Michael O'Hare polled one of his undergraduate policy design classes at Berkeley to see what they thought about the future of Social Security. The results:

  • 16%: Social Security is in very serious financial trouble and probably won’t be there for my parents
  • 66%:  Social Security is in financial trouble and probably won’t be there for me
  • 16%: Social Security is basically OK and just needs some minor adjustments.

From this we can conclude a couple of things: (a) there are probably 18 students in Mike's class, and (b) the conservative campaign to convince everyone that Social Security is doomed has been wildly successful, even among extremely bright kids who are actively interested in policy issues.

The success of this propaganda campaign is especially impressive because the truth of option 3 (Social Security only needs minor tweaks) is hardly arguable if you have even the barest understanding of Social Security's finances. I struggle constantly trying to figure out a way to convince people of this in a simple way, so here's another crack at it:

If we gradually raise the payroll tax from 6.2% to 7.2% and gradually raise the earnings cap from $100,000 to $250,0001 between 2030 and 2050, Social Security will be solvent forever.

That's it. How much simpler can it be? Certainly this is as easy to understand as raising the retirement age to 67 or changing the COLA formula or whatnot. I don't have any objection to considering some of that other stuff if and when we ever get around to cutting a deal on Social Security, but we don't have to if we don't want to. If you want a simple slogan for the masses, "1 point and 150 grand" does the job just fine. Add one point to Social Security taxes and increase the earnings cap by $150,000 over the course of 20 years. Done.

1Indexed for inflation, of course.

From my colleague Tim Murphy, commenting on a speech Rick Perry gave in New Hampshire on Friday:

Have you ever seen anyone so happy to receive a jug of maple syrup?

That comes toward the end, and Tim is right. Perry looks as if this is the first time in his life he's encountered the stuff. The rest of Perry's delivery is — um, a bit quirky too. Like this:

This is such a cool state. I mean, come on, "Live free or die"? You gotta love that, right? I come from a state where they had this little place called the Alamo, and they declared "Victory or death." You know, we're kinda into those slogans, man, it's like "Live free or die," "Victory or death," bring it!

Okey dokey. I guess that's what it takes when the local polls have you tied for sixth with Michele Bachmann at 3.3%.

Guess what? Last week's resolution of the eurozone crisis is turning out to be about as successful as all the past resolutions were:

Initial relief over Europe's latest attempt to end its debt crisis faded on Friday as investors fretted about the plan's lack of detail and grew more skeptical about Italy's turnaround effort....On Friday, attention focused on Italy. The nation is saddled with €1.9 trillion in debt, with more than €200 billion of it coming due next year. Some investors worry that unless Italy lowers its borrowing costs, it could become the center of a renewed flare-up in the crisis. In Friday's bond auction, Italy was forced to pay more than 6% interest on its new 10-year debt, approaching levels that some analysts said the country can't afford for long.

...."The truth of the matter is that the issues are not entirely resolved," said Steven Walsh, chief investment officer at bond manager Western Asset Management, which oversees $433 billion...."The firepower of this fund…is not enough to calm fears," said Silvio Peruzzo, an economist at RBS Global Banking & Markets in London.

Nobody should be surprised that this is such a hard problem, of course. Fundamentally, someone is going to lose absolutely gigantic sums of money, and figuring out who that someone is going to be was always going to be a fraught affair. As near as I can tell, though, each rescue effort seems to advance asymptotically toward honesty about the scale of the losses, realism about the need to allocate those losses among the non-broke members of the EU, and acceptance among the broke members that they're going to be required to suffer fairly harshly in return for being bailed out. We obviously haven't gotten to the really truly final resolution yet — that won't happen until the European public truly accepts that they're screwed and they can't do much about it — but I suspect that last week's deal is one more step along the path of recognizing the grim reality of the situation.

Either that or Europe is going to implode. In the end, though, I don't think either the ECB or Angela Merkel will allow that to happen.

On the left, Domino really is staring at the giant rose this week. It's not just a trick of perspective. On the right, Inkblot is reacting warily as Domino explores a gigantic bag that had been full of electronic goodness just a few moments before.

Why the early catblogging this week? Because Southern California Edison has kindly informed us that electric power in our neighborhood will once again be out for the day. So no blogging for me. This post was prescheduled Thursday night, and my computer has been safely shut down for the duration. Have a good weekend, all.

From Jed Rakoff, the federal judge overseeing the SEC fraud settlement against Citigroup:

How can a securities fraud of this nature and magnitude be the result simply of negligence?

Good question! This is #9 of nine questions that Rakoff has about the settlement, in which Citigroup has been fined an arbitrary amount, with no real explanation for how the amount was calculated, no real explanation of just what the fraud entailed, and no admission by Citigroup of any culpability. I suspect that Rakoff isn't going to get any satisfactory answers to his questions, but good for him for asking.

Good news from the Wall Street Journal:

A month after Bank of America got pummeled by consumers and politicians for introducing plans for new debit-card fees, most other big U.S. banks are steering clear of imposing similar charges.

Following eight months of consumer testing, J.P. Morgan Chase & Co. has decided that it won't charge customers who use their debit cards to make purchases....J.P. Morgan joins U.S. Bancorp, Citigroup Inc., PNC Financial Services Group Inc., KeyCorp and other large banks that have said in recent days that they won't impose monthly fees on debit cards. None of those banks said they made their decisions because of the outcry over Bank of America's fees.

Well, of course they didn't say it. But I think we can all take a pretty good guess that Bank of America's PR debacle had something to do with it.

BofA imposed its monthly debit card charge to make up for lower interchange fees mandated by Dodd-Frank, and that's why other banks have been considering it too. But as far as I'm concerned, banks could have avoided this mess completely simply by allowing merchants to pass along interchange fees to their customers if they wanted to. That is, allow merchants to post a sign saying "2% surcharge on all debit card purchases" and see what happens. If merchants try it, but competition eventually forces them all to stop, that's a convincing signal that interchange fees are a reasonable cost of business for having a reliable, risk-free payment system. If not, then not. But banks resolutely refused to allow this, which suggests very strongly that they knew perfectly well their fees were out of line and would get passed along to consumers in a free market. And having those fees passed along would have caused consumers to use their cards a lot less. So the last thing they wanted was transparent fees subject to normal market forces.

I don't know how this is all going to turn out. It's possible, of course, that banks will eventually figure out some other hidden or semi-hidden fee structure to replace the interchange fees. Obviously they're going to try to make up their lost interchange fee revenue somewhere. But my hope is that as long as they're forced to make it up with transparent fees of some kind, consumers will have a chance to react normally to those charges and market forces will then have a chance to exert some discipline on the banks — as they're doing now with the monthly debit card fee. This will keep fees as low as possible and consumers will benefit. We'll see.

With income inequality on everyone's radar today, the Center on Budget and Policy Priorities tweets this:

Quite so. This gives me an excuse to repost one of my favorite tables. It compares how much income various groups make today vs. how much they would be making if everyone's incomes, rich and poor alike, had grown at similar rates since 1979. As you can see, by 2005 the bottom 80% were collectively earning about $743 billion less per year while the top 1% were earning about $673 billion more. It's sort of uncanny how close those numbers are. For all practical purposes, every year about $700 billion in income is being sucked directly out of the hands of the poor and the middle class and shoveled into the hands of the rich.

One of the points this drives home is just how much the story of growing income inequality really is a story of the top 1%. Inequality has increased within the bottom 99%, but not all that dramatically. It's really the top 1% and the top 0.1% where all the action is. So if the Occupy Wall Street folks are ever looking for an alternate slogan, they might consider "Give us back our $700 billion."

You can, of course, try to concoct some story in which growing income inequality has boosted economic growth, so that the gains of the rich have been solely from income that nobody would have gotten otherwise. But it's a pretty tough story to tell, because there's simply no evidence for it. The American economy hasn't been growing any faster over the past 30 years than it did in the 30 years before, it's just distributed the gains of its growth disproportionately to the rich.

To bring this home a little more vividly, take a look at the row labeled "41-60." That's the dead middle of the income distribution. If all income groups had grown at the same rate over the past 30 years, that median household would today be making about $10,000 more than they are. That's the price we pay for our growing plutocracy.

Want more charts? This one comes from the chart pack we did for my article earlier this year, "Plutocracy Now." Click the link if you want to read it, or else click here if you just want to browse the charts.

Via Brad Plumer, here's the latest data from Common Sense Media about the media diets of young children in America. To be honest, I'm a little surprised that TV watching is only two hours a day for 5-8 year-olds. On the other hand, I'm sort of appalled that 75% of 0-2 year-olds watch TV, and of those, the average TV-watching time has increased from 1:02 to 1:30 over the past six years. In that age group, it probably ought to be zero. Other interesting nuggets:

  • 30% of kids under two have a TV in their bedroom.
  • Only about 60% of kids read or are read to every day. More reading, please.
  • 92% of high-income kids have high-speed cable. Only 42% of low-income kids do. The divide is about the same along the educational spectrum.

More at the link.

Wall Street is the New Wal-Mart

Matt Yglesias has an interesting notion today. He suggests that selling luxury goods to the wealthy is all well and good, but if you want to get truly rich you need to sell to a mass market. Think Henry Ford, Sam Walton, and Bill Gates. But what if you peer into the future and conclude that the middle class is going to be fairly stagnant while the rich are going to get ever richer and richer? What kind of mass market is there in goods for the rich? There are only so many yachts they can buy, after all.

Another of way saying this is that as the rich get richer, they spend a smaller and smaller share of their income on ordinary consumption. That leaves more and more money to be socked away as savings:

But rich people also don’t just “save” money in the way that middle class people do on a larger scale. They purchase large quantities of financial services. So to the extent that you anticipate income to be increasingly concentrated at the top, it makes more sense to go into selling financial services than into selling non-finance items. The people who get rich with non-financial enterprises (Bill Gates, the Walton family) are all selling to mass markets. Lots of people make a living selling luxury goods to the top 1 percent, but nobody becomes a billionaire that way. Unless they’re selling financial services.

As a corollary of sorts, I'd note that people have a tendency to do dumb things with money. That should come as no surprise. But when middle-class folks do dumb things, the consequences just aren't that bad. The consequences might be bad for them, but on a macro level, the middle class just doesn't have all that much money to do dumb stuff with. That's because they spend most of their income on food, clothes, housing, gasoline, and so forth.

But rich people? When their money starts to pile up so high that it's burning holes in their bespoke suits, they start doing dumb stuff on an epic scale. And Wall Street is there to cheerfully cater to their every dumb whim, and then toss in a few even dumber ones that they'd never thought of before. If you keep this up for a few years you get 2008. Social justice to the side, this is, in my mind, one of the key reasons why we should care about reducing income inequality. The middle class can more or less be trusted to do useful things with the bulk of its money. The rich can't.

How We Shop

Shopping expert Paco Underhill explains how we shop:

Some people predict that the Internet is going to replace the retail store. It's already killed Borders. What impact could it have on, say, buying a bed or a toaster?

Buying an electronic appliance generally involves three visits, or missions. A scouting mission, a narrowing mission, and a purchasing mission. Of those three missions, at least one or two might be happening online, whereas it previously would be happening in store. The role of the Internet is an information-gathering -- scouting and narrowing -- vehicle. It doesn't mean less buying. It means less day-to-day traffic.

That sounds disturbingly accurate. I need a new laptop, and a couple of weeks I started my scouting mission. On the internet. Last week I spent an afternoon on a narrowing mission, visting Fry's, Micro Center, Best Buy, the Microsoft Store, and the Sony Store. Two days ago I accidentally noticed a sale on one of the models at the top of my list, so today I'll probably head out on my purchasing mission.

Of course, I could just as easily have accidentally noticed a sale on the internet, in which case our local bricks-and-mortar retailers would have been out of luck. Still, Underhill has a point. The internet probably spurs nearly as much shopping as it cannibalizes.

Also of note is his anecdote about a Japanese department store that has a private club for loyal customers. Interesting! Sounds like something Nordstrom should try.