Will the fed action create jobs?

Big news today: the Federal Reserve is buying some $40 billion in mortgage backed securities a month to stimulate the economy.

From the Associated Press story:


The Fed said it will spend $40 billion a month to buy mortgage bonds for as long as it deems necessary to make home buying more affordable. It plans to keep short-term interest rates at record lows through mid-2015 — six months longer than previously planned. And it's ready to try other stimulative measures if hiring doesn't pick up.

"The idea is to quicken the recovery," Chairman Ben Bernanke said at a news conference. But Bernanke made clear that he thinks the economy will need the Fed's help even after the recovery strengthens.

The good news is that this activity will likely keep home mortgage rates at their historic low, keep interest rates on other things low and hopefully bolster the stock market, which is back to its pre-2008 recession highs but still off its all time high of 14,000 by about 700 points.

If interest rates are low, it's easier to buy a home, which we know is key to household formation of consumer units (families) who spend a bunch of money on things like refrigerators, furniture and other durable goods, demand for which creates a lot of good jobs.

Fed Chairman Ben Bernanke said part of the aim is to boost the stock market because people feel richer, more likely to spend. And I suppose that is partly true for SOME of the people.

But I was thinking of the Fed action while reading another story on why lots of baby boomers have put off retirement: their retirement earnings have been hammered by stock market but also low interest rates.

So they remain in the workforce.

Here's a telling fact from a good story in the Kansas City Star:


"In 1991, just one in 10 workers told the Employee Benefit Research Institute that they planned to wait to retire until they were older than 65. By 2007, three in 10 said that.
This year? More than four in 10."

And another:

"The number of older workers has grown more rapidly than any other age group in the last few years. This year, 18.6 percent of those 65 and older were participating in the labor force, compared with 13 percent in 2002."

And when you think of our main economic problem right now - too many people are unemployed - you can see how this is impacting those job numbers.

If seniors stay working past 65, we don't have the normal fill in from younger workers. The jobs from retirees are no longer opening up at the rate they once did.

This is helping in part to create higher unemployment and for a longer period of time.

The bigger question then is: Will any jobs program short of getting those 65 year olds to retire going to work?

We'd be better to work on incentives to get them to retire. Maybe a one-time exemption from taxes that go with lump sum withdrawals of retirement money. Maybe make medicare eligibility at 62 instead of 65.

Our job problem may be more related to demographics than structural issues in the private sector.

Read more here: http://www.kansascity.com/2012/08/18/3768575/for-many-boomers-retirement-age.html#storylink=cpy

Read more here: http://www.kansascity.com/2012/08/18/3768575/for-many-boomers-retirement-age.html#storylink=cpy

Voter ID: two views of fraud

A presentation by the League of Women Voters St. Peter Chapter on problems with Minnesota's Voter ID amendment drew cheers from the downtown Kiwanis Club at its Monday meeting.

Mostly because of the argument that there is very little voter impersonation fraud that has ever been uncovered and the amendment therefore is an unnecessary infringement on voting rights.

North Mankato City Council candidate and budget watchdog Kim Spears brings this story to my attention: "Maryland democratic congressional candidate drops out of race after allegations she voted in two states."
Officials of the Maryland Democratic party asked candidate Wendy Rosen to withdraw from the race after they investigated themselves the allegations of voting fraud and were confident they were true.

So we find ourselves with two points of view on the idea of the Voter ID amendment.

The St. Peter LWV outlined in a leaflet that it opposes the Photo ID/Elections Amendment.

Spokeswomen Lynn Solo and Helen Baumgartner made the case, and they emphasized their presentation was intended to be factual not political.

They lay out in a kind of flow chart the amendment language, then the language in the statute and then raise questions about the questions left unanswered by the language.

Essentially, the league's position is that the change in voting laws sought by the amendment will be "extreme and unnecessary changes" that it will "create hurdles" to voting for absentee and military voters, that it will be "harder for seniors  to vote," and end "election day registration as we know it."

They say it's another "unfunded government mandate" and will create a new system of provisional balloting that increases property taxes and other vital services as a result will be cut.

Spears says the Maryland case is "an interesting situation bearing on the upcoming ballot initiative."

Certainly, the Maryland case will be a high profile kind of media-attention getting case that will focus on the issue of voter fraud and impersonation, though the Washington Post said it was unclear if state Voter ID laws would prevent this kind of multi-state voter fraud.

I also don't consider the Downtown Kiwanis Club a bastion of liberalism, so the applause for the LWV was a bit surprising.

The Free Press has written two editorials on the Voter ID amendment, basically arguing there are a lot of questions and how they are answered could very well cost taxpayers more money to solve a problem that may not be as big as we think.

It all comes down to how one wants to solve problems in an imperfect voting system. Budget hawks should of course be willing to apply a strict cost/benefit analysis, the cost being the expenses associated with photo IDs and the benefits being the prevention of fraud. But there also may be a cost in preventing legitimate people from voting.

I will say this: If the amendment passes and it becomes law eventually, there will be plenty of stories on how legitimate citizens were denied their right to vote through some government snafu.

Those stories will be rampant because almost every news organization in the country is going to find one or two cases - easily - with the way this will be set up.

Medicare costs need to be controlled

Both Obama and Romney campaigns don't want to tell seniors the ugly truth: Medicare costs have to be reined in. They're not sustainable. And we either need to cut benefits or raise taxes to pay for it or change pretty significantly the way Medicare services are delivered.

We might have to do a little of each.

There's a great explanation on the claims of each campaign and how they're deceptive on Medicare at FactCheck.org. They also give great background on the history of Medicare.

It's not surprising that Congress and the president have raised Medicare payroll taxes several times over the years to help keep the health care benefits flowing to in important voting constituency.

But after reading it, you can't come to any other conclusion that we either need to rein in benefits or raise taxes to pay for care that's costly and inefficient and will eventually consume a greater share of GDP.

But the good news is we know how to cut Medicare costs. We only have to have the courage to do it.

Obama's plan was to reduce payments to health care providers and make them share the pain of cost reductions. Critics argue it might not be enough, and some providers might stop taking Medicare patients. He also planned to cut subsidies to private insurance plans offering Medicare.

Romney and Ryan want to allow more private insurance into serving Medicare patients as well as leaving traditional Medicare in place, figuring competition will drive down costs. But that only works if we have a lot of medical providers competing. And more and more, the health care market is consolidating and getting fewer competitors. Some worry that the private insurers will pick the healthiest seniors and leave the really sick ones for the government to serve through traditional Medicare.

Seniors today and those of the near future, Baby Boomers, have to get realistic about all of this and realize they are not going to be able to go to the doctor for every little ailment and have the government mostly pay for it.

They're going to have to go to a more managed care system, where they learn prevention, where they learn they can see a nurse instead of a doctor.

This is not Medicare as we know it. It has to change.