Category Archives: generational equity

The Sold Out Future By State Analysis Reprised

About a year ago I published an analysis based on U.S. Census Bureau government finances data, for all states and all available years from 1972 to 2016, that showed the extent to which each state’s future (with New York City and the rest of NY State analyzed separately, and the District of Columbia also included) has been sold out. Sold out by past decisions, non-decisions, deals and favors with regard to state and local government debt, past infrastructure investment, and under funded and/or retroactively increased public employee pensions.  The analysis was well received, and best of all many people downloaded the spreadsheet with all the data for all 50 states, all the tables, and almost all of the charts.  I always put up a post encouraging people to download the spreadsheets, look at the data themselves, and make up their own minds before reading my subsequent posts and getting my take on it. Generally people had downloaded charts, but not spreadsheets.  Last year that changed.

What I had forgotten last year, however, but have since remembered, is the multi-step process needed to put readable tables, in JPEG format, into the posts on WordPress.   So this year I added the tables to the posts I just completed on state and local government employment and payroll data from the 2017 Census of Governments, and I found that many people had downloaded them.  I don’t know why some people might prefer pictures of numbers to actual numbers, but apparently some people do.  So I plan to rectify last year’s omission of tables – except for people who downloaded the spreadsheet — from the Sold Out Futures posts with a brief reprise.   The data shows that while the blame for our sold out future is widely shared, New York City’s past taxpayers are the most the most blameless in the entire United States.  And New York City’s public employee unions and contractors have been the most unfair to other city residents.  And nowhere else is even close.

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A Value Added Tax Would Be Far More Fair Than the Payroll Tax

As I showed in my prior post…

https://larrylittlefield.wordpress.com/2019/07/31/dont-increase-the-federal-payroll-tax-replace-it-with-a-value-added-tax/

The federal payroll tax on the first $132,900 in wage and salary or self- employment income, a tax that has been increased over the decades, is both unjust and economically damaging.  All the groups of people who have become richer over the past four decades, at the expense of making everyone else poorer, have either all or much of their income exempt from it.  Today’s seniors, the richest generations in U.S. history, because their retirement income is exempt from the payroll tax (they also get special exemptions from the federal and state income taxes).  The very wealthy, because investment income is exempt from the payroll tax (divided and interest are also taxed at a lower rate under the federal income tax).  And those who get very rich non-wage benefits, generally unionized public employees – all that income is exempt from both the payroll tax and income taxes.

These groups have used their political power to capture a greater and greater share of total U.S. income, while the work income of ordinary private sector workers has been going down, generation by generation. With Millennials paid 25 percent less than Baby Boomers had been at the same point in their careers.

https://larrylittlefield.wordpress.com/2019/05/25/retirement-benefits-are-to-white-collar-crime-and-generational-inequity-what-handguns-are-to-street-crime/

And yet it is these less well off workers who are forced to carry the burden of Social Security and Medicare for the richer and more entitled generations that preceded them, the soaring cost of public employee pensions and health care, and the huge national debt run up by the multiple rounds for tax cuts for the rich.

So what would I propose to make federal taxes more equitable on a generational basis, and more progressive (with the better off paying more) as well? Replace the regressive, worker-only federal payroll tax with less regressive, everyone pays as they spend their money Value Added Tax (VAT).

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Don’t Increase the Federal Payroll Tax –Replace It With A Value Added Tax

If there is one tax that both Republicans and Democrats love to increase, it is the federal payroll tax, now at 15.3% of your paycheck, theoretically split between employers and employees with the “self-employed” paying both halves.  The biggest tax change in my lifetime took place in the early 1980s, at the start of my career.  With the biggest cut in the progressive income tax in history, followed by the biggest increase in the regressive payroll tax in history, during the Reagan Administration.  The income tax cut has been repeated twice since, to benefit the richest members of the richest generations in history at the expense of loading debt on the less well off generations to follow.  That has been a Republican policy.  But increasing the payroll tax – the base, the rate, or both — is a Democratic go-to as well, to increase or at least maintain Social Security benefits under various Democratic proposals, as noted here…

https://larrylittlefield.wordpress.com/2019/02/17/social-security-the-democrats-join-generation-greeds-theft-of-the-future-from-less-well-off-later-born-generations/

Or to pay for things like family leave, as in the state program in New York or the federal program proposed by New York Senator Gillibrand.

Why increase the payroll tax?  Because the types of people who have gotten richer and richer over the past 40 years, at the expense of those who have gotten poorer and poorer (to the point where their life expectancy is falling), don’t have to pay it, or as much of it.  Only regular workers do.  We are now in the special interest pandering, campaign contribution collecting portion of the 2020 Presidential campaign.  No wonder everyone wants higher payroll taxes – or, as alternative, even more in cuts in federal old age benefits for already-disadvantaged later-born generations only.

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Retirement Benefits Are to White Collar Crime and Generational Inequity What Handguns Are to Street Crime

Red State, Blue State, Democrats, Republicans, anti-tax advocates, public unions, public sector, private sector, federal, state and local and even in Europe.  Retirement and old age benefits are promises about the far off future, allowing any and all to use them as a tool to rip people off and make a getaway before the heist is discovered.  At the state and local government level, all over the U.S., one finds the generations now retired or about to retire promised themselves far more than they had been willing to pay for, leading to crises of various kinds. But always there is the assumption that the older generations that created the problem and benefitted from it can’t participate in sacrifices needed to prevent disaster.

The first response is always the union-friendly choice to drastically cut the pay and benefits of new hires, in order to offset the soaring cost of benefits for those cashing in and moving out.  Screwing the millennials as part of the “screw the newbie, flee to Florida” cycle that goes on and on.  “If you don’t like it, don’t take the job; take some other job that also pays 25 percent less than the Baby Boomers were paid for the same work,” as Federal Reserve Bank of New York research has shown.

https://www.wsj.com/articles/playing-catch-up-in-the-game-of-life-millennials-approach-middle-age-in-crisis-11558290908

But when that isn’t enough, the next proposal is a “pension freeze.” Middle-aged workers, now mostly the last of the Boomers in those in Generation X, get to keep the pension benefits they have earned so far, but are not allowed to accrue any new benefits at the rate they were promised.  They are allowed to contribute to a 401K instead.  “If you don’t like it, quit and take another job for 15 or 20 percent less than most Boomers and members of the Silent Generation were paid, if someone will hire you.”

That’s fair, isn’t it?  No it is not!

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Changes in NYC & U.S. Median Earnings and Income: The Generational War Has Been Going On For Decades

I was surprised to read an article in which the New York Times, of all publications, broke Omerta with regard to generational trends in society.

For Americans under the age of 40, the 21st century has resembled one long recession.  I realize that may sound like an exaggeration, given that the economy has now been growing for almost a decade. But the truth is that younger Americans have not benefited much…This loss of dynamism hurts millennials and the younger Generation Z, even as baby boomers are often doing O.K. Because the layoff rate has declined since 2000, most older workers have been able to hold on to their jobs. For those who are retired, their income — through a combination of Social Security and 401(k)’s — still outpaces inflation on average.

The Times included a couple of charts, which I’ll show below, along with a bunch more of my own.  But two comments on the article are worth noting up front.

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New York City’s Exploding Home Health Care Employment, Etc

The U.S. Bureau of Labor Statistics released re-benchmarked annual average Current Employment Survey data, for 2018 and earlier years, a week ago.  In past years, I’ve used this data source to document the trend in local government employment for New York City as compared with the Rest of New York State, something I will summarize briefly at the end of this post.  There is, however, a far more spectacular trend.  New York City’s private employment in the Home Health Care industry has apparently gone exponential.

NYC Home Health Care1

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America’s Debts: 2018 Could Have Been Worse but 2028 Almost Certainly Will Be

In March 2018 I wrote the following:

To be fair to President Trump, soaring federal debt doesn’t have to mean total U.S. debt soars as well.  After all, nothing pushes up debt as a percent of GDP more than a deep recession, which reduces GDP and causes federal tax revenues to plunge and social service costs to soar…Following the Trump tax cuts, it is possible that households and businesses could use the additional money floating around as the federal government goes broke to reduce their own debts, and to buy up all those extra U.S. Treasury bills and bonds. Remember “we owe it all to ourselves?”   But that’s not the way to bet.

I’m glad I didn’t take that bet.  For now.

Federal Reserve Z1 data was released for 2018 on March 7, and thanks to another future selling, anti-America (as a collective) Republican President, the federal debt indeed has begun to soar again.  Business debt is also soaring, even as investment in the United States remains low, as the executive/financial class pillages American business to buy back stock and inflate executive pay, while pillaging the future of the companies they work foragainst.   Following The Donald’s private-sector example.

But total U.S. credit market debt did not soar.  By not buying houses at inflated prices and saving rather than borrowing, screwed later-born generations are desperately trying to secure their own futures.  Even as those in control of our public and private institutions continue to sell their collective future out from under them, cashing in whatever is left. As a result their savings, placed with these institutions, are likely to go “poof” eventually.  And buying a house is an even worse bet.

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