Conservative Logic

An economic guide to politics, designed for post-Baby Boomers

Lightning Round

Posted by A Hamilton on June 30, 2008

I’m way behind on posting, so here is the lightning round – articles and commentary that I’ve run across that raise interesting and relevant insight – moving past the sound bites and obfuscation, and directly addressing the realities of today’s economy, foreign policy, war, etc.

The Productivity Revolution

This excellent article from the Wall Street Journal shows why protecting manufacturing jobs is not good policy, and why the disruptions that losing these jobs cause is a natural consequence of increasing American productivity.

Manufacturing versus productivity

“Look at the chart nearby. America’s manufacturing output, as measured by the Federal Reserve, is up seven-fold since 1950, but manufacturing jobs as a share of all jobs have fallen to 10% from 30%. Your grandfather and father may have worked for General Motors (and joined the UAW), but it’s likely that you don’t and won’t.

The problem, if it really is one, is not foreign competition or evil financiers. It is technology and productivity. In the 10 years ending in 2007, durable goods manufacturing productivity averaged an annual growth rate of 4.8%. In other words, if real growth is less than 4.8%, the sector needs fewer workers year after year.

For the economy as a whole, overall U.S. business productivity rose 2.7% at an average annual rate during the decade ending in 2007, 1.7% in the decade ending in 1997 and 1.4% in the 10 years through 1987. Change is everywhere, and it’s accelerating.”

Death by Entitlement

“Last month, the Congressional Budget Office (CBO) analyzed the growth of government spending and deficits for Rep. Paul Ryan (R.-Wis.), ranking member of the Budget Committee. The report estimated that spending on Medicare, Medicaid and Social Security, which in 2007 represented about 8 percent of GDP, would balloon to 14.5 percent in 2030 and 25.7 percent in 2082.

There is no way that can fly.

If you add in all other spending, including interest on the debt, federal spending under the CBO’s scenario would eat up an astounding 75.4 percent of GDP in 2084.

If taxes don’t keep pace, the CBO says the “additional spending will eventually cause future budget deficits to become unsustainable …”

And if taxes were to keep pace? The CBO says, “[T]ax rates would have to more than double.”

Here’s the source.

So guess who gets to pay the taxes to pay for these burgeoning entitlements? Younger generations of Americans, of course. These programs will fund the retirement and healthcare of older Americans. The taxes to fund them represent such a significant increase that they will be lifestyle-altering for millions of Americans. And still, Washington is intent to maintain the status quo, or even expand, these programs.


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