Bacon's Rebellion

Democracy Thrives in Sunlight

Check Out the “Retirement Crisis” Blog

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by

James A. Bacon
in

Kudos to EMR and Peter G. for keeping Bacon’s Rebellion a lively venue for discussing real issues during my prolonged absence. I’m parachuting in just to say hello — and to let Bacon’s Rebellion readers know about my new blog, The Retirement Crisis.

While Bacon’s Rebellion explores the theme of environmental sustainability, The Retirement Crisis tackles the theme of fiscal sustainability. Both are weighty. Both are game changers. No, that’s too mild. Both are civilization changers.

But of the two, I believe that fiscal collapse is more imminent than the environmental collapse. And if we can’t forestall the one, the United States won’t have the resources to avert the other.

The new blog focuses on the “retirement crisis” in a raw appeal to peoples’ self interest. Questions about multitrillion-dollar budget deficits, age wave-induced shortages of global capital, the overwhelming burden of carrying the national debt, and the disintegration of the retirement safety net are too abstract for most Americans to wrap their brains around. By making the case that the federal government will be unable to keep the promises made regarding Social Security, Medicare, Medicaid and other entitlements, I’m hoping I can make the case that these issues will impact readers directly.

I urge Bacon’s Rebellion readers to bookmark The Retirement Crisis or sign up for the RSS feed. I promise you, we’ll have a lot of fun — and perhaps even nudge the needle of debate at the national level, just as we did with Bacon’s Rebellion in Virginia.

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12 responses to “Check Out the “Retirement Crisis” Blog”

  1. Anonymous Avatar
    Anonymous

    “I believe that fiscal collapse is more imminent than the environmental collapse.”

    Which is why I have been saying we must spend our environmental dollars carefully.

    The best way to do that is to ensure (and to recognize) that it is OUR dollars we are spending.

    The idea that “polluters pay” is a farce, and the idea that we can get something for nothing amounts to stealing.

    Good luck with you rnew blog.

    RH

  2. Anonymous Avatar
    Anonymous

    “The idea that “polluters pay” is a farce, and the idea that we can get something for nothing amounts to stealing.”

    Ruining the environment in the pursuit of profits also amounts to stealing, IMO.

  3. Anonymous Avatar
    Anonymous

    Absolutely, and I never said otherwise, only that the idea is not one-sided.

    There is also the issue of taking environmental benefits in the form of property restrictions without paying for them.

    The issue of using environmental laws as blackmail to force conservation easements.

    The issue of environmental spending that is outright wasteful.

    And the issue of otherwise reasonable environmental regulations the costs of which are misallocated, overbilled, or billed wrongfully.

    All I suggest is that ethical environmentalists will keep watch of these things just as carefully as the keep watch over the environment.

    RH

  4. Anonymous Avatar
    Anonymous

    If we don’t spend enough on the environment there won’t be many places we would like to retire to. If we spend too much, we won’t be able to retire.

    RH

  5. Larry G Avatar
    Larry G

    How much do we “spend” on the environment right now?

    How much would be “too much”?

    how does spending on health care compare to spending on the environment?

    Is it more ..or less or about the same?

    Why is Obama concentrating on reforming health care rather than spending on the environment – to save money?

  6. Anonymous Avatar
    Anonymous

    “..How does spending on health care compare to spending on the environment?”

    ————————

    The objective function should be the optimal provision of public goods by the lowest level of government possible. The dual should be to find the tax rates necessary to pay for that level of public goods and no more, with constraints on market distortions and burdening the poorest Americans below subsistence levels.

    ————————-

    I’d suggest that the measure of success for environmental services and healthcare is about the same, mortality and morbidity prevented.

    We do not know how much we “spend” on the environment because environmentalists have been successful at keeping much of the spending “off the books”. We have no way of accounting for environmental “spending” that takes the form of a regulatory taking, for example.

    In the UK, their bureau of national statistics suggests that environmental spending in 2004 about 0.5% of GDP or 5.9 billion British Pounds and this was up 9.3% from 2003. Obviously, such an increase in the rate of growth for environmental spending is unsustainable: that would mean they were spending 9.2 billion today or almost one percent of GDP (Assuming, for the sake of argument, GDP has been static from
    2004 until now. Considering the state of the economy, it may no be a bad assumption).

    If that is the case then it is just as obvious that there is an increase of one half of one percent in GDP that had to come from someplace else (like your proverbial granite counter tops).

    But if a life is figured as worth 3 million British pounds then they NEED to save only around 3000 lives to justify such expenditure. We don’t know how many are actually saved, but suppose their environmental spending is highly efficient: that they ACTUALLY save 100 times as many, that would be 30,000 people, and it would be a pretty good buy.

    Now suppose you spent the ENTIRE GDP on environmental issues, then you could save 30,000,000 people or half the entire population of the UK. No one would suggest that half the population of Britain is in danger of dying from environmental issues, so expenditure at that rate could not be justified (not to mention possible).

    Yet, that is where they are heading, at a rate which will double their environmental spending every 5 years. at that rate they will be spending 16% of GDP on environmental costs in 25 years.

    RH

  7. Anonymous Avatar
    Anonymous

    In the United States, which has had both a high level of health spending per capita and a relatively high rate of real growth in that spending, the share of GDP devoted to health grew from 8.8% of GDP in 1980 to 15.2% of GDP in 2003, so we are doubling health care costs every 20 years. Surely no one thinks that we can sustain spending 30% of GDP on health care in 2030. Fortunately, we won’t have to because the boomers will mostly die off by then, and that tends to reduce health care costs.

    So, (if you believe the numbers) Britain In 2003 was spending around $300 per capita on environmental services and $2300 per person on health care. the US was spending around $5700 on health care, per person.

    If the British have the ratio “correct” it would imply that we should be spending around $500 per person per year on environmental services.

    What would be the correct ratio? Assuming one life is worth the same as another, you should be indifferent as to whether you spend $5000 on healthcare or the environment provided it results in one life saved.

    As you spend more and more money on health care it becomes more and more expensive to save that next life. At some point it becomes cheaper to save a life (probably eventually or some time in the future) by spending on environmental services.

    And it is always cheaper (from the government budget point of view but not the system or society view) if you can steal those services and “not pay” for them. Of course you always pay, but it is just “off the books”, meaning your accounting sucks.

    The same works the other way, each life you save through environmental spending gets progressively (and exponentially) more expensive. At some point it is less expensive to save lives by treating the illness than preventing the illness. This sounds perfectly crazy, but it is true.

    My guess is that it is a lot easier to save a life in the healthcare business than it is in the environmental business, with say$5000 to spend. For $5000 I can’t even analyze your Dioxin, let alone get rid of it. Obviously, it isn’t that easy because the economies of scale are so different.

    The perceived urgency is a lot different, too. If you roll me up to the emergency room and tell me I can’t go in until I write a check for $5000, I’ll probably write the check.

    But, if your message is that the whole world is on its way to the emergency room and I will die 30 years from now if I don’t write that check, then you are likely to get a different response.

    —————————

    Let’s assume that UK and US are about equal in producing healthcare results: similar longevity, birth survival rates, etc.

    That would mean that BOTH they are more than twice as efficient as we are at spending life saving money AND they value life saving half as much as we do. Otherwise, they could spend the same amount as we do and save twice as many lives. They must not care as much, even though they are (apparently) better at it than we are.

    RH

  8. Anonymous Avatar
    Anonymous

    So the bottom line is that “too much” is when you could have saved some other life, or prevented some other equal amount of illness, for less money. And it doesn’t matter n the least whther you are talking about “too much” health care spending or “too much” environmental spending.

    So, for given environmental and epidemiological conditions, the ratio of spending will change over time (boomers die off, the environment gets worse). The ratio also changes depending on how much you think a life is worth, and how much you have to spend. If you only have a small amount to spend, then just picking the low hanging fruit off of one tree may exhaust your resources. People in the lifeboats off the Titanic had to let people drown becuas they could not support any more people: they were out of resources.

    It didn’t matter what the “right” ratio of blankets to lifeboats was because they didn’t have enough lifeboats.

    So there you are: government spending is about 33% of GDP. healthcare is 15% of GDP and maybe one third of that is government spending. Environmental spending is one percent of GDP, but a lot of it isn’t paid for so all the counted spending is government spending. Bottom line, of the 33% government spending you started with 18% of it is environment and health. Then you spend one third for defense, and one third for entitlements other than health (Medicaid etc.) That leaves you with 22% for everything else: highways, schools, prisons, administration, etc.

    it isn’t a pretty picture. of course you can get more than 33%, if you are willing to take it out of private and consumer speding that generates growth and taxes.

    ——————–

    So, you “how much is too much” question has three parts: how much of you budget are you WILLING to spend on health and environment combined? And once you decide that, then where can you spend it most cost effectively: where will you save the most lives?

    And the third part is, if you don’t have enough, how much are you willing to invade private pockets to increase your budget? The more you take out of the economy now, the more you can solve present problems, but it slows growth which means you can solve fewer future problems. In other words what is the net present value of all the possibel future ways to solve the problem each budget year?

    How much am I willing to pay to save my life today, at the emergency room vs how much am I willing to pay to save it from some unspecified and probabilistic danger 25 years from now?

    And then there is the problem facing the greens (and everyone else) today: if the economy shrinks, so does you piece of the pie, which delays your favorite projects.

    ————————–

    These questions have answers. In fact, depending on how we spend our money, they WILL BE ANSWERED.

    The only question is whether we are willing to invest in an accounting system that is accurate enough to tell us what the answer was, after it hits us in the forehead. Then, knowing that answer, how do we make an incremental improvement next time? Or do we just flap our hands and say, “we believe the answer should be….”. Are we investing in government and results here, or religion?

    Neither the Pubs nor Dems nor Greens nor conservatives nor liberals nor libertarians nor socialists nor communists have ANY incentive to invest in such a system: they are too busy “selling” the preordained stock answer they have. They do not WANT to know the right answer because of the high probability that the truth will differ from their version of reality.

    I think Bacon calls it cognitive dissonance.

    RH

  9. Larry G Avatar
    Larry G

    “We do not know how much we “spend” on the environment because environmentalists have been successful at keeping much of the spending “off the books”.”

    really?

    I had no idea that they had so far a reach as to affect State and National budget accounting.

    Why should anyone bother reading what comes next after that statement?

    So we have 40 years of spending money on the environment and all that time.. the numbers of what was actually spent have been kept secret by those sneaky “environmentalists”?

    wow.

    what a bunch of dolts the rest of us are… for not knowing this.

  10. Anonymous Avatar
    Anonymous

    “because environmentalists have been successful at keeping much of the spending “off the books”.”

    really?”

    Yes, and it has nothing to do with the accounting, because it never hits the books.

    For example, we declare a flood plain protections zone that thakes away some uses or potnetial uses of the property, but we don;t pay for it so it never hits the books.

    Yet, it is a real environmental expense, for someone. we just don’t count it.

    RH

  11. Anonymous Avatar
    Anonymous

    Compared to the environment we have a pretty good idea how much we spend on health care, and what the effects are.

    For example:

    http://hadm.sph.sc.edu/COURSES/Econ/Classes/cbacea/cb.html

    We could find out, with regard to the environment, if we wanted to. But for the most part it has just been easier to flap our hands and say well, this is critical, we just HAVE to spend the money.

    I’m about to sign up for a farm service agency program, CRP 33, which is designed to provide habitat for bobwhite. I’ll get paid 90% of all my expenses for setting up the conservation areas, and then I’ll get rent on the land for ten years, If I’m accepted.

    the literature on the programs says that bobwhite have disappeared because of loss of habitat. I don;t believe it because I used to have quail and now I don’t, but the habitat hasn’t changed. After I have set up living space for the quail and stock them with new quail, I expect they will disappear, and I think it is because of foxes and hawks.

    But, it is a big program, designed to set aside 250,000 acres for quail, and it will take years before the quail census shows whether there is a ddifference or not.

    Will the environment be well served? would we be better off planting biofuels on those acres? I don’t know, but I need to do something about those areas anyway, I may as well get paid for it.

    RH

  12. Anonymous Avatar
    Anonymous

    “An external cost, also known as an externality, arises when the social or economic activities of one group of persons have an impact on another group and when that impact is not fully accounted, or compensated for, by the first group. Thus, a power station that generates emissions of SO2, causing damage to building materials or human health, imposes an external cost. This is because the impact on the owners of the buildings or on those who suffer damage to their health is not taken into account by the generator of the electricity when deciding on the activities causing the damage. In this example, the environmental costs are “external” because, although they are real costs to these members of society, the owner of the power station is not taking them into account when making decisions. Note that external costs are unintended and result from there being no property rights or markets for these environmental effects. The potential value of the ExternE project therefore lies in valuing external costs in order for those values to be included in the design of policy to correct for the present lack of such property rights and markets. “

    The internalisation of external costs is intended as a strategy to rebalance the social and environmental dimension with the purely economic one, accordingly leading to greater environmental sustainability. Doing so is a clear objective for the European Union, for example, as expressed in the Fifth and Sigth Framework Programme of the European Commission and in the Göteborg Protocol of 2001.

    The effects of energy conversion are physically, environmentally, and socially complex and difficult to estimate, and involve very large, sometimes ultimately unresolvable, uncertainties, unpredictabilites, and differences of opinion. Despite these difficulties, ExternE has become a well-recognised source for method and results of externalities estimation.

    http://www.externe.info/

    RH

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