Adding to the mix of less disposable money for consumer spending (which dri= ves the economy) is that Medicare is artificially higher than it has to be = because the drug companies (yes, those drug companies again) grossly inflat= e the prices they charge Medicare. It's a big part of why health costs are= rising so fast. The drug companies are now targeting Medicaid because sta= tes have to, by law, balance their budgets and have heretofore put pressure= on pharma to lower prices. Pharma is fighting back, so it's wait and see = what happens. Bush's claim that he doesn't want Americans buying from Cana= da is because drugs are cheaper there and it costs pharma profits. Pharma'= s also targeting the Canadian system now. Drug companies' stocks are falli= ng precisely because they have no new products to offer and recycling the o= ld drugs is wearing thin. Pharma's become a drain on the economy. Also, t= he ultra rich don't pay taxes, so that's another huge drain there, a huge c= hunk of income lost. Basically, nobody who counts cares what's going on, i= ncluding Bush, perhaps especially Bush with his tax cuts, and all these new= red states have blinders on. Nobody cares, and I'm wasting my time. Gott= a go. Andy Amago -----Original Message----- From: "Steven G. Cameron" <stevecam@xxxxxxxxxxxx> Sent: Dec 29, 2004 4:05 PM To: lit-ideas@xxxxxxxxxxxxx Subject: [lit-ideas] Re: Priorities ?? **Now free from grading and able to participate -- this economic warning=20 from this morning's editorials... TC, /Steve Cameron, NJ ---- The Next Economy http://www.washingtonpost.com/wp-dyn/articles/A32610-2004Dec28.html By Robert J. Samuelson Wednesday, December 29, 2004; Page A19 We are undergoing a profound economic transformation that is barely=20 recognized. This quiet upheaval does not originate in some breathtaking=20 technology but rather in the fading power of forces that have shaped=20 American prosperity for decades and, in some cases, since World War II.=20 As their influence diminishes, the economy will depend increasingly on=20 new patterns of spending and investment that are still only dimly=20 apparent. It is unclear whether these will deliver superior increases in=20 living standards and personal security. What is clear is that the old=20 economic order is passing. By any historical standard, the record of these decades -- despite flaws=20 -- is remarkable. Per capita income (average income per person) is now=20 $40,000, triple the level of 60 years ago. Only a few of the 10=20 recessions since 1945 have been deep. In the same period, unemployment=20 averaged 5.9 percent. The worst year was 9.7 percent in 1982. There was=20 nothing like the 18 percent of the 1930s. Prosperity has become the=20 norm. Poverty and unemployment are the exceptions. But the old order is slowly crumbling. Here are four decisive changes: ? The economy is bound to lose the stimulus of rising consumer debt.=20 Household debt -- everything from home mortgages to credit cards -- now=20 totals about $10 trillion, or roughly 115 percent of personal disposable=20 income. In 1945, debt was about 20 percent of disposable income. For six=20 decades, consumer debt and spending have risen faster than income. Home=20 mortgages, auto loans and store credit all became more available. In=20 1940, the homeownership rate was 44 percent; now it's 69 percent. But=20 debt can't permanently rise faster than income, and we're approaching a=20 turning point. As aging baby boomers repay mortgages and save for=20 retirement, debt burdens may drop. The implication: weaker consumer=20 spending. ? The benefits from defeating double-digit inflation are fading.=20 Remember, in 1979, inflation peaked at 13 percent; now it's 1 to 3=20 percent, depending on the measure. The steep decline led to big drops in=20 interest rates and big increases in stock prices (as interest rates=20 fell, money shifted to stocks). Stocks are 12 times their 1982 level.=20 Lower interest rates and higher stock prices encouraged borrowing and=20 spending. But these are one-time stimulants. Mortgage rates can't again=20 fall from 15 percent (1982) to today's 5.7 percent. Nor will stocks soon=20 rise twelvefold. The implication: again, weaker consumer spending. ? The welfare state is growing costlier. Since the 1930s, it has=20 expanded rapidly -- for the elderly (Social Security, Medicare), the=20 poor (Medicaid, food stamps) and students (Pell grants). In 2003,=20 federal welfare spending totaled $1.4 trillion. But all these benefits=20 didn't raise taxes significantly, because lower defense spending covered=20 most costs. In 1954, defense accounted for 70 percent of federal=20 spending and "human resources" (aka welfare), 19 percent. By 2003,=20 defense was 19 percent and human resources took 66 percent. Aging baby=20 boomers and higher defense spending now doom this pleasant substitution.=20 Paying for future benefits will require higher taxes, bigger budget=20 deficits or deep cuts in other programs. All could hurt economic growth. ? The global trading system has become less cohesive and more=20 threatening. Until 15 years ago, the major trading partners (the United=20 States, Europe and Japan) were political and military allies. The end of=20 the Cold War and the addition of China, India and the former Soviet=20 Union to the trading system have changed that. India, China and the=20 former Soviet bloc have also effectively doubled the global labor force,=20 from 1.5 billion to 3 billion workers, estimates Harvard economist=20 Richard Freeman. Global markets are more competitive; the Internet --=20 all modern telecommunications -- means some service jobs can be=20 "outsourced" abroad. China and other Asian countries target the U.S.=20 market with their exports by fixing their exchange rates. Taken at face value, these are sobering developments. The great=20 workhorse of the U.S. economy -- consumer spending -- will slow. Foreign=20 competition will intensify. Trade agreements, with more countries and=20 fewer alliances, will be harder to reach. And the costs of government=20 will mount. There are also global implications. The slow-growing European and=20 Japanese economies depend critically on exports. Until now, that demand=20 has come heavily from the United States, which will run an estimated=20 current account deficit of $660 billion in 2004. But if American=20 consumers become less spendthrift -- because debts are high, taxes rise=20 or benefits are cut -- there will be an ominous collision. Diminished=20 demand from Europe, Japan and the United States will meet rising supply=20 from China, India and other developing countries. This would be a=20 formula for downward pressure on prices, wages and profits -- and upward=20 pressure on unemployment and protectionism. It need not be. China and India are not just export platforms. Billions=20 of people remain to be lifted out of poverty in these countries and in=20 Latin America and Africa. Ideally, their demands -- for raw materials,=20 for technology -- could strengthen world trade and reduce reliance on=20 America's outsize deficits. If so, exports (and manufacturing) could=20 become the U.S. economy's next great growth sector. Already, the dollar=20 has depreciated 15 percent since early 2002; that makes U.S. exports=20 more price-competitive. What's at issue is the next decade, not the next year. We know that the=20 U.S. economy is resilient and innovative -- and that Americans are=20 generally optimistic. People seek out new opportunities; they adapt to=20 change. These qualities are enduring engines for growth. But they will=20 also increasingly have to contend with new and powerful forces that may=20 hold us back. Robert Paul wrote: > Lawrence writes: >=20 >=20 >>Bush-Bashers should slow down a bit and wait for the facts.< >=20 >=20 > (I had pointed out that as of last night, the US had pledged--not given, > pledged--$35 million in relief funds, and that Bush's inauguration will c= ost > _more than_ $40 million to stage.) >=20 > Lawrence sees this as 'Bush-Bashing.' He is welcome to. But one might won= der > whether seeing these juxtaposed facts in this way does not itself constit= ute > some unthinking flexing of the knees. >=20 > Robert Paul > The Reed Institute > ------------------------------------------------------------------ > To change your Lit-Ideas settings (subscribe/unsub, vacation on/off, > digest on/off), visit www.andreas.com/faq-lit-ideas.html >=20 >=20 ------------------------------------------------------------------ To change your Lit-Ideas settings (subscribe/unsub, vacation on/off, digest on/off), visit www.andreas.com/faq-lit-ideas.html ------------------------------------------------------------------ To change your Lit-Ideas settings (subscribe/unsub, vacation on/off, digest on/off), visit www.andreas.com/faq-lit-ideas.html