Larry Kotlikoff’s Commentaries
In addition to the federal income tax and all its special provisions, there are 42 separate state income tax systems. Then there are more than 30 different federal entitlement programs (most of which are state specific), including Medicaid, Obamacare, TAFDC, SNAP, Housing Assistance, Child Care Assistance, and Energy Assistance, etc. Here’s the bottom line from Prof. Kotlikoff: the average household in this country can expect to keep about 57 cents out of every dollar of earnings. When you earn a dollar, you are only earning a little more than half of that dollar for yourself. The rest of the dollar will go to the government.
South Korea, Taiwan, Beijing and Hong Kong have weathered the coronavirus far better than other countries. On a per capita basis, these countries and cities had more than 100 times as many Wuhan visitors as New York City or Milan. But they’ve each done an outstanding job of controlling the virus. So, what has really worked in these five places as well as in China, which has put a tight lid on COVID-19? The answer is in plain sight from pictures of daily life in the five success stories: People wear masks. And they do so with complete discipline.
The solution is PCR group-household testing of all American households every week. Doing so will require running only 6 million tests per week, which is eminently and imminently feasible. Group testing is used routinely to test blood donations. It’s also been used in PCR testing of animals. Its sensitivity to Covid-19 has been clearly established by Israeli scientists. Testing all American households every week won’t just save the economy, which is literally at death’s door. It will save tens of thousands of lives.
A strategy for extinguishing the novel coronavirus has been outlined by Cornell University’s Operations Research Professor Peter Frazier and colleagues. They developed a group testing protocol that could release 96 percent of the U.S. population back to society within four weeks, with this percentage rising even higher thereafter. Frazier envisions initially testing 62 households at a time, and assumes, to be conservative, a very high (30 percent false negative) test rate that would require some degree of redundancy to work efficiently. All told, though, the job could be done for the entire United States with only 6 million tests per week. That’s a large number, but just three to four times the test rate we’ve already reached.
Here is the most important: Cut Your Spending and Tap Your Retirement Account Assets. Suppose you expect to be furloughed or laid off for the next two years. Using Prof. Laurence Kotlikoff’s one-of-its-kind life time financial planning software, you can adjust your annual spending downward by an appropriate amount and make two withdrawals from your IRA to tide you over. The CARES act lets you do this without penalty.
The effect of the coronavirus pandemic on our sense of economic confidence will have everything to do with how long we are stuck inside, how long we are out of work, and what safety nets fail us in the interim. Even if stay-at-home orders are mostly “over” by this summer, how many of us would risk our lives to frequent restaurants or go shopping?
Bank of America has been giving priority to large corporations who have connections to officials at the Bank who will process their loans in front of the line. Those large corporations are in far better shape to weather this, the Greatest Depression, than virtually all truly small companies for whom the Paycheck Protection Program (PPP) funding and forgiveness represents the difference between economic life and death.
A bird in the hand is worth two in the bush. Paying off your mortgage may not be as glamorous as playing the market. But think of it this way. You’ll never have to make another mortgage payment for the rest of your life. Won’t that feel great!
First, test everybody – the healthy and the sick. The “healthy” may be infected and asymptomatic, yet still spreading the virus. Hence, testing the “healthy” can help us quarantine those who are infected but so far asymptomatic. Second, the “healthy” who test negative can be allowed to return to work, attend school, shop, frequent restaurants, etc. Group testing makes this practical.
Social Security has a policy of calling people close to 70 and making them an “offer” to start their benefits retroactively. Doing so saves Social Security money but hurts the recipients, who lose thousands of dollars of life time benefits. The bribe comes packaged with suggestions that if they die they won’t get their checks, so why not grab six months of benefits for sure.