July 18, 2019

Economic Scene: The Payoff in Retiring a Few Years Later

“It’s a disaster, but a slow rolling one,” said Jared Bernstein, former chief economic adviser to Vice President Joseph R. Biden Jr.

N. Gregory Mankiw, the former chief economic adviser to President George W. Bush, wouldn’t disagree. “Other than being precisely the opposite of the kind of fiscal changes we need, what’s not to like?” he told me, with more than a touch of irony.

Yet despite the broad criticism, what the impasse between Democrats and Republicans just did to the federal budget is not at all atypical. It follows to the letter the most ironclad rule of American politics, which has held sway for the last three decades: spare the old.

The impasse was portrayed as a doomsday machine that went off unexpectedly — the consequence of an intractable divide in Washington over taxes and spending. It led to the so-called sequester, the product of a longstanding bipartisan reluctance to tinker with the social safety net erected to maintain the living standards of the elderly. Why? Because the old vote at much higher rates than the young.

It’s true that Republicans have offered plans to limit spending on Medicare and Social Security by turning them into voucher-type programs, letting seniors buy their own health insurance with a set amount of money and manage their own pensions. But they never dared pay the political cost of turning these ideas into law even when they controlled Congress and the White House.

Democrats, meanwhile, have been reluctant to put up an all-out fight for the large tax increases needed to pay for the expanding entitlement programs demanded by an aging population, without any cuts. Usually champions of progressivity, they have nonetheless resisted proposals to direct benefits for the elderly more specifically to low and middle income Americans.

This fixation on defending entrenched positions is getting us nowhere. The problem — a growing cohort of retirees, born during the baby boom, now claiming Social Security and Medicare — is only getting bigger.

But what if there were a way for the government to ease the strain that the aging place on the budget while actually increasing their income in retirement, at little or no cost to their benefits? A well-designed reform would even improve the nation’s rate of economic growth. The way to do it is simply to encourage older workers to spend a larger share of their increasing life spans in the work force.

Reform along this line might even garner bipartisan support. But it requires Democrats and Republicans to overcome their fear of disturbing the old.

Spending on Medicare, Social Security’s old age pensions and retirement programs for civilians and military on the federal payroll will hit almost 9 percent of the nation’s total economic output by 2023, according to baseline projections by the Congressional Budget Office. It will consume about 38 percent of the federal government’s entire budget, up from 25 percent four decades ago, according to the Office of Management and Budget.

Meanwhile, the C.B.O. expects the discretionary part of the budget — which includes every program requiring annual appropriations, from the budgets of the Pentagon and the National Academy of Sciences to worker training programs and early childhood education — will shrink to its smallest share of the economy since the Eisenhower administration. Forty years ago discretionary programs, including much of the spending aimed at improving the economy for future generations, consumed more than half of the budget. In 10 years they will consume less than a quarter.

Senior citizens, to be sure, merit protection. Social insurance to keep retirees from dropping out of work and into poverty is as necessary today as when President Franklin Roosevelt signed the Social Security Act in 1935. But an income support system meant for a society where people retired in their late 60s and died in their late 70s is under strain as Americans take to retiring earlier and living well into their 80s and beyond.

Article source: http://www.nytimes.com/2013/03/06/business/the-payoff-in-retiring-a-few-years-later.html?partner=rss&emc=rss

A Long Shot for Geithner as He Begins Beijing Talks

BEIJING — Timothy F. Geithner, the U.S. Treasury secretary, came to Beijing on Tuesday hoping to persuade Chinese leaders to toughen their diplomatic stance toward Iran and soften their opposition to fiscal changes like a stronger renminbi that might help the American economy.

By many accounts, including some from the Chinese themselves, his odds of success are long. But on other issues, led by the need to address Europe’s debt problems, the two sides may find more to agree on.

Mr. Geithner, the point man for the Obama administration’s economic dealings with the Chinese, arrives here as fiscal and trade relations show signs of fraying. The Chinese slapped stiff tariffs last month on imports of American automobiles and opened an investigation in November into American government subsidies to renewable-energy industries.

On the American side, President Obama left China out of a trade pact with east Asian countries, the Trans-Pacific Partnership, that he announced in November. Washington is investigating or formally pursing trade disputes on a range of goods, like solar panels, broiler chickens and steel pipes.

Mr. Geithner’s arrival coincides with a report that Mr. Obama is creating an interagency task force to ferret out unfair trade and business practices by the Chinese.

That report, in The Wall Street Journal on Tuesday, said that Mr. Geithner would brief Chinese officials on the venture during his visit here.

U.S. corporations, involved in industries like telecommunications and financial services, have increasingly complained that China continues to restrict their access to domestic markets, despite pledges of openness when China joined the World Trade Organization a decade ago.

Differences aside, the economic relationship between the two countries has become so broad that Mr. Geithner and his counterparts are expected to find much to agree on.

In meetings on Tuesday and Wednesday with the vice prime ministers Wang Qishan and Li Keqiang, Vice President Xi Jinping and Prime Minister Wen Jiabao, the two sides are expected to focus on ways to keep Europe’s debt crisis from dragging the global economy back into recession.

At the first meeting Tuesday evening, Mr. Wang alluded to the global role facing the two largest economies in the world, saying the United Sates and China were “having important cooperation in the multilateral and global arena in the areas of economy, finance, trade policies and also G-20 related affairs.”

The visit also offers a chance for a meeting with Mr. Xi, the presumed successor to President Hu Jintao, before Mr. Xi travels to the United States this year.

Yet Mr. Geithner seems unlikely to gain many concessions on the two issues that have been headlined for this visit: the valuation of the renminbi and U.S. efforts to impose new financial sanctions on Iran’s nuclear program.

The United States has long complained that China keeps the renminbi artificially low to give its products a price advantage in foreign trade. Under constant U.S. pressure, China has allowed a slow appreciation of its currency against the dollar this year — in unadjusted terms, a gain of nearly 4.8 percent against the dollar in the last year, according to the Bank of China.

But some U.S. economists say the renminbi would appreciate another 10 percent to 20 percent were the market allowed to set its value. The Obama administration said in a report in December that China’s currency remained “substantially undervalued,” although it declined to take the sensitive step of branding China a currency manipulator.

Mr. Geithner is sure to raise the issue of the renminbi this week. But he is unlikely to get a sympathetic hearing given the uncertainty surrounding China’s own economic prospects, said Li Xiangyang, the vice director of the Institute of World Economics and Politics at the state-run Chinese Academy of Social Sciences.

“Other currencies are dropping against the U.S. dollar right now,” he said in an interview.

He added: “The United States has no right to ask China to appreciate its currency when the global trade is declining, and China’s economy itself is facing the risk of decline.”

Mr. Geithner faces an equally hard task on the Iranian issue. His Beijing visit comes four days after President Obama signed legislation that would deny foreign financial companies that buy Iranian oil access to the U.S. financial system. Those sanctions aim to increase pressure on Iran to curtail what many say is an effort to build nuclear weapons.

The European Union is moving toward a ban on purchases of Iranian oil, and Japan and South Korea, two of Iran’s major customers, have indicated muted support for the Washington initiative. Mr. Geithner will seek to enlist China’s help as well.

But on Monday, a senior Beijing diplomat seemed to suggest that that idea had no chance of succeeding. The diplomat, the vice foreign minister, Cui Tiankai, repeated China’s argument that differences over Iran’s nuclear intentions “cannot be resolved by sanctions alone,” but require more negotiations.

Mr. Cui dismissed the notion that China should try to sway Tehran by reducing or ending its purchases of Iranian oil or natural gas.

“Regular economic and trade relations between China and Iran have nothing to do with the nuclear issue,” he said. “We should not mix issues with different natures.”

China bought more than 11 percent of its oil imports from Iran in the first 11 months of 2011, up from 9.6 percent in the same period in 2010, Chinese customs statistics show. The Chinese also have a thriving business in oil services in Iran, having committed $120 billion to oil and gas projects there as of 2009, according to published reports.

China has historically been reluctant to support economic sanctions not approved by the United Nations. But its increasing isolation on the Iranian nuclear issue could lead the country to take some other measure to meet U.S. requests, like a direct message to Tehran, said François Godement, a senior fellow at the European Council on Foreign Relations.

Mia Li contributed research, and Keith Bradsher contributed reporting from Hong Kong.

Trade surplus shrinks

Exports from China rose 13.4 percent in December, compared with the same month a year ago, while import growth unexpectedly slowed to 11.8 percent because of lower prices and moderating domestic demand, government data released Tuesday showed, Sharon LaFraniere reported from Beijing.

The Chinese trade surplus shrank to $155 billion in 2011, from $183 billion in 2010, as imports picked up and demand for Chinese goods in Europe and elsewhere softened. IHS Global Insight, an economic forecasting firm, said that while still sizable, the surplus was China’s lowest in three years. That could help China fend off pressure from the United States to allow its currency to appreciate faster.

Analysts with IHS Global Insight called the decline in import growth “worrying” and an indication of rapidly falling domestic demand. “This will be of little help to a flagging global economy,” they said.

But Goldman Sachs noted that trade data was notoriously volatile and attributed much of the slowdown to lower prices, not fewer purchases. Barclays Capital also cited lower commodity prices, saying that domestic demand, while moderating, remained “robust.”

Article source: http://feeds.nytimes.com/click.phdo?i=718b096952a134665af9b09b1081cdf7