruption and more frequent bubbles. If more of this wealth (and the income that precedes it) belonged to the middle and lower classes, they would spend it on products and services which would grow the economy. That would be good for everyone, but I doubt many wealthy Americans (despite Warren Buffet) see their own enlightened self-interest here.

By the way – it may not be just the wealthy driving the problem. If Wall Street can count on a certain amount of money flowing into the stock market through 401k’s every month, but that money is not needed to increase production, will it just feed corruption and bubbles? More money to Wall Street could have negative consequences. This leads me to deep skepticism about, for example, privatizing Social Security Insurance.

The obvious solution many liberals jump to is to tax the wealthy and use that money for services to the rest of the country – to build roads and bridges perhaps, or provide direct subsidies. It would be better, in my opinion, to reverse the many tweaks to our economy that have lead to this imbalance, but that would involve a huge amount of work. With such polarization in our legislatures today, the problem is overwhelming. But returning the middle and lowers classes’ wealth seems imperative to our future.

Social Security’s History and Future

Social Security WorksRecently I reviewed a book because I hated the premise. I read this book because I like the premise. The title says it all (with an exclamation point): Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All. I wanted to see the proof offered by authors Nancy J. Altman and Eric R. Kingson.

With an average of five stars from over three hundred reviews on Amazon, the book has a following. Altman and Kingson aren’t Social Security’s only champions, as this article on shows, there was anger over Obama’s willingness to “give away the store…[and] cut spending on Medicare, Medicaid, and Social Security In exchange for a modest tax hike of $100 billion over 10 years—targeted at the wealthiest Americans… an outrageous deal.”

Some 54 million Americans receive benefits today, with the “average retiree’s checks roughly equal to the gross pay of someone working fulltime at the federal minimum wage.”

The authors seek to debunk “a three-decade-long, well-financed campaign [that] has sought to dismantle Social Security… [and been] successful in undermining confidence… The mainstream media has aided and abetted the campaign by uncritically accepting and advancing a panoply of misconceptions, while largely ignoring the facts.”

I must admit to being swayed by the anti-Social Security campaign. Since I started my career, I have assumed I would never receive any Social Security and used to joke that my tax went to my own grandmother. Yet, here I am, nearly forty years later, and Social Security looks secure for the next 20 years (assuming Congress doesn’t damage it.)

From the beginning, many opponents called Social Security socialism. “These same opponents rarely, however, express disgust with, or seek to privatize, America’s socialized police, fire, and prosecution services or our socialized system of roads, canals, and national parks, not to mention our socialized military.”

I found it interesting to read that President Eisenhower thought the opposite. In a message to Congress, he called Social Security “a reflection of the American heritage of sturdy self-reliance which has made our country strong and kept it free.” Continue reading

Enlightened Self-Interest and Climate Change

earth climate changeThe Earth’s climates are changing. I’m an American. I’m currently “winning” in terms of climate, so change is likely to be bad for me. Efforts to mitigate the impacts will be important to me and to posterity. We can also reduce our ongoing contributions to the problem.

Huge international summits produce more media stories than useful action. The world carries too much political baggage from the age of European colonization and – especially for America – the Cold War. At climate conferences, westernized nations see attempts at revenge and emerging economies see ongoing imperialism. Talking is better than shooting, but we need many answers, tailored to specific problems or locations.

I prefer enlightened self-interest, so I was pleased to read that “plenty of entrepreneurs are not waiting for the diplomats. They are finding ways to cut carbon emissions and make money from doing it.” While some “carbon offsets” seem phony – a tree planted today can be cut down tomorrow – I like the idea of reducing greenhouse gases at the source.

“Methane is… a potent greenhouse gas that warms the atmosphere – cow manure is ripe with it – but [on an Oregon dairy farm], the methane is captured and funneled into a red generator the size of a mini-bus. The generator burns it to make electricity. That electricity is sold back to the local power company. The farmers get paid.” To reject this idea and say we should get rid of the cows is to miss an opportunity.

But the manure to methane project has another source of income. “FarmPower makes additional money just for taking that methane out of circulation. For every ton of that methane they capture they earn a credit worth about five to $10. FarmPower then sells those credits to anyone who has to lower their own carbon emissions, say, a coal-fired power plant.”

America has used the “cap and trade” technique for many years, for example, to reduce sulfur-related smog. In the late 1970s, a refinery I worked for paved dirt roads around its plant to reduce dust generated by vehicles and thereby allow the refinery to put dust out its stack. (Don’t laugh at dust. Inhaled dust particles are directly linked to health problems.) Continue reading