Larry Kotlikoff’s Commentaries
Most people are really bad at personal, financial planning. Among the mistakes: they save too little or they save too much; they buy the wrong amount of life insurance; they leave great sums of Social Security benefits on the table; they pay more in taxes than they should, etc.
Imagine you’re a small business owner at the outset of Covid and learn that you can keep your workers employed and stay in business thanks to the Payroll Protection Plan enacted by Congress. Further imagine your bank is the Bank of America…. Some ten months later, when everyone else is receiving forgiveness on their PPP loans, you start contacting the Bank of America for confirmation that your loan has been forgiven. What you get is months of stonewalling ultimately followed by a declaration that your PPP loan never qualified for forgiveness.
The Social Security Trustees have released their annual report on the system’s finances. The news is awful. Social Security’s unfunded liability is an enormous $59.8 trillion. That’s over 2.5 times the size of the U.S. economy. Even more disturbing is the change since last year’s report. The system’s unfunded liability grew by $6.8 trillion. In other words, while Congress has been arguing over whether we can afford $3.5T in new spending, the debt we are leaving to our children grew by almost twice that amount without Congress lifting a finger.
But unlike the change in official debt, Social Security’s deficits are carefully kept off the books — for political, not economic reasons. Consequently, not a single media outlet we know of has reported these numbers
Victory over COVID-19 doesn’t mean eliminating it. That’s impossible given its global spread and mutation. Victory means suppressing it in the same way we have suppressed measles.
Larry Kotlikoff says the FDA is foot dragging on approving vaccines for children, without any defensible reason. FDA-sanctioned adult vaccine trials began in March 2020. Given the crisis, safer and riskier adult-trial phases were run in parallel, with adolescent trials soon thereafter. But the FDA pushed a conservative approach for children, ostensibly to protect them. So pediatric trials were delayed until March 2021 — a full year beyond the start of adult trials. This delay has threatened every American child with long-term morbidity and even mortality.
Reasonable customer service is part and parcel of what one is purchasing from our increasingly small number of mammoth retail companies. But Laurence Kotlikoff writes, “Every so often I focus on what seems, from personal experience, to represent “customer support” bordering on consumer fraud.” Examples: AJ Madison, Anthropologie, and Apple.
At the very time leftist politicians are proposing to finance their programs with mammoth deficit spending, leftist economists are giving them cover with the argument the country may never have to pay off the debt.
But Goodman Institute Senior Fellow and Boston University Economist, Professor Laurence Kotlikoff and his colleagues challenge this conclusion in two papers posted at the highly prestigious National Bureau of Economic Research Working Paper site. Deficits used to finance current consumption “are like Ponzi schemes,” they say.”
Lifetime spending inequity is one-third of wealth inequality. The main reason: government taxes and transfers, which make the system far more “progressive than we are led to believe. In 2018, for example, the top 1 percent of taxpayers paid 40.1 percent of all federal income taxes. The top 10 percent paid 71.4 percent. The bottom half of the country paid less than 3 percent of all federal income taxes.
John Goodman was the first person to note that health plans would respond to Obamacare incentives by imposing high deductibles (three times what is normal for employer plans) and narrow networks (as bad or worse than under Medicaid). Along with Boston University economist Laurence Kotlikoff, he has now proposed simple, straightforward reforms to both problems in an editorial published in the Hill.
Right now, the interest rate adjusted for inflation on government securities is negative. Today’s yields on TIPS (Treasury Inflation Protected Securities) are minus 1.81 percent out five years and minus 0.21 percent out 30 years. But Series I Saving Bonds issued by the US Treasury are offering a real rate of interest of zero fixed for 30 years. You can invest up to $10,000. You don’t receive interest until you cash in the bonds. And you don’t have to ay taxes on inflation-generated returns.