The Angry Future Expat

The Hollow Men – Peter G. Peterson And His Deficit Commission

Posted in Assholes, banksters, Blackrock, debt, Lost Decades, police state, Walk Away by angryfutureexpat on August 2, 2010

Yes, Pete Peterson, it's true

With apologies to the two or three of you out there that give a fuck, I spent the last week vacationing at a friend’s summer home, drinking margaritas, working, and generally contemplating life.  Ultimately, I determined that the path I was on was pretty much right – notwithstanding the (albeit mild – really mild!) slings and arrows from about the relative virtues of paying “back” debt and telling the banks to go fuck themselves.

As is always the case when I take an extended leave from blogging, it was an embarrassment of riches in subject matter over the last week.  But one piece of news seemed particularly telling Dwindling Retirement Savings ‘Undiscussed Explosive Bomb’ Of Recession:

After working in executive management for over ten years with a steadily increasing salary, Rick Stephens, 51, was laid off from his job in June 2008. Two years of steady unemployment later, he has sold his car, moved in with his 75-year-old father and blown through all his retirement savings to stay afloat.

“I pay my bills with what is left of the savings I accumulated by being frugal all my life, but I’m going through that pretty fast,” he said. “I have tapped my IRA, and the result of that is I will be heavily taxed on it next April. I honestly believe that there will be no recovery from this. If there is a recovery, it will be too late for me, as I will have exhausted my savings and my retirement that I had socked away by not living the high life.”

This is what happens when people have an obsession with paying bills.  Retirement saving should be non-negotiable, but an unhealthy desire to appear solvent makes it one of the first things to go – before credit cards, before the mortgage, before all the things that should be cut.  401ks are (I believe) insulated in bankruptcy, and are the ultimate safety net.  Draining an IRA or a 401k to make payments on credit cards and mortgages is probably the most self-destructive activity that anyone can engage in this side of snorting meth, but, as is our motto around here, desperate people do stupid shit, e.g. payday loans, student loans, teabagging, supporting Obama, etc., etc. etc.

“This is the undiscussed explosive bomb in all this, is all the pension benefits, all the 401(k) money that’s been drained out by workers trying to stay afloat until they find a job,” Rep. Jim McDermott (D-Wash.) told HuffPost. “There are a lot of people who, when this is over, are going to have nothing. They will have lost their house, they will have used all their pension money.”

Many Americans seem to be losing hope. Only 16 percent of respondents to the EBRI survey expressed confidence in their ability to retire comfortably, the second lowest point in the 20-year history of the survey.

Given what is happening to retirement savings, both on the asset value side and the voluntary draining to keep Jamie Dimon and Richard Fairbank living the lifestyle to which they have become accustomed, this strikes me as, to put it mildly, a particularly bad time to start fucking around with Social Security and Medicare.  Raising the eligibility ages, for example, while there are huge numbers of people in their 40s and 50s who will never get back on their feet seems, well, cruel.  In fact, if anything, this is when we should be expanding the social safety net.

But Peter G. Peterson is striving for his pound of flesh on the backs of the “lesser people,” so I tweeted the following:

Dear @Pete_Peterson, This is what happens when you throw people to the wolves. Now go sodomize yourself with dynamite.

I think that pretty fairly summarizes my feelings toward the founder of Blackrock and world-class asshole that is Peter Peterson, his Foundation, and his pet deficit commission.

Unfortunately, I did not tweet this to the right Pete Peterson (If anyone knows the Blackrock Pete Peterson’s twitter, please let me know!). It was just some struggling author.  He could have been a much bigger dick about my error, so here’s his book if you want to buy it.

But the basic point stands.  Here at AFEP, we’re not big fans of structural deficits of 10% of GDP, and we don’t just sit around and whine about stuff – We want to help!  So here is AFEP’s strategy for eliminating the deficit:

  • Print enough money for everyone to pay off their household debt;
  • Give it to them;
  • Watch the entrepreneurial revival in America swamp the Treasury with tax revenue!

Of course, that’s not the only solution.  Here’s another way to eliminate the deficit:

  • Make education free (eliminate student loans) – rationing will be required;
  • Make healthcare free (single-payer baby!);
  • Ration healthcare by letting people die with dignity (no ventilators for people 85+, no biopsies for 90-year olds), and if I’m a vegetable, pull the plug on me right quick!
  • Legalize drugs (and a bunch of other stuff) and get rid of all the fucking prisons;
  • Pull the military out of the vast majority of places we have them;
  • No more bank bailouts!
  • Raise taxes on the finance sector – a lot!

Optimally, we’d do some combination of the items from list 1 and list 2, but either list works.  Note, that neither requires forcing people to eat cat food.

But this is America, and since Americasux, I’m sure we’ll go for door number 3:

Or, you know, instead of asking the well-off to contribute as much as everyone else does, we could maybe just not give people their Social Security until they are 70, instead of 65. That sounds like a fine and sensible idea if you are a currently old person whose work is easy and enjoyable and rewarding enough that you continue doing things like being on deficit commissions long after you could’ve retired.

Of course, most currently young Americans who aren’t on deficit commissions will be working minimum wage service jobs cleaning and shining the robots that feed and nurse the nation’s Aspen Ideas Festival panel participants, and those Americans might enjoy the opportunity to retire with their meager checks before the robot wax completely blinds them.

And since Peter G. Peterson lacks the conscience required to do the right thing and kill himself with a lit stick of dynamite, we’ll watch the middle class in America die – not with a bang, but a whimper:

Once upon a time this was called the American Dream. Nowadays it might be called America’s Fitful Reverie. Indeed, Mark spends large monthly sums renting a machine to treat his sleep apnea, which gives him insomnia. “If we lost our jobs, we would have about three weeks of savings to draw on before we hit the bone,” says Mark, who is sitting on his patio keeping an eye on the street and swigging from a bottle of Miller Lite. “We work day and night and try to save for our retirement. But we are never more than a pay check or two from the streets.”

8 Responses

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  1. regrouping said, on August 2, 2010 at 11:02 am

    I was actually reading this HuffPo article yesterday and made the mistake of reading some of the comments. Depressing. The middle class is in a bad way.

    What gets me are the comments about how people should have saved more money. No matter what amount of money is mentioned: $10,000? $50,000? $200,000?, the response is always, “What were they thinking?” Well, some of them weren’t- they were out spending money, refinancing their homes, and applying for credit cards, just as they were encouraged to do. The others were trying to eat and shelter themselves on wages that have been stagnant for years.

    I’m in my thirties, but have several friends and acquaintances in their 50’s and 60’s. The overriding financial goal that they *all* have at this point is to keep their jobs until they turn 62 and then collect early SS. And it’s not because they want to stop working, it’s because they feel that they won’t be able to keep their jobs for much longer, are scared shitless, and are willing to accept the lower payments.

    These are all responsible people, who didn’t spend like crazy, don’t have huge debts, and saved and invested conservatively like they were told to do. Their homes have dropped in value, the interest rates on their savings are total crap, and they endure long, painful stretches of unemployment. Don’t even get me started on their health care sagas. The saddest thing is watching some of them realize that they’ve been had. They played by the rules and got dicked.

    Ugh. It’s ugly out there.

  2. setting me up said, on August 2, 2010 at 1:07 pm

    Once again you made some frightening observations – to add to your observations, social unrest will be the consequence of a population that has had its retirement dreams destroyed.

  3. Knute Rife said, on August 2, 2010 at 9:29 pm

    What the “What Were They Thinking?” crowd refuses to acknowledge is that for the last 40 years, we’ve been boiling the frog. The Powers That Be have been cranking the heat up a notch at a time on the Middle Class, taking away piece by piece all the elements that made the Middle Class possible. And like the frog in the pot, the Middle Class never felt it coming. We thought it was just a temporary downturn, or that we just needed to work harder, or that we just needed another degree or certification, or an endless list of other “justs.” We didn’t even realize we were being boiled until we were bright red and found ourselves on a plate with fava beans and a nice chianti.

  4. Abe said, on September 8, 2010 at 7:40 pm

    Actually, in my educated opinion your solutions would create even more problems and solve very little. The only thing so far that we agree on (apparently) is our shared loathing for Obama. The guy is an arrogant clueless moron.

    So here’s your list of solutions, and my feedback on their likely effects . . .

    >> Print enough money for everyone to pay off their household debt;
    >> Give it to them;
    >> Watch the entrepreneurial revival in America swamp the Treasury with tax revenue!

    Printing more money would merely create massive inflation. This happens because as more money is printed and injected into the economy, the value of each pre-existing dollar becomes diluted. Further, manufacturers/suppliers/producers/retailers will increase prices to reflect the “real” underlying value of their product. This is why in places like Zimbabwe everything costs many thousands upon thousands of Zimbabween dollars (or whatever it is that they use there)–their inflation rate was (at one count) 89.7 Sextillion Percent! Instead of making people wealthy, it made them poorer and poorer as it took more and more Zimbabween dollars to buy necessities, and every dollar they had previously deteriorated in value. In short, money doesn’t grow on trees or printing presses. Value is inherent to the products we eat, use, and enjoy; prices in a market relatively free of distortions merely provide a rough approximation of that “real” value. To beat this horse to death, if Obama gave every American $100,000 dollars, retailers would simply respond with a proportional increase in prices–as prices throughout the entire supply chain skyrocketed. This happens because those who provide the raw materials (wheat, steel, ore, labor, etc.) realize that each dollar that they will receive to pay for their goods has become worth less; and so they increase their dollar price for their goods. The increased cost in those raw materials then trickles down the entire supply chain, eventually showing up (pretty quickly I’d imagine) in retailers prices.

    This is why governments with fiat currencies can’t just print money to make their populaces wealthy: prices rise, costs of production inputs rise, salaries rise, and across the board it takes more dollars to buy or do anything.

    >>Of course, that’s not the only solution. Here’s another way to eliminate the deficit:

    >> Make education free (eliminate student loans) – rationing will be required;

    And who, pray tell, will decide who gets to go to college, who gets to study what, and what a person gets to do with their life? Rationing is a horrible idea, though I do agree that a certain byproduct of “free” services of any sort *is* rationing. This is because “free” is essentially a price floor set at $0 which leads to an immense shortage–in this case of admissions slots at academic institutions. Better yet, since you’re obviously fine with less people going to college in general, eliminate the idea that college education is a “right” by eliminating all government subsidies for higher education. Then watch the price of tuition fall as higher education once again becomes that which those who NEED a higher education pursue, and those who intend to be taxi drivers or plumbers do not.

    >>> Make healthcare free (single-payer baby!);

    Doing this, as you pointed out above relative to “free” education, would involve certain rationing of health care services. Again I ask, who decides who gets what treatments and when? Do we really want some government employee administrating our individual choices and healthcare? Do we really think their incentives are in-line with our own?

    Oh, and if you’ve been to a relatively comprehensive college you should’ve heard at some point that “there is no free lunch.” If that hasn’t sunk in yet as the ultimate truth about life, you’re not yet a “grown up.” NOTHING is “free.” Nothing.

    >>> Ration healthcare by letting people die with dignity (no ventilators for people 85+, no biopsies for 90-year olds), and if I’m a vegetable, pull the plug on me right quick!

    Again, this is easy to say, but do you really want some government committee telling you that your grandfather, mother, father, sister, wife, etc. has to die because they meet some arbitrary criteria (they’re the right age, or some grumpy doctor decides that they’re not healthy enough)?

    >>> Legalize drugs (and a bunch of other stuff) and get rid of all the fucking prisons;

    And then what do you propose to do with all the criminals? Shoot them? I’d instead suggest harsher three strikes laws. If you’re convicted of a violent crime a certain number of times then you’re executed. If you’re convicted of lesser crimes then you’re put in a deliberately uncomfortable/miserable jail for a long time and there is no parole. Criminals aren’t completely irrational, they pursue criminal behavior because the tradeoffs are worth it. So I do agree that there’s a great deal of room for “reform” as it pertains to the penal system of our country. We do pay way too much money just to keep a shit load of convicts in captivity.

    >>> Pull the military out of the vast majority of places we have them;

    I largely agree here too. I’d advocate pulling out of most places and instead spending our defense budget on ensuring our own national security at home, and ensuring that if we need to response or act we can do so efficiently and effectively.

    >>> No more bank bailouts!

    I agree, but I’d broaden it to include bailouts of ANY sort. Granting bailouts creates moral hazard. In the future will companies avoid risky behavior and have the incentives to practice good sound business policies if they believe that if worst comes to worst we’ll bail them out? No, is the correct answer. The government has credibly committed to bailing out any company who is either politically or economically valuable. Obama bailed out the unions in Detroit, temporarily “saving” hundreds of thousands of jobs . . . which will still get axed when the American car companies go under (who here thinks they’ve really learned from their mistakes? especially now that they’re even more burdened by union responsibilities?). Bailouts are bad. Bankruptcies are painful, even excrutiating, but they ARE necessary.

    >>> Raise taxes on the finance sector – a lot!

    Oh, because you’ve bought into the propoganda that they brought down the economy? Or that they’re a previously unknown golden goose that can be harvested for trillions of dollars in tax revenue? Why not raise taxes on everyone and all industries? Or on those who’ve been naughty? How about tax cuts for the nice? What you’re advocating is the equivalent to disciplining an ENTIRE industry because of a few bad apples. How is that an effective policy? Most of the individuals in the industry played no part in the financial disaster. And it’s still “fair” to punish them–because they were in the wrong industry? That’s similar to advocating taxing farmers harshly if one year their industry fails to produce enough food or does so at unattractively high prices! Taxes are not an appropriate tool of disciplinary action.

    • cassandravert said, on February 28, 2011 at 12:19 am

      You’re right, we should not use the tax system to punish the naughty. We need to toss the banksters in jail and seize their assets for what they are: stolen property.

  5. Fat Pat said, on December 23, 2010 at 9:34 pm

    Wow, alot of huffing dont worry about retirement it isnt gonna happen all the armchair crybabies need to quit wolfing and run for office and make changes , no matter what we do we will always be slaves to the goverment ad there is nothing you can do but leave

  6. cassandravert said, on February 28, 2011 at 12:17 am

    Yes, middle-aged people forced to draw down retirement savings is the large and mysteriously undiscussed growing time bomb of the recession. It isn’t all about their bad judgment, however.

    If you are a responsible 40-50something, you know you are supposed to “pay yourself first” (apply money to retirement saving first). That leads to a world where people have most of their assets in retirement accounts. They never carried a credit card balance, paid off their cars, and have no other assets to draw against.

    If you are an unemployed 40-50something with a retirement account, you cannot qualify for food stamps and other poverty programs. Clearly, the government wants you to drain your assets and pay the hefty early withdrawal tax. Why? Because the banksters are tipping all your money into their pockets. What they don’t get directly, they will get as “tax cuts” (in quotes because you can’t really reduce what they don’t pay).

    And I’m afraid the libertarian is right, you can’t solve the problem by printing money. And if you did, the same people would just steal that, too. No, we’ve got to get our money back from the people who took it. Then the next two steps work. Taxes are the most effective legal tool of wealth redistribution. Eliminate stupid loopholes for financial people. An income tax of 90% on everything over $1 million and a death tax of 90% on everything over $20 million ought to set things right, at least for our kids if not for us. Of course, we have to elect better people in the government or we will simply be transferring our money problem from one crook to another.

    NATIONALIZE the banks. Govt and banks are in each other’s pockets anyway, but this eliminates the profit siphoning ap and gives the government a direct line to distribute assets back to the public. Like…

    The other thing we need to do is move ownership of land back to the middle class. I have no idea how to do that in any fair and organized way, but it needs to happen. The closest thing I can think of for a model program is the old 40 acres and a mule. Banks are just foreclosing on any old house now, even ones that are paid up. This has to stop now.

  7. Anonymous said, on November 4, 2011 at 7:50 am

    Sorry, I’m coming to this post very late. Leaving all your other analysis aside I just have a minor thing to point out, which is that Blackstone and BlackRock are entirely different firms.

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