Podcast Center
Video Center
Webcasts
Resource Center
Events
April 18, 2010 at 08:00 PM
Sometimes you can tell more about the future by examining related issues, so-called “straws in the wind,” than by the direct extrapolation of an issue. A good example of a predictor of future trends and needs is the study of demographics. A surge in births is a certain predictor of the need for more schools and funding in 5 or 6 years. Sadly such straws in wind are not always factored into future planning.
An issue today that is of great public concern is the safety and soundness of our economy because warning flags are flying in many places. A straw in the wind that has received little public notice is the ability of some major businesses to borrow money at lower rates than the federal government. When organizations like Warren Buffett’s Berkshire Hathaway are a better credit risk than the U.S. government, there is reason enough to be concerned.
Perhaps a more ominous straw resides in our Social Security system. For more than 20 years Social Security taxes have exceeded payments for benefits and the excess, $2.5 trillion, has been deposited in the Social Security trust fund. This year the day of reckoning has arrived; benefits will exceed Social Security taxes by almost $30 billion, requiring the government to tap the trust fund by that much. Unfortunately they have already tapped the fund and will have to borrow the money to pay full benefits. More debt to put a drag on the economy.
A straw raising considerable controversy is the write-down of future earnings by major companies. Caterpillar started it with its write-down of $100 million and was quickly joined by AT&T with its write-down of $1 billion. Other major companies have released their numbers and one benefits organization estimates the total for all major businesses will be $14 billion and all because of the costs associated with the new health care law. Commerce Secretary Gary Locke, in a piece in the April 1 Wall Street Journal, challenges the write-downs, claiming savings in the bill affect the alleged company cost. The fact is the companies are required by law to state such cost in order to comply with accounting standards. Given the use of fuzzy math in selling this legislation, one can’t help but wonder if the Locke article was just an April Fools Day prank.
From my perspective, not all straws in the wind are destructive. The 2010 census, now underway, will change the political landscape just a bit. States scheduled to lose representatives in Congress are from the liberal bastions of New York, Massachusetts and Michigan. Arizona, Texas, Georgia and Utah will likely gain seats, which may bring a slight more moderate approach to future legislation.
One of the values of having 50 state governments is that you can try new initiatives without upsetting the whole country if they do not succeed. Conversely, useful experiments can readily spread to other states.
An example of this is currently playing out in two of our states. In 2006, Massachusetts implemented universal health care for its citizens. In addition to covering everyone, the plan purported to bring down health care costs. The results so far are not encouraging.
