Steve Rattner had a column in the NYT warning that 401(k) accounts are proving to be an inadequate replacement for traditional defined benefit accounts. While the points he makes are exactly right (people lose too much money in fees, make bad investment choices, and don’t put enough money aside), one of the figures he cites may have misled readers about the state of workers’ finances.
Rattner cites a study by Alicia Munnell, the director of the Center for Retirement Research at Boston College, which finds that households have an average of $111,000 in retirement accounts. While the figure is accurate, it refers to an average which is skewed by the large holdings of the wealthy, and only includes people with retirement accounts.
A more meaningful figure can be found in the same report. It gives a summary of the assets of the middle decile of households with someone between the ages of 55 to 64. This shows holdings in 401(K)s and IRAs of just $40,100. In fairness, this group still has a substantial amount of assets in defined benefit accounts (the report puts the figure at $153,700), but if the question is the extent to which 401(k)s have been a successful replacement, it is appropriate to exclude these assets. (Yes, there will be some substitution, so people would have more money in 401(k)s if they did not have DB pensions.)
Anyhow, Rattner is right about the basic story, but the picture is somewhat worse than this $111,000 figure might lead people to believe.
Steve Rattner had a column in the NYT warning that 401(k) accounts are proving to be an inadequate replacement for traditional defined benefit accounts. While the points he makes are exactly right (people lose too much money in fees, make bad investment choices, and don’t put enough money aside), one of the figures he cites may have misled readers about the state of workers’ finances.
Rattner cites a study by Alicia Munnell, the director of the Center for Retirement Research at Boston College, which finds that households have an average of $111,000 in retirement accounts. While the figure is accurate, it refers to an average which is skewed by the large holdings of the wealthy, and only includes people with retirement accounts.
A more meaningful figure can be found in the same report. It gives a summary of the assets of the middle decile of households with someone between the ages of 55 to 64. This shows holdings in 401(K)s and IRAs of just $40,100. In fairness, this group still has a substantial amount of assets in defined benefit accounts (the report puts the figure at $153,700), but if the question is the extent to which 401(k)s have been a successful replacement, it is appropriate to exclude these assets. (Yes, there will be some substitution, so people would have more money in 401(k)s if they did not have DB pensions.)
Anyhow, Rattner is right about the basic story, but the picture is somewhat worse than this $111,000 figure might lead people to believe.
Read More Leer más Join the discussion Participa en la discusión
That is what an article in the Washington Post seemed to imply, as it indicated that German Finance Minister Wolfgang Schäuble would have the European Union put up protectionist trade barriers as a way of punishing the United Kingdom if the country voted to leave the European Union. Such barriers would likely prove costly to the people in the European Union.
There have been a number of analyses showing that the UK could see a loss of between 2–5 percent in output if it left the European Union (EU) and suddenly faced substantial trade barriers. While the UK is less important as a trading partner for the EU as a whole than vice-versa, it is a very important trading partner for some members of the EU. For those countries, Schäuble’s plans would imply a substantial loss of income. It is striking that a German finance minister would have this sort of power. That could be one reason why people in the UK and other countries have an interest in leaving.
It would have also been worth pointing out that the economic policies imposed by Germany have cost the EU a decade of growth and needlessly kept millions of people out of work. This policies are based on some sort of quasi-religious belief in the virtues of balanced budgets and have been shown to be unmoved by evidence. It is reasonable to believe that if the European Union had pursued policies to promote rather than stifle growth, Europeans would have a more positive attitude toward it.
The article also wrongly refers to the Trans-Atlantic Trade and Investment (TTIP) pact as a “free-trade” deal. It isn’t. With few exceptions, the trade barriers between the U.S. and Europe are already very low and it would not be worth a great deal of time devising a pact to push them to zero. Rather the TTIP is about regulations and investment. Many of its provisions, such as stronger and longer copyright and patent protection, are actually protectionist in nature.
Politicians call pacts like the TTIP “free-trade” agreements because then quasi-intellectual types, like the people who write for newspapers, will then think they have to support them.
That is what an article in the Washington Post seemed to imply, as it indicated that German Finance Minister Wolfgang Schäuble would have the European Union put up protectionist trade barriers as a way of punishing the United Kingdom if the country voted to leave the European Union. Such barriers would likely prove costly to the people in the European Union.
There have been a number of analyses showing that the UK could see a loss of between 2–5 percent in output if it left the European Union (EU) and suddenly faced substantial trade barriers. While the UK is less important as a trading partner for the EU as a whole than vice-versa, it is a very important trading partner for some members of the EU. For those countries, Schäuble’s plans would imply a substantial loss of income. It is striking that a German finance minister would have this sort of power. That could be one reason why people in the UK and other countries have an interest in leaving.
It would have also been worth pointing out that the economic policies imposed by Germany have cost the EU a decade of growth and needlessly kept millions of people out of work. This policies are based on some sort of quasi-religious belief in the virtues of balanced budgets and have been shown to be unmoved by evidence. It is reasonable to believe that if the European Union had pursued policies to promote rather than stifle growth, Europeans would have a more positive attitude toward it.
The article also wrongly refers to the Trans-Atlantic Trade and Investment (TTIP) pact as a “free-trade” deal. It isn’t. With few exceptions, the trade barriers between the U.S. and Europe are already very low and it would not be worth a great deal of time devising a pact to push them to zero. Rather the TTIP is about regulations and investment. Many of its provisions, such as stronger and longer copyright and patent protection, are actually protectionist in nature.
Politicians call pacts like the TTIP “free-trade” agreements because then quasi-intellectual types, like the people who write for newspapers, will then think they have to support them.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
We usually like to think of people holding positions of responsibility in places like the United States and Europe as rational actors who make reasoned decisions based on the evidence presented them. Apparently this is not the case if the New York Times is to be believed.
According to the NYT, the leading figures in the European Union are prepared to act like spurned lovers if the people of the United Kingdom vote this week to leave the European Union. One might think that a rational course of action might be recognizing the decision of the people in the UK and then trying to negotiate terms for their future relationship that are mutually advantageous. Instead, the leaders of the EU are apparently planning punishment.
The article begins by telling readers:
“The rest of the European Union nations are looking at the possibility of a British departure from the bloc with disbelief, trepidation and anguish. But they are also preparing to retaliate.”
It goes on to give more details of the plans for punishment. Apparently a friendly divorce is out of the question for the EU honchos.
Rational people in the EU might also ask why people in one of the EU’s largest member states would think they are better off outside of the European Union. After all, the benefits of the federal government are evident to most people living in the United States, why is that not the case in much of Europe.
Somehow the leaders of the EU are apparently incapable of asking whether maybe they are doing something wrong. For example, perhaps the austerity that has cost the continent a decade of growth and needlessly subjected millions of people to unemployment and underemployment is not a good way to go. Given the competence and integrity of the folks running the EU it is certainly understandable that many in the UK would want to leave.
We usually like to think of people holding positions of responsibility in places like the United States and Europe as rational actors who make reasoned decisions based on the evidence presented them. Apparently this is not the case if the New York Times is to be believed.
According to the NYT, the leading figures in the European Union are prepared to act like spurned lovers if the people of the United Kingdom vote this week to leave the European Union. One might think that a rational course of action might be recognizing the decision of the people in the UK and then trying to negotiate terms for their future relationship that are mutually advantageous. Instead, the leaders of the EU are apparently planning punishment.
The article begins by telling readers:
“The rest of the European Union nations are looking at the possibility of a British departure from the bloc with disbelief, trepidation and anguish. But they are also preparing to retaliate.”
It goes on to give more details of the plans for punishment. Apparently a friendly divorce is out of the question for the EU honchos.
Rational people in the EU might also ask why people in one of the EU’s largest member states would think they are better off outside of the European Union. After all, the benefits of the federal government are evident to most people living in the United States, why is that not the case in much of Europe.
Somehow the leaders of the EU are apparently incapable of asking whether maybe they are doing something wrong. For example, perhaps the austerity that has cost the continent a decade of growth and needlessly subjected millions of people to unemployment and underemployment is not a good way to go. Given the competence and integrity of the folks running the EU it is certainly understandable that many in the UK would want to leave.
Read More Leer más Join the discussion Participa en la discusión
The NYT had two articles on occupational licensing requirements today and there was not one mention of the restrictions that lead us to pay twice as much for our doctors as other wealthy countries. It is illegal to practice medicine in the United States unless you completed a U.S. residency program. In other words, under the law, all of those doctors trained in Canada, Germany, the United Kingdom and other wealthy countries can’t be trusted to provide people in the United States with medical care.
This is called “protectionism.” We all know it is stupid, self-defeating, backward looking, etc. when it comes to steelworkers, textile workers, and other workers who tend to be less educated. But somehow all our great proponents of free trade can’t seem to notice the protectionism that benefits doctors. And this is real money. The average pay of doctors in the United States is more than $250,000 a year. If they were paid in line with the average for other wealthy countries the savings would be on the order or $100 billion a year or a bit more than $700 per household.
Anyhow, it striking to see the topic of unnecessary occupational licensing restrictions being addressed but zero discussion of the most costly one of them all. Hasn’t the NYT heard about doctors?
FWIW, our dentists are over-protected and over-paid also. Until recently, dentists have to graduate a U.S. dental school to practice in the U.S. In the last few years, we began to allow graduates of dental schools in Canada.
Perhaps at some point our doctors and dentists will have to get by without protectionism and learn to compete in the global economy — but reporters will probably have to notice first.
The NYT had two articles on occupational licensing requirements today and there was not one mention of the restrictions that lead us to pay twice as much for our doctors as other wealthy countries. It is illegal to practice medicine in the United States unless you completed a U.S. residency program. In other words, under the law, all of those doctors trained in Canada, Germany, the United Kingdom and other wealthy countries can’t be trusted to provide people in the United States with medical care.
This is called “protectionism.” We all know it is stupid, self-defeating, backward looking, etc. when it comes to steelworkers, textile workers, and other workers who tend to be less educated. But somehow all our great proponents of free trade can’t seem to notice the protectionism that benefits doctors. And this is real money. The average pay of doctors in the United States is more than $250,000 a year. If they were paid in line with the average for other wealthy countries the savings would be on the order or $100 billion a year or a bit more than $700 per household.
Anyhow, it striking to see the topic of unnecessary occupational licensing restrictions being addressed but zero discussion of the most costly one of them all. Hasn’t the NYT heard about doctors?
FWIW, our dentists are over-protected and over-paid also. Until recently, dentists have to graduate a U.S. dental school to practice in the U.S. In the last few years, we began to allow graduates of dental schools in Canada.
Perhaps at some point our doctors and dentists will have to get by without protectionism and learn to compete in the global economy — but reporters will probably have to notice first.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Back in January, when the Congressional Budget Office (CBO) issued its annual Budget and Economic Outlook, the Washington Post and other deficit hawk types seized on the projections of rising deficits and debt to GDP ratios in the latter part of its 10-year projections. There was another round of cries for deficit reduction, with cuts to Social Security and Medicare again holding center stage.
Some of us took the opportunity to point out that the projections of rising deficits hinged almost entirely on CBO’s projections that interest rates would rise sharply in the next few years. In effect, it assumed that interest rates would soon return to levels that were similar to their pre-crash levels. CBO had made the same assumption in its prior six Budget and Economic Outlooks. It had been wrong.
It now looks like it will be wrong again, at least for its 2016 prediction on rates. It projected in January that the 10-year Treasury bond rate would average 2.8 percent. It has averaged less than 2.0 percent through the first five and half months of the year and is currently hovering near 1.6 percent.
This means that if interest rates are going to return to “normal” or near normal levels, it is likely to be further in the future than previously believed. Don’t bet on that causing the deficit hawks to give up their attacks on Social Security and Medicare, but hopefully the rest of the world will take them even less seriously than is currently the case.
One final point: it would be good if interest rates did rise because it would mean the economy was getting stronger, so there is no reason to celebrate low interest rates. However, in the context of an economy than is still far from having recovered from the collapse of the housing bubble, low interest rates are better than high interest rates.
Back in January, when the Congressional Budget Office (CBO) issued its annual Budget and Economic Outlook, the Washington Post and other deficit hawk types seized on the projections of rising deficits and debt to GDP ratios in the latter part of its 10-year projections. There was another round of cries for deficit reduction, with cuts to Social Security and Medicare again holding center stage.
Some of us took the opportunity to point out that the projections of rising deficits hinged almost entirely on CBO’s projections that interest rates would rise sharply in the next few years. In effect, it assumed that interest rates would soon return to levels that were similar to their pre-crash levels. CBO had made the same assumption in its prior six Budget and Economic Outlooks. It had been wrong.
It now looks like it will be wrong again, at least for its 2016 prediction on rates. It projected in January that the 10-year Treasury bond rate would average 2.8 percent. It has averaged less than 2.0 percent through the first five and half months of the year and is currently hovering near 1.6 percent.
This means that if interest rates are going to return to “normal” or near normal levels, it is likely to be further in the future than previously believed. Don’t bet on that causing the deficit hawks to give up their attacks on Social Security and Medicare, but hopefully the rest of the world will take them even less seriously than is currently the case.
One final point: it would be good if interest rates did rise because it would mean the economy was getting stronger, so there is no reason to celebrate low interest rates. However, in the context of an economy than is still far from having recovered from the collapse of the housing bubble, low interest rates are better than high interest rates.
Read More Leer más Join the discussion Participa en la discusión
No, I’m not talking about its decision not to raise interest rates yesterday, I mean the release of May data on industrial production. The data showed a decline in manufacturing output in May of 0.4 percent. The output levels for both March and April were also revised downward. Over the last three months production has been declining at a 2.4 percent annual rate.
This indicates that the manufacturing sector continues to be a drag on the economy and is likely to mean further job losses in the months ahead. The report is yet another warning that the economy is not moving along at a healthy pace.
No, I’m not talking about its decision not to raise interest rates yesterday, I mean the release of May data on industrial production. The data showed a decline in manufacturing output in May of 0.4 percent. The output levels for both March and April were also revised downward. Over the last three months production has been declining at a 2.4 percent annual rate.
This indicates that the manufacturing sector continues to be a drag on the economy and is likely to mean further job losses in the months ahead. The report is yet another warning that the economy is not moving along at a healthy pace.
Read More Leer más Join the discussion Participa en la discusión
