Yahoo’s short “Just Explain It” video on Social Security seriously misrepresented the financial situation of the program. The segment misled viewers on both the magnitude of the demographic  changes affecting  the programs finances and also the impact of the projected shortfall.

 The piece told viewers:

“Back in 1950, there were 7.11 workers per retiree. That number today is 4.5 and in 30 years, economists estimate that number will be 2.6 workers for every retiree.”

The Social Security trustees report actually puts the ratio of covered workers to retirees at 16.5 to 1 in 1950 and just 2.8 in 2012. It is projected to be 2.2 in 30 years.

The difference is important because most of the drop in the ratio of workers to retirees has already occurred. Astute readers will note that on average workers and retirees both enjoy considerably higher living standards today than in 1950 in spite of the sharp decline in the ratio of workers to retirees.

The reason this happened is that the impact of productivity growth swamps in raising living standards swamps any negative impact of demographic changes in lowering living standards. As the chart below shows, the gains from even modest rates of productivity growth vastly exceed the impact of the projected decline in the ratio of workers to retirees.  

                       Source: Social Security Administration and author's calculations.

 

It is true that most workers have seen little benefit from the gains in productivity growth over the last three decades. This has been due to the huge upward redistribution of income over this period. If this pattern continues then there will be grounds for worrying about the living standards of most of our children and grandchildren. However, this highlights the need to address the policies that have increased inequality and not to waste time worrying about demographic issues.

Finally the piece badly misrepresents the meaning of the shortfall in the Social Security trust fund projected for 2033. This projected shortfall does not mean that the program would pay zero benefits, it means that it could only pay about 75 percent of scheduled benefits (closer to 80 percent in the Congressional Budget Office projections).

Tuesday’s elections could bring some changes to U.S.-Latin America policy, but how significant they are remains to be seen. At the administration level, Obama’s second term is likely to continue the 12 years of the “war on drugs,” support for coups d’etat, funding of opposition groups in left-leaning countries, promotion of “free trade” deals and other policies that characterized the Bush administration’s approach to Latin America and which were carried on by Obama. As we have previously noted, the Obama administration has largely left Latin America policy to the State Department – itself a clear sign that it was a low priority compared to the Middle East, Asia, Europe and other regions.

It was other votes that could spell some changes in U.S.-Latin American relations. Some vocal Latin American policy proponents on the right were defeated, but committee leadership changes could result in a more right-leaning policy. Meanwhile, landmark referendums to legalize recreational marijuana use in two states – Colorado and Washington – could have an impact beyond the U.S. borders, depending on how the Federal government reacts to them.

First, Congressman Cornelius Harvey McGillicuddy IV, aka Connie Mack, lost his Senate bid to incumbent Bill Nelson (D – FL). Since Mack gave up his House seat in order to run for Senate, this means that Mack will no longer chair the Western Hemisphere Subcommittee of the House Foreign Affairs Committee, and therefore will have to abandon his dream of having Venezuela declared a state sponsor of terrorism. He will be gone from Congress, but not forgotten – his entertaining conspiracy theories will still be available online for anyone that likes a good story, as will video of his classic dust-up with former Minnesota Governor Jesse Ventura on Larry King Live. Mack’s chairmanship of the subcommittee will likely go to Rep. Michael McCaul (R – TX), currently the vice-chair.

Speaking of conspiracy theorists, Mack’s like-minded Florida neighbor, Allen West (a Republican from the 22nd District who has said there’s 81 communists in the House of Representatives) may also be on his way out, pending final election results.

Dean Baker
The Guardian Unlimited, November 8, 2012

An Argentine judge ordered Chevron’s assets embargoed in an effort to enforce an Ecuadorean court ruling, reports the Associated Press. Plaintiffs, who have waged a decades long legal battle against Chevron, have taken their fight outside the country to wherever Chevron has assets. Enrique Bruchou, the Argentina lawyer on the case, told reporters, “This is a ruling that sets an example. What we're telling the world is that in Latin America we want to demand that whoever comes to exploit does it following the same health an environmental standards as they do in their countries of origin.” Other than Argentina, the plaintiffs have filed suit in Canada, Brazil and Colombia.

State legislation legalizing recreational marijuana use in Washington and Colorado may impact Latin American countries drug war policies, reports McClatchy. The legislation, which the Mexican Institute for Competitiveness found would significantly reduce drug cartel profits, is a “game-changer”, according to Kasia Malinowska-Sempruch, the director of the global drug-policy program of the Open Society Foundation. Alejandro Hope, who co-authored the study, noted that, “Politically and symbolically, this is really powerful. My guess is that this will accelerate some countries’ efforts to have a legal marijuana regime.” The head of incoming president Enrique Pena-Nieto’s transition team told the AP: "Obviously we can't handle a product that is illegal in Mexico, trying to stop its transfer to the United States, when in the United States, at least in part of the United States, it now has a different status…These important modifications change somewhat the rules of the game in the relationship with the United States…I think that we have to carry out a review of our joint policies in regards to drug trafficking and security in general."

Three laborers were killed in Honduras this past week over a land conflict in the Bajo Aguan region, reports EFE. A 2011 report by the International Federation for Human Rights noted that the “The government has converted the area of these agrarian conflicts in Bajo Aguán into a war zone.” EFE points out that some 70 peasants have been killed in the past few years in fights with security personnel and guards from wealthy landowners. Last year an agreement was reached to give some 4,000 hectares of land to the landless families in the region, yet the agreement has yet to be implemented. MUCA, an organization representing the rural workers, released a statement:  “MUCA repudiates ... these cowardly acts of intimidation against the peasants and calls on the regime of (President Porfirio) Lobo to stop this violence against the laborers of Bajo Aguan.” Professor Dana Frank has written extensively about the conflict previously.

November 2012, Shawn Fremstad

November 2012, Eileen Appelbaum

Mark WeisbrotThe Guardian Unlimited, 7 de noviembre, 2012En Inglés

Mark WeisbrotThe Guardian Unlimited, November 7, 2012En Español

A guest post by former CEPR intern Tara Ruttenberg.

Ecuador made international headlines this week, first for plaintiffs taking their fight to Argentina and Colombia to hold Chevron accountable for decades of toxic pollution, and secondly as a result of the government’s recent decision to tax bank profits as a way to increase state revenue for social spending on poverty alleviation. As Ecuador celebrated the fourth anniversary of its relatively new citizen’s constitution last month, news agencies and policy analysts have made note of the successes of the many changes taking place under President Correa, particularly related to social policies targeting poverty reduction through increased public social expenditure and cash transfers to the poor. These and other reforms embody Correa’s proclaimed commitment to 21^st century socialism and an inverted juxtaposition of traditional power relations, placing people and the environment above the market economy and the formerly unbridled reign of the private sector. Ecuador’s social and economic policy platform and successful poverty reduction experience are a strong reflection of wider regional trends in countries governed by left-of-center leaders now nearly a decade into Latin America’s post-neoliberal era.

While analysts continue to draw due attention to Ecuador’s success in reducing poverty and improving socioeconomic indicators by balancing strong economic growth with policies geared toward greater income redistribution (see CEPR publication on Ecuador’s economy since 2007), many have neglected the wider paradigmatic framework within which Ecuador’s new constitution thrives; that is, the indigenous-born and politically articulated concept of ‘buen vivir’ (living well). Buen vivir as a social paradigm incorporated into Ecuador’s constitution seeks to “better the quality of life of the population, develop their capacities and potential; rely on an economic system that promotes equality through social and territorial redistribution of the benefits of development; ….establish a harmonious coexistence with nature… promote Latin American integration; and protect and promote cultural diversity” (Article 276 of the Constitution of the Republic of Ecuador). Refreshingly, we see Ecuadoran policies living up to these ambitious constitutional aims based on buen vivir, with Correa continuing to focus on income redistribution, as demonstrated by the most recent tax on banks.

Eileen AppelbaumEconomic Intelligence (U.S. News & World Report), November 5, 2012

The Wall Street Journal reported yesterday on Hurricane Sandy’s ongoing toll on Haiti. Ingrid Arnesen writes: Poor roads and communications have hindered damage assessments and relief efforts. Haitian government and international agencies say Sandy destro

Before hitting the U.S.’ east coast last week, Sandy wreaked havoc on Haiti leading many to fear a food security crisis, reports the Miami Herald. Coming just nine weeks after Tropical Storm Isaac devastated agricultural crops throughout the country, Sandy inflicted an estimated $70 million in agricultural damages, mostly in the South department. An analysis done by the Haitian government following Isaac found that changing weather patterns were negatively effecting food security in almost every region of the country. Writing in NACLA, Kevin Edmonds discusses how climate change will affect Caribbean countries. Edmonds speaks with University of the West Indies professor Norman Girvan, “30 years ago, one expected to deal with major disasters of this kind, say, once every ten years. Nowadays, most islands expect at least one, and possibly two or three, every year. In other words this now has to be seen as a permanent, recurring phenomenon or integral feature of Caribbean development.” Edmonds notes that despite climate change presenting a significant threat to the Caribbean, the countries lack the power to address to the problem on a global scale.

Speaking at the G-20 summit in Mexico City, Argentina’s Economy Minister called on advanced countries to place restrictions on vulture funds, reports Bloomberg. The call comes after a U.S. court ruled that Argentina must pay vulture funds with the same priority that they pay holders of their restructured bonds, which some 93 percent of creditors accepted following Argentina’s default in 2001.  The court ruling, which has been called a huge win for vulture funds, could impact other sovereign debt restructurings. Economy Minister Lorenzino told his fellow ministers, “We hope that G-20 nations understand that the latest developments could affect any future restructuring process of sovereign debt…All nations should be on alert.” Meanwhile, Argentine and South African officials met to discuss NML Capital’s attempts to detain an Argentina ship docked in South Africa. The move by NML Capital, run by billionaire Republican donor Paul Singer, comes after they successfully detained an Argentina naval vessel in Ghana last month.

The Peruvian government is moving forward with plans to pay back billions of dollars in 40 year-old land bonds, reports Reuters. General Juan Velasco issued the bonds as compensation during a land redistribution program started in the 1970s. In 2001, the Constitutional Court ruled that the government should repay the bonds, yet a string of government’s since then have punted on the issue. Now, the payment is becoming more pressing as the U.S.-Peru Free Trade agreement comes into force. Over the years, many of the bonds have been bought by investors on a secondary market. With the “free trade” agreement, the funds which hold the bonds could sue in U.S. courts to seek payment, a similar strategy as vulture funds have employed in Argentina. Constitutional Court president Ernesto Alvarez told Reuters, “There is a worry among some authorities in the executive branch ... that Peru could find itself hurt if complaints were lodged in courts under clauses in the free-trade pact with the United States.” If Peru pays back the bonds, they could be on the hook for up to $8 billion, or 4 percent of GDP.