This is my attempt at blogging. I'm still learning about the blogging world, and this is my own personal study hall.

Thursday, August 20, 2009

Jumping to Conclusions, The Patriotic Retirement Plan, and Fuzzy Math

The following email has been going around a lot lately. The text (of at least one version) of the email is immediately below, followed by my comments on it.

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Subject: PLAN TO FIX THE ECONOMY

This is from an article in the St. Petersburg Times Newspaper on Sunday. The Business Section asked readers for ideas on “How Would You Fix the Economy?”

I think this guy nailed it!

Dear Mr. President:
Please find below my suggestion for fixing America ’s economy.Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 40 million people over 50 in the work force.

Pay them $1 million apiece severance for early retirement with the Following stipulations:

1) They MUST retire. Forty million job openings – Unemployment fixed.
2) They MUST buy a new American CAR. Forty million cars ordered – Auto Industry fixed.
3) They MUST either buy a house or pay off their mortgage – Housing Crisis fixed.

It can’t get any easier than that!

If more money is needed, have all members of Congress and their constituents pay their taxes…
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Now, first of all, whenever you get one of these emails, you have to ask yourself where it originated. My gut instinct is to always check www.snopes.com. They're very good at confirming or debunking urban myths sent around by email. In this case, I didn't look it up on Snopes, but instead I just looked up the line preceding the proposal, "You can call it the Patriotic Retirement Plan," on Google. It turns out that, with a little embelishment, the proposal presented in the email did, in fact, come from a reader of the St. Petersburg Times, who was, in fact, responding to a request by the paper for readers to submit their ideas for how to fix the economy. It was first published in print (and online) on Sunday, February 8, 2009.
Here's the link: http://www.tampabay.com/news/business/article973953.ece

Fine, it's settled that this is not some hokey chain email that someone made up in his basement for his own amusement that went viral.

But wait, let's think about the proposal itself. It sounds good, right? $1M retirement package? 40M new jobs? 40M cars purchased? No more "underwater" mortgages?

Oh, wait, I'm sorry, how are we going to pay for those payouts? Here's an imaginary conversation I had with the generic reader of this guy's suggestion whose gut reaction was to say that this would be an amazing idea and who passes it on by email to all his or her friends and family.

Said Reader: Well, it's only a million dollars. Surely the government can afford that. Why, we give billions to the banks!

Me: Yes, but it's a million dollars to a lot of people.

SR: Right, but let's figure this out: 1 million dollars times 40 is only 40 million dollars.

Me: Yes, yes, but remember, it's not 40 people. It's 40 MILLION people.

SR: Oh, right, so what's that then, like 400 billion dollars? We can afford that, right?

Me: Nope, it's higher.

SR: What, then, like 4 trillion? So what? That's high, but not as high as our national debt, which is only going to get higher because of all the money we're handing out in stimulus that may or may not work.

Me: That would be true, except that it's not. Keep going. It's not $4 trillion. It's $40 trillion.

I can see how someone can gloss over the 40 million x $1 million equation. I really can. I almost did, myself. It's easy to look at the bullet points and say, "Hey, that looks really good," without actually thinking about the total cost of the idea. I wish it were so simple. Unfortunately, we simply don't have that kind of money, and we won't anytime soon, especially if we enact something like that.

On the other hand, I have seen and heard some other proposals, which are not quite as costly, which have a bit more merit. One that sticks out in my mind has even been proposed by conservative economists to Republican leaders (I heard it, I think live, on C-SPAN Radio), and one that is very similar was mentioned by Jon Stewart on the Daily Show and got a nod from another conservative economist, who was his guest, as a plausible solution to the housing crisis. Basically, the two similar proposals buy out all the "underwater" mortgages, or at least the portion that is "underwater", or perhaps take the average value of homes that are "underwater" and give that portion to those with mortgages that are "underwater" or nearly so, perhaps with a means test, so that people facing extreme financial pressure can have more money freed up from their debt, and so that the banks can have their liquidity back and can begin lending again (instead of just hoarding their bailout checks).

The latter option, with whatever variations and stipulations would go along with it, would be very expensive: somewhere in the tens to hundreds of billions, possibly even the low, single-digit trillions, of dollars. Whether it would work as intended, there's no way to know for sure. Whether it would trickle out (not exactly "down") to the rest of the economy, again, we can't know for sure. But it sounds like it could. It doesn't matter, though, since there's no talk of that happening. And with Health Care dominating the discussions these days, the bank bailouts already ongoing for several months now, and other stimulus projects slowly beginning to take shape, there's no money for that sort of initiative.

But it's a nice idea: Trickle-down hasn't worked, and trickle-up is too dependent on the moods of the people, so give money to the people with stipulations on how to spend it, or give it to the banks on behalf of the people, and everyone will get the money they need so that the economy can loosen-up and rebound.

Finally, I have to give a hat-tip to the Alaskan Librarian for the thoughtful analysis of the Patriotic Retirement Plan email. http://alaskanlibrarian.wordpress.com/2009/06/19/road-to-ruin-patriotic-retirement-plan/

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