Why subsidize retirement saving if the subsidies don't work?
Imagine there were no 401(k)s. You wouldn't stop saving for retirement, right? Right? Don't worry, I won't tell Suze Orman. Not that CNBC's personal finance guru would get mad at you -- according to a new paper, most households wouldn't sock away any less for their golden years if we eliminated 401(k)s. Which raises a $100 billion question...
Why subsidize retirement saving if the subsidies don't work?
As far as tax expenditures go, the one for retirement savings is a biggie. Remember, "tax expenditure" is just econospeak for the various deductions, exclusions, and preferential rates -- in other words, subsidies -- that litter the tax code. According to the Congressional Budget Office (CBO), excluding pension contributions and earnings from taxes will cost us about 1.2 percent of GDP over the next decade, or an average of $240 billion a year. That's a lot of spending -- that's what tax expenditures are, just disguised spending -- without much bang for the buck. Maybe just a penny's worth.
In fact, one penny's worth is exactly how much extra saving a dollar's worth of retirement subsidies produced in Denmark, according to the recent paper by Raj Chetty and John N. Friedman of Harvard, Soren Leth-Petersen and Tore Olsen of the University of Copenhagen, and Torben Heien Nielsen of the Danish National Centre for Social Research. In other words, we might be spending $240 billion to get people to save $2.4 billion more.
But don't the trillions of dollars in 401(k) accounts tell a different story? Not necessarily. There isn't enough data for the U.S., but Chetty et. al. looked at the numbers for Denmark, which has accounts similar to our 401(k)s, to examine how much more incentives to save get us to save. The first chart shows how much households contributed to tax-preferred accounts after subsidies increased and the second chart shows how much they contributed to non-tax-preferred accounts, again after subsidies increased. It's a bit hard to see, but the decrease in the latter almost completely offsets the increase in the former -- households saved an average of 1 cent more.
Households save where the subsidy is, but don't save more because of the subsidy. It turns out the best way to get households to save more is ... to make them save more. In other words, automatically take a percentage of each person's paycheck and put it in a retirement account, as a default. If this sounds familiar, it's because that's how the payroll tax works -- except it's how you think the payroll tax works now. There's a misconception that the money the government withholds from you every month ends up in an account with your name on it that eventually becomes your Social Security benefits. It doesn't. The money the government withholds every month pays for current retirees, which is why the system needs some kind of tweak over the next few decades as the Boomers retire.
A system of forced, or nudged, saving wouldn't replace this social insurance, but rather the wasteful dinosaur that is the 401(k). It's mostly the well-off, who have retirement savings to move around, who move their savings to where the subsidies are. The 401(k) doesn't do much if your goal is to get people who don't save much to save more, and it doesn't do this at quite the cost.
We need Suze to tell Congress that we can't afford it.
He lives near San Francisco, makes more than $50,000 per year, and is voting for the billionaire to fight against political correctness.
For several days, I’ve been corresponding with a 22-year-old Donald Trump supporter. He is white, has a bachelor’s degree, and earns $50,000 to $60,000 per year.
He lives near San Francisco.
“I recently became engaged to my Asian fiancée who is making roughly 3 times what I make, and I am completely supportive of her and proud she is doing so well,” he wrote. “We’ve both benefitted a lot from globalization. We are young, urban, and have a happy future planned. We seem molded to be perfect young Hillary supporters,” he observed, “but we're not. In 2016, we're both going for Trump.”
At first, we discussed Bill Clinton.
Last week, I wrote an article asking why Trump supporters aren’t bothered that their candidate called Clinton a shameful abuser of women who may well be a rapist. After all, Trump used to insist that Clinton was a victim of unfair treatment during his sex scandals. Either Trump spent years defending a man that he believed to be a sexual predator, even welcoming him as a guest at his wedding, or Trump is now cynically exploiting a rape allegation that he believes to be false.
In the 1990s, A.J. Benza learned first hand how the real-estate developer got his name––and his net worth––in all the New York City papers.
Earlier this month, I heard A.J. Benza, the host of the celebrity-scandal show “Case Closed with A.J. Benza,” tell the podcast host Adam Carolla about his younger days as a gossip reporter in New York City. He hung out with celebrities until the wee hours of the morning, reported out sensational rumors, and constantly traded favors in order to get juicy tidbits for columns at Newsday and the New York Daily News. Most trades involved information he wanted about a particular person at a particular moment––and he would then owe his source a favor in the future.
“Donald Trump was the biggest guy in the world with that,” he said. “Trump spent every morning on the phone with me, with Page 6––he loved to get his name in the paper. As a result, he would drop dimes on other people in every industry he knew dirt on. You put the story in the paper, and then, three days later, you say, ‘Donald Trump was at a Knicks game with this supermodel.’ And he’s happy. That’s all it took.”
Finally, an explanation for Bitchy Resting Face Nation
Here’s something that has always puzzled me, growing up in the U.S. as a child of Russian parents. Whenever I or my friends were having our photos taken, we were told to say “cheese” and smile. But if my parents also happened to be in the photo, they were stone-faced. So were my Russian relatives, in their vacation photos. My parents’ high-school graduation pictures show them frolicking about in bellbottoms with their young classmates, looking absolutely crestfallen.
It’s not just photos: Russian women do not have to worry about being instructed by random men to “smile.” It is Bitchy Resting Face Nation, seemingly forever responding “um, I guess?” to any question the universe might pose.
This does not mean we are all unhappy! Quite the opposite: The virile ruler, the vodka, the endless mounds of sour cream—they are pleasing to some. It’s just that grinning without cause is not a skill Russians possess or feel compelled to cultivate. There’s even a Russian proverb that translates, roughly, to “laughing for no reason is a sign of stupidity.”
Though Baby Boomers may criticize Millennials for being self-centered, careerist, and politically dispassionate, they are really just adapting to the world they live in today.
Graduation season is almost done, and it has brought the usual spate of commencement speeches that urge graduates to follow their passion, be true to themselves, inspire their fellow humans, and save the world. But in recent years there has been a dissenting note to this feel-good rhetoric. In 2012, the speech that became a YouTube sensation—now viewed by 2.5 million people!—was by a then-obscure high-school English teacher to his senior class. The title was “You Are Not Special,” which also gives you a sense of the thesis. It was an elegant essay that was actually gentle in comparison to some of the other characterizations of young people in the media these days. The “Me Generation” was the name given to the Baby Boomers. Time magazine ran a cover in 2013 on the Millennials with the title “The Me Me Me Generation.”
A conversation about how Game of Thrones’s latest twist fits in with George R.R. Martin’s typically cliché-busting portrayal of disability
In 2014, a few media outlets ran stories diagnosing Game of Thrones’s Hodor as having expressive aphasia, a neurological condition restricting speech. Some aphasia experts pushed back, saying that while Hodor has often been described as “simple-minded” or “slow of wits,” aphasia only affects linguistic communication—not intelligence.
A new study finds that deliberately considering the perspectives of others can help conceited people feel empathy.
Love is great, but it’s actually empathy that makes the world go ‘round. Understanding other peoples’ viewpoints is so essential to human functioning that psychologists sometimes refer to empathy as “social glue, binding people together and creating harmonious relationships.”
Narcissists tend to lack this ability. Think of the charismatic co-worker who refuses to cover for a colleague who’s been in a car accident. Or the affable friend who nonetheless seems to delight in back-stabbing.
These types of individuals are what’s known as “sub-clinical” narcissists—the everyday egoists who, though they may not merit psychiatric attention, don’t make very good friends or lovers.
A rock structure, built deep underground, is one of the earliest hominin constructions ever found.
In February 1990, thanks to a 15-year-old boy named Bruno Kowalsczewski, footsteps echoed through the chambers of Bruniquel Cave for the first time in tens of thousands of years.
The cave sits in France’s scenic Aveyron Valley, but its entrance had long been sealed by an ancient rockslide. Kowalsczewski’s father had detected faint wisps of air emerging from the scree, and the boy spent three years clearing away the rubble. He eventually dug out a tight, thirty-meter-long passage that the thinnest members of the local caving club could squeeze through. They found themselves in a large, roomy corridor. There were animal bones and signs of bear activity, but nothing recent. The floor was pockmarked with pools of water. The walls were punctuated by stalactites (the ones that hang down) and stalagmites (the ones that stick up).
Yet the proposal’s Trumpian moniker is not the most significant thing about it. This is an expansive bill, sponsored by a member of the House Republican leadership and a member of the health committee in the Senate, that seeks to enact conservative, market-oriented reforms to the insurance industry but does not—repeat, does not—repeal the Affordable Care Act. Instead, Representative Pete Sessions of Texas and Senator Bill Cassidy of Louisiana are proposing to allow people to leave the Obamacare exchanges and instead receive a $2,500 tax credit (plus $1,500 for each child) to purchase health insurance on the private market or put in a health-savings account.